Privatisation

Question 1

what is privatisation

Answer 1

the act of selling a company or activity controlled by the government to private investors

Question 2

what are monopolies

Answer 2

a situation where a business activity is controlled by one company or governments and other entities cannot compete with it

Question 3

nationalised industries

Answer 3

companies that were previously privately owner, now under state ownership

Question 4

natural monopolies

Answer 4

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

Question 5

what are the ways of privatisation in the uk (3)

Answer 5

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

Question 6

reasons for privatisation

Answer 6

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

Question 7

effects of privatisation on consumers(2)

Answer 7

• 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

Question 8

effects of privatisation on government (4)

Answer 8

• 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

Question 9

effets of privatisaion on workers (2)

Answer 9

• 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

Question 10

effects of privatisation on businesses (4)

Answer 10

• 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

Question 11

what is diversification

Answer 11

when an entity ie gov/ economy/ businesses, increases and expands into different markets and areas of production

Question 12

what is hostile takeover

Answer 12

when a business is taken over that the businesses does not want or agree to

Question 13

what is takeover

Answer 13

getting control of a company by buying over 50 percent of its shares