CBSE Class 11 Business Studies HOTs Private Public and Global Enterprises

HOTs

Question. What are the different types of PSEs?
Answer : The different types of Public Sector Enterprises or PSEs are:
• Statutory Corporation
• Departmental Undertaking
• Statutory Corporation

Question. What are the objectives of a public sector enterprise?
Answer :
• To accomplish rapid economic enhancement through industrial growth
• To prevent the development of monopoly and concentration of the economic power in the private hands

Question. What are the features of an MNC?
Answer :
• Product innovation
• Foreign collaboration
• Advanced technology
• Huge capital resources

Question. What is departmental undertaking?
Answer : Departmental undertaking is a form of organisation in the public sector where a public enterprise is allowed to function like a full fledged division. It is maintained, organised and financed by the government. For e.g. India Posts functions as a department within the Ministry of Communication.

Very Short Answer Type Questions

Question. State different types of public sector enterprises
Answer : Different types of Public sector enterprises are :
1. Departmental undertaking
2. Statutory Corporation
3. Government Companies

Question. Which type of business enterprise would emerge when two business firms agree to join together to achieve a common purpose and mutual benefit
Answer :  When two businesses agree to join together for a common purpose and mutual benefit, it gives rise to a joint venture. Joint venture is the pooling of resources and expertise by two or more businesses, to achieve a particular goal.

Question. Which form of public sector bought into existence by a special act of the parliament?
Answer : Statutory corporations are public enterprises brought into existence by a Special Act of the Parliament. The Act defines its powers and functions, rules and regulations governing its employees and its relationship with government departments. They have the power of the government and considerable amount of operating flexibility of private enterprises

Question. Which committee was formed to reconstruct the sick public units?
Answer : All public sector units were referred to the Board of Industrial and Financial Reconstruction to decide whether a sick unit was to be restructured or closed down. The Board has reconsidered revival and rehabilitation schemes for some cases and winding up for a number of units.

Short Answer Type Questions

Question. Explain any three features of Public Private Partnership
Answer : 
Features:
• The public partners in PPP are Government entities, i.e., ministries, government departments, municipalities or stateowned enterprises. The private partners can be local or foreign (international) and include businesses or investors with technical or financial expertise relevant to the project
• The government’s contribution to PPP is in the form of capital for investment and transfer of assets that support the partnership in addition to social responsibility, environmental awareness and local knowledge.
• The private sector’s role in the partnership is to make use of its expertise in operations, managing tasks and innovation to run the business efficiently.

Question. Identify the form of public sector enterprise in the following cases:
(a) This is the oldest and traditional form of public enterprise.
(b) Special act of the parliament brings this public enterprise into existence.
(c) Minimum 51% of the paid up capital is held by Government
Answer : 
(a) This is the oldest and traditional form of public enterprise- Departmental Undertaking
• These enterprises are established as departments of the ministry and are considered part or an extension of the ministry itself
• They act through the officers of the Government and its employees are Government employees.
• These undertakings may be under the central or the state government and the rules of central/state government are applicable
• Examples of these undertakings are railways and post and telegraph department
(b) Special act of the parliament brings this public enterprise into existence- Statutory Corporations
• Statutory corporations are public enterprises brought into existence by a Special Act of the Parliament
• The Act defines its powers and functions, rules and regulations governing its employees and its relationship with government departments.
• They have the power of the government and considerable amount of operating flexibility of private enterprises
(c) Minimum 51% of the paid up capital is held by Government- Government Company
• According to the section 2(45) of the Companies Act 2013, a government company means any company in which not less than 51 per cent of the paid up capital is held by the central government, or by any state government or partly by Central government and partly by one or more State governments and includes a company which is a subsidiary of a government company.
• There are certain provisions which are applicable to the appointment/retirement of directors and other managerial personnel
• The shares of the company are purchased in the name of the President of India.
• Since the government is the major shareholder and exercises control over the management of these companies, they are known as government companies

Question. Discuss some features of MNC’s which distinguish MNC’s from public sector co. and public sector enterprises
Answer :
• Huge capital resources:

• They possess huge financial resources and the ability to raise funds from different sources.
• They are able to tap funds from various sources.
• They may issue equity shares, debentures or bonds to the public.
• They are also in a position to borrow from financial institutions and international banks.
• They enjoy credibility in the capital market

• Foreign collaboration:

• They enter into agreements with Indian companies pertaining to the sale of technology, production of goods, use of brand names for the final products, etc.
• They may collaborate with companies in the public and private sector.
• There are usually various restrictive clauses in the agreement relating to transfer of technology, pricing, dividend payments, tight control by foreign technicians, etc.
• foreign collaborations have given rise to the growth of monopolies and concentration of power in few hands

• Advanced technology:

• These enterprises possess technological superiorities in their methods of production.
• They are able to conform to international standards and quality specifications.
• This leads to industrial progress of the country in which such corporations operate since they are able to optimally exploit local resources and raw materials

• Product innovation:

• These enterprises are characterised by having highly sophisticated research and development departments engaged in the task of developing new products and superior designs of existing products.
• Qualitative research requires huge investment which only global enterprises can afford

Long Answer Type Questions

Question. Define Joint Venture and explain its major benefits
Answer :  Joint Venture
• When two businesses agree to join together for a common purpose and mutual benefit, it gives rise to a joint venture.
• 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. The reasons behind the joint venture often include business expansion, development of new products or moving into new markets, particularly in another country
• Examples of Joint Ventures are AVI Oil India Pvt. Ltd., Green Gas Ltd etc
• A joint venture must be based on a memorandum of understanding signed by both the parties, highlighting the basis of a joint venture agreement.
• Negotiations and terms must take into account the cultural and legal background of the parties.
• The joint venture agreement must also state that all necessary governmental approvals and licences will be obtained within a specified period

Benefits are as follows:
• Teaming up adds to existing resources and capacity enabling the joint venture company to grow and expand more quickly and efficiently 
• When a business enters into a joint venture with a partner from another country, it opens up a vast growing market
• They have Access to Advance technology. Advanced techniques of production leading to superior quality products saves a lot of time, energy and investment as they do not have to develop their own technology.
• Joint ventures allow business to come up with something new and creative for the same market.
Especially foreign partners can come up with innovative products because of new ideas and technology
• International corporations invest in India, they benefit immensely due to the lower cost of production. They are able to get quality products for their global requirements
• One of the parties benefits from the other’s goodwill which has already been established in the market.

Question. Explain merits and three limitations of Departmental undertaking
Answer :  Merits:
• It facilitates the Parliament to exercise effective control over their operations high degree of public accountability
• The revenue earned by the enterprise goes directly to the treasury and hence is a source of  income for the Government
• Where national security is concerned, this form is most suitable since it is under the direct control and supervision of the concerned Ministry
Limitations:
• No flexibility, which is essential for the smooth operation of business
• The employees or heads of departments of such undertakings are not allowed to take independent decisions, without the approval of the ministry concerned
• The bureaucrat’s over-cautious and conservative approval does not allow them to take risky ventures
• No action can be taken unless it goes through the proper channels of authority
• Lot of political interference through the ministry
• These organisations are usually insensitive to consumer needs and do not provide adequate services to them

Question. Which public sector act through the officers of the government & its employees are government employee? Discuss some of its features.
Answer :
Departmental Undertakings
• These enterprises are established as departments of the ministry and are considered part or an extension of the ministry itself
• They act through the officers of the Government and its employees are Government employees.
• These undertakings may be under the central or the state government and the rules of central/state government are applicable
• Examples of these undertakings are railways and post and telegraph department 

Features:
• The funding of these enterprises come directly from the Government Treasury and are an annual appropriation from the budget of the Government
• Subject to accounting and audit controls applicable to other Government activities
• The employees of the enterprise are Government servants and their recruitment and conditions of service are the same under government
• It is a major subdivision of the Government department and is subject to direct control of the ministry
• They are accountable to the ministry

Question. Describe the industrial policy 1991, towards the public sector
Answer :  Four major reforms in the public sector in its new industrial policy in 1991were made:
• In the 1956 resolution on Industrial policy, 17 industries were reserved for the public sector. In 1991, only 8 industries were reserved for the public sector, they were restricted to atomic energy, arms and communication, mining, and railways. In 2001, only three industries were reserved exclusively for the public sector. These are atomic energy, arms and rail transport 
• Disinvestment involves the sale of the equity shares to the private sector and the public.
The objective was to raise resources and encourage wider participation of the general public and workers in the ownership of these enterprises
• All public sector units were referred to the Board of Industrial and Financial Reconstruction to decide whether a sick unit was to be restructured or closed down.
The Board has reconsidered revival and rehabilitation schemes for some cases and winding up for a number of units.
• Improvement of performance through a MoU system by which managements are to be granted greater autonomy but held accountable for specified results. Under this system, public sector units were given clear targets and operational autonomy for achieving those targets