Unit 3 - Mncs & Business Sectors
Unit 3 - Mncs & Business Sectors
Unit 3 - Mncs & Business Sectors
CORPORATIONS
OBJECTIVES
Definitions
Features
Investment Motives
Recent trends
Changing attitudes
MNCs in India
Features:
Large size and profit motive
Cost and quality conscious
Multifarious activities
Invest funds in developing countries
Dominate global economy
Operate as per host country laws
Difficult to control and monitor their operations
Enjoy efficient management and functioning
INVESTMENT MOTIVES
Home countries enter or venture into developing
countries (host countries) for following reasons:
I. Strategic motive
a) Control over key sectors
b) Technological Monopoly
c) Market Development
d) Cheap Inputs
e) Political Safety
II. Economic motive
a) Financial strengths
b) Sources of funds
c) Earning higher profits
d) Economies of scale
e) Skilled manpower
REASONS FOR GROWTH OF MNCS
MARKET SUPERIORITIES
FINANCIAL SUPERIOROTIES
TECHNOLOGICAL SUPERIOROITIES
PRODUCT INNOVATION
BENEFITS RECEIVED FROM MNCs
Investment, income and employment
Transfer of technology
FDI attractiveness
Labor competitiveness
Public Sectors
Departmental form
Public Corporation
Government Company
Private Sector
Joint Sector
Co-operative Sector
PUBLIC SECTOR
The business units owned, managed and controlled by
the central, state or local government are termed as
public sector enterprises or public enterprises.
These are also known as public sector undertakings.
Promote export
Public
Departmental Form
Corporation
Government
Company
DEPARTMENTAL FORM OF PSU
Departmental undertakings are the oldest among the
public enterprises.
Departmental Undertaking form of organization is
primarily used for provision of essential services such as
railways, postal services, broadcasting etc.
A departmental undertaking is organized, managed and
financed by the Government.
This form is considered suitable for activities where the
government desires to have control over them in view of
the public interest.
FEATURES OF DEPARTMENTAL PSU
a) It is established and controlled by a specific
department of the government. Each such department
is headed by a minister.
b) All policy matters and other important decisions are
taken by the controlling ministry.
c) The Parliament lays down the general policy for such
undertakings.
d) The enterprise is financed by annual appropriation
from the treasury and all or major share of its
revenues are paid into the treasury.
e) It is subject to budgetary, accounting and audit control.
f) Its policy is laid down by the government and it is
accountable to the legislature
PUBLIC CORPORATIONS (STATUTORY)
Statutory corporation is also known as public corporation.
Statutory Corporation refers to a corporate body created by
the Parliament or State Legislature by a special Act which
define its powers, functions and pattern of management.
Its capital is wholly provided by the government. Its
management pattern, its powers and functions, the area of
activity, rules and regulations for its employees and its
relationship with government departments, etc. are
specified in the concerned Act.
Examples of statutory corporations are State Bank of India,
Life Insurance Corporation of India, Industrial Finance
Corporation of India, State Trading Corporation etc.
It may be noted that more than one corporation can also be
established under the same Act. State Electricity Boards
and State Financial Corporation fall in this category.
FEATURES
1. It is wholly owned by the State.
2. It is generally created by a special law defining its powers and
duties
3. As a corporate body it is a separate entity for legal purposes
and can sue and be sued, enter into contract and acquire
property in its own name.
4. A public corporation is usually independently financed.
5. It is generally exempted from most regulatory and
propitiatory statues applicable to expenditure of public
funds.
6. It is ordinarily not subject to budget accounting and audit
laws and procedure applicable to non corporate agencies.
7. In majority of cases, employees of public corporations are not
civil servants and they are recruited and remunerated under
terms and conditions, which the corporation itself
determines.
GOVERNMENT COMPANY
Government Company refers to the company in which
51 percent or more of the paid up capital is held by the
government.
It is registered under the Indian Companies Act, 1956
and is fully governed by the provisions of the Act.
Most business units owned and managed by
government fall in this category.
It has a separate legal entity. It can sue and be sued,
and can acquire property in its own name.
The annual reports of the government companies are
required to be presented in parliament.
The capital is wholly or partially provided by the
government.
It is managed by the Board of Directors. All the
Directors or the majority of Directors are appointed
by the government, depending upon the extent of
private participation.
Its accounting and audit practices are more like
those of private enterprises and its auditors are
Chartered Accountants appointed by the
government.
Its employees are not civil servants. It regulates its
personnel policies according to its articles of
associations.
PRIVATE SECTOR
Completely owned, managed and controlled by
private individual or group of individuals.
No government interference except for social norms,
sole authority in decision making and profit sharing
Types:
Sole Proprietorship
Partnership
Joint Hindu Family
Joint Stock Company
SOLE PROPRIETORSHIP
A sole proprietorship is a business owned and
operated by one individual.
The shops or stores which you see in your locality
- the grocery store, the vegetable store, the sweets
shop, the chemist shop, the paan-wala, the
stationery store, the STD/ISD telephone booths
etc come under sole proprietorship.
When the ownership and management of a
business are in control of one individual the form
of business is called sole proprietorship.
CHARACTERISTICS
The business enterprise is owned by one single
individual (i.e. both profit and risk belong to him)
Owner is the Manager
No registration
No profit sharing
Easy decision-making
Easy to windup
No corporate taxes
Disadvantages:
Unlimited liability
Limited Life
JOINT HINDU FAMILY BUSINESS
Comes into existence as per the Hindu Inheritance Act of
India
This form of business found only in India
All members of the Hindu Undivided Family(HUF) own the
business jointly
The affairs of the business are managed by head of the
family called Karta. All other members are called Co-
partners
Membership is restricted only to members of the Joint
family. No outsider can become the member
Karta has unlimited liability while all other members have
limited liability
The share of each member keeps on fluctuating
Business continues to exist upon the death of any member
or Karta.
ADVANTAGES OF HUFs:
Every co-partner has an assured share in profits
The business has continued existence
Decision making is quick as the powers are with
the Karta
No corporate tax
People use it mostly for tax benefits these days
DISADVANTAGES OF HUFs:
Absolute power in the hands of Karta.
Instability
Limited Resources can be raised
Scope for conflict
PARTNERSHIP
Disadvantages of JSC:
Formation is not easy.
Control by a Group.
Excessive government control.
Delay in Policy Decisions.
1. Choice of Project
2. Matrix management and structure issues
3. Limitations of public sector red tapism and
corruption
4. Limitations of private sectors lack of social welfare
and exploitation of resources
5. Extent of government interference and profit
distribution issues
COOPERATIVE SECTOR
It refers to the sector which is voluntary association of
persons owned and managed for their or sometimes the
communities benefit. A cooperative is a legal entity with
several Corporate features, such as limited liability, an
unlimited life span, an elected board of directors.
Members or Owners pay annual fees to the cooperative
and share profits.
A cooperative organization is an association of persons,
usually of limited means, who have voluntarily joined to
achieve a common economic and through the formation
of a democratically controlled organization, making
equitable contributions to the capital required and
accepting a fair share of risks and benefits of the
undertaking.
A cooperative is defined as an autonomous
association of persons united voluntarily to
meet their common economic, social, and
cultural needs and aspirations through a
jointly-owned and democratically-controlled
enterprise.
Producers Housing
Co-operative Co-operative
Society Society
Consumers Credit
Co-operative Co-operative
Society Society
Producers Co-operative Society :
In this form, the workers wish to be their own
masters. They elect their own managers. They are
their own employees.
The profit goes to the actual workers. There are no
strikes and lock-outs.
Egs haryana handloom, APPCO
Examples :
Agricultural Industries.
Cottage Industries.
Shortcomings :
Inadequate capital
Inefficient management
Lack of discipline
Housing Co-operative Society:
These are formed for the purpose of getting plots or
constructing house for the needy persons.
Government provides great facilities for this
purpose.
These societies are formed to provide residential
houses to members. They purchase land, develop it
and construct houses or flats and allot the same to
members. Some societies also provide loans at low
rate of interest to members to construct their own
houses.
The Employees Housing Societies and Metropolitan
Housing Co-operative Society are examples of
housing co-operative society
Credit Co-operative Society :
Its object is to finance the poor cultivators by providing loans at
low rate of interest for the development of land, purchase of
agricultural machinery, fertilizers etc.
Advantages :
Provide better methods and tools of production to small
manufacturers and craftsmen
Help the farmers in farming and marketing their products
efficiently
Provide financial assistance at moderate rate of interest
Opening of super bazaar types of stores gives relief to the weaker
section of the society
Disadvantages :
Lack of Co-ordination
Chances of undue advantages
Favorism
Limited Capital
Inefficient Management
Political influence
Consumers Co-operative Society :
The consumers living in a particular area combine
together. Each contributes a small capital.
A store is opened in which articles of common use
are stocked and sold at reasonable prices. Such
stores are found in colleges and schools.
Advantages :
Much capital is not needed
The management is simple and honorary
There is legal control and inspection
Disadvantages :
They offer very little selection for consumers
The honorary office bearers do not take much pains,
they are sometimes dishonest
Consumers Co-operative Society: These societies are formed to
protect the interest of general consumers by making consumer
goods available at a reasonable price. They buy goods directly
from the producers or manufacturers and thereby eliminate the
middlemen in the process of distribution. Kendriya Bhandar,
Apna Bazar and Sahkari Bhandar are examples of consumers
co-operative society
Co-operative Marketing Society: These societies are formed by
small producers and manufacturers who find it difficult to sell
their products individually. The society collects the products
from the individual members and takes the responsibility of
selling those products in the market. Gujarat Co-operative Milk
Marketing Federation that sells AMUL milk products is an
example of marketing co-operative society.
Co-operative Farming Society: These societies are formed by
small farmers to work jointly and thereby enjoy the benefits of
large-scale farming. Lift-irrigation cooperative societies and
pani-panchayats are some of the examples of co-operative
farming society
MERITS OF COOPERATIVES
Easy Formation
Open membership
Democratic Control
Limited liability
State Assistance
Stable Life
DEMERITS OF COOPERATIVES
Limited Capital
Problems in management
Lack of motivation
Lack of Cooperation
Dependence on government
EXAMPLE
Local or regional
Membership Wide spread membership
territory.