NCERT Solution for Class 11 Business Studies Chapter 3 – Private, Public and Global Enterprises

NCERT Solution for Class 11 Business Studies Chapter 3 – Private, Public and Global Enterprises

NCERT Solutions are an invaluable resource for students preparing for the CBSE Class 11 Business Studies exams. These solutions, curated by subject matter experts, provide comprehensive knowledge and are highly effective for exam preparation. NCERT Solutions for Class 11 Business Studies Chapter 3 – Private, Public and Global Enterprises offer a concise introduction to the fundamental concepts in Business Studies.

Short Answer Questions

Q. 1. Explain the concept of public sector and private sector.

Ans.

Public Sector and Private Sector

Public Sector:

• Definition: The public sector consists of government-owned and operated organizations. These entities are funded by tax revenues and are accountable to the government and the public.
• Purpose: The primary goal of public sector organizations is to provide essential services to the community, such as education, healthcare, transportation, and public safety.
• Examples: Examples of public sector organizations in India include Indian Railways, Bharat Sanchar Nigam Limited (BSNL), and the Indian Post Office.

Private Sector:

• Definition: The private sector is composed of privately-owned businesses and organizations. These entities are funded by private investments and are accountable to their owners and shareholders.
• Purpose: The primary objective of private sector organizations is to generate profit and grow their business. They offer a wide range of goods and services to consumers.
• Examples: Examples of private sector companies in India include Tata Group, Reliance Industries, and Infosys.

Q. 2. State the various types of organisations in the private sector.

Ans.

Types of Organizations in the Private Sector

1. Sole Proprietorship:

• Definition: A business owned and operated by a single individual.
• Characteristics: The owner has full control, enjoys all profits, and bears all risks.

2. Partnership:

• Definition: A business owned by two or more individuals who share profits, losses, and responsibilities.
• Characteristics: Partnership agreements outline each partner’s role and share of profits.

3. Joint Hindu Family Business:

• Definition: A business owned by members of a Hindu Undivided Family and governed by Hindu law.
• Characteristics: The business is managed by the eldest male member, known as the “Karta.”

4. Cooperative Society:

• Definition: A voluntary association of individuals who come together to achieve a common economic goal.
• Characteristics: Profits are distributed among members based on their participation.

5. Company:

• Definition: A business entity registered under the Companies Act, with legal existence separate from its owners.
• Characteristics: Companies can be private or public, with limited liability for shareholders.

Q. 3. What are the different kinds of organisations that come under the public sector?

Ans.

Types of Organizations in the Public Sector

1. Departmental Undertakings:

• Definition: These are government agencies managed by government departments.
• Examples: Indian Railways, All India Radio, and Doordarshan.
• Characteristics: They are funded directly by the government and operate under strict government control.

1. Public Corporations:

• Definition: These are autonomous or semi-autonomous entities established by a special act of parliament or state legislature.
• Examples: Life Insurance Corporation of India (LIC), State Bank of India (SBI).
• Characteristics: They enjoy a greater degree of independence and flexibility compared to departmental undertakings.

1. Government Companies:

• Definition: These are companies in which the government holds at least 51% of the paid-up capital.
• Examples: Bharat Heavy Electricals Limited (BHEL), Oil and Natural Gas Corporation (ONGC).
• Characteristics: They are registered under the Companies Act and operate like private enterprises but under government control.

Q. 4. List the names of some enterprises under the public sector and classify them.

Ans.

Public Sector Enterprises

1. Departmental Undertakings:

• Indian Railways: Provides railway transportation services.
• All India Radio (AIR): Offers broadcasting services.
• Doordarshan: Provides television broadcasting services.

2. Public Corporations:

• Life Insurance Corporation of India (LIC): Offers life insurance services.
• Food Corporation of India (FCI): Ensures food security and procurement.

3. Government Companies:

• Bharat Heavy Electricals Limited (BHEL): Manufactures electrical equipment.
• Oil and Natural Gas Corporation (ONGC): Engages in oil and gas exploration and production.
• Steel Authority of India Limited (SAIL): Produces steel and related products.

Q. 5. Why is the government company form of organisation preferred to other types in the public sector?

Ans.

Preference for Government Company Form of Organization

1. Operational Flexibility:

• Government companies have greater autonomy compared to departmental undertakings and public corporations. They operate like private enterprises, allowing for more efficient decision-making and responsiveness to market changes.

1. Professional Management:

• Government companies often attract professional managers and skilled employees due to their corporate structure and competitive salaries, leading to better management and performance.

1. Access to Capital:

• As government companies can raise funds through equity and debt from the capital market, they have access to larger financial resources for expansion and modernization.

1. Legal Status:

• Registered under the Companies Act, government companies enjoy a separate legal identity, limited liability, and perpetual succession, which enhances investor confidence and operational stability.

1. Government Support:

• Despite operating independently, government companies benefit from government ownership, which can provide financial backing, policy support, and a reliable customer base.

Q. 6. How does the government maintain a regional balance in the country?

Ans.

Maintaining Regional Balance by the Government

1. Decentralized Development:

• The government promotes regional development by decentralizing economic activities and encouraging investments in less developed areas to reduce regional disparities.

1. Special Economic Zones (SEZs):

• Establishment of SEZs in various regions to attract foreign and domestic investments, create job opportunities, and boost regional economies.

1. Infrastructure Development:

• Investing in infrastructure projects like roads, railways, airports, and ports in underdeveloped regions to improve connectivity and promote economic growth.

1. Fiscal Incentives:

• Providing tax concessions, subsidies, and other financial incentives to businesses that set up operations in economically backward regions.

1. Skill Development Programs:

• Implementing skill development and training programs to enhance the employability of the local workforce in less developed areas.

1. Targeted Schemes:

• Launching specific schemes and initiatives aimed at the development of particular regions, such as the North Eastern Region Development Scheme or the Backward Regions Grant Fund.

Q. 7. State the meaning of public private partnership.

Ans.

Public-Private Partnership (PPP)

Definition:

• A Public-Private Partnership (PPP) is a cooperative arrangement between the public sector (government) and the private sector (businesses) to jointly undertake projects and provide services.

Key Features:

1. Collaboration:

• Both the government and private entities share resources, risks, and rewards to achieve common objectives.

2. Efficiency:

• Private sector involvement brings in efficiency, innovation, and expertise to public projects.

3. Infrastructure Development:

• PPPs are commonly used in infrastructure projects such as roads, bridges, hospitals, and schools, aiming to improve public services and facilities.

4. Funding:

• Projects are funded through a combination of public funds and private investments, reducing the financial burden on the government.

This concise explanation should help you understand the concept of Public-Private Partnership (PPP) for your class 11 CBSE curriculum.

Long Answer Questions

Q. 1. Describe the Industrial Policy 1991, towards the public sector.

Ans.

Industrial Policy 1991: Towards the Public Sector

Introduction:

• The Industrial Policy of 1991 was a significant policy reform introduced by the Government of India to liberalize and modernize the Indian economy. The policy aimed to reduce government control and enhance the role of the private sector while retaining the importance of the public sector in certain strategic areas.

Objectives:

1. Economic Liberalization:

• To create a more competitive and efficient industrial environment by reducing bureaucratic hurdles and government intervention.

1. Promotion of Foreign Investment:

• To attract foreign direct investment (FDI) and foster technology transfer by allowing greater participation of foreign companies in the Indian market.

1. Disinvestment:

• To reduce the burden on government finances by disinvesting in certain public sector enterprises (PSEs) and encouraging privatization.

Key Features of the Policy towards the Public Sector:

1. Reduction in Public Sector Monopoly:

• The Industrial Policy of 1991 abolished the public sector monopoly in many industries except for a few strategic and essential sectors like defense, atomic energy, and railways. This opened up numerous industries to private sector participation.

1. Disinvestment and Privatization:

• The government initiated the process of disinvestment in PSEs by selling a portion of its equity to private investors. This aimed to improve efficiency, management, and accountability within these enterprises. Privatization of non-strategic PSEs was also encouraged.

1. Professional Management and Autonomy:

• PSEs were granted greater autonomy and encouraged to adopt professional management practices. The policy aimed to improve their performance by reducing political interference and allowing them to operate more like private sector companies.

1. Restructuring of Sick Units:

• The policy emphasized the need to restructure and revive sick public sector units (PSUs) to make them financially viable. Sick units that could not be revived were considered for closure to prevent further losses.

1. Encouragement of Joint Ventures:

• The policy encouraged PSEs to enter into joint ventures and strategic alliances with private sector companies, both domestic and international, to enhance their technological capabilities and competitiveness.

1. Focus on Core Areas:

• The policy directed PSEs to focus on core areas of competence and strategic importance. Non-core activities were either divested or outsourced to the private sector to improve efficiency and productivity.

Impact and Evaluation:

• The Industrial Policy of 1991 had a profound impact on the Indian economy. It led to increased private sector participation, higher FDI inflows, and modernization of industries. However, the policy also faced challenges such as social resistance to privatization, concerns over job losses in PSEs, and the need for effective regulatory frameworks to ensure fair competition.

Conclusion:

• The Industrial Policy of 1991 marked a pivotal shift in India’s economic strategy. By reducing the dominance of the public sector and fostering a more competitive environment, the policy aimed to create a more dynamic and resilient economy. While the transition presented challenges, the long-term benefits of liberalization and modernization have been significant in driving India’s economic growth.

Q. 2. What was the role of the public sector before 1991?

Ans.

Role of the Public Sector Before 1991

Introduction:

• Before the economic reforms of 1991, the public sector in India played a significant role in the nation’s economic development. The government’s intervention was driven by the need to achieve self-reliance, reduce regional disparities, and promote social welfare.

Objectives of the Public Sector:

1. Economic Growth:

• The public sector was seen as the primary driver of economic growth. The government invested heavily in large-scale industries, infrastructure, and basic services to stimulate industrialization and development.

1. Social Equity:

• The public sector aimed to promote social equity by ensuring the equitable distribution of resources and providing essential services to all sections of society, particularly the marginalized and underprivileged.

1. Self-Reliance:

• One of the key objectives was to achieve self-reliance in critical industries and reduce dependence on foreign imports. This included developing capabilities in sectors like steel, heavy machinery, and defense.

1. Employment Generation:

• The public sector was a major source of employment, providing jobs to millions of people across various industries. It aimed to address the issue of unemployment and provide stable livelihoods.

1. Regional Development:

• The government used the public sector to promote balanced regional development by establishing industries in less developed areas. This helped reduce regional disparities and promote inclusive growth.

Key Features of the Public Sector:

1. Large Investments:

• The government made substantial investments in the public sector, focusing on the development of core and heavy industries such as steel, coal, and power.

1. State Control:

• Public sector enterprises (PSEs) were owned and controlled by the government. They operated under strict regulations and government oversight to ensure alignment with national development goals.

1. Central Planning:

• Economic planning was centralized, with the government formulating Five-Year Plans to guide the development of the public sector. These plans set targets and priorities for various industries and sectors.

1. Monopoly in Strategic Sectors:

• The government maintained a monopoly in key strategic sectors such as defense, atomic energy, and railways to ensure national security and control over critical resources.

1. Subsidies and Support:

• The public sector received significant subsidies and financial support from the government to sustain operations and achieve social objectives. This included subsidies for basic services like healthcare, education, and transportation.

Impact and Evaluation:

1. Industrial Growth:

• The public sector played a crucial role in laying the foundation for India’s industrial growth. It established large-scale industries and infrastructure that contributed to economic development.

1. Social Welfare:

• The public sector’s focus on social equity led to improvements in healthcare, education, and other essential services, benefiting millions of people.

1. Challenges:

• Despite its contributions, the public sector faced several challenges, including inefficiencies, bureaucratic delays, and financial losses. Many PSEs struggled to compete with private enterprises and international markets.

1. Economic Reforms:

• The limitations and challenges of the public sector prompted the government to introduce economic reforms in 1991. These reforms aimed to liberalize the economy, reduce government control, and enhance the role of the private sector.

Conclusion:

• Before 1991, the public sector was a key pillar of India’s economic strategy, driving industrial growth, promoting social welfare, and striving for self-reliance. While it faced challenges, its contributions laid the groundwork for the nation’s development. The economic reforms of 1991 marked a shift towards a more market-oriented economy, reshaping the role of the public sector in India’s growth story.

Q. 3. Can the public sector companies compete with the private sector in terms of profits and efficiency? Give reasons for your answer.

Ans.

Can Public Sector Companies Compete with Private Sector in Terms of Profits and Efficiency?

Introduction:

• The debate on whether public sector companies can compete with private sector companies in terms of profits and efficiency has been ongoing for years. While public sector companies have historically been criticized for inefficiencies and lower profitability, there are instances where they have matched or even outperformed their private sector counterparts. This discussion explores the reasons for and against the competitiveness of public sector companies.

Arguments in Favor of Public Sector Competitiveness:

1. Access to Government Support:

• Public sector companies often benefit from government support in the form of subsidies, grants, and policy incentives. This financial backing can provide a cushion during economic downturns and help them invest in long-term projects.

1. Strategic Importance:

• Public sector companies often operate in sectors of strategic importance, such as energy, defense, and infrastructure. Their mandate to ensure national security and public welfare can drive investments in advanced technologies and efficient practices.

1. Economies of Scale:

• Many public sector companies operate on a large scale, which allows them to achieve economies of scale. This can lead to cost reductions and improved efficiency in production and distribution.

1. Public Accountability:

• Public sector companies are accountable to the government and the public, which can drive transparency and adherence to ethical practices. This accountability can foster a culture of responsibility and long-term sustainability.

1. Professional Management:

• With reforms and modernization efforts, many public sector companies have adopted professional management practices. This shift towards corporate governance and merit-based leadership can enhance operational efficiency.

Arguments Against Public Sector Competitiveness:

1. Bureaucratic Hurdles:

• Public sector companies often face bureaucratic delays and red tape, which can hinder decision-making and operational efficiency. This can lead to slower responses to market changes and reduced competitiveness.

1. Political Interference:

• Political considerations and interference can impact the strategic decisions of public sector companies. This can result in suboptimal investments and priorities that are not aligned with market demands.

1. Limited Profit Motive:

• Public sector companies often prioritize social objectives over profit maximization. While this focus on public welfare is essential, it can limit their ability to compete with private sector companies driven by profit motives.

1. Rigid Organizational Structures:

• The organizational structures of public sector companies can be rigid, making it difficult to adapt to changing market conditions. This lack of flexibility can impede innovation and responsiveness.

1. Resource Allocation:

• Public sector companies may face challenges in resource allocation due to competing government priorities and budget constraints. This can limit their ability to invest in research and development, marketing, and other critical areas.

Examples of Success:

• Despite these challenges, there are examples of public sector companies that have achieved significant success. For instance, Indian Railways has demonstrated profitability in certain segments, and the Indian Space Research Organisation (ISRO) has achieved global recognition for its cost-effective space missions.

Conclusion:

• While public sector companies face inherent challenges, they also possess unique strengths that can enable them to compete with private sector companies. The key to enhancing their competitiveness lies in adopting professional management practices, reducing bureaucratic hurdles, and leveraging government support strategically. By balancing social objectives with operational efficiency, public sector companies can achieve both profitability and public welfare.

Q. 4. Why are global enterprises considered superior to other business organisations?

Ans.

Why Are Global Enterprises Considered Superior to Other Business Organisations?

Introduction:

• Global enterprises, also known as multinational corporations (MNCs), operate in multiple countries and are often viewed as superior to other business organizations due to their extensive resources, market reach, and ability to drive economic growth. This discussion explores the reasons why global enterprises are considered superior and their impact on the global economy.

Extensive Resources:

1. Financial Strength:

• Global enterprises have access to vast financial resources, enabling them to invest in research and development, advanced technologies, and large-scale production facilities. This financial strength allows them to withstand economic fluctuations and maintain a competitive edge.

1. Human Capital:

• With operations in multiple countries, global enterprises attract a diverse and highly skilled workforce. They can leverage the expertise and talents of employees from different regions, fostering innovation and enhancing productivity.

1. Technological Advancements:

• Global enterprises invest heavily in cutting-edge technologies and innovation. This focus on technological advancements enables them to develop new products, improve processes, and stay ahead of competitors.

Market Reach and Expansion:

1. Global Presence:

• Operating in multiple countries provides global enterprises with a broad market reach. They can tap into diverse consumer bases, increase their customer base, and achieve higher sales volumes.

1. Economies of Scale:

• By producing and distributing products on a global scale, multinational corporations benefit from economies of scale. This results in lower production costs, higher efficiency, and competitive pricing.

1. Brand Recognition:

• Global enterprises often have strong brand recognition and loyalty. Their presence in multiple markets enhances their brand visibility and reputation, making it easier to attract and retain customers.

Economic Impact:

1. Foreign Direct Investment (FDI):

• Multinational corporations are significant contributors to foreign direct investment in host countries. Their investments in infrastructure, manufacturing, and services create job opportunities and stimulate economic growth.

1. Technology Transfer:

• Global enterprises facilitate the transfer of advanced technologies and best practices to host countries. This knowledge transfer enhances local industries’ capabilities and fosters innovation.

1. Trade and Export:

• Multinational corporations play a vital role in international trade. They contribute to the growth of exports from host countries, improving the trade balance and generating foreign exchange earnings.

Challenges and Criticisms:

1. Cultural Differences:

• Operating in diverse cultural environments can pose challenges for global enterprises. Navigating cultural differences and adapting business practices to local customs and preferences is essential for success.

1. Ethical Concerns:

• Multinational corporations may face ethical concerns related to labor practices, environmental impact, and corporate governance. Ensuring responsible and sustainable business practices is crucial to maintaining their reputation.

1. Market Dominance:

• The dominance of global enterprises in certain markets can lead to monopolistic practices and reduced competition. This concentration of market power can disadvantage smaller, local businesses.

Conclusion:

• Global enterprises are considered superior to other business organizations due to their extensive resources, market reach, and positive economic impact. Their ability to operate on a global scale, attract top talent, and invest in innovation gives them a competitive advantage. However, it is essential for these corporations to address challenges related to cultural differences, ethical concerns, and market dominance to ensure sustainable and inclusive growth.

Q. 5. What are the benefits of entering into joint ventures and public private partnership?

Ans.

Benefits of Entering into Joint Ventures and Public-Private Partnerships

Introduction:

• Joint ventures and public-private partnerships (PPPs) are collaborative arrangements that combine the strengths of two or more entities to achieve common objectives. These partnerships offer numerous benefits to the participating organizations and contribute to economic growth and development. This discussion explores the benefits of entering into joint ventures and PPPs.

Benefits of Joint Ventures:

1. Access to New Markets:

• Joint ventures provide an opportunity for companies to enter new markets and expand their customer base. By partnering with a local firm, companies can leverage their partner’s market knowledge and distribution channels.

1. Shared Resources and Expertise:

• In a joint venture, partners pool their resources, including capital, technology, and expertise. This collaboration allows both parties to benefit from each other’s strengths and capabilities.

1. Risk Sharing:

• Joint ventures enable companies to share the financial and operational risks associated with new projects. By dividing the risks, companies can undertake larger and more ambitious projects with greater confidence.

1. Innovation and R&D:

• Partnering with another company can lead to increased innovation and research and development (R&D) activities. Joint ventures encourage the exchange of ideas and technologies, resulting in the development of new products and solutions.

1. Cost Efficiency:

• Joint ventures can lead to cost savings through economies of scale, shared facilities, and optimized resource utilization. This cost efficiency enhances the overall profitability of the venture.

Benefits of Public-Private Partnerships (PPPs):

1. Infrastructure Development:

• PPPs are instrumental in developing critical infrastructure such as roads, bridges, airports, and hospitals. The collaboration between the public and private sectors ensures the timely and efficient completion of projects.

1. Access to Private Capital:

• PPPs attract private sector investments, reducing the financial burden on the government. This access to private capital enables the implementation of large-scale projects that might otherwise be delayed or unfeasible.

1. Improved Service Delivery:

• The involvement of the private sector brings in expertise, efficiency, and innovation, leading to improved service delivery in public projects. This results in better quality and more reliable public services.

1. Risk Management:

• In PPPs, risks are allocated to the party best equipped to manage them. This strategic risk allocation ensures that projects are managed effectively, reducing the likelihood of delays and cost overruns.

1. Job Creation and Economic Growth:

• PPPs stimulate economic growth by creating job opportunities and promoting local businesses. The development of infrastructure and services enhances the overall economic environment and attracts further investments.

1. Enhanced Public Welfare:

• PPPs focus on providing essential services to the public, such as healthcare, education, and transportation. These partnerships ensure that public welfare is prioritized while maintaining efficiency and cost-effectiveness.

Challenges and Considerations:

1. Alignment of Objectives:

• Successful joint ventures and PPPs require alignment of objectives and mutual trust between partners. Clear communication and well-defined agreements are essential to avoid conflicts and ensure the smooth functioning of the partnership.

1. Regulatory and Legal Issues:

• Navigating regulatory and legal frameworks can be challenging for both joint ventures and PPPs. Compliance with local laws, regulations, and policies is crucial for the success of the partnership.

1. Cultural Differences:

• In international joint ventures and PPPs, cultural differences can pose challenges. Understanding and respecting cultural nuances are important for building strong relationships and achieving common goals.

Conclusion:

• Joint ventures and public-private partnerships offer significant benefits, including access to new markets, shared resources, risk management, and improved service delivery. These collaborative arrangements drive innovation, economic growth, and public welfare. While challenges exist, careful planning, clear communication, and mutual trust can lead to successful and sustainable partnerships.