Public and private enterprises

QUEENS’ COLLEGE
SESSION : 2011-12
SUBJECT : B.STUDIES
PRIVATE,PUBLIC AND GLOBAL
ENTERPRISES
GUIDED BY:SHALINI MA’AM
MADE BY : PURVASHI VERMA
CLASS : XI ‘C’
ROLL NO. : 11328

1. ACKNOWLEDGEMENT
2. INTRODUCTION
3. CHARACTERISTICS
4. TYPES OF BUSINESS ACTIVITIES
5. PUBLIC ENTERPRISES
6. GLOBALISATION
7. MULTINATIONAL COMPANIES
8. JOINT VENTURES
9. JOINT SECTOR ENTERPRISES
10. PRIVATE ENTERPRISES

ACKNOWLEDMENTACKNOWLEDMENT
I have been privileged by Mrs. Shalini , as she has given me theI have been privileged by Mrs. Shalini , as she has given me the
task of making a project.task of making a project.
Working on the project was a very difficult task but of courseWorking on the project was a very difficult task but of course
without any question it has widened my views. I felt a heavywithout any question it has widened my views. I felt a heavy
delight, working on the project.delight, working on the project.
Though I did not claim for the originality of the matter but I triedThough I did not claim for the originality of the matter but I tried
my best on the whole project. This project is the cummulativemy best on the whole project. This project is the cummulative
result of thorough study. The help of various textbooks andresult of thorough study. The help of various textbooks and
references made this difficult task a feather light.references made this difficult task a feather light.
Thank you…Thank you…

INTRODUCTION
A business undertaking is an institutional
arrangement to conduct any type of business activity.
The undertaking maybe run by one person or
association of persons. It may be based on formal or
informal agreement among persons who undertake to
run the concern. According to Wheeler, a business
undertaking is "a concern, company or enterprise
which buys and sells, is owned by one person or a
group of persons and is managed under a specific set
of operating policies." The persons join together and
pool their resources and conduct the activities of the
undertaking for the benefit of all.

I. Separate Entity
II. Separate Ownership
III. Separate Management
IV. Independent Risk Bearing
V. Exchange of Goods and Services
VI. Dealing in Goods and Services
VII.Profit Motive
VIII.Continuity of Transactions
IX. Risk and Uncertainly
X. Social Responsibility

TYPES OF BUSINESS UNDERTAKINGSTYPES OF BUSINESS UNDERTAKINGS
SIZE BASISSIZE BASIS NATURE OF ACTIVITIESNATURE OF ACTIVITIES OWNERSHIPOWNERSHIP
SMALL ENT.SMALL ENT. MEDIUM ENT.MEDIUM ENT. LARGE ENT.LARGE ENT.
INDUSTRIAL ENT.INDUSTRIAL ENT. TRADING ENT.TRADING ENT. SERVICES ENT.SERVICES ENT.
PRIVATE SECTORPRIVATE SECTOR PUBLIC SECTORPUBLIC SECTOR JOINT SECTORJOINT SECTOR

INDIAN ECONOMYINDIAN ECONOMY
PUBLIC SECTORPUBLIC SECTOR PRIVATE SECTORPRIVATE SECTOR
DEPARTMENTAL
UNDERTAKINGS
DEPARTMENTAL
UNDERTAKINGS
STATUTORY
CORPORATION
STATUTORY
CORPORATION
GOVERNMENTAL
UNDERTAKINGS
GOVERNMENTAL
UNDERTAKINGS
SOLE PROPRIETORSHIPSOLE PROPRIETORSHIP
PARTNERSHIPPARTNERSHIP
JOINT HINDU COMPANYJOINT HINDU COMPANY
COOPERATIVE SOCIETYCOOPERATIVE SOCIETY
COMPANYCOMPANY
MULTINATIONAL CO.MULTINATIONAL CO.

PUBLIC SECTORPUBLIC SECTOR
ENTERPRISESENTERPRISES

PUBLIC ENTERPRISES…..
A public sector enterprise or a public
enterprise is one which is owned, managed
and controlled by the Central Government
or any State Government or any local
authority.
They are also known as ‘Public
Undertakings. The forms of organizing
public enterprise are : Departmental
undertakings, Public Corporations,
Government Companies.

CHARACTERISTICS OFCHARACTERISTICS OF
PUBLIC SECTOR ENTERPRISESPUBLIC SECTOR ENTERPRISES
PUBLIC SECTOR ENTERPRISESPUBLIC SECTOR ENTERPRISES
STATE OWNERSHIPSTATE OWNERSHIP
STATE CONTROLSTATE CONTROL
STATE FINANCINGSTATE FINANCING
SOCIO-ECONOMIC OBJECTIVESSOCIO-ECONOMIC OBJECTIVES
PUBLIC ACCOUNTABILITYPUBLIC ACCOUNTABILITY

State OwnershipState Ownership - Public Sector enterprises are owned by- Public Sector enterprises are owned by
Central or State Government or jointly by both or LocalCentral or State Government or jointly by both or Local
authority.authority.
State ControlState Control – The rights of its management vest in the– The rights of its management vest in the
Government. The majority of the directors and top officialsGovernment. The majority of the directors and top officials
are appointed by the government for the management ofare appointed by the government for the management of
such enterprises.such enterprises.
State FinancingState Financing – The whole or major source of financing– The whole or major source of financing
such enterprises is the government. The funds are suppliedsuch enterprises is the government. The funds are supplied
from the government treasury or budget of the concernedfrom the government treasury or budget of the concerned
Ministry Department or investory by government in theMinistry Department or investory by government in the
share capital of the enterprises.share capital of the enterprises.

4. Socio-economic Objectives – Such enterprises are guided by
both the profit and social objectives for the benefits of the
community as a whole such as:
* to set up basic and strategic industries (like steel and oil).
* to promote balanced regional development through the growth
of economic activity in backward, rural and remote areas of
country.
* to ensure adequate supply of essential goods at a fair price.
* to check the growth of monopoly and monopolistic tendencies
in the private sector.
5. Public Accountability – Such enterprises are accountable to the
public through the government. Their performance is subject to
scrutiny of the Parliament or State Legislatures and is
evaluated by the committee on Public Undertakings or Public
Accounts Committee or Estimates Committee. Their reports are
presented for discussion in Parliament or State Assembly.

OBJECTIVES OF PUBLIC ENTERPRISES
To achieve rapid economic development.
To channelise resources.
To ensure balanced regional development.
To prevent concentration of economic power.
To prevent the growth of monopoly.
To control the prices of essential goods.
To secure public welfare.
To reduce inequalities in income distribution.
To provide satisfactory employment.
To mobilise savings through financial
institutions to meet demands of public and
private enterprises.

REASONS FOR GOVERNMENTREASONS FOR GOVERNMENT
PARTICIPATION IN BUSINESSPARTICIPATION IN BUSINESS
REASONS FOR GOVERNMENTREASONS FOR GOVERNMENT
PARTICIPATION IN BUSINESSPARTICIPATION IN BUSINESS
PLANNED
DEVELOPMENT
PLANNED
DEVELOPMENT
INFRASTRUCTURAL
FACILITIES
INFRASTRUCTURAL
FACILITIES
ACT AS MODEL
EMPLOYER
ACT AS MODEL
EMPLOYER
REGIONAL
DEVELOPMENT
REGIONAL
DEVELOPMENT
GENERATION OFGENERATION OF
EMPLOYMENTEMPLOYMENT
GENERATION OFGENERATION OF
EMPLOYMENTEMPLOYMENT
SOCIALSOCIAL
WELFAREWELFARE
SOCIALSOCIAL
WELFAREWELFARE
DISTRIBUTION OFDISTRIBUTION OF
ECONOMIC GAINSECONOMIC GAINS
DISTRIBUTION OFDISTRIBUTION OF
ECONOMIC GAINSECONOMIC GAINS
NEED FORNEED FOR
NATIONALISATIONNATIONALISATION
NEED FORNEED FOR
NATIONALISATIONNATIONALISATION

FORMS OFFORMS OF
PUBLIC ENTERPRISESPUBLIC ENTERPRISES
FORMS OFFORMS OF
PUBLIC ENTERPRISESPUBLIC ENTERPRISES
DEPARTMENTALDEPARTMENTAL
UNDERTAKINGSUNDERTAKINGS
DEPARTMENTALDEPARTMENTAL
UNDERTAKINGSUNDERTAKINGS PUBLICPUBLIC
CORPORATIONCORPORATION
PUBLICPUBLIC
CORPORATIONCORPORATION
GOVERNMENTALGOVERNMENTAL
COMPANYCOMPANY
GOVERNMENTALGOVERNMENTAL
COMPANYCOMPANY

DEPARTMENT UNDERTAKINGS
Departmental Undertaking is a public
enterprise which is organised, controlled and
managed by the government in the same way
as any other government department.
Example :
Railways,
Post and Telegraphs,
Public works Department(PWD),
Ordnance factories.

1. Formation : Departmental Undertaking is created by the government
and is attached to a particular ministry.
2. No Separate legal Entity : It is not a separate legal entity. It cannot
sue and cannot be sued without government’s consent.
3. Management & Control : It is managed and controlled by the
concerned ministry of the government.
4. Finance : It is wholly financed by the government out of budgetary
appropriations.
5. No Borrowing Powers : It has no powers to borrow.
6. No Authority to use Revenue : It has no authority to use its
revenues. Its revenues are paid into treasury.

MERITS OFA DEPARTMENTALUNDERTAKINGSMERITS OFA DEPARTMENTALUNDERTAKINGSMERITS OFA DEPARTMENTALUNDERTAKINGSMERITS OFA DEPARTMENTALUNDERTAKINGS
EASYEASY
TO FORMTO FORM
EASYEASY
TO FORMTO FORM
EASYEASY
FINANCINGFINANCING
EASYEASY
FINANCINGFINANCING
SECRECYSECRECYSECRECYSECRECY
ACCOUNTABILEACCOUNTABILE
TO PEOPLETO PEOPLE
ACCOUNTABILEACCOUNTABILE
TO PEOPLETO PEOPLE

DEMERITS OF A DEPARTMENTAL UNDERTAKINGSDEMERITS OF A DEPARTMENTAL UNDERTAKINGS
LACK OF
FLEXIBILITY
LACK OF
FLEXIBILITY
LOW
EFFICIENCY
LOW
EFFICIENCY
GUIDED BY
POLITICAL
CONSIDERATIONS
GUIDED BY
POLITICAL
CONSIDERATIONS
LACK OF
MANAGEMENT
LACK OF
MANAGEMENT
LACK OF
QUICK
DECISION MAKING
LACK OF
QUICK
DECISION MAKING
LACK OF
AUTONOMY
LACK OF
AUTONOMY

PUBLIC CORPORATION
Public corporation is an autonomous organisationPublic corporation is an autonomous organisation
which is established by a special Act of thewhich is established by a special Act of the
Central or State Legislatures. This Special ActCentral or State Legislatures. This Special Act
defines its powers, duties, functions, immunitiesdefines its powers, duties, functions, immunities
and the pattern of management. It is also knownand the pattern of management. It is also known
as Statutory Corporation.as Statutory Corporation.
ExampleExample ::
Life Insurance corporation,Life Insurance corporation,
Indian Air Lines,Indian Air Lines,
Air India,Air India,
State Bank of India,State Bank of India,
Oil and Natural Gas Commission.Oil and Natural Gas Commission.

1. Formation : Public Corporation is created by a special Act of Central or State
Legislature.
2. Separate Legal Entity : Like a company, it has a separate legal entity. It can sue
and be sued.
3. Management & Control : It is managed by the Board of Directors.
4. Finance : it is wholly financed by the government.
5. Borrowing Powers : It has powers to borrow funds from government as well as
public.
6. Authority to use Revenue : It has authority to use its revenue to meet its
expenditure.
7. Budgeting and Audit : It has powers to prepare its own budgets.
8. Accountability : It is accountable to the public through concerned legislatures.
9. Public Service Motive : Its primary motive of formation is public service and not

MERITS OF AMERITS OF A
PUBLICPUBLIC
CORPORATIONSCORPORATIONS
MERITS OF AMERITS OF A
PUBLICPUBLIC
CORPORATIONSCORPORATIONS
EASY TO RAISE FUNDSEASY TO RAISE FUNDSEASY TO RAISE FUNDSEASY TO RAISE FUNDS
OPERATIONAL AUTONOMYOPERATIONAL AUTONOMYOPERATIONAL AUTONOMYOPERATIONAL AUTONOMY
WORKS WITH SERVICE MOTIVEWORKS WITH SERVICE MOTIVEWORKS WITH SERVICE MOTIVEWORKS WITH SERVICE MOTIVE
ACCOUNTABILITYACCOUNTABILITYACCOUNTABILITYACCOUNTABILITY FLEXIBILITYFLEXIBILITYFLEXIBILITYFLEXIBILITY

MERITS OF PUBLIC CORPORATIONMERITS OF PUBLIC CORPORATIONMERITS OF PUBLIC CORPORATIONMERITS OF PUBLIC CORPORATION
LACK OFLACK OF
AUTONOMY INAUTONOMY IN
PRACTICEPRACTICE
LACK OFLACK OF
AUTONOMY INAUTONOMY IN
PRACTICEPRACTICE
UNRESPONSIVEUNRESPONSIVE
TOWARDSTOWARDS
CONSUMERSCONSUMERS
UNRESPONSIVEUNRESPONSIVE
TOWARDSTOWARDS
CONSUMERSCONSUMERS
DIFFICULTY INDIFFICULTY IN
CHARGINGCHARGING
THE ACTTHE ACT
DIFFICULTY INDIFFICULTY IN
CHARGINGCHARGING
THE ACTTHE ACT

GOVERNMENT COMPANY
A government company is a company which at least 51 % of
the paid up share capital is held by:
(a) the Central Government
(b) any State Government
(c) Partly Central Government and partly State Government (s).
Government company includes a company which is a
subsidiary of such a company.
Example :
State Trading Corporations (STC),
Hindustan Machine Tools (HMT),
Maruti Udyog Ltd.

1. Formation : It is formed by complying with the provisions of The
Company Act, 1956.
2. Separate Legal Entity : Like any other company, it has a separate legal
entity.
3. Management & Control : It is managed by the Board of Directors. The
members are nominated by the government and elected by the
shareholders.
4. Ownership : At least 51% of the share capital is held the Central or
state Government or by both.
5. Staffing and terms of service : Its employees are not civil servants.
They are appointed by the company on its own terms and conditions.
6. Finance : It can raise funds from government or public.
7. Power to use revenues : It has power to use revenues.

8.8. Operational AutonomyOperational Autonomy : It runs an Commercial: It runs an Commercial
principles like, private enterprise and enjoys higherprinciples like, private enterprise and enjoys higher
degree of freedom from government interference.degree of freedom from government interference.
It can frame its own rules and regulation to governIt can frame its own rules and regulation to govern
its internal management.its internal management.
9.9. Annual ReportsAnnual Reports : Its annual reports and accounts: Its annual reports and accounts
along with the audit reports are to be presented toalong with the audit reports are to be presented to
the legislatures as per The Companies Act.the legislatures as per The Companies Act.
10.10. Appointment of AuditorsAppointment of Auditors : Its auditors are: Its auditors are
appointed by the government on the advice ofappointed by the government on the advice of
Comptroller and Auditor General of India (CAG).Comptroller and Auditor General of India (CAG).
11.11. Borrowing PowersBorrowing Powers : It has powers to borrow.: It has powers to borrow.

MERITS OF A GOVERNMENT COMPANYMERITS OF A GOVERNMENT COMPANY
EASY TO FORMEASY TO FORM
FLEXIBILITY OF RAISING CAPITALFLEXIBILITY OF RAISING CAPITAL
OPERATIONAL FLEXIBILITYOPERATIONAL FLEXIBILITY
EASY TO AMEND DOCUMENTSEASY TO AMEND DOCUMENTS
FACILITATES PRIVATE PARTICIPATIONFACILITATES PRIVATE PARTICIPATION

DEMERITS OF A GOVERNMENT COMPANYDEMERITS OF A GOVERNMENT COMPANY
LACK OF
ACCOUNTABILITY
LACK OF
ACCOUNTABILITY
LACK OF
CONTINUITY IN
POLICIES & MGMT.
LACK OF
CONTINUITY IN
POLICIES & MGMT.
FEAR OF PUBLIC
ACCOUNTABILITY
FEAR OF PUBLIC
ACCOUNTABILITY
ABSENCE OF
REAL AUTONOMY
ABSENCE OF
REAL AUTONOMY
LACK OF
PROFESSIONAL
EXPERIENCE
LACK OF
PROFESSIONAL
EXPERIENCE

CHANGING ROLE OF PUBLIC
SECTOR
Despite the considerable role in the economic development of the country, the
public sector has its ills and these are many. For instance over 100 of the 242
Central Public sector Undertakings are loss making units with many of them
terminally sick. In the present era of globalisation and liberalisation, it is required
to bring reforms in public sector undertaking. The government has realised the
need of reforming the public sector undertakings.
Reforming, Public Sector Enterprise is neither a simple nor uniform process.
Each enterprise is different from the other. The objectives are often different
and for these reasons it is required to do different reform measure.
The measures for reforming the Public Sector Enterprise are broadly divided
into following.
1. Reforming Public Sector Enterprises by signing Memorandum of Understanding
(MOU).
2. Green field Privatization
3. Reforming Public Sector Enterprises by selling their assets either partially or
wholly to the private sctor or to the general public.

Public and private enterprises

GLOBALIZATION
Globalization is the system of
interaction among the countries of
the world in order to develop the
global economy. Globalization refers
to the integration of economics and
societies all over the world.
Globalization involves
technological, economic, political,
and cultural exchanges made possible
largely by advances in
communication, transportation, and
infrastructure.

EFFECTS OF GLOBALIZATION
• Improvement of International Trade.
• Technological Progress.
• Increasing Influence of Multinationals.
• Power of the WTO, IMF, and WB.
• Greater Outsourcing of BPO’S.
• Greater Mobility of Human Resources.
• Civil Society.

DRAWBACKS OF GLOBALISATIONDRAWBACKS OF GLOBALISATION
• Increased flow of skilled and non-skilled jobs from developed to
developing nations as corporations seek out the cheapest labour.
• Corporate influence of nation-states far exceeds that of civil society
organizations and average individuals.
• Greater risk of diseases being transported unintentionally between
nations
• Spread of a materialistic lifestyle and attitude International bodies
like the World Trade Organization infringe on national and individual
sovereignty
• Increase in the chances of civil war within developing countries and
open war between developing countries as they vie for resources
• Decreases in environmental integrity as polluting corporations take
advantage of weak regulatory rules in developing countries

MULTINATIONAL COMPANIES
A multinational corporation is a
corporation that has its facilities and
other assets in at least one country other
than its home country. Such companies
have offices and/or factories in different
countries and usually have a centralized
head office where they co-ordinate global
management.
Very large multinationals have budgets
that exceed those of many small
countries.

EXAMPLES OF
EXAMPLES OF
INFOSYSINFOSYS
BILLABONGBILLABONG
SONYSONY
FORDFORD
KARGILLKARGILL
AMWAYAMWAY

FEATURES OF MNC’sFEATURES OF MNC’sFEATURES OF MNC’sFEATURES OF MNC’s
1. huge amount of capitalhuge amount of capital
2. large sized plant and machinery2. large sized plant and machinery
3. various activities3. various activities
4. expansion on large scale4. expansion on large scale
5. professional management5. professional management
6. advance technology6. advance technology
7. market expansion7. market expansion
8. profit is the main objective8. profit is the main objective
9. control of head office9. control of head office
10. creation of new project10. creation of new project
1. huge amount of capitalhuge amount of capital
2. large sized plant and machinery2. large sized plant and machinery
3. various activities3. various activities
4. expansion on large scale4. expansion on large scale
5. professional management5. professional management
6. advance technology6. advance technology
7. market expansion7. market expansion
8. profit is the main objective8. profit is the main objective
9. control of head office9. control of head office
10. creation of new project10. creation of new project

BENEFITS OF MNC’s
raining of local labor with more sophisticated
techniques which on the long run will bring
external benefits to the host country when these
techniques can be used in all economic sector.
raise the growth rate of host nation by
introducing new investment and new technology.
induce their local rivals to become more
innovative and competitive.
promote improvement or development to various
supporting industry or complementary
industries
contributions of taxation, plus providing the host
country with foreign exchange that can be used to
purchase vital imports.

 MNC may enjoys high competitive advantages over local firms that
can destroy local competition rather than promote it.
 they can require their subsidiaries to operate polices that may be
inefficient or create distortion in local market
 they may misuse the environment
 they may create uncertainty because foreign firms control the
country within it by controlling part of its industries.
 they may not promote any development for the nation's economic
activities by simply source their components from abroad. which
means the they will drive local producers out of business.
 avoid tax by practicing transfer pricing.

JOINT VENTURES
A contractual agreement joining together
two or more parties for the purpose of
executing particular business undertaking.
All parties agree to share in
the profits and losses of the enterprise.

BENEFITS OF JOINT VENTURE
• Provide companies with the opportunity to gain new capacity
and expertise
• Allow companies to enter related businesses or new
geographic markets or gain new technological knowledge
• access to greater resources
• sharing of risks with a venture partner
• Joint ventures can be flexible. For example, a joint venture
can have a limited life span and only cover part of what you
do, thus limiting both your commitment and the business'
exposure.

EXAMPLES OF JOINT VENTURESEXAMPLES OF JOINT VENTURES
SONY ERICSSONSONY ERICSSON
COLGATE AND PALMOLIVCOLGATE AND PALMOLIV
VIRGIN MOBILE INDIA LIMITEDVIRGIN MOBILE INDIA LIMITED
NEWYORK LIFE INSURANCENEWYORK LIFE INSURANCE

DRAWBACKS OF JOINT VENTURE
• It takes time and effort to build the right relationship and partneringIt takes time and effort to build the right relationship and partnering
with another business can be challenging. Problems are likely towith another business can be challenging. Problems are likely to
arise ifarise if
• The objectives of the venture are not 100 per cent clear andThe objectives of the venture are not 100 per cent clear and
communicated to everyone involved.communicated to everyone involved.
• There is an imbalance in levels of expertise, investment or assetsThere is an imbalance in levels of expertise, investment or assets
brought into the venture by the different partners.brought into the venture by the different partners.
• Different cultures and management styles result in poor integrationDifferent cultures and management styles result in poor integration
and co-operation.and co-operation.
• The partners don't provide enough leadership and support in theThe partners don't provide enough leadership and support in the
early stages.early stages.
• Success in a joint venture depends on thorough research and

JOINT SECTOR ENTERPRISESJOINT SECTOR ENTERPRISES
A joint sector enterprises is one which isA joint sector enterprises is one which is
owned, managed and controlled jointly byowned, managed and controlled jointly by
the private entrepreneurs and thethe private entrepreneurs and the
government. For example, Cochingovernment. For example, Cochin
Refineries, Gujarat State FertilizersRefineries, Gujarat State Fertilizers
Company. Such enterprises are organized toCompany. Such enterprises are organized to
encourage private entrepreneurs toencourage private entrepreneurs to
participate in industrial development jointlyparticipate in industrial development jointly
with the government.with the government.

JOINT OWNERSHIPJOINT OWNERSHIPJOINT OWNERSHIPJOINT OWNERSHIP
JOINT MANAGEMENTJOINT MANAGEMENTJOINT MANAGEMENTJOINT MANAGEMENT
JOINT FINANCINGJOINT FINANCINGJOINT FINANCINGJOINT FINANCING
SOCIO-ECONOMIC OBJECTIVESSOCIO-ECONOMIC OBJECTIVESSOCIO-ECONOMIC OBJECTIVESSOCIO-ECONOMIC OBJECTIVES
JOINT ACCOUNTABILITYJOINT ACCOUNTABILITYJOINT ACCOUNTABILITYJOINT ACCOUNTABILITY

CHARACTERISTICSCHARACTERISTICS
Joint OwnershipJoint Ownership : Joint sector enterprises are: Joint sector enterprises are
owned by private entrepreneurs and theowned by private entrepreneurs and the
government.government.
Joint ManagementJoint Management : Such enterprises are mainly: Such enterprises are mainly
managed by private entrepreneurs.managed by private entrepreneurs.
Joint FinancingJoint Financing : Such enterprises are financed: Such enterprises are financed
jointly by private entrepreneurs and thejointly by private entrepreneurs and the
government. The proportion of capital to begovernment. The proportion of capital to be
continued is decided by mutual consent.continued is decided by mutual consent.
Socio-Economic ObjectivesSocio-Economic Objectives : Such enterprises: Such enterprises
are guided by both the profit and socialare guided by both the profit and social
objectives.objectives.
Joint AccountabilityJoint Accountability : Such enterprises are: Such enterprises are
accountable both to the private entrepreneurs andaccountable both to the private entrepreneurs and
the government.the government.

PRIVATE SECTORPRIVATE SECTOR
PRIVATE SECTORPRIVATE SECTOR
A private sector enterprise or a privateA private sector enterprise or a private
enterprise is one which is owned, managed andenterprise is one which is owned, managed and
controlled by private entrepreneurs. Forcontrolled by private entrepreneurs. For
example, business houses managed by Tataexample, business houses managed by Tata
such as TELCO, TISCO, TATAPOWERS,such as TELCO, TISCO, TATAPOWERS,
business houses managed by Birlas such asbusiness houses managed by Birlas such as
Century,MPRL, Birla Yamaha, GrasimCentury,MPRL, Birla Yamaha, Grasim
Industries, business houses managed byIndustries, business houses managed by
Ambanies such as Reliance Industries, RelianceAmbanies such as Reliance Industries, Reliance
Petroleum, Reliance Capital etc….Petroleum, Reliance Capital etc….

CHARACTERISTICS OF
PRIVATE SECTOR ENTERPRISES
CHARACTERISTICS OF
PRIVATE SECTOR ENTERPRISES
PRIVATE OWNERSHIPPRIVATE OWNERSHIP
PRIVATE FINANCINGPRIVATE FINANCING
PRIVATE MANAGEMENTPRIVATE MANAGEMENT
PRIVATE ACCOUNTABILITYPRIVATE ACCOUNTABILITY
PROFIT OBJECTIVEPROFIT OBJECTIVE

• Private OwnershipPrivate Ownership : These enterprises are owned
by private entrepreneurs.
• Private ManagementPrivate Management : The rights of management
vest in the owner but professionals can be
employed for the efficient management of such
enterprise.
• Private FinancingPrivate Financing : Such enterprises are financed
by the private entrepreneurs.
• Profit ObjectiveProfit Objective : Such enterprises are mainly
guided by profit objective.
• Private AccountabilityPrivate Accountability : Those who manage such
CHARACTERISTICS

SOLE PROPRIETORSHIP
'Sole' means single and 'proprietorship' means
ownership. It means only one person or an
individual becomes the owner of the business.
Thus, the business organisation in which a
single person owns, manages and controls all
the activities of the business is known as sole
proprietorship form of business organisation.
The individual who owns and runs the sole
proprietorship business is called a ‘sole
proprietor’ or ‘sole trader’. A sole proprietor
pools and organizes the resources in a
systematic way and controls the activities with
the sole objective of earning profit.

1. Single Ownership
2. No sharing of Profit and Loss
3. One-man’s Capital
4. One-man Control
5. Unlimited Liability
6. Less legal formalities

ADVANTAGES
Easy to Form and Wind up
Direct Motivation
Quick Decision and Prompt Action
Better Control
Maintenance of Business Secrets
Close Personal Relation
Flexibility in Operation
Encourages Self-employment

LIMITATIONS
 Limited Capital
 Unlimited Liability
 Lack of Continuity
 Limited Size
 Lack of Managerial Expertise:

PARTNERSHIP
A legal contract entered into by two or
more persons in which each agrees
to furnish a part of the capital and
labor for a business enterprise, and
by which each shares a fixed
proportion of profits and losses.

FEATURES
 Formation according to the Partnership Act of 1932.
 Financing with the help of partners.
 All have right to take part in Management .
 Restriction on Transfer of Interest, no partner can transfer the
interest.
 Unlimited Liability of Partners.
 Duration is according to the type of partnerships.
 Taxation.
 Implied Authority.

ADVANTAGES
 Easy to set up.
 More capital can be brought into the business.
 Partners bring new skills and ideas to a
business.
 Decision making can be much easier with more
brains to think about a problem.
 Partners share responsibilities and duties of the
business.
 Division of labour is possible as partners may
have different skills.

LIMITATIONS
o Instability of the firm.
o Limited resources due to restriction
maximum membership.
o Unlimited liability.
o Scope for friction and quarrel.
o No continuity.

JOINT HINDU FAMILY
Joint Hindu Family Business is a different type of
organization, which is found only in India. As the
name suggests, it is type of organization in which
all the members of Hindu Undivided Family
manage and control the business with the direction
of head of the family.
It is not a Partnership. It is just like a Partnership
where only the members of the family can take
part. It is not even sole trading concern, but it is
enlargement of sole trading concern in which
continuity is guaranteed. The business is carried
on from generation to generation. It comes into
existence by the operation of Hindu law.

FEATURES
Comes into existence by Hindu Law.
No outside membership. Male members up to three
successive generations of a family own the business jointly.
The senior most co-parcener, known as KARTA has the
implied authority to run the business.
Even if the co-parceners have equal share, it fluctuates
with every birth and death of a male in the family.
The liability of the members are limited to the extent of
their share but the liability of the karta is unlimited.

ADVANTAGES
 Assured share in profits.
 Sharing of knowledge and
experience among members.
 Co-operative efforts.
 Unlimited liability of the karta.
 Continued existence.

LIMITATIONSLIMITATIONSLIMITATIONSLIMITATIONS
a.Limited resources.
b.Lack of motivation
among members.
c.Scope for misuse of
power by karta.
d.Scope for conflict and
instability.
a.Limited resources.
b.Lack of motivation
among members.
c.Scope for misuse of
power by karta.
d.Scope for conflict and
instability.

COOPERATIVE SOCIETY
Any ten persons can form a co-operative society.
It functions under the Cooperative Societies Act,
1912 and other State Co-operative Societies Acts.
A co-operative society is entirely different from
all other forms of organisation. The co-
operatives are formed primarily to render
services to its members. Generally it also
provides some service to the society. The main
objectives of co-operative society are:
(a)rendering service rather than earning profit,
(b)mutual help instead of competition, and
(c)self help in place of dependence

COOPERATIVE SOCIETYCOOPERATIVE SOCIETY
CONSUMERCONSUMER
CREDITCREDIT MARKETTINGMARKETTING
FARMINGFARMING HOUSINGHOUSING
PRODUCERSPRODUCERS

FEATURES
o It is a body corporate that enjoys certain privileges like a
joint stock company.
o Its primary objective is to render services to its members in
particular and society in general.
o Its management is most democratic in nature as compared to
other forms of business organisations.
o Its major finance is raised through government loans, grants,
subsidies and outside donations.
o Members get return on capital at a fixed rate of dividend
from the profit as per the Societies Act.

ADVANTAGES
Formation is easy.
Democratic management.
Assistance from the government.
Elimination of middlemen’s profit.
Fairly stable life.

LIMITATIONS
Limited capital.
Lack of managerial talent.
Lack of motivation.
Lack of secrecy.
Dependence on the government.

JOINT STOCK COMPANY
A Joint Stock Company form of organisation is a voluntary association
of persons to carry on business.
It is an association of persons who generally contribute money for
some common purpose. The money so contributed is the capital of the
company. The persons who contribute capital are its members. The
proportion of capital to which each member is entitled is called his
share, therefore members of a joint stock company are known as
shareholders and the capital of the company is known as share capital.
The total share capital is divided into a number of units known as
‘shares’. You may have heard of the names of joint stock companies like
Tata Iron & Steel Co. Limited, Hindustan Lever Limited, Reliance
Industries Limited, Steel Authority of India Limited, Ponds India
Limited etc.
The companies are governed by the Indian Companies Act, 1956. The
Act defines a company as an artificial person created by law, having
separate entity, with perpetual succession and a common seal.

COMPANYCOMPANY
PUBLIC LIMITED
COMPANY
PUBLIC LIMITED
COMPANY
PRIVATE LIMITED
COMPANY
PRIVATE LIMITED
COMPANY

EXAMPLES OF PRIVATE LIMITED COMPANIESEXAMPLES OF PRIVATE LIMITED COMPANIES
Reliance Industries LimitedReliance Industries Limited
Tata Consultancy Services (TCS)Tata Consultancy Services (TCS)
Hero Honda Motors LimitedHero Honda Motors Limited
TATA Steel LimitedTATA Steel Limited

EXAMPLES OF PUBLIC LIMITED COMPANIESEXAMPLES OF PUBLIC LIMITED COMPANIES
Indian Oil Corporation (IOC)Indian Oil Corporation (IOC)
Bharat Heavy Electricals Limited (BHEL)Bharat Heavy Electricals Limited (BHEL)
Indian AirlinesIndian Airlines
Steel Authority of India Limited (SAIL)Steel Authority of India Limited (SAIL)

FEATURES
 Artificial Person.
 Separate legal Entity.
 Common Seal.
 Perpetual Existence.
 Limited liability of Members.
 Transferability of Shares.
 Minimum membership– 2 for Private limited
company for public limited company.
 Maximum membership – 50 for Private limited
company and unlimited for Public limited
company.

ADVANTAGES
Limited liability
Continuity of existence
Benefits of large scale operation
Professional management
Contribution to the society through
creation of employment, promoting
ancillary industries etc.
Research and Development

LIMITATION
Compliance with several laws and
fulfillment of a number of legal.
formalities during formation.
Management and control by a group.
Shares are subject to manipulation and
speculation.
Government interference.
Scope of misuse of resource power.

CHANGING ROLE OF PRIVATE SECTORCHANGING ROLE OF PRIVATE SECTOR
The private sector has done more than expected.The private sector has done more than expected.
India's software industry is world class. Indian manufacturing has finally becomeIndia's software industry is world class. Indian manufacturing has finally become
competitive.competitive.
Indian companies are making foreign acquisitions galore and becoming MNCs - TataIndian companies are making foreign acquisitions galore and becoming MNCs - Tata
Steel, Bharat Forge, Tata Motors and Ranbaxy are a few examples.Steel, Bharat Forge, Tata Motors and Ranbaxy are a few examples.
Power was long a state monopoly, and state electricity boards were bankrupt whenPower was long a state monopoly, and state electricity boards were bankrupt when
reforms began in 1991.reforms began in 1991.
The second green revolution is being energised by the private sector, not the publicThe second green revolution is being energised by the private sector, not the public
sector.sector.
Reliance has led the charge into rural areas in Punjab with a farm-to-fork operation -Reliance has led the charge into rural areas in Punjab with a farm-to-fork operation -
managing the chain from seeds and crops to processing and hypermarket sales.managing the chain from seeds and crops to processing and hypermarket sales.
ITC is rapidly expanding its e-choupals.ITC is rapidly expanding its e-choupals.
The Mahindras, Tatas and Shrirams are setting up rural supermarkets.The Mahindras, Tatas and Shrirams are setting up rural supermarkets.
The government developed the idea of deficiency payments for roads, with the contractThe government developed the idea of deficiency payments for roads, with the contract
going to the bidder requiring the lowest toll subsidy.going to the bidder requiring the lowest toll subsidy.

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