Modern economies stand on the structure of private, public, and global enterprises, the three pillars of resource utilization and value creation. A form of enterprise serves a unique purpose with particular ownership that distinctly impacts economic development. Private-public and global enterprises vary from each other in terms of ownership, objectives, and scope of operations, but all of them have much to do with meeting the requirements of businesses and societies. We will discuss the following enterprises in this article in depth, including characteristics, types, and comparisons.
What is a Public Sector Enterprise?
A government-owned enterprise is one in which ownership, management, and control belong to the public. Public enterprises are set up in the interest of public needs for promoting economic growth and correcting the anomalies of market failures. Their aim is to deliver goods and services that might not be offered profitably by private enterprises. The government finances the public enterprises out of public revenue and ensures their delivery in support of national policies.
In the case of public sector enterprises, they usually operate within industries like transportation, energy, defense, and infrastructure that require extensive investment and appeal to the public’s welfare.
Categorization of Public Sector Enterprises
Public sector enterprises can be divided based on ownership structure, funding, and operational control. They can be categorized into three types: Departmental Undertakings, Statutory Corporations, and Government Companies.
1. Departmental Undertakings: These organizations are directly owned by a particular department of the government. The government finances directs, and regulates their functioning.
- Examples: Indian Railways, Postal Services.
- Benefits: The government is held responsible directly. Resource allocation is quite simple.
- Drawbacks: It suffers from bureaucratic delays and lack of flexibility.
2. Statutory Corporations: These are formed by an Act of Parliament or State Legislature. They are independent of government control, with a separate legal identity.
- Examples: Life Insurance Corporation of India (LIC), and Reserve Bank of India (RBI).
- Advantages: Greater autonomy, greater freedom.
- Disadvantages: In some cases, the absence of government control results in inefficiency.
3. Government Companies: Government companies are incorporated under the Companies Act and are owned by the government. They are identical to private companies except that they have government ownership.
- Examples: Steel Authority of India (SAIL), and Bharat Heavy Electricals Limited (BHEL).
- Advantages: Professional management, and commercial orientation.
- Disadvantages: Political interference.
What is a Private Sector Enterprise?
A private sector enterprise refers to an enterprise that is privately owned and operated by an individual, group, or private organization. It is driven towards maximizing profits and increasing wealth. A private enterprise performs in competitive markets; it seeks its performance from efficiency, innovation, and satisfaction of customers. These can be small, medium-scale, or large-scale enterprises.
Private sector businesses create employment, innovation, and resource allocation efficiency, which helps in promoting economic growth. They are unique compared to other enterprises in the public sector, which operate without government funding.
Types of Private Sector Enterprises
Private businesses fall into four categories: Sole Proprietorships, Partnerships, Private Limited Companies, and Public Limited Companies.
1. Sole Proprietorship
A sole proprietorship is owned and managed by one person who bears all the risks and benefits.
- Examples: Local grocery stores, and small retail businesses.
- Advantages: Simple to establish, fully owned
- Disadvantages: Unlimited liability, fewer resources
2. Partnership
A partnership is an agreement that involves two or more individuals who share the ownership of a business. The profit and loss of the undertaking are shared equally.
- Examples: Law firms, accountants’ practice
- Advantages: Shared wealth and skills
- Disadvantages: Interpersonal liability between partners.
3 . Private limited company
A separate legal entity, and it is owned by shareholders. This does not make its shares available in the open market.
- Examples: Flipkart, Ola.
- Advantages: Liability is limited, and professional management is there.
- Disadvantages: Cannot raise too much capital.
4. Public Limited Compan: A public limited company can raise shares from the public and issue them on the stock exchanges.
- Examples: Reliance Industries, Tata Steel.
- Advantages: The capacity to raise large capital.
- Disadvantages: Regulatory compliance and scrutiny.
What is a Global Enterprise?
A global enterprise, also referred to as an MNC, is an organization operating in various countries. Companies have a centralized head office in a country but with other subsidiaries or other operations located in other countries. They employ international markets, resources, and talent for them to gain higher profit margins and boost their productivity.
Global enterprises are characterized by huge operations, innovative technology, and high economic impact. They spend significantly on research and development and adapt their policies based on the requirements of local markets.
Types of Global Enterprises
Global enterprises are classified into two major heads based on their pattern:
- Transnational Companies: Transnational companies operate in various countries but keep it decentralized. They modify the products and services as per the regional markets.
Examples: Nestle, Unilever.
- Multinational Companies: The multinational companies are controlled from the headquarters. However, all their operations are performed in diversified countries. They follow uniform policies and practices very stringently.
Examples: Apple, Coca-Cola.
- Global Companies: The global companies believe that the entire world is one market. They have a strong emphasis on uniformity in products and activities centralization.
Examples: Boeing, Microsoft.
- International Companies: They import their products to the foreign market while having no base in the parent nation.
Examples: Hyundai, and Sony in their developing stage.
Difference Between Private Public and Global Enterprises
Below is a detailed table that brings out the key differences between Private, Public, and global enterprises. By studying this you can get an in-depth insight into each of the enterprises and how impactful it is in today’s world.
| Characteristic | Private Enterprises | Public Enterprises | Global Enterprises |
| Ownership | Owned by some individual, or private group of organizations, or a private company of shareholders. | The government owns and controls it.. | Owned by private persons or shareholders of the world, usually having one central headquarters with several overseas offices. |
| Purpose | Profits, producing wealth for its shareholders, innovation | It focuses on public well-being, economic progress, and the efficient distribution of resources. | Internationalization of its global market, growing revenues, and capturing international markets. |
| Financing | Obtained funds by private investment, loans, internal earnings, and public or private issuance of stocks. | It receives finances from the governmental budget, public funds, and grants. | Raises capital from global equity markets, international investments, and partnerships in host countries. |
| Scale of operation | It operates at the local, national, or international level depending on the size and scope of the business. | Operates within domestic or national boundaries to address local or national priorities. | Functions globally with a presence in multiple countries and often leverages regional offices to cater to specific markets |
| Decision making | More rapid, nimble, and commercially competitive and led by market demands and innovation needs. | Decision-making processes become slower due to bureaucratic layers and government policy adherence.e | Decision authority can be either centralized for cohesion or decentralized with visitor flexibility in regional terms. |
| Focus area | Efficiency, Customers, and profitability are at center stage to have a competitive stand in the business market. | Service Delivery, Public Good, and Economy Equity are at the forefront rather than profit generation. | Focuses on establishing international brands, market expansion, and sustaining excellence. |
| Examples | Tata Group, Reliance Industries, Infosys, Wipro. | Indian Railways, LIC of India, Bharat Heavy Electricals Limited (BHEL). | Apple, Coca-Cola, Microsoft, Nestlé, Unilever. |
| Regulation | Regulated through market forces, competition acts, and industry sector-specific regulatory requirements. | Strongly regulated through government policy, acts, and guidelines. | It is subjected to several international laws, local regulations,s, and international trade agreements. |
| Employment policy | Offers employment based on performance, market demand, and profit goals. | Offers stable government jobs with a focus on job security and public welfare programs. | Employs a diverse global workforce with policies aligned to international labor standards and regional requirements. |
| Revenue model | Earning from product sales, services, and investments. | Depends on service charges, taxes, and subsidies to sustain operations. | Earning from global operations, exports, local sales, and international collaborations. |
| Innovation | High levels of innovation driven by competition and market demands. | Limited innovation due to bureaucratic constraints and public welfare priorities. | Leads in global innovation with significant investments in research and development to stay ahead of competitors. |
Private Public and Global Enterprises FAQs
What are private public and global enterprises?
Private enterprises are owned by private organizations or individuals and are profit-oriented. Public enterprises are owned by the government and serve the public. Global enterprises cover the world and are spread in more than one country.
What is the major difference between private and public enterprises?
The difference between the two is ownership and objectives. Private enterprises are owned by individuals or shareholders and are profit-oriented, while public enterprises are owned by the government and are objective-oriented towards public interests and economic development.
How do global enterprises differ from private and public enterprises?
Global enterprises are present in many countries, utilizing the international markets and resources. Private and public enterprises usually operate within the country or region, whereas global enterprises are mostly large-scale operations that span countries.
Is it possible for a public enterprise to be a global enterprise?
Yes, public enterprise can also be internationalized and can be regarded as a global enterprise. For example, state-owned companies like Bharat Heavy Electricals Limited, and BHEL work worldwide through the export of their products and services.
Which of the following is the most important source of innovation?
Private and global enterprises are the leading innovators. Private enterprise is spurred by competitive forces, while global enterprise invests lavishly in the science of research and development to maintain global competitiveness.
