THE NEW INDIAN SCHOOL W.L.

L
KINGDOM OF BAHRAIN
CLASS: XI BUSINESS STUDIES
CH 9 – SMALL BUSINESS & ENTREPRENEURSHIP DEVELOPMENT
NOTES
Learning objective:

 Small business – meaning

 Role of small business in India
 Government & institutional support to small business
 Entrepreneurship Development – meaning & characteristics
 Start-up India – meaning & funding
 Intellectual property right – meaning & types

Concept & Definition of small business

The Micro, Small and Medium Enterprises Development Act, 2020 (MSMED) has divided the small
enterprises into 3 categories as Micro, Small & Medium on the basis of two criteria:

a. Amount of Investment in Plant & Machinery or equipment and

b. Amount of Annual turnover

1. Micro Enterprise: Micro enterprise is one in which investment in plant & machinery is up to Rs.1 crore,
and annual turnover is up to 5 crores.

2.Small Enterprise: Small enterprise is one in which investment in plant & machinery is above Rs.1 crore
up to 10 crores, and annual turnover is above 5 crores and up to 50 crores.

3.Medium Enterprise: Medium enterprise is one in which investment in plant & machinery is above Rs.10
crore up to 50 crores, and annual turnover is above 50 crores and up to 250 crores.

ROLE OF SMALL BUSINESS IN INDIA

The role small business, with special reference to rural areas, has been highlighted by the following points:

•1.Employment generation: By locating business units in rural areas, small business generates employment,
which benefits the rural population. They are the second largest employers of human resources, after
agriculture. They are, considered to be more labour intensive and less capital intensive.

•2.Balanced Regional growth: Small business units can be started anywhere in the country. Therefore, they
have helped in the balanced and equitable growth of all regions including rural, backward and hilly areas.
Small industries in India account for 95 per cent of the industrial units in the country
•3. MSME in our country supply an enormous variety of products : It include mass consumption goods,
readymade garments, hosiery goods, stationery items, soaps and detergents, domestic utensils, leather, plastic
and rubber goods, processed foods and vegetables, wood and steel furniture, paints, varnishes, safety matches,
etc. & also electric and electronic goods like televisions, calculators, electro-medical equipment etc.

4.Can reap the benefit of Industrialisation: MSME which produce simple products using simple
technologies and depend on locally available resources both material and labour can be set up anywhere in the
country. Hence the benefits of industrialisation can be reaped by every region.

5.Provide ample opportunity for entrepreneurship: The latent skills and talents of people can be channelled
into business ideas which can be converted into reality with little capital investment and almost nil formalities
to start a small business.

6.MSME also enjoy the advantage of low cost of production. Locally available resources are less expensive.
Establishment and running costs of small industries are on the lower side because of low overhead expenses.

7. Facilitates quick and timely decisions : Due to the small size of the organisations, quick and timely
decisions can be taken without consulting many people as it happens in large sized organisations. New business
opportunities can be captured at the right time.

GOVERNMENT SCHEMES AND AGENCIES TO SUPPORT SMALL BUSINESS UNITS

There are various Government agencies, which provide aid to develop small-scale industries in all areas,
particularly in rural, backward and hilly areas. Two such prominent agencies are National Small Industries
Corporation Ltd (NSIC) and District Industries Centre (DIC).

NATIONAL SMALL INDUSTRIES CORPORATION LTD.(NSIC) (Refer text book)

DISTRICT INDUSTRIES CENTRE (DIC) (Refer text book)

Entrepreneurship Development (ED)

Entrepreneur is the person who conceives a business idea and set up a business to give practical shape to his
idea in a creative and innovative way. The process followed by the entrepreneur (i.e. all actions an
entrepreneur undertakes to establish an enterprise) is known as ‘entrepreneurship’. The outcome of the
process is the setting up of a business called ‘Enterprise’.

Characteristics of Entrepreneurship

 Entrepreneurship is a systematic process of organizing business activities to implement the business

idea. It is a systematic, step-by-step and purposeful activity.
 It is a lawful and purposeful activity. The object of entrepreneurship is lawful business. Its purpose
is to create value for the customers. Purpose of entrepreneurship is creation of value for personal profit
and social gain.
 It is a creative and innovative process. The entrepreneur conceives new business ideas and introduces
new methods of production and new products, services or technology in his business. Innovation may
be cost saving or revenue-enhancing.
  It facilitates organisation of production like land, labour, capital and technology and ensures optimum
utilization of the inputs.An entrepreneur have the knowledge about availability and location of the
resources as well as the optimum way to combine them
 It involves risk taking in business. Entrepreneurs avoid situations with higher risks as they hate failure.
They dislike lower risk situations as they want to take challenges in business.
Need for entrepreneurship development

The need for entrepreneurship development arises because of the important roles played by the entrepreneurs
in relation to both economic development and the development of enterprises. Every country, whether
developed or developing, needs entrepreneurs. Whereas, a developing country needs entrepreneurs to initiate
the process of development, the developed one needs entrepreneurship to sustain it.

STARTUP INDIA

Ministry of Commerce and Industry defines Startup:

 Startup means an entity incorporated or registered in India

 Not older than five years
 With annual turnover not exceeding 25 crore in any preceding financial year, and
 Working towards innovation, development or improvement of products or processes or services.

Startup India is a new programme initiated by the Central Government to encourage dynamic young
persons to adopt entrepreneurship as a career. The Government provides concessional finance and allows
tax exemption to the startups.

Ways to fund startup

The funding options to raise capital for startups are:

1) Self- financing or Bootstrapping: self- financing is an effective way of startup financing. First time
entrepreneurs often have trouble in getting funding. They can invest from their own savings or can get
their families or friends to contribute capital.
2) Crowdfunding : It’s the pooling of resources by a group of people for a common goal. It helps small
businesses to meet their funding requirements.
3) Venture capital: Venture capital represents professionally managed funds who invest in companies
that have huge potential. They usually invest in a business against equity shares and also provide
expertise and mentorship to budding enterprises.
4) Angel investors: Angel investors are individuals with surplus cash and a keen interest to invest in and
extend a helping hand to upcoming startups. They can offer mentoring or advice alongside capital
through their experience and knowledge.
5) Incubators and accelerators: Early state business can consider incubator and accelerator program as
funding option. Incubators are like parent to a child, who nurtures the business, providing shelter,
tools, training, and network to a business and thus an incubator helps a business to walk while
Accelerator helps to run/ take a giant leap.
 6) Microfinance and NBFCs: Micro finance facilitate banking services to those who do not have access
to conventional banking services or have not qualified for a bank loan.
Similarly NBFCs provide banking services without much legal formalities.
INTELLECTUAL PROPERY RIGHT

Intellectual Property rights are legally recognized exclusive rights to the creations of mind. Under the law, the
owners of intellectual property are granted certain exclusive rights to a variety of intangible assets. Since the
entrepreneur does creative work by bringing innovative product designs, products and process in the market,
he should be aware of his rights to creative things and should get the legal right to own his/her own “idea”. He
can get his rights to creative work registered with the Government so that other people do not copy his creative
things.

Common types of intellectual property rights include:

1) Copy right: It’s the right to “not copy”. It is offered when an original idea is expressed by the creator
or author. It gives the creator of the original work exclusive right of the content for a specified period.
Copyrights protection is available in case of wide range of creative intellectual work such a literary
work, Artistic work and Dramatic work.
2) Trade Mark: A trademark is any word, name, symbol, design or a combination of all, which
distinguishes products or service of a particular trade from similar products or services of other traders.
It is also a protected intellectual property which gives an identity to the goods made by an individual,
company or organisation.
3) Patent: A patent is a type of IPR which protects the scientific inventions which shows technical
advancements.It grants an inventor the right to exclude others from making, using, selling or offering
to sell for a specified period in exchange for the public disclosure of the invention.