Business Studies 4 Marks Question

(b) Statutory corporation.

(c) Government company.

(d) Statutory corporation.

(b) Features of Departmental Undertakings:

(i) These enterprises are subject to accounting and audit controls applicable to other government activities.

(ii) The employees of these enterprises are government servants.

(iii) These enterprises are accountable to the ministry since their management is directly under the concerned ministry.

(b) The Act defines the objectives, powers and privileges of Statutory Corporation.

(c) Merits of Statutory Corporations:

(i) Free from undesirable government regulation and control.

(ii) Non-interference of government in their financial matters.

(iii) Valuable instrument for economic development.

(b) Merits of Government Company:
(i) Separate legal entity.
(ii) Maximum autonomy in decisions.
(iii) Curb unhealthy business practices.

(b) The advantages of Departmental Undertakings are as follows:

(i) These undertakings facilitate the Parliament to exercise effective control over their operations.

(ii) These ensure a high degree of public accountability.

(iii) Where national security is concerned, this form is most suitable since it is under the direct control and supervision of the concerned Ministry

(b) Statutory corporations have following distinct features:

(i) Statutory corporations ac cet up under an Act of Parliament and are governed by the provisions of the Act. The Act defines the objects, powers and privileges of a statutory corporation.

(ii) A statutory corporation is a body corporate and can sue and be cued, enter into contract and acquire property in its own name.

(iii) A statutory corporation is not subject to the same accounting and audit procedures applicable to government departments. It is also not concerned with the central budget of the Government.

(b) Government company enjoys several advantages, which are as follows:

(i) A government company can be established by fulfilling the requirements of the Indian Companies Act. A separate Act in the Parliament is not required.

(ii) It has a separate legal entity, apart from the government.

(iii) It enjoys autonomy in all management decisions and takes actions according to business prudence.

(b) The benefits of Joint Venture are:

(i) 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.

(ii) 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.

(iii) 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.

(b) Statutory corporation.

(c) Government company.

(d) Government company.

1. No separate entity: It does not have separate legal entity.
2. Finance: It is financed by annual budget allocation of the government and all its earnings go to government treasury.
3. Accounting and Audit: The government rules relating to audit and accounting are applicable to it.
4. Staffing: Its employees are government employees and are recruited and appointed as per government rules.
5. Accountability: These are accountable to the concerned ministry.

1. It is more effective in achieving the objective laid down by government as it is under the direct control of govt.
2. It is a source of government income as its revenue goes to government treasury.
3. It is accountable to parliament for all its actions which ensures proper utilisation of funds.
4. It is suitable for activities where secrecy and strict control is required like defence production.

1. It suffers from interference from minister and top officials in their working.
2. It lacks flexibility which is essential for smooth operation of business.
3. It suffers from red tapism in day to day work.
4. These organizations are usually insensitive to consumer needs and do not provide goods and adequate service to them.
5. Such organisations are managed by civil servants and government officials who may not have the necessary expertise and experience in management.

1. Huge capital resources: MNCs possess huge capital resources and they are able to raise lot of funds from various sources.
2. International operations: MNC has production, marketing and other facilities in several countries.
3. Centralised control: MNCs have headquarters in their home countries from where they exercise 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.

1. It is registered or incorporated under Companies Act.
2. It has a separate legal entity.
3. Management is regulated by the provision of Companies Act.
4. Employees are recruited and appointed as per the rules and regulations contained in Memorandum and Articles of Association.
5. The Government Company obtains its funds from government shareholdings and other private shareholdings. It can also raise funds from capital market.

1. It can be easily formed as per the provision of Companies Act. Only an executive decision of government is required.
2. It enjoys autonomy in management decisions and flexibility in day to day working.
3. It can appoint professional managers on high salaries.

1. It suffers from interference from government officials, ministers and politicians.
2. It evades constitutional responsibility, which a company financed by the government should have, as it is not directly answerable to Parliament.
3. The board usually consists of the politicians and civil servants who are interested more in pleasing their political bosses than in efficient operation of the company.

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.

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.

1. Greater resources and capacity: In a joint venture the resources and capacity of two or more firms are combined which enables them 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 gain 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.

1. They are formed by a Special Act of Parliament. The Act defines their powers, objects and privileges.
2. They can sue and be sued, enter into contracts and purchase or sell property in their own name as it has the status of body corporate.
3. They are independently financed. They are financed by borrowings from the government or from public and through revenue generated by sale of goods and services. They can also make use of their revenues.
4. They are free from government accounting and audit control because they are not financed from the central budget of the government.
5. The employees of such enterprises are not government or civil servants. Their conditions, procedures, rules and regulations of work are prescribed under the provisions of the act itself.

1. Inflow of private investment: PPP attracts private investment which is of utmost importance to undertake such essential projects.
2. Increased efficiency: Involvement of private sector will bring efficiency in implementation of projects and cut down cost and time.
3. Innovation: It helps in bringing innovative design and constructive practices.
4. Better economic viability: Involvement of experienced and creditworthy sponsors and commercial lenders can increase economic viability of the projects.
5. Risk sharing: The structuring of a PPP project allocates the risks to the agency which can handle it most suitably.

1. Increased cost: Cost of production increases for the government as private sector also demands its profit share for the money it invests.
2. Control gets divided: Control gets divided between private and public sector. Government remains involved in all stages and private sector, is responsible for more commercial functions like project design, construction, finance and operations.

1. Departmental Undertaking: These enterprises are established as departments of the ministry and are considered as part or an extension of the ministry Itself. These undertakings may be under the Central or the State Government. Examples: Railways and; Post and Telegraph Department.
2. Statutory Corporation: Statutory corporations are public enterprises brought into existence by a Special Act of the Parliament, which defines its powers and functions. It is a financially independent corporate body created by the legislature and has a clear control over a specified area or a particular type of commercial activity.
3. Government Company: According to the Indian Companies Act, 1956, a government company means any company in which at least 51 percent 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. These are established purely for business purposes.

1. Sole Proprietorship: It refers to the form of organisation where business is owned, managed and controlled by a single individual who bears all the risks and enjoys the whole profit.
2. Partnership: It is defined as an association of two or more persons who agree to carry the business together and share the profit as well as bear risks collectively.
3. Joint Hindu Family: The business is owned and carried on by the member of a hindu undivided family which is governed by the hindu law.
4. Cooperative Societies: Cooperative society is a voluntary association of persons, who join together with the motive of welfare of 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.

1. Government wants to control a company in the private sector without nationalisation.
2. Government wants to go for a collaboration with private enterprise.
3. The projects require government planning and funds.
4. The government wishes to promote and develop a field of economic activities in the public sector.

1. It is established under a special act which defines its objects, powers and functions.
2. It has a separate legal entity.
3. Its management is vested in a Board of Directors appointed or nominated by the government.
4. It has its own staff, recruited and appointed as per the provisions of act.
5. This type of enterprise is usually independently financed. It obtains funds by borrowing from government or from public or through earnings.
6. It is not subject to same accounting and audit rules which are applicable to Government Department.

1. Internal autonomy: It enjoys a good deal of autonomy in its day to day operations and is free from political interference.
2. Quick decisions: It can take prompt decisions and quick actions as it is free from the prohibitory rules of government.
3. Parliamentary control: Their performance is subject to discussion in Parliament which ensures proper use of public money.
4. Efficient management: Their Directors and top Executives are professionals and experts of different fields.

1. Flexibility is for name sake only: In reality, there is not much operational flexibility. It suffers from lot of political interference.
2. Lack of profit motive: Usually they enjoy monopoly in their field and do not have profit motive due to which their working turns out to be inefficient.
3. Corruption: Where there is dealing with public, rampant corruption exists. Thus public corporation is suitable for undertaking requiring monopoly powers e.g., public utilities.

1. MNCs 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.
2. MNCs possess technological superiorities and are capable to conform as per international standards and quality specifications.
3. They make use of aggressive marketing strategies for their products.
4. They have an established brand image in the market.