Commercialisation | Definition, Features, Merits & Demerits

COMMERCIALISATION | Definition, Reasons, Advantages and Disadvantages

This is a state policy of making its companies, enterprises, parastatals, etc, more efficient and even more profit oriented. It will also make these organisations come up with efficient management resources.

Reasons for Commercialisation

• Efficient management: Commercialisation makes for efficient management of most industries.
• Collective or individual ownership of enterprises: Opportunity is created for collective or individual’s participation in the country’s economic activities.
• Revenue generation: More revenues are generated for the government through commercialization.
• Extinction of enterprises: Commercialisation creates the opening for the economy to experience the extinction or exit of enterprises that are unproductive.
• Profit-oriented: Efficient and effective management of industries, enterprises, etc could result in making them more profit oriented.

Advantages of Commercialisation

• Efficiency: Efficiency in production is one of the gains of commercialisation.
• More revenues are generated: More revenues are generated for the three tiers of government; local, state and federal governments.
• Reduction of expenditures: Observed that most public enterprises are not viable, the expenditure on them will be reduced drastically.
• Introduction of new ideas: Competition makes way for the injection of innovations, new ideas, etc, into most of the enterprises, industries, etc.
• Wide range of choices for consumers: This policy is acreation of abundant products in the system bringing about wide-range of choices for the consumers .
• Profit making venture: The target set in commercialisation is always the tendency towards profit-making.

Disadvantages of Commercialisation

• High cost of goods produced: This may be out of the reach of the consumers. This is because the high cost of produced goods is passed to consumers as a result of the company’s set objective which is profit maximization.
• Fall In people’s standard of living: Commercialisation in most cases leads to a drastic fall in people’s standard of living. This is a result of most organizations policy of profit maximization over and above the economic well being of the people, even by exploiting them.
• Laying off workers: There is always a reduction ofworkforee in many industries as a result of cemmereialisation.
• Consumers’ welfare scheme under threat: Consumers’ welfare scheme are mostly neglected owing to commercialisation.
• Uneven distribution of income: Income is unevenly distributed as a result of the policy of commercialisation. Few people now control the means of production of goods and services in the system.

Aims and Objectives of Commercialization

Commercialization, like privatization, is expected to achieve certain objectives. It is meant:

• To encourage government to concentrate resources on its core functions and responsibilities;
• To improve the operational efficiency of state enterprises;
• To remove the dominance of unprofitable investment in the public sector;
• To make public enterprises to be profit-oriented and selfsustaining without depending on national treasury.
• To encourage public ownership of equity in local enterprises and broaden the existing scope of the capital market.