Private, Public, and Global Enterprises
We have all come across different types of organizations in our daily life. There are shops owned by Sole Proprietor or big retail organizations run by a Company. Then there are people providing services like legal services, medical services, is owned by one or more person i.e. Partnership Firms. These are all privately-owned organizations. Similarly, there are other offices and places of business that may be owned by the government. There are businesses that operate in more than one country known as Global Enterprise. There are all kinds of business organizations small or large, industrial or trading, privately owned or government owned existing in our country. Since the Indian economy consists of privately owned and government-owned business enterprises, it is known as a mixed economy.
The Private Sector consists of businesses owned by individuals or a group of individuals. Whereas the Public Sector consists of various organizations owned and managed by Government.
Forms of Organizing Public Sector Enterprises:
Some kind of organizational framework is needed for the Government’s participation in business and economic sectors of the country to function. In the Public Sector, Government plays a major role in organizing and formulating the key points related to an organization. The Government acts through its people, its offices, and employees who take decisions on behalf of the Government. For this, Public enterprises were formed by the government to participate in the economic activities of the country. These public enterprises are owned by the public and accountable to the public through the parliament. A public enterprise may take any particular form of organization depending upon the nature of its operation and its relationship with the government. The forms of organization that a public enterprise may take are as follows:
- Departmental Undertaking
- Statutory Corporation
- Government Company
1. Departmental Undertaking:
Departmental enterprises are established as departments of the ministry and are considered part or an extension of the ministry itself. They have not been constituted as autonomous or independent institutions and as such are not independent legal entities. These undertakings are under Central or State Government and the rules of Central/State Government are applicable. Eg. Railways
Features: The main characteristics of Departmental Undertaking are as follows-
- The funding of these undertakings comes directly from the government.
- They are subject to accounting and audit controls applicable to other govt. activities.
- The recruitment and conditions of employment are the same as any other employee directly under the government.
- It is subject to direct control of the concerned ministry.
- Accountability of such enterprise is to the concerned ministry.
2. Statutory Corporations:
Statutory Corporations are public enterprises that are brought into existence by a Special Act of Parliament. The Act defines its powers and functions, rules and regulations governing its employees, and its relationship with government departments. It enjoys the legal identity of a corporate person and has the capacity of acting in its own name.
Features: Statutory Corporations have certain distinct features, which are discussed as below-
- These are set up under an Act of Parliament and are governed by the provisions of the Act.
- This type of organization is wholly owned by the state.
- These act as a corporate body and can sue or be sued, enter into a contract and own property in its own name.
- This type of organization is usually independently financed.
- These are not subject to the same accounting and audit controls applicable to other govt. departments.
3. Government Company:
A Government company is established under the Indian Companies Act and is registered and governed by the provisions of the Indian Companies Act. According to the Indian Companies Act 2013, any company in which not less than fifty-one percent of the paid-up share capital is held by the Central Government, or by any State Government or Government, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company is called Government Company.
Features: Government Company has certain characteristics which makes them distinct from other forms of organizations. These are discussed as follows-
- It is an organization created by the Indian Companies Act 2013.
- It has a legal identity.
- The management of the company is regulated by the provisions of the Companies Act, like any other Public Limited Co.
- The employees of the organization are appointed according to their own rules and regulations.
- These companies are exempted from the accounting and audit rule procedures. An appointed auditor by the central or state govt. presents the Annual Report directly in the parliament or state legislature.
Changing Role of Public Sector:
At the time of Independence, public sector enterprises were formed to play an important role in achieving certain objectives of the economy either by direct participation in the business or as a catalyst. At that time, the private sector was unwilling to invest in projects which required heavy investment and had a long gestation period. In the post 90’s period, after going through a lot of transition, the New Economic Policy emphasized liberalization, privatization, and globalization. The role of the public sector was redefined. It was not supposed to play a passive role but to actively participate and compete in the market with other private sector companies in the same industry. The role of the public sector is definitely not what was envisaged in the early 60s or 70s.
1. Development of Infrastructure.
2. Regional Balance.
3. Economies of Scale.
4. Check Over Concentration of Economic Power.
5. Import Substitutions.
6. Government Policy Towards the Public Sector Since 1991.
Global Enterprises also known as Multi-National Corporations(MNCs) are gigantic corporations that have their operations in a number of companies. They are characterized by their huge size, a large number of products, advanced technology, marketing strategies, and network of operations all over the world.
Features: These corporations have distinct features which distinguish them from other private sector companies, public sector companies, and public sector enterprises. They are as follows-
- They have huge financial resources.
- These enterprises often enter into agreements with Indian companies pertaining to the sale of technology, production of goods, etc.
- These companies possess technological superiorities in their method of production.
- They have highly sophisticated research and development departments.
- Their operations and activities extend beyond the physical boundaries of their own country.
- They have their headquarters in their home country and exercise control over all branches and subsidiaries.
Joint ventures may mean many things, depending upon the context we are using them in. But in a broader sense, a Joint Venture is the pooling of resources and expertise by two or more businesses, to achieve a particular goal. The risks and rewards of the business are also shared.
Benefits: This form of organization enjoys certain advantages in its working which are as follows-
- Joint ventures enjoy increased resources and capacity.
- Getting into a joint venture gives companies access to new markets and distribution networks.
- Access to superior technology.
- It allows a business to come up with something new and creative for the same market.
- It enables them to operate at a low cost of production.
- It helps them establish a brand name.