26 Outline two potential problems of a state-owned business

[Sir Afzal Shad]

26 Outline two potential problems of a state-owned business. [3]
Hint: Inefficiency > No profit motive can lead to higher costs and waste.
Hint: Political interference > Decisions might be made for political reasons (e.g., winning votes) rather than for business reasons.

[EmmanWaseem]

One reason can be lack of efficiency
Due to less competition than private companies and not focusing on profit margins, it will lead to inefficiency
Another reason is political interference
The decision will be made based on political reasons, not the business reason

[Aarib Saad]

(KN)Poor allocation of resources.
(APP)For instance, a state-owned hospital will hire more nurses than needed as the government's goal is to reduce unemployment.
(AN)This would mean that labor will be underutilized, reducing the output produced by the country, leading to shortages and worsened living standards.

[Abdullah Altaf]

[KN] A primary issue with state-owned businesses is the reduction in operational efficiency, caused from the absence of a profit-driven incentive.
[APP] Since the lack of a profit motive often leads to higher operational costs. Consequently, this increased expenditure necessitates higher government spending, which can consequently create budget deficits.
[AN] Hence can lead to a decrease in financial resources available for investment in other crucial areas like the healthcare system and the education sector, potentially hampering societal progress and development.

===
Examiner Comments:
> [KN] is good
> APP is not making sense
> AN is not having 3 elements

[shamaim shakeel]

Problem 1 – Inefficiency
KN: State-owned businesses may be inefficient because they lack a profit motive.
APP: For example, a government-owned railway might overspend on staff or equipment.
AN: This can lead to higher costs and waste, reducing value for taxpayers.

Problem 2 – Political interference
KN: Decisions may be influenced by politics rather than business logic.
APP: For instance, a government might keep an unprofitable factory open just to win local votes.
AN: This can harm long-term performance and competitiveness.

[Muaz Aamir]

KN: A state owned business can have problems because it is run by the government instead of private owners.

AP: For example, the government might make choices for political reasons rather than to keep the business efficient.

AN: This can make decisions slower since there’s lots of rules to follow. It might also waste money because there’s less pressure to control costs. On top of that, if the business loses money, taxes might be used to cover it, which can annoy the public.

[Shaliza khawaja]

State owned business may be less innovative then a private owned business for example a government owned airline will have less pressure to upgrade its plan or services as compared to privately owned airline, this means customers get outdated services, in the long run this lack of innovation will make them fall behind in business and hence reduce there presence in the society eventually leading to less revenue.
state runned business can be expensive for the government for example if the state owned business makes a lose then government would have to use its tax money to operate it meaning they will not be able to fund other public sector projects like making schools or hospitals in the long run econoic growth will slow down, and if the lose continues government would have to raise taxes for the public .

[Abdur Rehman khan]

[KN] State-owned businesses may lack efficiency because they don’t have a strong profit motive.
[APP] For example, employees might not feel pressured to reduce costs or improve quality.
[AN] This can lead to higher operating costs, wastage of resources and reduced competitiveness compared to private firms.

[KN] Political interference may negatively impact the operations of state-owned businesses.
[APP] For example, a government may keep prices low to win votes instead of focusing on financial sustainability.
[AN] This could result in poor financial performance ,underinvestment in the business and long-term decline in quality of service.

[hassanalizafar]

[KN]A state owned business may face inefficiency because it does not have a strong profit motive.
[APP] For instance, a govt owned electricity company might keep extra staff to have unemployment rate low and operate with outdated equipment since there is little pressure to cut costs.
[AN]This raises operating costs which reduces productivity leading to slower service delivery causing customer dissatisfaction which damages the organisations reputation hence increases the financial burden on the government and taxpayers.

[abdurrehman waseem]

KN: One problem is inefficiency due to lack of competition. Another is political interference in decision-making.
APP: For instance, a government transport company may provide slow service and overstaffing because efficiency is not the main goal.
AN: This can lead to wastage of public money and poor service quality.

[areeshasaber]

[kn] two problems of a state owned business can be inefficiency and political interference.
[app] for example, an electricity company may keep more staff than needed.
[an+] this can lead to higher expenses, lower productivity, and poor long-term sustainability.

[Abdul Hadi]

KN: A state owned business may face political response and interference.
APP: For Example, a government owned railway company might run on high costs and unprofitable routes due to political pressure.
AN: This causes the increase in operating costs, reducing value for tax payers, political influence may lead to poor efficiency and reduce profitablilty as prices are to be kept too low in order to gain political support, such reasons can lower the quality of the business and influence efficiency due to political intervention.

[Naveen fatima]

•1ST PROBLEM
[KN]One potential problem of a state-owned business is inefficiency.
[APP]For example, managers may not work hard because the government will keep funding the business even if it makes a loss.
[AN]This can lead to wasted resources, poor service and higher costs for taxpayers.
•2ND PROBLEM
[KN] Another problem is slow decision-making.
[APP] For instance, big changes may need government approval before being carried out.
[AN]This can make the business less flexible, cause delays in improvements and reduce competitiveness compared to private businesses.

[Fatima ibtehaj]

[KN]Lack of efficiency Because state-owned businesses don’t need to make profit like private companies ,Political interference – The government might make decisions based on politics.
[APP]For example, a government-run train service might keep running late or waste money because there’s no pressure to improve and for political pressure
keeping a loss-making factory open just to protect jobs in an election year
[AN]This can lead to poor service for the public and higher costs for taxpayers, which makes people unhappy and puts pressure on the government

[tanzeelrehman]

[KN] = Overstaffing
[APP] = Most of the state-owned businesses focus on reducing unemployment rate, so they hire more number of employees than required
[AN] = This will increase salary expenses, reduce efficiency, cause financial losses, and create a heavy burden on the government’s budget. In the long term, it will reduce the govt's budget for other economic and welfare development projects.

[KN] = Inefficiency
[APP] = F.e, due to political interference in state-owned business, it can cause inefficiency
[AN] = This reduces service quality. This makes the customers dissatisfied. It leads to continuous financial losses, so heavy burden on govt's budget