Privatisation Flashcards
what is privatisation
the act of selling a company or activity controlled by the government to private investors
what are monopolies
a situation where a business activity is controlled by one company or governments and other entities cannot compete with it
nationalised industries
companies that were previously privately owner, now under state ownership
natural monopolies
situation where one firm or industry can serve the entire market at lower prices and more efficiently rather than having many businesses offering the same service
what are the ways of privatisation in the uk (3)
sale of nationalised businesses - national businesses like british airways or british railway were once private sector businesses but were sold off due to the public sector as they were less efficient however after industrialisation and years, they were sold to private investors
Contracting out - contracters are given a chance to bid for services previously supplies by the public sector
The sale of land and property - people who rented council estates were given a chance to buy homes, at generous discounts, as a result around 1 million state homes were sold of to private investors
reasons for privatisation
To generate income - the sale of state assets in order to generate revenue
Public sector was inefficient - some industries lack the incentive to make profit and often made losses, private sectors would usually cut loses and improve efficiency and customer satisfaction due to more accountability
to reduce political interference - some nationalised industries usually are inefficient due to political intereference, such as not being funded etc, private sector businesses are not directly effected by politics, as they are free to join their own investments, prices, products etc
effects of privatisation on consumers(2)
- once private secotor businesses are accountable and under pressure to meet consumer needs, businesses may improve production, lower production costs, invest in better services, machinery, overall gaining customer satisfaction
- however some privatised businesses still may not perform adequetely and since the service is heavily in demand, like railway, they may be desperately granted subsidies, which will be felt by the taxpaer
effects of privatisation on government (4)
- huge amounts of revenue from privatised businesses
- amount spent of advertising can be critised, at the taxpayers expense
- some state assets sold to cheaply, failed to maximise revenue
- privatised businesses may be subject to hostile takeover, not in interest of government
effets of privatisaion on workers (2)
- workers may be made redundant as private businesses may make an effort to cut costs
- workers may be pressed to increase in productivity, low wages, stretched thin over multiple jobs
effects of privatisation on businesses (4)
- some businesses have to face competition now that they are privatised, leading to adaptation and change of objectives
- following privatisation they have increased investment
- numbers of mergers and takeovers following privatisation, leading to less competition and economies of scale
- privatised businesses have diversifies into new areas
what is diversification
when an entity ie gov/ economy/ businesses, increases and expands into different markets and areas of production
what is hostile takeover
when a business is taken over that the businesses does not want or agree to
what is takeover
getting control of a company by buying over 50 percent of its shares
