Private, Public, and Global Enterprises

Introduction

Organizations have different sizes, markets, governance, and employee bases. In fact, all companies are different from one point of view or another. Depending on these differences organizations are divided into three major types which are private, public, and global enterprises.

It is notable that although there are differences in these three types of organizations there are many similarities too. That is why when we look at the structure, motives, and management procedures of organizations, we find many common threads apart from the differences.

For example, it is notable that except for a few nonprofit firms, the objective of all other enterprises is to earn profits. This may be done domestically or internationally. However, all of these companies work in a certain manner that is common among them all. It is therefore quite interesting to see the differences and commonalities among these three types of organizations.

Private Sector Enterprises

Private sector enterprises are owned by an individual or a group of individuals. This means that the management of private-sector enterprises may include a single person or many persons. Depending on the market size and the number of employees, private sector enterprises are divided into small, medium, and large enterprises.

The trading methods of private sector companies may be different too. Some of these are traded privately while others may be traded publicly. However, there are laws pertaining to business trading methods, which means that companies cannot just choose how they will be traded. There are guidelines for an enterprise to be able to trade publicly. This also requires a given amount of net worth for companies to trade publicly. So, only financially healthy companies usually go for public trading in the share markets.

Private sector enterprises are formed either by starting a new company or by privatizing a public sector company. Privatizing requires selling off the government stake in the company. Usually, governments privatize companies when their productivity is low or when public sector companies run into losses for a long period of time. Privatizing turns the ownership and management to private bodies, and it is a general notion that private sector companies earn more revenues and are managed well because the primary aim of private sector companies is to be efficient and earn more profits.

Types of Private Sector Companies

The private sector is the most common type of enterprises and they contribute a handsome amount to the country’s economy. Types of private sector enterprises may be divided into the following −

• Sole proprietorship

• Partnerships

• Small and medium-sized enterprises (SMEs)

• Large and multinational companies

• Professional and trade associations

• Trade unions.

Public Sector Enterprises

Public sector enterprises are managed and owned by local, state, or central governments. Governments may hold 100% ownership of these firms. However, the firms in which the government has more than 50% share are also considered public in nature. Public sector enterprises either provide remunerations or goods to the government er services to society.

The government usually funds public sector companies by collecting taxes, revenues, and fees from the citizens. That is why these companies usually aim to provide kindness instead of profit from the operations. Governments, as mentioned above, may privatize a public sector firm by selling their stake in the firm. This is done to make the firm more efficient and profitable.

Types of Public Sector Companies

• Public or statutory corporation − This type of enterprise is formed by either central or state legislature and complete funding for the corporation is provided by the government. The objectives, powers, process of functioning, etc. of the enterprise are controlled according to the act. Examples of such organizations include the State Bank of India, Life Insurance Corporation of India, Oil and Natural Gas Corporation, and Food Corporation of India.

• Departmental Undertaking − The oldest form of governmental organization is also a kind of department of the government. It is also fully funded by the government and there may be no individual existence of the company apart from a department or a ministry. For example, broadcasting, post and telegraph, railways, telephone services, etc.

• Government company − The government has 51% or more shares in these companies. These firms are however run following the Companies Act, of 2013. Steel Authority of India, Hindustan Machine Tools, and State Trading Corporation are examples of this kind of enterprise.

Global Enterprises

As the name suggests, Global Enterprises have global existence. They are larger than multinational companies (MNCs) and their operational strategy is different from all other types of enterprises. These are the largest possible firms that earn internationally. Their profitability and growth depend on their global operations.

In terms of funding and revenue generation, these companies are ahead of all other firms. These enterprises are divided into various categories depending on their size, products, marketing and strategy, technological advancements, and operational network around the globe.

Global enterprises earn international currencies but at the end of the financial year, the books of accounts it manages are merged to check profitability and revenue generation. These companies include behemoths, such as Apple, Microsoft, Google, etc. that offer considerable push to the countries in which they operate.

Conclusion

• Private sector enterprises are owned by an individual or a group of individuals.

• Depending on the market size and the number of employees, private sector enterprises are divided into small, medium, and large enterprises.

• Private sector enterprises are formed either by starting a new company or by privatizing a public sector company.

• Public sector enterprises are managed and owned by local, state, or central governments.

• The public or statutory corporation is a type of public enterprise formed by either central or state legislature.

• The oldest form of governmental organization is also a kind of department of the government. It is known as a departmental undertaking.

• The government has 51% or more shares in government public sector companies. These firms are however run following the Companies Act, of 2013.

• Global enterprises are divided into various categories depending on their size, products, marketing and strategy, technological advancements, and operational network around the globe.

It is important for firms and stakeholders to know whether their firms are public, private, or global. This offers them the idea of how it should be managed and categorized in general. That is why learning about various types of enterprises is considered valuable in economics.

FAQs

Qns 1. What is a private sector enterprise? What are its types?

Ans. Private sector enterprises are firms that are owned by an individual or a group of individuals. Depending on the market size and the number of employees, private sector enterprises are divided into small, medium, and large enterprises.

Qns 2. What is meant by public sector enterprise? What is a statutory corporation?

Ans. Public sector enterprises are firms that are managed and owned by local, state, or central governments. The public or statutory corporation is a type of public enterprise formed by either central or state legislature.

Qns 3. How many shares should government hold in a government public sector company?

Ans. The government should have 51% or more shares in government public sector companies. These firms are however run following the Companies Act, of 2013.