Small Business & Entrepreneurship PDF

# Small Business & Entrepreneurship Businesses can be classified in large or small scale, by several parameters. - The number of people employed in business. - Capital invested in business. - Level of output production. - Power consumption for business activities. ## Micro, Small & Medium Enterp...

# Small Business & Entrepreneurship Businesses can be classified in large or small scale, by several parameters. - The number of people employed in business. - Capital invested in business. - Level of output production. - Power consumption for business activities. ## Micro, Small & Medium Enterprises Development Act, (MSMED), 2006 October: - This act relates with definition, credit, marketing & technology of micro, small & medium enterprises. - It also includes how these enterprises can be developed. - According to this act, enterprises are classified into two categories: - Manufacturing. - Services. ### Manufacturing In the case of enterprise engaged in the manufacturing of goods, there are 3 types of manufacturing enterprises: - **Micro enterprises:** The investment in plant & machinery does not exceed 25 lakh rupees. - **Small enterprises:** The investment in plant & machinery is more than 25 lakh but does not exceed 5 crore rupees. - **Medium enterprises:** The investment in plant & machinery is more than 5 crore but does not exceed 10 crore rupees. ### Services In the case of enterprises engaged in providing services, there are 3 types of service enterprise: - **Micro enterprise:** The investment in equipment does not exceed 10 lakh rupees. - **Small enterprise:** The investment in equipment is more than 10 lakh rupees but does not exceed 2 crore rupees. - **Medium enterprise:** The investment in equipment is more than 2 crore rupees but does not exceed 5 crore rupees. ## Village Industries - Village Industries are the industries located in rural areas which produce any goods, offer any service. - They can work with or without the use of power. - The investment of fixed capital per person is decided by central government, time to time. ## Cottage Industries - These are also known as 'rural industries' or 'traditional industries'. - They are different than other small industries, because cottage industries are not defined by capital investment criteria as in the case of other small-scale industries. - However, cottage industries are characterized by certain features: - These are organized by individuals, with private resources. - Normally use family labour & locally available talent. - The equipment used is simple. - Capital investment is small. - Produce simple products. - Produce goods using indigenous (traditional) technology. # Role of Small Business in India 1. The small industries in India are of 95% of the total industries in India. They contribute almost 40% of total exports in India. 2. Small industries are the 2nd largest employers, after agriculture. They generate more number of employment opportunities as compared to large industries. Therefore, they are considered to be more labour intensive and less capital intensive. 3. Small industry in our country supply large variety of products which includes consumption goods, stationery items, soaps & detergents, foods & vegetables, paints, safety matches etc. Along with these, electronic goods like TV, refrigerators, electronic teaching aids, AC etc, are also supplied by these industries. 4. Small scale industries help in regional development (urban & rural region) balance. Urban regions develop along with large industries, but rural regions need growth too. The small industries are easy to set up in these rural areas & help them grow. They use simple tools, make basic products, & rely on local resources, so they can be set up easily. 5. Small industries provide opportunity for entrepreneurship. The skills & talents of people can be used into business ideas with little investment & almost no formalities to start a small business. 6. Small scale industry use locally available resource which are less expensive. Their establishment & running costs are also very low. Hence, they enjoy low cost of production. 7. Small scale industry can have quick & timely decisions without consulting many people, as it happens in large industries. # Problems of Small Business - Small-scale industries are at a disadvantage as compared to large-scale industries; ### Finance - One of the major problem faced by small-scale industry is non-availability of finance to carry out its operations. - Generally a small business begins with a small capital, & as their operation increases, the requirement of finance also increases. - As a result, they heavily depend on money lenders or commercial banks for credit. ### Raw Materials - Another major problem of small business is purchase of raw materials. If the required materials are not available, then they have to compromise on the quality or have to pay high price to get good quality materials. ### Quality - Small business organizations are not able to maintain standards of quality. - As their main focus is to concentrate on reducing costs & keeping prices low. Thus, they aren't able to compete in global market, as maintaining quality is their weakest point. ### Global Competition - Apart from the problems mentioned, these businesses also have the fear of feeling threatened due to global competition. - Small business not only face competition from medium or large business, but also from multinational companies (MNC) which are giant in terms of size & finance. - It is difficult to resist the quality standards, technological skills, financial creditworthiness, managerial & marketing capabilities of medium, large & multinational industries. ### Managerial Skills - Small business is generally promoted & operated by a single person, who may not possess all managerial skills required to run the business. - Moreover, they may not find enough time to take care of all functional activities. - At the same time they are not in a position to afford professional managers. ### Marketing - Marketing is one of the most important activities as it generates revenue. - Effective marketing of goods requires a thorough understanding of customer needs & requirements. - In most cases, marketing is a weaker area of small business, as they also lack infrastructure. ### Labour - Small business can't afford to pay high salary to employees, which affects the employee willingness to work hard & produce more. Thus, productivity per employee is also low. - Unskilled workers join for less salary, but training them is time-consuming process. ### Technology - Use of outdated technology is often stated as a serious problem in small business. - This results in low productivity. ### Sickness - The cause of sickness is internal & external. - Internal problems include lack of labours, & managerial and marketing skills. - External problems include delayed payment, shortage of working capital, inadequate loans & lack of demand for their products. # Govemment Assistance to Small Business ## Incentives: (benefits) - **Land:** - States gives land for industries, often at low costs. - Some states don't charge rent initially, while some allow payment in installments. - **Power:** - Electricity is provided at half the usual price. - Some states even allow free electricity for the first few years. - **Water:** - Water is given at cost price (no profit or loss). - In some cases, industries get a 50% discount or free water for 5 years. - **Sales tax:** - Industries located in union territories don't have to pay sales tax. - Some states give 5-year tax exemption. - **Raw material:** - Government provides scarce materials like cement & iron to small industries in less developed areas. - **Finance:** - Industries get a 10-15%. funds to help buy or build important assets like machine or building. - Loans are given at lower interest rates to make borrowing easier. ## Institutional Support (schemes/ plan/ strategy) ### National Small Industries Corporation (NSIC): - **Establishment:** Started in 1955 to help small businesses grow in India. - **Functions of NSIC:** - **Machines:** Provides Indian & imported machines in installments payments. - **Raw materials:** Supplies Indian & imported raw materials to industries. - **Technology:** Builds software parks & centres to share advanced technology. - **Awareness:** Helps business learn about upgrading technology. - **Credit Worthiness:** Teaches business why credit rating (worthiness) is important. - **Financial records:** Encourages business to maintain good financial records. ### District Industries Centres: (CDICs): - **Established:** Started on 1st May 1978 to help people setting business in villages & district level. - **Functions:** - **Suitable plans:** Finds right business plan & ideas for local areas. - **Arrange credit:** Helps businesses get loans or financial support. - **Reports:** Prepares reports to check if a business idea will be successful. - **Raw material:** Supplies raw material, as well as additional help like training, advice & tools to start & run business. - **Support for Special groups:** DIC also works to support rural workers, skilled craftspeople, & handloom weavers who may not always get attention. ### National bank for agriculture & Rural development, (CNABARD): - **Established:** started in 1982 to support rural development. - **Functions:** - **Support:** Helps agriculture, small business, cottage industries, & village industries. - **Financial Help:** Provides loans to rural areas. - **Guidance:** offers advice & training to help them succeed. - **Skill development:** organizes program to teach skills & improve knowledge for rural businesses. ### Rural small business development Centre, (CRSBDC): - **Sponsored by:** NABARD, to help people in rural areas by teaching new skills to start a business (small-scale). - **Functions:** - **Support:** Helps people who are socially (gender, religion, caste) or financially disadvantaged, provides training. - **Teaches skills:** skills like food processing, soft- toy making, making ready made garments, candle & incense stick making etc. ### Rural & women entrepreneurship development (CRWED): - **Purposes:** Helps rural people & women start & grow their business. - **Functions:** - **Supportive environment:** Creates supportive environment for rural & women entrepreneurs. - **Skills:** Builds skills to boost productivity. - **Training & advice:** offers training, guidance & advice to support business growth. ### Scheme of fund for regeneration of traditional Industries: (SFURTI): - **Functions:** - **Support:** Helps improve productivity of traditional industry. - **Develop groups:** Creates groups of traditional industry across country. - **Enhance skills:** Builds skills & upgrades technology to keep industry profitable & sustainable. - **Create jobs:** Provides long-term employment. - **Established:** In 2005, by Central Government. # Meaning & Concept of Entrepreneur development. - **Entrepreneur:** A person who sets up business/businesses, taking risk in return of profit. It's derived from french word meaning 'one who undertakes an endeavor'. - **Entrepreneurship:** The process by which an individual or group of individuals identify a business opportunity & acquires it, then utilizes the necessary resources for itt expansion. - **Entrepreneurship development:** It requires a person with necessary knowledge & skills to successfully start & run the enterprise. # Entrepreneur: Entrepreneurship: Enterprise: - **(Person)** - **(Process)** - **(Object)** ## Features of entrepreneurship: 1. **Systematic activity:** - Entrepreneurship is not a mysterious gift & something that happens by chance. It is a step-by-step & purposeful activity. - It requires specific skills & knowledge that can be learnt through education & training, & developed through observation & work experience. 2. **Lawful & purposeful activity:** - The purpose of entrepreneurship is to be lawful business. - It is important to understand that entrepreneurship cannot be used as an excuse for illegal activities, even if it involves risk. - The main goal of entrepreneurship is to earn profits while also benefiting society. It combines both personal success & ethical practices. 3. **Innovation:** - Entrepreneurship is about being creative & bringing the new ideas to life. - It means developing existing ideas or introducing something completely new. - Entrepreneurs take steps & make changes whenever required. - Their creativity improves the business & meets the need of society. 4. **Organization of production:** - An entrepreneur brings all resources like land, labor & capital, together & manages them. - To do this successfully, they need strong organizational skills, good management abilities & leadership qualities. - This ensures the business runs smoothly & efficiently. 5. **Risk taking:** - Risk is an inherent (built-in) & inseparable element of entrepreneurship. - An entrepreneur launches & runs an enterprise for profit motive, but there is every possibility of loss. ## Process of entrepreneurship development: 1. **Self - Introspection:** Entrepreneurs evaluate their strengths & weaknesses. 2. **Identifying Business opportunities:** Entrepreneurs find business opportunities by looking for needs & wants of customers that are not yet satisfied by the market. 3. **Evaluation of business opportunities:** The evaluation of different business ideas is done, and then the best business idea is selected. 4. **Assessment of selected business idea:** Entrepreneurs check if the chosen idea can work, by doing different types of research to see if it's practical & profitable. 5. **Raise start-up capital:** Entrepreneur initiates steps to raise start-up capital. 6. **New business is launched:** The new business is launched & necessary activities are carried out to make it a success. 7. **Faster growth:** For growth of business, new ideas are developed & implement them. 8. **Harvesting:** The final stage, wherein the entrepreneurs may sell their business and gain rewards. # Startup India: A startup is a new business that is created to solve a market problem by developing new products, or services. - It encourages to come up with innovative ideas to help boosts the economy & create employment. - According to department of industrial policy & Promotion (COIPP), ministry of commerce and industry, government of India! ## Definition of Startup: - A business entity that is registered in India. - It must be private limited company, partnership firm, or limited liability partnership. ## Age limits: - The business should be less than 7 years old from the date of registration. - For biotechnology companies startups, the age limit is 10 years. ## Turnover (profits): - The annual turnover (profits) must not exceed 225 crore in any of the 7 years which is the age limit ## Focus on Innovation: - The startup should work on innovation, development, or improvement of products, or services. ## Scalable business: - It should be a scalable business, meaning that it should be able to grow & expand easily, so that it can create jobs & wealth in the future. - Provided that an entity formed by splitting up or reconstruction of an existing firm shall not be considered a 'startup'. - An entity shall come to an end to be a 'Startup': - on completion of 7 years from date of it's registeration, & 10 years in case of bio-technology. - (OR) if it's turnover (profits) for previous year exceeds *25 crore. ## Objective of promoting start-up (Aim of goal): - The startup scheme was initiated by government. This scheme specifically aims to: 1. **Promote entrepreneurship:** The scheme aims to help people learn about the idea of starting businesses. The government wants to develop a mindset where people are motivated to create new business by using their skills & ideas. 2. **Create awareness:** The government wants young people to be aware of what it takes to start a business & how good it feels to be recognized as an entrepreneur. It teaches them to understand the pride & respect that comes along by creating something successful. 3. **Encouraging entrepreneurship:** The government wants to encourage educated young people from all fields, to consider starting their own business as a good, profitable career choice. 4. **Supporting new entrepreneurs:** The government wants to help new entrepreneurs from the beginning of their business journey, including planning & promoting their business. 5. **Promoting entrepreneurship for all:** The government wants to encourage entrepreneurship in all parts of society, especially among the poor & disadvantaged, to promote fair & long-term growth in country. # Start-Up India Initiatives: (Govt. support for start-up) - In order to give a boost to start-up project within the country, the government is providing the support in following way: 1. **Simplified procedure:** The government is making it easier to start a business by creating simple & flexible rules to encourage people to become entrepreneurs. 2. **The start-up Hub India:** The set-up hub India is a platform where entrepreneurs can connect with others, share knowledge, & find financial help from advisors, consultants, mentors, guides, angel investors. 3. **Tax Exemption:** The government allows start ups to be free from income tax on their profits for the first 3 years, to encourage new businesses. 4. **Legal Support:** The government provides legal support through the 'Start ups Intellectual property protection' (SIPP) system, which helps startups protect their ideas, such as patents & trademarks, & speeds the process. 5. **Easy Exit:** Besides providing a simplified procedure, the exit process is also not difficult. This has been done so that the entrepreneurs don't have to worry about being stuck in a failing business. ## Ways to fund start-ups: 1. **Boot strapping:** Also known as self-financing. It refers to self starting business without external help or capital. 2. **Venture Capital:** It is the money provided by firms to support new, small businesses that have high growth potential. In return, these investors get a part of business ownership. 3. **Angel Investor:** A wealthy person who gives money to help start a business, usually in exchange to take a part of business, or a loan that can turn into ownership later. 4. **Start up accelerators:** Public events & programs where business pitches its ideas. They help businesses grow quickly. They offer money, guidance, connections & education. 5. **Business Incubators:** Govemment supported programs that help specific types of business, like biotech or technology, without taking any ownership. 6. **Microfinance:** Provides financial service, like small loans, to people who can't access regular banks or haven't qualified for a bank loan. 7. **Non-banking financial companies (NBFC):** offers banking service but don't meet legal requirements to be a bank. 8. **Crowd funding:** When a group of people contribute money to support common goal. In India, new platforms have recently emerged to help startups & small businesses raise funds from the public. # Intellectual Property Rights (IPR) ## IP (Intellectual property): - A group of property rights that include intangible creation of human intellect. - Intellectual property (IP) is of 2 types: ### IPR: - Protects inventions & creations: - Trademark - Patent - Design - Music ### Copyright: - Protects artistic works, such as: - Literature - Art. - The goal of IP laws is to encourage creativity & protect the rights of creators to their ideas & works. - **Importance of IPR for entrepreneurs:** - **Encourages new ideas:** IPR helps entrepreneurs create ideas, leading to better & innovative solutions. - **Motivates Creators:** It gives recognition & rewards to inventors, authors, & creators for their hard work & creativity. - **Brings Financial benefits:** Entrepreneurs can earn money by protecting their work from being used without permission. - **Global Protection:** India follows global rules under TRIPS (Trade - related Intellectual property rights) to protect inventions & creative works. TRIPS ensure that Indian creations are protected both in India & internationally. see back ## Types of IPR: 1. **Law:** This type of IPR gives legal protection to creators & owners. It ensures others cannot use their work without permission. - It includes: - Copy right - Trademarks - Patents - Design rights 2. **Technology:** This type of IPR applies to original creators in fields like IT, medicine, & biotechnology, protecting innovative works in these areas. - It includes: - Plant variety - Semiconductor integrated circuits layout design. 3. **Business & Economics:** This type of IPR helps businesses grow by giving exclusive rights, allowing them to stay competitive in market. - It includes: - Geographical Indications. (GI) ## Now, let's learn about each IPs): ### 1) Trademark: - **What is a trademark?** - A trademark is a unique word, name or symbol (or their combination) that identifies goods made by a company, or individual. - It helps differentiate one company's product from another. - **What does a Trademark show?** - Represents the company's reputation, goodwill, & products/service. - Helps distinguish products from competitors in the market. - **Protection against copyright:** - Competitors cannot use the same /similar trademark due to deceptive similarity (looks, sound or structure are too alike). - **Types of trademarks:** - **Conventional trademark:** Includes words, logos, labels, packaging, colors, & product shapes. - **Non-conventional trademark:** Includes newer & unique types of trademark, that go beyond regular logos, words, or symbols. - Eg: • Sound (tune or ringtone that reminds you of a brand). • Dynamic marks (moving logos or animation that represent a brand). - In some countries, smells & tastes are also a trademark, but not in India. - **Is registration necessary?** - Not mandatory under trademark act 1999, but registration gives exclusive right & legal protection. ### 2) Geographical Indications, (GI): - **What is GI?** - A tag or label that shows a product is made in a specific place & its special because of it's location. - **Types of product with GI:** (Examples): - Agriculture products (like chilli) - Natural items. - Handicrafts (like paintings & banaras saree) - Manufactured goods. - Food items (like tea, nagpur orange) - **Why is GI important?** - Promotes the local heritage of product. - Represents the goodwill & reputation of that specific area, since the product is special. - **Place of origin vs GI:** - A place of origin means where something is made. - A GI guarantees the product has special qualities tied to it's geographical roots. ### 3) Patents: - **What is patent?** - A patent is a special right given by the government to someone who creates a new invention. It allows them to stop others from making, using, selling the invention. - **What can be patented?** - **Inventions:** New products that are unique. - **Not discoveries:** A patent is for inventions of products, not for discovering things. Eg! Newton didn't get patent for gravity because he discovered it, not invented it. - **3 requirements for patents:** - The invention must be original & new - The invention should not be too obvious. It should be creative & inventive step. - It must be something that can be made in industry or factory. - **Example:** - **Invention:** Alexander bell invented telephone which is new, & received patent. - **Discovery:** Isaac newton discovered gravity, not invent, so no patent. - **Patent duration & licensing:** - A patent gives inventor exclusive rights for their invention for 20 years. - During this time, others need the permission of inventor by paying fees. - This is called **Licensing**. - After 20 years, patent expires, & becomes public domain (anyone can use it for free). This encourages in fair competition, & prevents monopoly. ### 4) Design rights: - A design refers to shape, pattern, or color combination in an article, focusing on appearance. - Design protection lasts for 10 years, & can be renewed for another 5 years, if wished. - During this period, others must get permission (a license) from owner to use it. - After protection period ends, the design enters the public domain, & can be used by anyone freely. ### 5) Plant variety: - It means grouping plants based on their traits, making variety of crops. - Farmers develop & improve these varieties, like ereating hybrid potatoes. - Plant variety in saving & improving plant types. - This IP helps in recognizing farmers efforts. - Plant variety helps in providing better seeds, & also helps the seed industry grow! ### 6) Semiconductors Integrated Circuits designs: - It is an essential component in semiconductor. It is used in computer chips. - **Integrated Circuits (ICs):** A small circuits made up of these semiconductor chips, designed to do electronic tasks like process data etc. - **Why protect semiconductor IC design?** - Each IC design is unique, this is why it needs to be protected to prevent stealing. - Protecting IC designs ensure that your company's IPR is protected. (Prevent stealing). - Prevents others from copying your design, & helping it stay competitive. ### 7) Copy rights: - **What is it:** Copyright gives creators the right to stop others from copying or using their work without permission. - **Who gets it:** It applies to authors, artists, musicians & filmmakers. - **What it protects:** Protects work like books, songs, movies or artwork from being used or distributed without approval. - **Unique feature:** Copyright protection starts automatically as soon as work is created. - **Registration:** It isn't required, but it's helpful for legal action if violation occurs. ## IP & business: - Startups & innovations. - Startups create new & better products & services. - India has over 20,000 startups, making it the 3rd largest in the world. ## How IPR helps startup businesses: - IPR protects the ideas so startups can earn money from them. - It helps startups stay strong in the market. - IPR supports 'Startup India', which aims to create job makers; not job seekers. ==End of OCR for page 22==