Classification Using the Public & Private Sector (CIE IGCSE Business)

Public and Private Sector Firms
 

• Public sector firms are owned and controlled by the Government
• Private sector firms are owned and controlled by other firms and private individuals (entrepreneurs and shareholders)
• Privatisation occurs when government-owned firms are sold to the private sector
• Many government owned firms have been partially privatised
  • The government retains a share in them so they can influence decision-making and receive a share of the profits e.g. the shares of Singapore Airlines are 55% government owned & 45% privately owned 
     

The Characteristics of Public and Private Sector Firms

Public Sector Firms	Private Sector Firms
Their main goal is usually to provide a service Public sector firms can operate on a local, regional or national government level E.g. Transport for London (local);  Agricultural State Service in India (regional); Caribbean Airlines (national)	The objective of most private sector organisations is profit maximisation This often causes the private sector to be more efficient than the public sector with higher levels of productivity  Types of business ownership vary from sole trader to partnerships to company shareholders

• Public firms are government-owned
  • They are often referred to as state-owned enterprises (SOEs) or government corporations
  • Public firms exist to ensure public service provision, protect strategic industries and national security, create jobs, and provide economic growth
     

Public Service Provision

• Government-owned firms are often established to provide essential public services such as transportation, healthcare, education, and utilities
• These entities are tasked with ensuring that critical services are accessible to the public, and their operations may prioritise social welfare over profit maximisation

Strategic Industries and National Security

• Governments may own firms operating in strategic industries, such as defense, energy, telecommunications, and natural resources
• This ownership allows the government to exert control over sectors vital to national security, economic stability, and long-term development
• Market Regulation and Competition Control:

Employment and Economic Development

• Government-owned firms can play a role in promoting employment and economic development
• By investing in and owning enterprises, governments can stimulate economic activity, create jobs, and support industries that contribute to the overall growth and stability of the economy