Privatization

Privatization

Privatization

Introduction

privatization is the transfer of federal properties and activities to the private sector, while at the same time reducing the government's role as a creator of markets. In other words, privatization is the act of reducing the role of government, or increasing the role of the private sector, in an activity or in the ownership of assets. We have experienced renewed interest in this concept recently because many feel that Uncle Sam has become too big, too expensive, and too much like "Big Brother". In addition, the interest stems from a belief that an amicable arrangement between the private and public sectors might just boost productivity and efficiency, and at the same time, offer more opportunities and satisfaction for the public. The distinction between public and private can be very confusing. First, let us define public. When we think of a park or government building, we think of it as publicly-owned by the government. However, the word public may often be used to describe a corporation which issues stock and has a large number of stockholders, such as IBM or GM. Any member of the public may buy part of the company. Public may also be used to refer to a place or activity that is open to the public, as in the case of a park or restaurant.

Discussion

In the private sector only those who pay directly for a good or service receives the benefits of them. There is a relationship between the quality of service provided and the socio-economic status of customers. Furthermore the private sectors work hard to keep their customers happy, as they are aware that it is more profitable to keep existing customers than to go in search of new ones. Firms supply a service at just above the satisfactory level in order to retain customers. Also if customers are willing to pay more they will receive a better more efficient service. This means that the level of service is improved for those who are willingly to pay. Therefore the private sector focuses on those who can afford to pay. The private sector does not rationalise as the public sector does but it rationalises by price i.e. if a customer doesn't have the money they can't purchase the good or service. Marketing in the private sector is designed to attract customers and increase profits, as profits are a measure of how well a firm is competing in the market(Evans 1999).

Politics play a huge part in the management of public sector organisations "This political context is the driving force behind public bodies and is reflected in how they are managed." (Davison 1999)The public sector has multiple stakeholders such as managers, politicians, users, citizens and media. The public hold managers of the public sector accountable if they are dissatisfied with the goods and services supplied and this in turn is scrutinised by the media. "The supposedly burgeoning cost of public services has encouraged the view that that public sector managers are to be held responsible ...