Hello, welcome to this blog on topic: Reasons for commercialization and privatization of public enterprises in commerce.
Table Of Content
- Definition of commercialization
- Definition of privatization
- Reasons for commercialization and privatisation
- Advantages of commercialization and privatization
- Disadvantages of Commercialization privatization.
Definition Of Commercialization
Definition: Commercialization is a policy geared towards making state owned enterprises to become more efficient and profit oriented. The policy makes it possible for public enterprises to become more viable and effective.
Definition Of Privatization
Definition: Privatization on the other hand can be defined as a policy designed to enable individuals and private or corporate organizations take over the ownership and control of government businesses such as public companies and corporations.
Reasons for commercialization and privatization
- Efficient management: Commercialization and privatization help to develop a good and efficient management of enterprises.
- Participation of private individuals: They also assist individuals to participate in economic activities through ownership of enterprises.
- To generate more revenue: They assist the government to generate more revenue.
- Autonomy of Enterprises: It helps to provide autonomy for the Enterprises.
- Remover of unproductive Enterprises: They also assist to remove or divest or productive Enterprises in the economy.
Advantages of Commercialization and Privatization
- Reduction in public expenditure: Commercialisation and privatization help in reducing public expenditure on Enterprises that are not viable.
- It promotes efficiency: Commercialization and privatization do help to promote efficiency in production.
- Generation of more revenue: Both policies equally help to boost the generation of revenue for the government.
- Emergence of innovations: The existence of competition in the Industries assists in the emergence of innovations.
- Better choice by consumers: Both policies do assist the consumers to have a wide range of choice where there are abundant products.
Disadvantages of Commercialization and Privatization
- Poor standard of Living: Commercialization and privatization lead to poor standard of living of the people due to a shift in interest from pure service delivery to profit maximisation.
- High cost of products: These policies are aimed at profit maximisation hence they are usually associated with high cost of products or goods.
- Reduction in employment: Many workers are usually laid off when Industries are commercialised or privatised.
- Uneven distribution of income: Income is often unevenly distributed as few individuals and now in control of the Industries.
- Loss of consumer’s welfare scheme: Under commercialization and privatization, consumers welfare are not catered for.
Revision Questions
- What is commercialization?
- Define privatization
- What are the reasons for commercialization and privatization.
- What are the advantages and disadvantages of commercialization and privatization
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