Is the process for converting government enterprises into individually owned firms?

Q7:
Inhaltsverzeichnis Show
The idea that individuals would contribute according to their abilities and receive benefits according to their needs supports which type of economy? A) Market economy B) Socialist based economy C) Mixed market economy D) Capitalist market economy E) Communist based economy
Q8:
Which environment is NOT an important dimension of a business organization's external environment? A) The political-legal environment B) The sociocultural environment C) The technological environment D) The corporate cultural environment E) The global business environment
Q9:
An organization's external environment consists of everything outside of the organization that might affect it.
Q10:
What term denotes a nation's basis for allocating its resources among its citizens? A) Capital structure B) Economic system C) Ownership processes D) Distribution network E) National regulations
Q11:
What is the environment where a firm conducts its operations and derives its revenues known as? A) Global business environment B) Economic environment C) Domestic business environment D) Technological environment E) Political-legal environment
Q13:
Changes in which type of business environment can reduce or replace the need for traditional working methods,physical equipment,and other platforms needed to conduct business? A) Global business environment B) Economic environment C) Domestic business environment D) Technological environment E) Political-legal environment
Q14:
What factor of production is used to generate forecasts based on specialized knowledge and economic data? A) Economic resources B) Labor C) Information resources D) Entrepreneurs E) Physical resources
Q15:

What is profit? A) Total money taken in by a corporation B) Increases in income from year to year C) Increases in a corporation's stock price D) Revenue generated by goods and services E) Difference between revenues and expenses
Q16:
What are the benefits of business for society?
Q17:
Compare a sociocultural environment to an economic environment.

What Is Privatization?

Privatization occurs when a government-owned business, operation, or property becomes owned by a private, non-government party.

Privatization may also describe a transition that takes a company from being publicly traded to becoming privately held. This is referred to as corporate privatization.

Key Takeaways

Privatization describes the process by which a piece of property or business goes from being owned by the government to being privately owned.
It generally helps governments save money and increase efficiency, where private companies can move goods quicker and more efficiently.
Critics of privatization suggest that basic services, such as education, shouldn’t be subject to market forces.
Privatization may also refer to a public company becoming privately-held once again.

Privatization

How Privatization Works

Privatization of specific government operations happens in a number of ways, though generally, the government transfers ownership of specific facilities or business processes to a private, for-profit company. Privatization generally helps governments save money and increase efficiency.

In general, two main sectors compose an economy: the public sector and the private sector. Government agencies generally run operations and industries within the public sector. In the U.S., the public sector includes the U.S. Postal Service, public schools and universities, the police and firefighter departments, the national park service, and the national security and defense services.

Enterprises not run by the government comprise the private sector. Private companies include the majority of firms in the consumer discretionary, consumer staples, finance, information technology, industrial, real estate, materials, and healthcare sectors.

There are two types of privatization: government and corporate; although the term generally applies to government-to-private transfers.

Public-to-Private Privatization vs. Corporate Privatization

Corporate privatization, on the other hand, allows a company to manage its business or restructure its operations without the strict regulatory or shareholders' oversight imposed on publicly listed companies.

This often appeals to companies if the leadership wants to make structural changes that would negatively impact shareholders. Corporate privatization sometimes takes place after a merger or following a tender offer to purchase a company’s shares. In order to be considered privately owned, a company cannot get financing through public trading via a stock exchange.

Dell Inc. is an example of a company that transitioned from being publicly traded to privately held. In 2013, with approval from its shareholders, Dell offered shareholders a fixed amount per share, plus a specified dividend as a way to buy back its stock and delist. Once the company paid off its existing shareholders, it ceased any public trading and removed its shares from the NASDAQ Stock Exchange, completing the transition to being privately held. In 2018, Dell reverted back to being a public company.

Advantages and Disadvantages of Privatization

Proponents of privatization argue that privately-owned companies run businesses more economically and efficiently because they are profit incentivized to eliminate wasteful spending. Furthermore, private entities don’t have to contend with the bureaucratic red tape that can plague government entities.

On the other hand, privatization naysayers believe necessities like electricity, water, and schools shouldn’t be vulnerable to market forces or driven by profit. In certain states and municipalities, liquor stores and other non-essential businesses are run by public sectors, as revenue-generating operations.

Real-World Examples of Privatization

Before 2012, the state of Washington controlled all sales of liquor within the state, meaning that only the state could operate liquor stores. This policy allowed the state to regulate how and when liquor was sold, and to collect all revenue from liquor sales within the state. However, in 2012, the state moved to privatize liquor sales. Once privatized, private businesses such as Costco and Walmart could sell liquor to the general public. All previously state-run stores were sold to private owners or closed, and the state ceased collecting all revenue from liquor sales.

One of the most famous and historically important examples of privatization occurred after the fall of the Soviet Union. The Soviet Union's form of government was communism, where everything was owned and run by the state; there was no private property or business. Privatization began before the collapse of the Soviet Union under Mikhail Gorbachev, its then-leader, who implemented reforms to hand over certain government enterprises to the private sector. After the Soviet Union collapsed, there was mass privatization of previous government enterprises to a select portion of the populace in Russia, known as oligarchs, that dramatically increased inequality within the nation.

There have been several attempts to privatize the Social Security system in the U.S., where supporters believe returns would be greater for citizens and there would be increased economic growth.

What Types of Institutions Can Become Privatized?

Many types of institutions and facilities typically run by public officials or governments can and have been privatized. These include, among others: prisons; public schools & universities; hospitals; highways; airports and harbors; public utilities (e.g., water, electricity); waste disposal; mail delivery; and communications infrastructure.

Why Are Some Prisons Privatized?

Prisons and jails are often owned and operated by local or state governments. But, there has been a trend to privatize these facilities as governments seek to lower costs, raise capital, and create jobs in their communities. Proponents argue that specialist companies are better-equipped and skilled at controlling prison populations, Critics, however, argue that for-profit prisons are rife with scandal, cutting corners, prisoner abuse, and other ethics violations.

Do Shareholders Get Anything if a Company Goes Private?

Yes. Shareholders first must agree to give up ownership in the company in exchange for some amount of money. If approved, all shareholders will receive a certain amount per share, often at a premium to the market price. Afterward, they are no longer shareholders and the company's shares would be de-listed from exchanges.

What is the process of converting government enterprises into individually owned firms?

Privatization describes the process by which a piece of property or business goes from being owned by the government to being privately owned. It generally helps governments save money and increase efficiency, where private companies can move goods quicker and more efficiently.

Which of the following types of firms design produce and manufacture?

A multinational firm is described as a firm that operates and manufactures products in different countries.

What happens to price in an oligopoly when one firm reduces its price?

The kinked-demand curve explains why firms in an oligopoly resist changes to price. If one of them raises the price, then it will lose market share to the others. If it lowers its price, then the other firms will match the lower price, causing all the firms to earn less profit.

Which of the following is characterized by having few sellers similar prices among sellers and difficult market entry?

An oligopoly is defined as a market structure with few firms and barriers to entry. Oligopoly = A market structure with few firms and barriers to entry. There is often a high level of competition between firms, as each firm makes decisions on prices, quantities, and advertising to maximize profits.