Disadvantages or Arguments against State Enterprise - QS Study
QS Study

Disadvantages or Arguments against State Enterprise

If the state gets the ownership on continual at any business directly or indirectly incest it that business is called as the state enterprise. The business controlled or operated by the government is known as a state enterprise. It can be either formed by the government or the government may take the ownership and custody of any private company.

The state enterprise refers to that business which is wholly owned and controlled by the government. All the elements of the business are most on less present in such an organization. State enterprise has many advantages but that are some disadvantages also. The state enterprise has some inherent disadvantages in the matter of the management and administration. The disadvantages of state enterprise are stated below-

The inefficiency of management: Government officials who are asked to manage this organization generally have a shortage of business knowledge. They do not have required business skills and efficiency. This causes a delay in all the activities in the organization. Because of this inefficiency in management, the state enterprise becomes an unprofitable organization.

Delay in making a decision: In conducting all the activities of state enterprise, the management has to take some decision about activities which must follow government rules regulations with full formalities. These are causes delay in decision making which is harmful to managing the state enterprises.

Lack of flexibility: State enterprise is not following flexibility for the effective business operations. It is created by law that’s why it’s not able to change the business strategies and rules for these reasons it cannot match with the changing situation. As a result, it cannot survive in the competitive business world.

Limited fields of operation: The activities and fields of operations are limited by the law, that’s why it cannot cross the limits to operate its activities. As a result, state enterprise cannot take the chance to expand the business.

Nepotism: Top managers of state enterprise are engaged in nepotism, favoritism, and rampant corruption, they don’t appoint the efficient people as employees they often help their own people to get the job. As a result, inefficiency increases and it don’t get success.

Strict government control: As like as other government organization there is strict government control over state enterprise. So any person cannot provide any decision for the development of state enterprise.

Political Intervention: Political intervention is found in the daily activities of state enterprise these enterprises are under the control of ministers and the political persons which belong and hardly understand the problems of management of industry. The state enterprise trends to make decisions on political rather than technical or economic grounds.

Creating tax burden on people: It gives the burden of losses over general public heads by imposing tax, levy etc. To compensate file losses of state enterprise, increase the price of products and increase the tax burden on general people soldiers.

The problem in keeping secrecy: Profit, losses etc of state enterprise are exposed in the newspaper and sometimes in parliament. As a result, confidential matters of business are exposed and state enterprise cannot keep the secrecy.

After above discussion, we can say that there are many disadvantages in the state enterprise. That’s why these enterprises are continuing losses all over the world. So where these enterprises are really needed for the state and public welfare, their state enterprises should be operated.