Class 11 Business Studies

Small – scale According to the Industries Development &

Regulation Act 1951, any enterprise which has
Industries employees not more than 50 persons when
using power and 100 persons when not using
power and with capital assets not exceeding 5
lakh rupees is known as Small Scale Industries
(SSI).

According to the Micro Small and Medium Enterprises Development (MSMED) Act 2006,

Enterprises are Classified into Two Categories :

Manufacturing Services
1) Manufacturing : In the case of enterprises
engaged in the manufacturing of goods,
There are three types of enterprises :
Micro Under micro enterprise the investment in plant and
Enterprise machinery does not exceed 25 lakh rupees.
Under small enterprises the investment in plant and
Small
machinery is more than 25 lakh rupees but does not
Enterprise
exceed 5 crore rupees.
Under medium enterprise the investment in plant and
Medium
machinery is more than 5 crore rupees but does not
Enterprise
exceed 10 crore rupees.
2) Services : In the case of enterprises
engaged in providing services,
There are three types of enterprises :
Micro Under micro enterprise the investment in equipment
Enterprise does not exceed 10 lakh rupees.
Under small enterprises the investment in equipment is
Small
Enterprise
more than 10 lakh rupees but does not exceed 10 crore
rupees.
Under the medium enterprise the investment in
Medium
Enterprise
equipment is more than 2 crore rupees but does not
exceed 5 crore rupees.
 Village Industries
Village industry is the industry located in a
rural area which produces any goods, renders
any service with or without the use of power
and in which the fixed capital investment per
head is specified by the central government,
from time to time.
Cottage Industries
These are also known as rural
industries or traditional industries.
They are not defined by capital
investment criteria as in the case of
other small-scale industries.

Cottage industries are characterized by certain features like the following :

These are organized by an individual, with private resources.

Normally use family labour and locally available talent.

The equipment used is simple.

Capital investment is small.

Produce simple products, normally on their premises with indigenous technology.

 Role of Small Businesses in India
1) Major Portion in Industrial Units :
 Small industries in India account for 95 per cent of the total industries in India. They contribute almost
40 per cent of the gross industrial value added and 45 per cent of the total exports from India.

2) Second Largest Employment Provider :

 Small industries are the second largest employers of human resources, after agriculture. They
generate a greater number of employment opportunities as compared to large industries.
 Therefore, they are considered to be more labour-intensive and less capital-intensive.

3) Large Variety of Products :

 Small industries in our country supply a large variety of products which includes mass consumption goods, stationery items, soaps
and detergents, foods and vegetables, paints, safety matches etc. along with these electronic goods like televisions, refrigerators,
electronic teaching aids, air conditioners etc. are also supplied by these industries.

4) Balanced Regional Development :

 They contribute to the balanced regional development of our country as these industries produce simple products using simple
technologies and depend on locally available resources so they can be set up anywhere in the country.

5) Opportunities for Entrepreneurship :

 Small industries provide ample opportunity for entrepreneurship. The latent skills and talents of people can be channelized into
business ideas which can be converted into reality with little capital investment and almost no formalities to start a small
business.

6) Low Cost of Production :

 As they use less expensive and locally available resources. Therefore, these industries enjoy the
advantage of the low cost of production.
 Their establishment and running costs are also very low. Hence, they enjoy a low cost of production.
 Problems of Small Business
Problems
Raw Managerial
Finance Quality Labour Technology
materials skills

1) Finance :
 One of the major problems faced by the small-scale industry is the non-availability of adequate finance
to carry out its operations.
 Generally, a small business begins with a small capital base. Many of the units in the small sector lack the
credit worthiness required to raise as capital from the capital markets. As a result, they heavily depend
on money lenders or commercial banks for the supply of credit.

2) Raw Materials :
 The second major problem of small businesses is the procurement of raw materials.
 If the required materials are not available, they have to compromise on the quality or have to pay a high
price to get good quality materials.
3) Quality :
 Small business organizations are not able to maintain standards of quality. As their
main focus is to concentrate on cutting the cost and keeping the prices low.
 As they are not able to compete in global markets because maintaining quality is their
weakest point.
4) Labour :
 Small business firms cannot afford to pay higher salaries to the
employees. As Less amount of salaries results in a lack of motivation.
 As a result, present employees are not able to give their full efforts
which results in low productivity per employee and high employee turnover.
5) Managerial Skills :
 Small business is generally promoted and operated by a single person, who may not
possess all the managerial skills required to run the business. Also, they are not in a
position to afford professional managers.
6) Technology :
 Use of outdated technology is also a major problem for small
industries, resulting in low productivity and uneconomical production.
 Government Assistance to Small Industries and Small Business Units
Incentives :
1) Land :
 Every state offers developed plots for setting up industries.
 The terms and conditions may vary. Some states don’t charge rent in the initial years, while some allow
payment in installments.
2) Power :
 Power is supplied at a concessional rate of 50 per cent, while some states exempt such units from payment
in the initial years.
 Water:
 Water is supplied on a no-profit, no-loss basis or with a 50 per cent concession or exemption from water
charges for a period of 5 years.
3) Sales Tax :
 In all union territories, industries are exempted from sales tax, while some states
extend the exemption for 5 years period.
4) Raw Materials :
 Units located in backward areas get preferential treatment in the matter of
allotment of scarce raw materials like cement, iron and steel etc.
5) Finance :
 Subsidy of 10-15 per cent is given for building capital assets.
 Loans are also offered at concessional rates.
Institutional Support :
1) National Bank for Agriculture and rural development (NABARD) :
 NABARD was set up in 1982 to promote integrated rural development.
 Apart, from agriculture it supports small industries, cottage and village industries and rural artisans using credit and non-credit
approaches. It has been adopting a multipurpose strategy for the promotion of rural business enterprises in the country.
2) The Rural Small Business Development Centre (RSBDC) :
 It works for the benefit of socially and economically disadvantaged individuals and groups. It aims at providing management and
technical support to small entrepreneurs in rural areas.
 It has organized several programmes on rural entrepreneurship and awareness and counseling camps in various villages.
3) National Small Industries Corporation (NSIC) :
 NSIC was set up in 1955 to promote, aid and foster the growth of small business units in the country.
 NSIC performs various functions :
 Supply indigenous and imported machines on easy-hire-purchase terms.
 Procure, supply and distribute indigenous and imported raw materials.
 Developing software technology parks and technology transfer centres.
 Creating awareness of technological Upgradation.
 NSIC also implemented a new scheme of performance and credit rating of small businesses with two objectives :
 Sensitizing the small industries about the need for credit rating
 Encouraging small business units to maintain a good financial track record.
4) The District Industries Centers (DICs) :
 The District Industries Centers programme was launched on 1 May 1978, to provide an integrated administrative framework at the
district level.
 It provides all the services and support facilities to the entrepreneurs for setting up small and village industries. The main activities
performed by DICs are :
a) Identification of suitable schemes
b) Arranging credit
c) Preparation of feasibility reports
d) Provision of raw material and other extension services.
e) DIC also attempts to look after some of the neglected factors like rural artisans, skilled craftsmen and handloom operators.
Entrepreneurship
Development
 Entrepreneur is a person who sets up a business or
businesses, taking on financial risks in the pursuit of profit.
 Entrepreneurship is the act of being an entrepreneur, which
is a French word meaning "one who undertakes an
endeavor". Entrepreneurship may be defined as the process
by which either an individual or a team identifies a
business opportunity and acquires and deploys the
necessary resources required for its expansion.
 Entrepreneurship development seeks to equip a person
with the necessary knowledge and skills needed for
successfully starting and running the enterprise.

Entrepreneur Entrepreneurship Enterprise

(Person) (Process) (Object)
 Features of Entrepreneurship
Economic Activity
 An entrepreneur seeks to satisfy the needs of the society by offering appropriate goods and services.
 Entrepreneurship is regarded as an economic activity because it is concerned with setting up a business
enterprise in pursuit of earning profit.

Dynamic
 Since a business operates in an ever-changing environment.
 Entrepreneurship is dynamic in nature as the success of an entrepreneur depends upon the ability to innovate constantly in the light
of changing situations.

Risk
 Risk is inherent in every business activity regardless of its nature and size.
 Entrepreneurship therefore, involves assuming risks of varied kinds and proportion in order to realize desired goals.

People with High Competence

 The success of an enterprise greatly depends upon the proficiency of the entrepreneur.
 Therefore, entrepreneurship is suitable for those people who are equipped with the required knowledge
and skills to work in challenging and innovative situations.

Purposeful Activity
 Entrepreneurship is a meaningful activity.
 Entrepreneurship involves the identification and implementation of new business ideas with the purpose of benefiting the people at
large.
 Employment
Generation
Balanced Economic
Development
Need for
Entrepreneurship Innovations
Development
Compete in the
International Market

Social Benefits
 Employment Generation
 By setting up a business enterprise, an entrepreneur creates job opportunities for many
others many other people who are employed in his business.
 Hence, entrepreneurship is regarded as a vital instrument for employment generation
in the country through the establishment of new and small enterprises.

Balanced Economic Development

 It has been seen that the local talent and resources are tapped effectively by an entrepreneur who sets up a business
in rural areas and be easily carried out in rural and semi-urban areas.

Innovations
 Entrepreneurship provides autonomy to an individual to explore and utilize his creativity and
talent in the best interest of the business as well as society at large.
 It encourages innovations in enterprises as they enjoy greater flexibility as compared to a
large-scale enterprise and foster growth of small firms in the country.

Compete in the International Market

 It has enabled the Indian industry to compete in the international market due to the enhanced competence of small
business in the country.

Social Benefits
 It offers innumerable social benefits, like ensuring optimum utilization of resources, raising the standard of living of
people by providing better quality products at reasonable prices.
 Self Introspection
Process of
Entrepreneurship Business Opportunities are Identified
Development
Evaluation of Various Business Opportunities

Assessment of the Selected Business Idea

Raise Start-up Capital

Business Venture is Launched

Foster Growth

Harvesting
 Self Introspection
The person(s) concerned does a self-introspection to gauge
his/their relative strengths and weaknesses.
Business Opportunities are Identified
The various forthcoming business opportunities are identified in terms of
unsatisfied needs and wants of people.

Evaluation of Various Business Opportunities

The evaluation of various business opportunities is done
and the selection is narrowed down to one best business idea.

Harvesting
The final stage relates to harvesting wherein the entrepreneur(s) may sell
their business and gain rewards of their endeavours.
 Raise Start-up Capital
The entrepreneur initiates steps to raise start-up capital.
Business Venture is Launched
The business venture is launched and necessary activities are carried out
to make it a success.
Foster Growth
To foster growth of business new ideas are developed and
implemented through effective environmental scanning.
Assessment of the Selected Business Idea
The assessment of the selected business idea is done in terms of its
feasibility to be become a viable business venture by conducting varied
types of research.
  A start-up company is an entrepreneurial venture which is typically a newly
Startup emerged business that aims to meet a marketplace need by developing a viable
business model around a product, service, process or a platform.

India  Start-up as defined by Department of Industrial Policy & Promotion (DIPP), the
Ministry of Commerce and Industry, Government of India.
 Start-up means an entity, incorporated or registered in India.
 Up to a period of seven years from the date of incorporation/registration or up to
ten years in case of Start-ups in Biotechnology sector.
 As a private limited company or registered as a partnership firm or a limited
liability partnership.
 With an annual turnover not exceeding 25 crores for any of the financial years since
incorporation/registration.
 Working towards innovation, development or improvement of products or processes
or services, or if it is a scalable business model with a high potential of employment
generation or wealth creation.

Provided that an entity formed by splitting up or reconstruction of an existing business shall not be
considered a 'Start-up'.

An entity shall cease to be a Start-up

 On completion of seven years from the date of its incorporation/registration, ten years in case of Start-ups in
Biotechnology sector, or
 If its turnover for any previous year exceeds 25 crores.
 Objectives of Promoting Start-up
The government seeks to achieve the following objective by promoting start-up initiatives in
India. The scheme specifically aims to :
1) To foster a culture of entrepreneurship development and entrepreneurship
values among the people at and develop a mind-set of people towards
initiating new projects on their own by building upon their entrepreneurship skills.
2) To create an awareness, among the youth, in particular regarding the process of
entrepreneurship and the sense of achievement and prestige attached in being
acknowledged as an entrepreneur by the society.
3) To stimulate in particular the educated youth from varied fields to give due consideration to
entrepreneurship as an ideal, profitable and practicable career option.
4) To provide adequate assistance to the budding entrepreneurs, in the initial stages of setting up
of their business starting from its conception till promotion.
5) To ensure development of entrepreneurship at the grass root level, and give its benefits to the
lower and backward sections of the society as well. This will help to promote inclusive and
sustainable development within the country.
 Start-up India Initiative
In order to give a boost to start-up project within the country, the
government is providing the due support in the following ways :
1) Simplified Procedures : The government has laid down simple, friendly and flexible procedures
for setting up start-up ventures, in order to encourage entrepreneurship.
2) The Start-up Hub India : This platform has been specifically created for entrepreneurs to connect
with other entrepreneurs, so as to facilitate information, knowledge and financial exchange. This
includes interaction amongst Advisors, Consultants, Mentors, Guides, Angel Investors.
3) Legal Support And Fast-tracking Patent Examination : A well-defined system with regard to
start-ups Intellectual Property Protections (SIPP) has been provided to ensure smooth progress
and protection of patents, trademarks and designs of innovative and interested start-ups.
4) Easy Exit : Beside providing, a simplified procedure for setup, the process to exit from Start-up
venture is also not difficult. This has been done, in order to free the mind of the budding
entrepreneurs from the fear of being trapped in unsuccessful business ventures.
5) Tax Exemption : In order to encourage entrepreneurship within the country, the profits of the
Startup ventures are exempted from income tax for a duration of 3 years.
 Ways to Fund Start-up
Bootstrapping  Bootstrapping refers to a self-starting a business without external help or capital.

 Venture capital is a type of private equity, is provided by firms or funds who take on the
Venture Capital risk of financing and invest in small, early-stage, emerging firms that are deemed to have
high growth potential in exchange for equity, or an ownership stake, in those firms.

 An angel investor is an affluent individual who provides capital for a business start-up,
Angel Investor
usually in exchange for convertible debt or ownership equity.

 Start-up accelerators are fixed-term, group-based programs that include seed investment,
connections, mentorship, educational components and culminate in a public pitch event or
Startup accelerators
demo day to accelerate growth.
or Seed Accelerators  In contrast, business incubators are government-funded, generally take no equity, and
focus on biotech, financial technology, medical technology or product-centric companies.

 Banks also provide start-up funds that are essential to kick start a
Funding from Banks
viable business idea based on certain assessments and conditions.

 Since start-up India is an initiative of the Government of India the government also
provides funds for such ventures through various schemes like the MUDRA Banks scheme
Government Support
(Pradhan Mantri Mudra Yojana), an initiative which aims to provide micro-finance, low-
interest rate loans to entrepreneurs from low socioeconomic backgrounds.
 Intellectual Property Rights
Intellectual Property (IP) is a group of property that includes intangible creations
of the human intellect.
Intellectual property encompasses two types of rights namely;
 Industrial property rights (trademarks, patents, designations of
origin, industrial designs and models) and;
 Copyright;
 It includes intangible creations of the human intellect, and primarily encompasses
copyrights, patents, and trademarks besides other types of rights, such as trade secrets,
publicity rights, moral rights and rights against unfair competition;
 Moreover, artistic words like music and literature, as well as some discoveries,
inventories, words, phrases, symbols and designs, can all be protected as intellectual
property;
 The rationale for formulating intellectual property law is to encourage the
development of a large array of intellectual goods.
 Importance of Intellectual property rights for entrepreneurs
The various intellectual property rights are considered important for the
entrepreneurs because of the following reasons :

 It stimulates conception of new, trend setting inventions leading to a

paradigm shift in the present approaches.
 It acts as a source of motivation for the inventors, authors,
creators, etc., by providing them due recognition for their exemplary work.
 It brings i financial gains to the inventors by restricting the free distribution and
communication public without proper permission.
 With the establishment of WTO, and India being a signatory to the agreement on Trade
Related Intellectual Property Systems (TRIPS), several legislations were passed for the
protection of intellectual property rights to meet the international obligations. These
included Trade Mark Act 1999, the Geographical Indications of Goods (Registration and
Protection) Act 1999, Designs Act 2000 and Protection of Plant Varieties and Farmers'
Rights Act 2001, the Patents Act 2005 and the Copyright.
 Types of Intellectual Properties
The various types of intellectual properties are explained below :
Law Technology
The intellectual Property The intellectual Property
Rights, are also deemed Rights, are conferred
to be the legal rights upon a person, only on
conferred upon the the belief, that the
creator / IP owner to subject matter, is his
prevent others from original creation related
using the protected to a particular field like,
subject matter. It acts as information technology,
a legal protector of medicine, biotechnology
knowledge. etc.
Business & Economics
The prime objective of
granting intellectual
property rights, is also to
promote the growth and
development of business
and industry within an
economy. This is because it
provides exclusive
privileges to the
entrepreneurs to create a
competitive edge.
The various types of Intellectual Property Rights that are recognised in India are as follows :

1) Patent :
 A patent is a form of right granted by the government to an inventor,
giving the owner the right to exclude others from making, using,
selling, offering to sell and importing an invention for a limited period
of time, in exchange for the public disclosure of the invention.
 An invention is a solution to a specific technological problem, which may be a
product or a process and generally has to fulfil three main requirements:
 It has to be new, not obvious and there needs to be an industrial applicability. To
enrich the body of knowledge and stimulate innovation, it is an obligation for
patent owners to disclose valuable information about their inventions to the public.
 The Indian Patent Office is administered by the Office of the Controller
General of Patents, Designs & Trade Marks (CGPDTM). This is a
subordinate office of the Government of India and administers the
Indian law of Patents, Designs and Trade Marks.
 The World Trade Organization’s (WTO) TRIPS Agreement provides that the term of
protection available to a patent should be a minimum of twenty years.
2) Copyright :
 A copyright gives the creator of an original work exclusive rights to it, usually for a limited
time. Copyright may apply to a wide range of creative, intellectual, or artistic forms, or
"works".
 Copyright does not cover ideas and information themselves, only the
form or manner in which they are expressed.
 The "Copyright Act, 1957" (as amended sixth time by the Copyright
Amendment Act 2012) governs the subject of copyright law in India.

3) Trademarks :
 A trademark is a recognisable sign, design or expression which distinguishes products or
services of a particular trader from the similar products or services of other traders.
 “Indian trademark law” statutorily protects trademarks as per the Trademark Act, 1999
and also under the common law remedy of passing off.
 In India, a government agency i.e. the Controller General of Patents, Designs and Trade
Marks is responsible for ensuring statutory protection of trademark. This agency is
accountable to the Department of Industrial Policy and Promotion (DIPP), under the
Ministry of Commerce and Industry.
 Trademark may be group into two categories namely conventional and
non-conventional trademarks.
Difference Between Patent, Copyright and Trademark
Basis Patent
Patent is an exclusive right provided by
Meaning the law for a limited time to the Patentee
for an invention.
By patenting an invention, the patentee is
able to restrict the making, using, selling
Purpose or importing of the patented product or
process that is new, involving inventive
step and capable of industrial application.
Patent registrations have a validity of 20
Validity years from the date of filing of patent
application.
The patents Act, 1970 amended by the
Act patents (Amendment) Act, 2005.
The Indian Patent office is administered
Issuing by the office of the Controller General of
Authority Patents, Designs & Trade Marks
(CGPDTM)
Copyright Trademark
Trademark is a visual symbol which may
Copyright is a right conferred by the law
be a word signature, name, device,
to person(s) for literary, dramatic,
label, numerals or combination of
musical and artistic works and
colours used by a business concern to
producers of cinematograph films and
distinguish and protect itself from of its
sound recordings.
competitors.
Copyrights is primarily used to shelter Trademarks are commonly used by
the literacy, dramatic, musical and individuals, commercial entities to guard
artistic works including cinematograph brand names, business names, slogans
films and sound recordings. etc.
Trademark registrations are valid for a
In general a copyright lasts for 60 years. period of 10 year from date of
application.
The Copyright Act 1957 (as amended by
In India trademarks are protected under
the copyright Amendment Act 2012)
governs the subject of copyright law in
law as per the provisions of Trademark
Act, 1999.
India.
The Copyright Office is to be under the
In India, a government agency i.e. the
immediate control of a Registrar of
Controller General of Patents, Designs
Copyrights to be appointed by the
and Trade Marks is responsible for
Central Government, who would act
ensuring statutory protection of
under the superintendence and
trademark.
directions of the Central Government.
4) Geographical Indication :
 Geographical indications are generally traditional products, produced by rural,
marginal or indigenous communities over generations, which have gained a
reputation on the local, national or international market due to their specific
unique qualities. For e.g. : A US firm can’t use a trademark in the name of
basmati rice as the rice is protected as a GI under the GI Registry of India.
 Goods that can be protected and registered as GI may be grouped into categories
namely; agricultural products, natural, handicrafts, manufactured goods and food
stuffs. For e.g. : Darjeeling Tea, Nagpur Orange, Banaras Brocades and Sarees etc.

5) Design :
 Design is one of the categories of IPR where the design system focuses on the
aesthetic feature of an article derived from its visual appearance.
 Relevant aspects are the shape, configuration, surface pattern, the colour or line or
a combination thereof as applied to an article which produces an aesthetic
impression on the sense of sight.
 For example, A toothbrush design includes the pattern or
ornament or composition of colour etc.
6) Plant Variety :
 The Protection of Plant Variety and Farmers Right Act, 2001 (PPV & FR Act) was
enacted to provide for the establishment of an effective system for protection of
plant varieties, the rights of farmers and plant breeders, and to
encourage the development and cultivation of new varieties of plants.
 The rights granted under this Act are heritable and assignable
and only registration of a plant variety confers the right.
 Farmers are entitled to save, use, sow, re-sow, exchange or sell their farm
produce including seed of a registered variety in an unbranded manner.

7) Semiconductor Integrated Circuits Layout Design :

 The semiconductor integrated circuit is an integral part of every computer chip.
 Furthermore, integrated circuit is made up of hundreds or thousands of
semiconductor devices and are not easily describable in a
patent specification or the claims.
 The Semiconductor Integrated Circuits Layout-Design Act
(SICLDA) was passed in the year 2000. "Semiconductor
Integrated circuits Layout Design Act 2000" is a supplement ACT to designs.
Traditional  It refers to the indigenous knowledge and
local knowledge systems rooted in the cultural
Knowledge traditions of regional, indigenous, or local
communities and based on series of
experiential observation and on interaction
with the environment.
 Traditional knowledge includes, types of
knowledge about traditional technologies of
subsistence like tools and techniques for
hunting or agriculture, ecological knowledge,
traditional medicine, celestial navigation,
ethno astronomy, climate, to name a few.
 This knowledge is passed on from one
generation to another orally.
Trade  Trade secrets, are also considered to be a type
of intellectual property.
Secrets  It includes information related to a formula,
pattern, compilation, program, device,
method. technique or process.
 In India, Trade secrets are protected under the
Indian Contract Act, 1872.
 These secrets help a business to obtain an
economic advantage, by creating an edge over
its competitors.
 Trade secrets may also include substances that
a person or company has not decided to patent
yet, like a new plant hybrid, chemical
compound, technical invention etc.