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Small businesses.pdf
1. &1 ENTREPRENEURSHIP DEVELOPMENT
cec o Enreoreneurship Development
Errneursihip Derelopment is the process ofimproving the
sls i iorovledge ofentrepreneurs through various training
i ciassroom programs. The whole pointofentrepreneurship
development is to increase the number of entrepreneurs.
Entrepreneurship is regarded as one of the four majorfactors
ofproduction,the other three being land, labour and capital.
The word entrepreneur is derived from the French verb
emterprendre', which means to undertake'. This refers to those Entrepreneurship: All in your Hands
8.1
2. n.2
who 'undertake' the tisk of new enterpris, An eniterprier is efeateel hry nti erd
proen ol ereatiom iscalled T nlreprenrurahiy
mobilising renoureen and organising production with a view to deliveriny ualue tn the custin
ners,
returns for the imvestors
andprofitafor lhe self in accordance with the risks and uncertaintins assuniatnd
with businews. Entrepreneurship in a process of actions of an entrepreneur. An ETtreprerui
TMN or a group of pernons who establishes an enterpriN, take the riskn, accunulatesa
the resources required to carry omut production or perform urvices and creata an intervative
product or service.
Tntroprenrurnhi ean br defind as a tystematic, purponrful and creative a11ityf udentifyinyu n d
Ernerpos
Entroprenour Etropronourship
The Otrome
The Porson The Procoss
Characteristics of Entrepreneurship
The definition of Entrepreneurship highlights its certain characteristics, which are discued
as under:
1. Systematic Activity: Entrepreneurshipisasystematic,step-by-stepand purposefulactivity.
It has certain temperamental, skill and other knowledge and competency requirernents
that can be acquired, learnt and developed, both by formal educational and vocational
training as well as by observation and work experience
Lawful and Purposeful Activity: Entrepreneurship aims to conduct a lawful business.
The purpose of entrepreneurship is to create value for personal profit and social gain.
t must be noted that one may try to legitimise unlawful actions as entrepreneurship on the grounds
that just as entrepreneurship involves risk, so does unlawful business
2.
3. Related to Innovation: Entrepreneurship involves a continuous search for new ideas.
Entrepreneurship is innovative as it involves introduction of new products, discovery
of new markets and sources of supply of inputs, technological breakthroughs as well as
introduction of newer organisational forms for doing things better, cheaper, faster and in
a manner that causes the least harm to the environment.
Entrepreneurship is creative in the sense that it involves creation of value. In the absence of
entrepreneurship, 'matter does not become a 'resource' By combining the various factors of
production, entrepreneursproducegoodsandservices thatmeetthe needsand wantsofthesociety
4. Organisation of Production: Production requires the combined utilisation of diverse
factors of production, land, labour, capital and technology. Entrepreneur mobilises these
resources into a productive enterprise or firm. Organisation of production also involves
product development and development of the market for the product. Entrepreneur may
also be required to develop even the sources of supply of requisite inputs.
Risk-Taking: The essence of entrepreneurship is the 'willingness to assume risk' arising
out of the creation and implementation of new ideas. Risk is an
inherentand
inseparable
element of entrepreneurship. If an entrepreneur does not have the willingness to assume
risk, entrepreneurship would never succeed.
5.
3. 8.3
Small Busiress and Enterprises
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Need for Entrepreneurship
Country, whether developed or
developing, needs entrepreneurs. A developing country
entrepreneurs to initiate the process of development, while the developed one needs
repreneurship to sustain it. In the present Indian context, entrepreneurship can really take
India to the heights of becoming a
super economic power.
1.
Contribution to Gross Domestic Product
(GD
Increase in GDP is considered as the most common jocof
indicator for economic
development. As income is
generated in the process ofproduction,entrepreneurs
generate income through organisation of production,
be it
agriculture, manufacturing or services.
2. Capital Formation:
Entrepreneurial decision is an
investment decision that enhances the productive
capacity of the economy, which results in capital
formation.
By investing their own
savings and mobilising
savingsof their friends and relatives,entrepreneurs
contribute to the process of capital formation.
Such informal funding supplements the funds
made available by the formal means of raising
resources from banks, financial institutions and
Nurturing Success
capital markets.
3. Generation of
Employment: Entrepreneurship is a source of
employment to
people
with different abilities, skills and
qualifications. Entrepreneurship provides livelihood to
those who neither have capital to earn interest nor have the land to earn rent. As a result,
entrepreneurs improve the standard of living of many people, directly and indirectly.
4. Generation of Business Opportunities for Others: Every new business creates
opportunities for the suppliers of inputs (known as Backward Linkages) and marketers of
the output (known as Forward Linkages). For example, a
pen manufacturer would create
opportunities for refill manufacturers as well as wholesalers and retailers of stationery
products. These immediate linkages induce further linkages. So, through a
chain-reaction,
entrepreneurship stimulates the level of economic activity.
5. Improvement in Economic Efficiency: Efficiency means to have greater output from the
same input. Entrepreneurs improve economic efficiency by:
Improving processes, reducing wastes, increasing yield; and
Bringing technical progressby altering labour-capital ratios.
6. Increasing Spectrum and Scope of Economic Activities: Diversification of economic
activities across the
geographic,sectoral and
technological scope leads to
development of
an economy. Entrepreneurs mobilise local and even overseas resources to
augment the
4. Business Studies for Class XI
8.4 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * . . . . . * . * * * * * * |
* * * *
productive capacity of a country. Indian MultinationalG1ants are fast
becominga reality
Entrepreneurs lead the processofeconomic developmentby bringingabout sectoral change
Impact on Local Communities: As there are no entry barriers in terms ofeducational
qualifications, entrepreneurship is an attractive career optionfor marginalised groups such
as women, SC, ST and OBC to pursue their economic dreams. Agro-based rural industries
and craft-based cottage industries can reallycatapultlocal commurnities to socio-economic
success stories.
8.2 START-UP INDIA SCHEME
It is a
flagship initiative of the Government of India which aims toprepareastrong eco-system
tor nurturing innovation and start-ups in the country. Ttis drive will lead towards sustainable
economic growth and generate large-scaleemploymentopportunities. The Indian Government
aims to empower start-ups to grow through innovation and design. A start-up is a newly
energed venture that aims to develop a viable to meet a marketplace need or problem.
The main objectives of this scheme are:
1. To initiate an entrepreneurial culture and inculcate entrepreneurial values in the society
and influence the mindset of people towards entrepreneurship.
To create awareness about the charms of being an entrepreneur and the process of
entrepreneurship, especially among the youth.
3To encourage more dynamic start-ups by motivating educated youth, scientists and
technologists to consider entrepreneurship as a lucrative, preferred and viable career.
4 To support the early phase of entrepreneurship development, including the pre-startup
as well as, early post start-up phase and growth enterprises.
2
What does a Start-up Mean?
As per the rnotification dated 17th February, 2017, issued by the Ministry of Commerce and
Industry, a start-up means:
1. An eritity incorporated or registered in India.
2 Not older than five years.
3 Annual turnover does not exceed ? 25 crore in any preceding year.
4Working towards innovation, development or commercialisation ofproducts/service/
proxes driven by technology or Intellectual Property Rights (IPRs) and patent.
i Oninte
5. Ways to Fund Start-up
In addition to the
government plans that offer capital and bank loans to start-ups, the funding
for start-ups can also be availed in the following ways:
ty
Boot Strapping: Boot strapping in business means starting a business without external
help or
capital. It is
commonly known as self financing. It is considered as the first funding
option because by using personal savings and resources, entrepreneur is tied to his business.
Moreover, investors consider it as a merit at a later stage. However, it is a good option of
funding only if the initial requirement is small and handy.
2. Crowdfunding: It is the practice of funding a projectbyraising money from a large number
of people for a common goal. Organisations reach out to common people for funding.
The emergence of platforms that promote crowdfunding is fairly recent to India. These
platforms help start-ups or small businesses to meet their furnding requirements.
1.
Of
3. Angel Investment: Angel investors are individuals with surplus cash who have keen
interest to invest in upcoming start-ups. They also offer mentoring or advice alongside
capital.
Venture Capital: There are professionallymanaged furnds which are invested in companies
4.
that have huge potential. Venture capitalists provide expertise, mentorship and evaluate
business from sustainability and scalability point of view.
Imeashators and Acceleratore. Farly stace business can consider incubator and
6. Read about Indian governments Startup India Action Plan.
3. INTELLECTUAL PROPERTY RIGHTS AND ENTREPRENEURSHIP
Intellecutal Property (IP) systems can be critical in helpingnew ventures transform
their
innovation potential and creativity into market value and competitiveness. Intellectual Pro
er
rights (IPR) allow innovative entrepreneurs to protect their inventions. It also give an edge o
your comnpetitor.
3.1 What is the IP System?
General definition of intellectual property rights (1PR)
Intellectual Property (IP) is divided into two categories
1. Industrial property, which includes inventions (patents), trademarks, industrial designs
and geographic indications; and
2. Copyright, which includes literary and artistic
works
Intellectual property rights (1PR) reter to the general term for the assignment of property
rights on these assets)
The IP system as an asset for innovative entrepreneurship
The Intellectual Property Right, ie., IPR is very very important and beneficial for innovative
entrepreneur in the following way:
1. Innovative potential get market value.
2. Specially upcoming entrepreneur can make their name and place in market with IPR.
3. Research shows more than 25% patent are taken by new and upcoming entrepreneurs.
4. IPR gives the entrepreneur property right on intangible assets.
7. Chapter: 8 Small Businessand Enterprises 241
IPR eive an edge over your conpetor and help you to become leader in your field.
5.
Intellectual Property include
. Copyrights
2. Patents
3. Trademarks
Copyright protection gives the copyright holder the exclusive right to copy the work,
modify it (that is, create "derivative works"), and distribule. perform and display the work
publicly.
Patents: Patents protect processes, methods and inventions that are "novel" "non-obvious
and "useful:" If granted, a patent gives you monopoly on selling, using, making or importing
an invention. The requirements for a patent are complex.
3 Trademarks: A trademark is like a brand name. It is any word(s) orsymbol(s) that represent
a product to identify and distinguish it from other products in the marketplace.
is tradenmark of Nikecompany
Example 'Nike '
Trademark gives you a legal protection that no one else can use this trade mark.
8. paranmeters.
8.4 INTRODUCTION:SMALL BUSINESS
Small businesses play a significant role ina developing country like India, especially in the field
of employment generation and economic development. For the past few years, these businesses
have been producing a wide range of commodities, ranging from ordinary consumer goods to
sophisticated goods based on the latest technology.
8.5 SMALL SCALE ENTERPRISE AS PER MSMED ACT, 2006
With the emergence of large services sector, it was necessary for the government to include other
enterprises (i.e. Small Scale Industries and related service entities) under the same umbrella.
Expansion of small scale enterprises was taking place growing into medium scale enterprises
and they were required to adopt higher levels of technologies in order to remain competitive
in a fast globalising world.
In India, MSMED Act, 2006 (Micro, Small and Medium Enterprises Development Act, 2006)
was established for developing and enhancing the competitiveness of micro, small and medium
enterprises and for matters connected therewith.
.The Act was published in gazette of India on 16th June, 2006. However, it came into force
from 2nd October, 2006.
9. Smail Business and Enterprises
8.7
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Small business is generally defined in terms of size of business enterprise. There are sEveral
parameters to measure the size of business units, like number of persons employed, capital
invested, volume or value of output, power consumed, etc.
In India, small business is defined on the basis of investment in plant and machinery. ihis
approach is justified because of
scarcity of capital and abundance of labour in our country.
Taking capital invested as the basis, the small business units in India can fall under any ofthefollouing
ategories:
Classification of
Manufacturing Enterprises
According to MSMED Act, 2006, an
enterprise, engaged in the manufacture or
production of
goods pertaining to any industry specified in the first schedule to the Industries (Developrnernt
and Regulation) Act, 1951, there are three types of enterprises:
Micro Enterprise: If investmentin Plant and Machinerydoesnot exceed 25 lakhs.
Small Enterprise: If investment in Plant and Machinery is more than 25 lakhs but does not
exceedR5 crore.
Mediunm Enterprise: If investment in Plant and Machinery is more than 5 crore but does
not exceedR 10crores.
Note: While calculating the investment in plant and machinery, the cost of pollution control, research
and development, industrial safety devices and such other items shal be excluded.
Classification of Service Enterprises
In the case of enterprises engaged in providing or rendering of services, there are three types
of enterprises:
Micro Enterprise: If investment in equipment does not exceed 10lakhs.
Small Enterprise: If investment in equipment is more than 7 10 lakhs but does not exceed
2 crore.
Medium Enterprise: If investment in equipment is more than 2 crorebut does not exceed
5 crore.
t must be noted that Manufacturing Enterprises are definedin terms ofimvestment in plant and machinery
while Service Enterprises are defined in terms of their investment in equipment.
CLASSIFICATION ASPERMSMEDACT,2006
Manutacturing Enterprises Service Enterprises
Ceiling on investment in Plant
and Machinery does not exceed
Ceiling on investment in
Equipment does not exceed
710 Lakh 72 Croree 75Crore
25 Lakh 75 Crore 710Crore
Medium
Small
Enterprise Enterprise
Micro Smail Medium Micro
Enterprise Enterprise Enterprise Enterprise
10. 5. ROLE OF SMALL BUSINESS IN RURAL INDIA
Small-scale industries provide the following benefits in rural area:
Employment: Small-scale industries are labour-intensive so they provide additional
()
employment to men and women. Next to agriculture, small business constitutes the most
Dopular occupation of people of India. They also provide employment to agriculturists who
remain idle during a part of year.
(i) Improves Economic Condition: By providingemploymentopportunities,thesmall-scale
industries provide more income to people living in rural areas, which improves eco
conditions in villages.
(iii) Promotion of Artistic andCreative Sense: Small business set up in rural area provides
scope for the promotion of artistic achievement and creativity that has been suppressed in
rural areas.
(v) Rural Development: Small-scaleindustryset up in rural areasleadstotheirdevelopment
(iv)
wncn
may result in rural reconstruction, sustained growth and removal of regional
disparity.
11. Chapter: 8 Small Business and Enterprises 243
(() Mobilisation of Local Resources: Small-scale industries facilitate mobilisation
and utilisation of local resources which might otherwise remain unutilised. This
helps in tapping resources like entrepreneur skill and small savings specially in rural
areas.
12. CS TOr
Enterprises in kural, Backward and Hilly areas
8.11 INSTITUTIONAL SUPPORT
The government has set up following institutions for the benefit of the small scale industries:
1. National Small Industries Corporation (NSIC)
National Small Industries Corporation Ltd. (NSIC) is an ISO 9001-
2008 certified Government of India Enterprise under Ministry of
Micro, Small and Medium Enterprises (MSME). It was set up in
1955 to promote the growth of small business units in the country.
NSIC
ISO9001: 2000
National Small Industries Corporation
Functions of NSIC
The main functions of NSIC are as follows:
i) To supply domestic and imported machines on
easy hire-purchase terms.
ii) To procure, supply and distribute indigenous and imported raw materials.
ii) To export the products ofsmallbusiness units and develop export-worthiness.
(iv) To provide mentoringand advisory services.
(v) To serve as
technology businessincubators.
(vi) To create awarenesson technological upgradation.
(vii) To develop software technology parks and
technology transfer centres.
NSIC has implemented a new scheme of Performance and credit rating' of small businesses to
achieve two objectives:
i) Sensitising the small industries about the need for credit rating.
(11)
Encouraging small business units to maintain good financial track record.
This is to ensure that they score higher rating for their credit requirements as and when they
approach the financial institutions for their working capital and investment requirements.
13. I1S ana
networKing events.
2. District Industries Centers (DICs)
DIC Programme was launched in 1st May, 1978 at the district level to provide services and
support facilities to the entrepreneurs for setting up small and village industries. It provides
different kinds of assistance to the entrepreneurs.
.DIC provides guidance about the various assistance schemes ofthegovernment, preparation
of feasibility reports, arranging for credit, machinery and equipment, provision of raw
materials and other extension services for the entrepreneurs of small and village industries.
Broadly, DICs are trying to bring change in the attitude of the rural entrepreneurs and all
other who are connected with economic development in the rural areas.
rs,
S.
Efforts are being made to look at some of the neglected factors like the rural artisan, the
skilled craftsman and the handloom operatorand to tune up these activities with the general
process of rural development.
Thus, DIC is emerging as thefocal pointforeconomic and industrial growth at the district level.
Some More Institutional Support