Distinction between Private Enterprises and Public Enterprises The main points of distinction between a private enterprise and a Public enterprise are as follows: 1. Objects: Private enterprises are motivated primarily by considerations of profit. Therefore, these enterprises operate mainly in those areas of economic activities which offer a regular and steady return on capital investment. On the other hand, Public enterprises are guided by several socio-economic and political objectives. They cover a wide spectrum of operations with little regard for considerations of profit. 2. Ownership: A Public enterprise is owned by the Central Government and / or one or more State Governments either singly or jointly. On the contrary, the ownership of a private enterprise vests in one or more private individuals or corporate bodies. 3. Management: A private sector enterprise is managed by its owners or their elected representatives. The management has to abide by the guidelines laid down by the owners. However, there is enough scope for initiative and dynamism because policies can be modified or even discarded according to the requirements of the particular situation. In case of public sector enterprises there is little scope for initiative and dynamism because managers of such enterprises are required to operate within the rigid policy framework and rules framed by the Government. 4. Capital: The entire or majority capital of a private enterprise is contributed by private investors / owners from their own resources. Its capacity to raise capital is limited and it can face shortage of funds. On the other hand, the entire or at least 51 per cent of the capital of a Public enterprise is provided by the Government from public funds. Such an enterprise can never be short of funds because Government can mobilise unlimited financial resources. 5. Freedom of management: In a private enterprise, the owners are free to manage and control the affairs with little interference. But a Public enterprise faces continuous interference from several agencies, e.g., ministries, politicians and bureaucrats. Quite often there is interference in day-to-day affairs of the enterprise. 6. Flexibility: A private enterprise can easily modify its policies and operations to meet the requirements of any specific situation. There are few restrictions on its owners for attaining the objects and policies of the enterprise. However, in a Public enterprise any change in objects and policies requires the approval of the Government and its functionaries. 7. Area of Operations: Private enterprises are ready to venture out into any field of investment where steady and reasonable returns are expected. But Public enterprises operate mainly in the field of basic and strategic industries, public utility services and other areas of social benefit.
Posted on: Sun, 07 Dec 2014 15:32:27 +0000
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