NCERT Solutions For Class 11 Business Studies Private, Public and Global Enterprises

NCERT Solutions For Class 11 Business Studies Private, Public and Global Enterprises

NCERT Solutions play a crucial role in aiding students in their preparation for CBSE Class 11 Business Studies examinations. These study materials have been meticulously compiled by our team of subject-matter experts, who have taken special care to provide comprehensive explanations for each topic in a clear and understandable manner.

In this particular chapter of NCERT Solutions for Class 11 Business Studies, Chapter 3, we provide a concise overview of the fundamental concepts related to Private, Public, and Global Enterprises.

NCERT Solutions For Class 11 Business Studies Private, Public and Global Enterprises

Multiple Choice Questions

Question 1. A government company is any company in which the paid up capital held by the government is not less than

(a) 49 per cent

(b) 51 per cent

(c) 50 per cent

(d) 25 per cent

Question 2. Centralised control in MNC’s implies control exercised by

(a) Branches

(b) Subsidiaries

(c) Headquarters

(d) Parliament

Question 3. PSE’s are organizations owned by

(a) Joint Hindu Family

(b) Government

(c) Foreign companies

(d) Private entrepreneurs

Question 4. Reconstruction of sick public sector units is taken up by

(a) MOFA

(b) MoU

(c) BIER

(d) NRF

Question 5. Disinvestments of PSE’s implies

(a) Sale of equity shares to private sector/public

(b) Closing down operations

(c) Investing in new areas

(d) Buying shares of PSE’s

Answers: 1. (b) 2. (c) 3. (b) 4. (c) 5. (a)

Short Answer Type Questions

Question 1. Explain the concept of Public Sector and Private Sector.

Answer: Private sector consists of business owned by individuals or a group of individuals. Examples of private sector include sole proprietorship, partnership, Joint Hindu Family system, cooperative and company.

On the other hand, the public sector consists of various organizations owned and managed by the government, owned either wholly or partly by the central or the state government. These may be part of a ministry or come into existence by a special act of the parliament. Public sector works for social welfare while private sector works for profit motive.

Public sector organizations may take form of departmental undertaking, statutory corporation and a government company. Private sector may take form of sole proprietorship, partnership, Joint Hindu Family, company or a cooperative.

Question 2. State the various types of organizations in the private sector.

Answer: Various types of organizations in the private sector include:

1. Sole Proprietorship: Sole proprietorship refers to a form of business organization which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks.
2. Hindu Undivided Family Business: It refers to a form of organization wherein the business is owned and carried by the members of the Hindu Undivided Family (HUF).
3. Partnership: Partnership is the relation between persons who have agreed to share the profit of the business carried on by all or any one of them acting for all.
4. Cooperative Society: Cooperative society is a voluntary association of persons, who join together with the motive of welfare of the members.
5. Joint Stock Company: A company is an association of persons formed for carrying out business activities and has a legal status independent of its members.
6. Multinational Corporations: An MNC is a company whose business operations extend beyond the country in which it has been incorporated.

Question 3. What are the different kinds of organizations that come under the public sector?

Answer: Following are the different kinds of organizations that come under the private sector.

1. Departmental Undertaking: This is the oldest and traditional form of public enterprises. It is managed by government officials as one of the government departments. It is under the control of concerned minister of the department, who is answerable to government through parliament.
2. Statutory Corporation: Statutory Corporation is a corporate body with a separate legal existence, set up under a special act of parliament or of the state legislature.
3. Government Company: According to the Indian Companies Act 1956, a government company means any company in which not less than 51 per cent of the paid up capital is held by the government or by any state government or partly by central government and partly by one or more state governments.

More Resources for Class 11

• NCERT Solutions for Class 11 Physics
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Question 4. List the names of some enterprises under the public sector and classify them.

Answer: Some of the enterprises under the public sector are as follows:

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

Answer: Government company form of organization is preferred to other forms of organizations due to it advantages over other forms. These advantages are as follows:

• It is registered or incorporated under Companies Act.
• It has a separate legal entity.
• Management is regulated by the provision of Companies Act.
• Employees are recruited and appointed as per the rules and regulations contained in Memorandum and Articles of Association.
• The government company obtains its funds from government shareholdings and other its private shareholdings. It can also raise funds from capital market.
• It can be easily formed as per the provision of Companies Act. Only an executive decision of government is required.
• It enjoys autonomy in management decisions and flexibility in day to day working.
• It can appoint professional managers on high salaries.

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

Answer: The government is responsible for developing all regions of a country. Earlier, most of the development was limited to few areas like port towns. For providing employment to the people and for accelerating the economic development of backward areas many industries were set up by public sector in those areas.

1. Four major steel plants “were set up in the backward areas to accelerate economic development.
2. The government also makes efforts to prevent mushrooming growth of private sector units in already advanced regions.
3. Government provided many incentives to private sector like tax concessions, loan at cheap rate of interest etc. to motivate them to set up industries in backward regions.

Long Answer Type Questions

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

Answer: Development of a country originates from industrial development. Industrially developed countries are also economically prosperous. The 2nd Five Year Plan also called the Mahalnobis Model lead to the promotion of heavy and key industries in India. The period 1950 onwards witnessed development of infrastructure, research and development, establishment of large scale along with many small scale industries, co-existence of public and private sector enterprises, growth of both consumer and capital goods industries.

The industrial sector made a significant contribution to agriculture and trade. The industrial policy plays a key role in influencing the foreign trade policy, fiscal policy, the monetary policy, the economic policy of the country. Government of India declared its 1st Industrial Policy Resolution (IPR) in 1948. It divided the industries into four categories.

1. Industries that were to be state monopolies. These were limited to atomic energy, arms and ammunition and railways (3 in all).
2. Basic industries in which the state would have the exclusive right to new investment- 6 industries were included in this – iron and steel, shipbuilding, mineral oils, coal, aircraft production and telecommunication equipments.
3. Industries of national importance that the state might regulate and license in consultation with state government. 18 industries were placed in this category.
4. All other industries would be opened to the private sector without constraints. IPR 1948 remained in force till 1956. Two developments had taken place. One; the first plan which was initiated in 1951 was completed. Second, Parliament accepted the socialistic pattern of society. This led to IPR 1956.

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

Answer: Before 1991, public sector was supposed to perform the following role in India:

1. Rapid Economic Development: It was required to make efforts so that the rate of economic development accelerates.
2. Provision of Infrastructure: Another expectation from public sector was to provide infrastructure in the form of better roads, more hospitals, more schools, better irrigation facilities etc.
3. Sound Industrial Base: We also needed public sector to develop a sound industrial base because Private Sector either did not have huge capital required for these or were not interested in this sector as they had a long gestation period.
4. Development of Backward Regions: Public sector also aimed at developing backward regions as it is necessary for the balanced development of a country. Private sector being profit minded does not take interest in investing in backward regions.
5. Generation of Surplus: Another expectation from public sector was to generate a surplus that could be used for investment in other sectors whereby the growth rate could be accelerated.
6. Creation of Employment Opportunities: Public sector also played its role in creating employment opportunities in organized sector so that poverty can be reduced and standard of living can be enhanced.
7. Control of Monopoly and Restrictive Trade Policies: Public sector also aimed at controlling monopoly and restrictive trade policies. Otherwise few private industrialists would have gained extreme economic power. It could be harmful for the nation as a whole.
8. Serving of Strategic National Interests: Public sector also plays its role in serving strategic national interests. They provide law and order, administrative services, police, defence, and many infrastructural facilities even when they are not given any profit as such in monetary terms.

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

Answer: It is difficult for a public sector undertaking to compete with a private sector undertaking in terms of profits due to following reasons:

1. Motive of public sector is not profit: Public sector works not for profit but for social welfare. It gives first priority to social welfare then it is almost impossible for it to compete with private sector enterprise on the basis of profit which mainly works for profit only.
2. Public sector takes care of strategic industries: Public sector invests in strategic areas even when these industries have low return generating capacity and long gestation period. These industries do not give monetary returns but if we consider their return in development of our economy otherwise their return is really high.
3. Public sector provides many facilities free of fast to the weaker section of society: We can’t expect a government hospital or a government school to generate profits. Many public sector undertakings provide many facilities for free or at a very low cost due to the benefits that it gives to other sectors of the society.

It is difficult for a public sector undertaking to compete with a private sector undertaking in terms of efficiency due to following reasons:

1. Dependence on authorities for taking minor decisions: Public Sector undertakings follow a protocol for everything. It leads to delay in decision making and inefficiency in operations.
2. Job security: Workers of Public Sector enjoy job security. It reduces their performance as they know that in spite of bad performance there is no fear of losing job.
3. Red tapism and bureaucracy: In public sector undertakings there is red tapism and bureaucracy. It leads to inefficiency in operations.

Question 4. Why are global enterprises considered superior to other business organizations?

Answer: Global enterprises are considered superior to other business organizations because it has following advantages which other business organizations may not have.

1. Huge capital resources: MNCs possess huge capital resources and they are able to raise lot of funds from various sources.
2. International operations: A MNC has production, marketing and other facilities in several countries.
3. Centralized control: MNCs have headquarters in their home countries from where they exercise their control over all branches and subsidiaries. It provides only broad policy, framework to them and there is no interference in their day to day operations.
4. Foreign collaboration: Usually they enter into agreements relating to sale of technology, production of goods, use of brand name etc. with local firms in the host country
5. Advanced technology: These organisations possess advanced and superior technology which enable them to provide world class products and services.
6. Product innovations: MNCs have highly sophisticated research and development departments. These are engaged in developing new products and superior design of existing products.
7. Marketing strategies: MNCs use aggressive marketing strategies. Their brands are well known and spend huge amounts on advertising and sale promotion.

Question 5. What are the benefits of entering into joint ventures?

Answer: Benefits of joint ventures are as follows:

1. Greater resources and capacity: In a joint venture the resources and capacity of two or more firms are combined which enables it to grow quickly and efficiently.
2. Access to advanced technology: It provides access to advanced techniques of production which increases efficiency and then helps in reduction in cost and improvement in quality of product.
3. Access to new markets and distribution network: A foreign company gains access to the vast Indian market by entering into a joint venture with Indian company. It can also take advantage of the well established distribution system of local firms.
4. Innovation: Foreign partners in joint ventures have the ideas and technology to develop innovative products and services. They have an advantage in highly competitive and demanding markets.
5. Low cost of Production: Raw materials and labour are comparatively cheap in developing countries so if one partner is from developing country they can be benefited by the low cost of production.
6. Well known brand names: When one party has well-established brands and goodwill, the other party gets its benefits. Products of such brand names can be easily launched in the market.

Higher Order Thinking Skills (HOTS)

Question 1. “The basic rationale of public sector has changed significantly.” In the light of this statement explain any four initiatives taken by the government.

Answer: In the industrial policy 1991, the Government of India introduced four major reforms in public sector.

1. Reduction in number of industries reserved for public sector: This number is reduced from 17 to 8 and to 3 industries only in 2001. These three industries are atomic energy, arms and rail transport.
2. Memorandum of Understanding (MOU): Under this govt, lays down performance targets for the management and gives greater autonomy to hold the management accountable for the results.
3. Disinvestment: Equity shares of public sector enterprises were sold to private sector and the public. It was expected that this would lead to improved managerial performance and better financial discipline.
4. Restructure and revival: All public sectors, sick units were referred to Board of Industrial and Financial Reconstruction (BIFR). Units which were potentially viable were restructured and which could not be revived were closed down by the board.

Question 2. “Global enterprises are giant both in size and operations.” Substantiate this statement.

Answer: The statement is absolutely correct that global enterprises are giant both in size and operations.

1. It has huge capital resources.
2. It involves foreign collaboration.
3. It uses advanced technology.
4. It leads to product innovation.
5. It makes use of marketing strategies.
6. It leads to expansion of market territory.
7. It makes use of centralized control.

Question 3. “MNC’s are in a position to exercise massive control on an economy.” Substantiate.

Answer: MNC’s are in a position to exercise massive control on an economy because of the following reasons:

• MNC’s are characterised by possessing huge financial resources. These huge financial resources give them economic power in the economy. They can afford to survive even during losses as well.
• MNCs possess technological superiorities and are capable of conform to international standards and quality specifications.
• They make use of aggressive marketing strategies for their products.
• They have an established brand image in the market.

Value Based Questions

Question 1. Multinational Companies have done more harm than good. Explain.

Answer: Yes, I agree that Multinational Companies have done more harm than good. It is clear from the following disadvantages which it is creating for the economy.

1. It disregards national priorities.
2. It leads to creation of monopoly.
3. It leads to depletion of natural resources.
4. It leads to technology obsolete .
5. It creates threat to national sovereignty.

Question 2. “Public sector has changed its role since 1991 a great deal”. Do you agree? Justify your answer.

Answer: The role and importance of public sector changed with passage of time.

1. Development of infrastructure: At the time of independence, India suffered from an acute shortage of heavy industries such as engineering, iron and steel, oil refineries, heavy machineries, etc. Because of huge investment requirement and long gestation period, private sector was not willing to enter these areas. The duty of development of basic infrastructure was assigned to public sector which it discharged quite efficiently.
2. Regional balance: Earlier, most of the development was limited to a few areas like port towns. For providing employment to the people and for accelerating the economic development of backward areas many industries were set up by public sector in those areas.
3. Economics of scale: In certain industries (like electric power plants, natural gas, petroleum, etc) huge capital and large base are required to function economically. Such areas were taken up by public sector.
4. Control of monopoly and restrictive trade practices: These enterprises were also established to provide completion to private sector and to check their monopolies and restrictive trade practices.
5. Import substitution: Public enterprises were also engaged in production of capital equipments which were earlier imported from other countries. At the same time public sector companies like STC and MMTC have played an important role in expanding exports of the country. Very important role was assigned to public sector but its performance was far from satisfactory which forced government to do rethinking on public enterprises.

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