Advantages and disadvantages of public enterprises: How different they are from private enterprises


Date Posted: 12/19/2012 12:39:18 PM

Posted By: sashoo  Membership Level: Silver  Total Points: 382

Advantages of Public Enterprises.
• Charges low prices.
• Provide essential facilities like education, health, free or at reduced prices.
• Ensures efficient control of industry.
• Expert administrative services.
• Money can be made available for R&D.
• Private monopoly which would cause high prices is avoided.
• Foreign denominations of the economy are avoided.

Disadvantages of Public Enterprises.
• Government must bear losses or this could lead to higher taxation.
• Consumers’ choice is restricted to the state if the business is a monopoly.
• Regulations may be passed to curb the progress of private business.
• Lack of competition may lead to inefficiency and higher prices.
• Government interference.
• Don’t care attitude.
• Political pressure.
• Corruption and embezzlement of funds.
• Foreign investment may be discouraged due to fear of nationalization.

Differences between Private and Public Enterprises.
1. Formation:
Private companies formed by private individual while public enterprises are formed by the government.

2. Membership.
Private members are shareholders while public enterprises no shareholders.

3. Control.
Controlled by board of directors elected by shareholders whereas public enterprise controlled by board of director’s approved by government.

4. Share of Profit.
Shared in form of dividend while public enterprises all profits got to the state.

5. Financing.
Private companies financed by member contributions, ploughing back, borrowing while for public enterprises capital provided by taxation, rate assessment, sloughing back, borrowing, etc.

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