Foundation of Indian Business PDF

BCOC-132 Indira Gandhi National Open University Business Organisation and School of Management Studies Management Foundation of Indian Business 1 ...

BCOC-132 Indira Gandhi National Open University Business Organisation and School of Management Studies Management Foundation of Indian Business 1  BCOC-132 Business Organisation and Indira Gandhi National Open University Management School of Management Studies Block 1 FOUNDATION OF INDIAN BUSINESS UNIT 1 Introduction to Business 5 UNIT 2 Technological Innovation and Skill Development 29 UNIT 3 Social Responsibility and Ethics 45 UNIT 4 Emerging Opportunities in Business 61 PROGRAMME DESIGN COMMITTEE B.COM (CBCS) Prof. Madhu Tyagi Prof. D.P.S. Verma (Retd.) Prof. R. K. Grover (Retd.) Director, SOMS, IGNOU Department of Commerce School of Management University of Delhi, Delhi Studies IGNOU Prof. R.P. Hooda Former Vice-Chancellor Prof. K.V. Bhanumurthy (Retd.) Faculty Members MD University, Rohtak Department of Commerce SOMS, IGNOU University of Delhi, Delhi Prof. B. R. Ananthan Prof. N V Narasimham Former Vice-Chancellor Prof. Kavita Sharma Prof. Nawal Kishor Rani Chennamma University Department of Commerce Belgaon, Karnataka University of Delhi, Delhi Prof. M.S.S. Raju Prof. I. V. Trivedi Prof. Khurshid Ahmad Batt Dr. Sunil Kumar Former Vice-Chancellor Dean, Faculty of Commerce & Dr. Subodh Kesharwani M. L. Sukhadia University, Management Udaipur University of Kashmir, Srinagar Dr. Rashmi Bansal Prof. Purushotham Rao (Retd.) Prof. Debabrata Mitra Dr. Madhulika P Sarkar Department of Commerce Department of Commerce Osmania University, Hyderabad University of North Bengal, Dr. Anupriya Pandey Darjeeling COURSE DESIGN COMMITTEE Prof. Madhu Tyagi Prof. A.K. Singh Faculty Members Director Department of Commerce SOMS, IGNOU SOMS, IGNOU University of Delhi, Delhi Prof. N V Narasimham Prof. D.K. Vaid (Retd.) Prof. Vijay Kumar Shrotriya Prof. Nawal Kishor NCERT Delhi Department of Commerce Prof. M.S.S. Raju University of Delhi, Delhi Dr. Sunil Kumar Prof. Bhanu Murthy (Retd.) Dr. Rajendra Maheshwari (Retd.) Dr. Subodh Kesharwani Department of Commerce University of Delhi, Delhi Ramanujan College Dr. Rashmi Bansal University of Delhi, Delhi Dr. Madhulika P Sarkar Dr. Anupriya Pandey COURSE PREPARATION TEAM Prof. Madhu Tyagi (Unit-2) Prof. Nawal Kishor Prof. Bhanu Murthy (Unit-3) (Editor & Course Coordinator) Dr. Subodh Kesharwani (Unit-2 and 4) Dr. Subodh Kesharwani Business Organisation: ECO-01 (Editor & Course Coordinator) (Unit-1 Revised by Dr. Subodh Kesharwani) Prof. P. K Ghosh (Retd.), University of Delhi, Delhi Dr. Nafis Baig (Retd.), AMU, Aligarh, UP Dr. R.N Goyal (Retd.), Deshbandhu College University of Delhi, Delhi MATERIAL PRODUCTION Mr. Y.N. Sharma Mr. Sudhir Kumar Assistant Registrar (Publication) Section Officer (Pub.) MPDD, IGNOU, New Delhi MPDD, IGNOU, New Delhi August, 2019 © Indira Gandhi National Open University, 2019 ISBN: 978-93-89200-13-3 All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other means, without permission in writing from the Indira Gandhi National Open University. Further information on the Indira Gandhi National Open University courses may be obtained from the University’s office at Maidan Garhi, New Delhi-110 068. Printed and published on behalf of the Indira Gandhi National Open University, New Delhi, by the Registrar, MPDD, IGNOU. Laser typeset by Tessa Media & Computers, C-206, A.F.E-II, Jamia Nagar, New Delhi-110025 Printed at: SG Print Packs Pvt. Ltd,. F - 478, Sector - 63, Noida, U.P. BLOCK 1 FOUNDATION OF INDIAN BUSINESS This is the first block on the course “Business Organisation and Management”. This block will familiarise you to various dimensions of business including technology, ethical dimension and emerging service on business opportunities. This block will also expose you to the introductory aspect of business, technological innovation, skill development, social responsibility, ethics, and emerging opportunities in business. The block on the theme “Foundation of Indian business” comprises of four units. Unit 1: The very first unit of this particular block emphasizes on how does business facilitate in generating revenue by producing or buying and selling products (such as goods and services). This unit also focuses on the basic aspects of business including its fundamental, features and rationale. It also explains how is the business different from profession. Unit 2: This unit explains the concept of innovation, its model and different types. It deliberates on the significance of skill development and the initiatives taken by government of India towards skill development including its different strategies and approaches. Unit 3: Every business has the responsibility to act ethically, alongwith obligations to its different stake holders. This particular unit focuses on the ethics and responsibilities which are required to comply with while performing business activities. Unit 4: There are a number of emerging trends that will influence future directions in a current state of affairs in business. This unit deals with emerging trends in business. 4   Introduction to UNIT 1 INTRODUCTION TO BUSINESS Business Structure 1.0 Objectives 1.1 Introduction 1.2 Human Activities 1.2.1 Non-economic Activities 1.2.2 Economic Activities 1.2.3 Sector of Economic Activities 1.3 Business, Profession and Employment 1.3.1 Business 1.3.2 Profession 1.3.3 Employment 1.3.4 Comparison among Business, Profession and Employment 1.4 Business 1.4.1 Essential Features of Business 1.4.2 Objectives of Business 1.5 Industry 15.1 Classification of Industry 1.6 Commerce 1.6.1 Trade 1.6.2 Aids to Trade 1.7 Micro, Small and Medium Size Enterprises 1.8 Let Us Sum Up 1.9 Key Words 1.10 Answers to Check Your Progress 1.11 Terminal Questions 1.0 OBJECTIVES After going through the unit, you will be able to: x identify broad categories of human activities x describe what is business x list the features and objectives of business x classify business activities and their inter-relationship x explain the nature of business organisation x discuss the meaning and benefits of MSME 5     Foundation of Indian Business 1.1 INTRODUCTION In our day-to-day life, we use words like business, commerce, trade, industry, etc. quite often. These words have a definite meaning in ‘Business Organisation’. In this introductory unit, you will learn the exact connotation of such terms. You will also learn the distinction between economic and non- economic activities, objectives of business, the classification of business activities, importance of organisation and the role of entrepreneur in business. 1.2 HUMAN ACTIVITIES All of us participate in various kinds of works from the time we get up from bed in the morning till the time we go to sleep at night. We get up from bed in the morning, brush our teeth, take bath and get breakfast. Then children go to school or college to study, elders go to office or factory or shop or field to work, and housewives work at home. In the evening all of us come back home, take food and sleep. All the activities in which we, thus, participate from morning till night are called ‘human activities’. If you closely examine the human activities, you will find that some of these produce economic benefits e.g., working in a factory or in an office or at the farm. Some other activities like brushing teeth, taking breakfast, going to school, playing, cooking food for the family, etc., do not produce any direct economic benefits. Thus, we can classify the human activities into two groups: (1) non-economic activities, and (2) economic activities. Human Activities Economic Activities Non-Economic Activities Business Profession Employment Fig. 1.1: Classification of Human Activities 1.2.1 Non-economic Activities These are the activities which are conducted by the human beings due to love and affection, social obligation, religious obligation, physical requirement, patriotism, etc., but not for earning money. The housewife cooking for the family, children going to school and playing games, people going to a temple or a mosque for prayer, a social worker working for the uplift of the poor, etc., are some such examples. Persons who participate in such activities do not get any direct economic benefit. Non-economic activities are carried out with the motive of providing services to others with a non-monetary objective. An example is the working of Non-Government Organisations (NGOs). These activities are first and foremost undertaken for satisfaction of personal, social, religious, cultural and sentimental 6    requirements of human beings. Non-Economic activities are described by Introduction to Business the nonappearance of a financial partner or where the cost paid by the consumer is not corresponded to the expense of the product or service. A few models are: x Charitable activities: Labour searching for a social benefit purely based on solidarity and without monetary advantages. For instance government funded education institutes, community work or social assistance. x Household activity: like tidying, washing dishes, child care, sewing garments or home economics. x Independency: Navigating under privileged and under marginalised sectors of society in their upliftment and independence in order to meet their livelihood. x Voluntarily skilling: People who facilitate marginalised individuals in achieving employment by training in skills. 1.2.2 Economic Activities These are activities which are undertaken by human beings for earning money or livelihood. These economic activities are concerned with production, exchange and distribution of goods and services. For example, a doctor works in the hospital, a teacher working in a school, an employee going to his office, a farmer working in the field etc. They are all doing this to earn his or her livelihood or to acquire wealth. Table 1.1: Differences between Economic and Non-Economic Activities Bases of Economic Activities Non-economic Activities Difference Meaning These are the activities which These are the activities which are are performed for financial gain. performed to fulfill social, These activities generate psychological and mental revenue which may provide necessities. For example financial stability to the functioning of NGO, like help organisation for example age, save the children, CRY, etc. working in the factory, office etc. Propose These activities are undertaken These activities are undertaken with a financial motive. with social and mental needs. Outcomes These activities result in the These activities result in personal generation and dissemination of contentment. goods and services. Measurement These can be measured in These are measured in personal financial terms. fulfillment terms. Value These actions add value to the These activities do not add value national income. to the national income. Example An academician, a skilled A teacher teaching her own son, a person, a doctor, lawyer, doctor treating poor patients Chartered accountants, etc. without charging any fees, a boy developing a software (website or an App) which helps his father in facilitating his business etc. 7     Foundation of 1.2.3 Sector of Economic Activities Indian Business The economic activities generate economic or financial achievement by producing goods or services. The economic activity of any country can be arranged into following division; primary sector, secondary sector and tertiary sector. Economic activities are commenced with a cost-effective intention. Non-economic activities, alternatively, do not have fiscal cause. These activities are carried out on account of love, warmth, societal enriching or spiritual reasons. Fig. 1.2: Sector of Economic Activities It is well understood from the Fig 1.2 that all the sectors work together to create an economic chain of production. The primary sector gathers the raw material, the secondary sector pulls the raw materials to use, tertiary sector sells and supports the activities of the other two sectors. – Primary economic sector: Primary sector is a sector which is related to withdrawing materials required for production of goods. These are the activities which are dependent upon nature. The examples of this sector are: agriculture, breeding, forestry, fishery, hunting, and mining. – Secondary economic sector: Secondary sector relates with the goods produced by the raw materials of primary sector. Its example includes: clothes made by the raw material of cotton, jute etc, the Indian Khadi Industry, the construction of houses etc. – Tertiary economic sector: Tertiary sector refers to the service providing activities which can be seen in distinguish domains. Its examples are: transportation work, disseminating education, medical services etc. Other examples include: retail trade, real estate, governmental and judicial activities, Insurance and financial services, health services, media, transportation and storage, educational services, hotels and restaurants, telecommunications, etc. 1.3 BUSINESS, PROFESSION AND EMPLOYMENT We can further classify these economic activities into three groups: 8 (a) Business, (b) Profession, and (c) Employment.    Introduction to 1.3.1 Business Business Any activity carried primarily with the object of earning profit can be called a business activity. This objective of earning profit is achieved by production and/or exchange of want satisfying goods and services. Therefore, we can define business as “any activity concerned with the production and/or exchange of want satisfying goods and services carried with a view of earning profit”. Production of soaps, sale of eggs, production of TV sets, transport, etc., are some examples of business. A person who is engaged in business is called a businessman or entrepreneur. Similarly, a firm formed for the purpose of carrying a business activity is called a business enterprise or a business firm. You will learn in detail about business later in this unit. 1.3.2 Profession An activity which involves the rendering of personalised services of a specialised nature, based on professional knowledge, education and training is called a profession. Services rendered by doctors, lawyers, chartered accountants, etc., come under this category. Generally, for each category of profession, there would be a professional body. For example, Bar Council of India is the professional body of lawyers which guides and regulates the law profession in India. The professional body prescribes the nature and type of educational qualifications and training required to practice the concerned profession. A professional should become the member of concerned professional body and follow the code of conduct prescribed by such body. Professionals charge some fee for the professional service they render. 1.3.3 Employment Any activity assigned to a person by the employer under an agreement or rules of service comes under the category of employment. A person who undertakes such activity is called employee. For performing such activity, the employee receives remuneration from the employer in the form of wage or salary, allowance, bonus, etc. The employment is also called ‘service’. Working in a factory, office, hotel, college, etc., are a few examples of employment. Even professionally qualified persons also work as employees in various organisations. For example, doctors employed in government/ private hospitals, engineers employed in a factory, etc. Employment is an alliance between two parties, often dependent on an agreement where work is compensated for. One party, which might be a company, for profit, non-profit, association of persons, co-operative or any other entity, is the employer and the other is the employee. Employment refers to the contractual association between two parties i.e. employer and employee. Employees work in return for payment, which may be in the form of an hourly wage, by piecework or an annual salary as lump sum payment or a contractual basis. This depends upon the work of an employee does or the sector she or he works in. Under certain kinds of employment, employees may receive perquisites beyond their regular payments. These include gratuities, bonus payment or employee stock option plan (ESOP), health insurance, housing, disability insurance or access to recreational service during office hours. Employment is typically governed by employment laws or regulations or legal contracts. 9     Foundation of Types of Employment Indian Business Employees can be recruited under several types of employments. The type of employment under which an individual is employed is mentioned in the employment contract. The employed person is bound by instructions, directions regarding working hours, place of work, etc, mentioned in the contract. The types of employment are as under: x Full-time employment: Employment in which an individual works a base number of hours put forth by the employer is known as full-time employment. It is usually accompanied by benefits that are not ordinarily offered to part time employees. x Part-time employment: It is a form of employment where employees work fewer hours per week than full-time employees. Such employees are not entitled to all the benefits that full-time employees are given. x Casual employment: Casual employees are recruited on an irregular basis. Their engagement depends on the need and requirement of the business. x Contract employment: Employment done for a fixed term or for the duration of a specific task is called contract employment. Employment is over as soon as the contract finishes. x Apprenticeship: Apprenticeship is a practice of training for individuals in a particular trade or profession. A person undergoing apprenticeship is called an apprentice. Apprentices have the benefit of full insurance protection (sickness, accident, unemployment and pension insurance) and have special shield against removal from office. x Seasonal employment: Seasonal workers provide their services on seasonal basis. For example, in the hotel and catering trade, seasonal workers are subject to special cooperative settlement provisions regarding their working time as well as full social insurance protection. 1.3.4 Comparison among Business, Profession and Employment Look at Table 1.2 which shows the comparison among Business, Profession and Employment. Although business, profession and employment are distinguished from each other, they are also inter-dependent. Business enterprises provide employment to a large number of people in the country. Similarly, professionals like engineers, chartered accountants, cost accountants, management consultants, legal experts, doctors, etc., work with the business firms for tackling complicated technical problems. Thus, business enterprises provide employment opportunities to professionals and general public. At the same time the success of the business is dependent on its employees and professionals working with it. These three form a part of economic activities which have been bifurcated in Table 1.2. The purpose behind this section is to distinguish among the business, profession and employment and provide a bird’s eye view of the 10 same.     Introduction to Table 1.2: Comparison among Business, Profession and Employment Business Basic Business Profession Employment Mode of Entrepreneur’s Membership of a Appointment letter establishment decision and other professional body and service legal formalities, if and certificate of agreement necessary practice Nature of work Provision of goods Rendering of Performing work and services to the personalised, as per service public expert services contract or rules of service Qualification No minimum Expertise and Qualification and qualification is training in a training as necessary specific field is a prescribed by the must employer Reward or return Profit earned Professional fee Salary or wages Capital investment Capital investment Limited capital No capital required as per size needed for required and nature of establishment business Risk Profits are Fee is generally Fixed and regular uncertain and regular and pay; no risk irregular, risk is certain; some risk present Transfer of interest Transfer possible Not possible Not possible with some formalities Code of conduct No code of conduct Professional code Norms of behavior is prescribed of conduct is to be laid down by the followed employer are to be followed. 1.4 BUSINESS You have learnt that the entire range of economic activities of the human beings may be classified into business, profession and employment. Among these three categories, profession and employment, though important, are outside the scope of this course. We are primarily concerned with business. So, let us discuss about business in more detail. 1.4.1 Essential Features of Business You have learnt that business refers to the human activities engaged in production and/or exchange of want satisfying goods and services carried with the intention of earning profits. Now let us study the important characteristics of business. We can list the following five broad features of business. 1) Dealings in goods and services: Business deals with goods and services. The goods may be consumer goods such as sweets, breads, clothes, shoes, etc. They may be producer’s goods such as machinery, equipment, etc., which are used to produce further goods for consumption. Business also deals with services such as transport, 11     Foundation of warehousing, banking, insurance, etc., which are intangible and Indian Business invisible. 2) Production and/or exchange: You can call an economic activity a ‘business’ only when there is production or transfer or exchange or sale of goods or services for value. If goods are produced for self-consumption or presentation as gift, such activities shall not be treated as business. In a business activity, there must be two parties i.e., a buyer and a seller. Such activity should concern with the transfer of goods or exchange of goods between a buyer and a seller. The goods may be bartered or exchanged for money. 3) Continuity and regularity in dealings: A single transaction shall not be treated as business. An activity is treated as business only when it is undertaken continually or at least recurrently. For example, if a person sells his residential house, it is not considered as business. If he repeatedly buys houses and sells to others, such activity comes under business. But how frequently the transaction should occur depends on the nature of the activity. For example, a ship building company takes a long time to manufacture and sell a ship. At the same time, a vegetable vendor purchases vegetables from the market in the morning and sells out to his customers by evening. But both these activities are treated as business. 4) Profit motive: Earning profit is the primary motive of business. This is not to undermine the importance of the element of service in business activity. In fact, a business will flourish only when it is able to serve its customers to their satisfaction. Profits are essential to enable the business to survive, to grow, expand, and to get recognition. 5) Element of risk: In every business, there is a possibility of incurring loss. This possibility of incurring loss is termed as risk. The element of risk exists due to a variety of factors which are outside the control of the business enterprise. There are two kinds of risks. (1) Risks whose probability can be calculated and can be insured. Losses due to fire, floods, theft, etc., are some examples. (2) Risks whose probability cannot be calculated and which cannot be insured against, e.g., changing technology, fall in demand, changing fashions, short supply of raw materials, etc. These risks are to be completely borne by the enterprise. 1.4.2 Objectives of Business You have learnt that the primary objective of business is to earn profit. Although profit plays an important role as a criterion of success, business may not exist for long with the sole objective of earning profit. As stated by Henry Ford, “business is not mere money chasing but it also should aim at serving the community”. According to Urwick, “profit can no more be the objective of a business than eating is the objective of living”. Thus, serving the community is regarded as another important objective of business. In fact, some authors regard ‘service to community’ as the major objective of business and state that this provides the main justification for the existence of business as an important human activity. Therefore, while profit is necessary for the businessman to stay in business, he ought to aim at 12 something more for its survival and growth.    The objectives of business could be listed under three broad Introduction to Business headings: Let us learn them. 1. Economic Objectives: The primary objective of business are economic. Some of the main economic objectives are: x Earning of satisfactory profits. x Exploring new markets and creation of more customers. x Growth and expansion of business operations of the firm x Making innovations and improvements in goods and services so that customers get improved and more economic goods and services. 2. Social Objectives: Business, being a part of the society, has obligations towards the society also. Some major social objectives are: x Providing more and more employment opportunities to the people in the country x Supply of quality goods to the community x Providing goods at reasonable price x Ensure fair returns to investors x Avoidance of profiteering and unfair practices x Production of goods in accordance with national interests and priorities. 3. Human Objectives: Business activity is, generally, carried out through the human objectives of business and may thus take account of economic well-being and the employees, social and psychological satisfaction of employees as well as development of human resources. You just recollect what we have stated about business. We stated that business is concerned with production and/or exchange of goods and services with the intention of earning profit. It states that business is concerned with two aspects i.e. production and exchange. Based on this, we may classify business activities into two categories. In the first category we can group all the business activities relating to production. Similarly, all the activities relating to exchange may be grouped under the second category. The first category is known as industry’, while the second category is called ‘commerce’ which will be discussed more elaborately under separate head. Thus, business organisation means bringing together various components of business such as workforce, raw materials, machines, capital, energy etc. putting them on work systematically, and coordinating and controlling their activities effectively to achieve the objective of earning profit. Business may be owned and managed by a single man, or a group of persons forming a partnership firm or as a joint stock company or even as a cooperative society. Thus, on the basis of ownership and management, we can classify business organisation into two categories (sole proprietorship and partnership form) may be called non-corporate forms of organisations. The remaining two categories (company form and cooperative society) may be called as corporate forms of 13     Foundation of organisation. About these forms of organisation, you will study in details in Indian Business Unit 5. If you are planning to start a business, you should evaluate the merits and demerits of each different business structure and work out which structure suits the requirement. A business structure is a group of organisation that is lawfully recognised in a given jurisdiction and characterised by the legal definition of that particular type. On the basis of ownership and management business may be classified into following category. 1. Sole Proprietorship 2. Partnership 3. Company 4. Co-operatives You will learn in details in Unit 5. Check Your Progress A 1) What is the main distinction between the economic activity and non- economic activity? …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. 2) What is business? …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. 3) What is profession? …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. 4) What is employment? …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. …………………………………………………………………………. 14    5) Classify the following activities into business, profession and Introduction to Business employment. Activity Classification 1 Selling vegetables. ………………………. 2 A person working in a medical shop as ………………………. salesman. 3 A doctor working in a government hospital. ………………………. 4 A Chartered accountant started private practice. ………………………. 5 Manufacture of biscuits. ………………………. 6 Lawyer started private practice ………………………. 7 Transporting of goods. ………………………. 6) State whether the following statements are True or False 1 The sole objective of business is earning ………………………. profit. 2 Profession is a non-economic activity. ………………………. 3 Employment is an economic activity. ………………………. 4 There is no element of risk in business ………………………. 5 Business is concerned only with the ………………………. exchange of goods and services. 6 Industry is a part of business activity. ………………………. 7 Industry and commerce together constitute ………………………. business activity. 8 An activity is treated as business when it is ………………………. undertaken continuously or recurrently. 9 In case of profession, ownership interest ………………………. can be transferred to others. 10 Activities taken up for earning money or ………………………. livelihood are called economic activities. 11 Father teaching his daughter is an economic ………………………. activity. 1.5 INDUSTRY As you have learnt, industry refers to that part of business activities which is concerned with the production of want satisfying goods/services through utilisation of available material resources. Industry utilises the natural resources and transfer them for final consumption or further use. It means that the industrial activity aims at ensuring the supply of goods in that form which suits the objects, needs and convenience of the persons expected to use them. Thus, industry creates form utility to goods. For example, farms, factories, mines, etc., make available a wide range of goods. These goods cater to the needs and convenience of the people. In a nut shell, the activities of human beings engaged in extraction, production, processing, construction and fabrication of products come under industry. 15     Foundation of There is another explanation for industry. Under this second explanation, industry Indian Business means a group of factories usually specialising in a particular product line. For example, all the factories which produce fertiliser are collectively called fertiliser industry. Similarly, all automobile factories together constitute automobile industry. But, in the present context, this approach is not relevant. We adopt the first approach. 1.5.1 Classification of Industry There are various approaches of classifying industries. All these approaches are listed below: 1) On the basis of the nature of activity a) Extractive industries b) Genetic industries c) Manufacturing industries d) Construction industries 2) On the basis of the nature of goods produced a) Consumer goods industries b) Producer goods industries 3) On the basis of the level of investment a) Heavy industries b) Light industries 4) On the basis of size of the activity a) Small scale industries b) Large scale industries 5) On the basis of area of operations a) Regional industries b) National industries c) Multinational industries Since the theme of the discussion in this Unit is centred around human activity, the classification based on the nature of activity is more appropriate for us. So, let us discuss about the first classification in detail. a) Extractive Industries: Activities engaged in the discovery and extraction of natural resources like minerals, animals, plants, trees, etc., from the surface or beneath the surface of the earth or air or water come under this category. Extractive industries are also called exhaustive industries because with every attempt there is a depletion of resources and this wealth exhausts. Mining, farming, quarrying, hunting, fishing, etc., come under this category. b) Genetic Industries: Activities which are concerned with reproducing and multiplying plants and animals with the objective of earning profit from their sale come under this category. Examples are nurseries which multiply and sell plants, poultry farms, cattle breeding farms, fish culture, etc. 16    There is one important difference between an extractive industry and a Introduction to Business genetic industry. In the case of extractive industry, man cannot add to the wealth which he withdraws from the earth, sea, and air. However, in the case of genetic industry, man not only adds to the growth but also reproduces the nature made goods. c) Manufacturing Industries: These types of industries are engaged in the conversion or transformation of raw-materials and semi-finished materials into finished products. Generally, the products of extractive industries become raw-materials for manufacturing industries.’ In other words, manufacturing industries create ‘form utility’ to the products of extractive industries. Cement industry, sugar industry, cotton textile industry, iron and steel industry, fertiliser industry, etc., are some examples for manufacturing industries. d) Construction Industries: These industries are engaged in the construction activities like the construction of buildings, bridges, dams, roads, canals, railway lines, etc. These industries consume the products of manufacturing industries (e.g., bricks, cement, iron and steel) and extractive industries (e.g., quarries, wood). The products of construction industries are immovable. They are erected, built or fabricated at a fixed site. Look at Fig 1.3 for classification of industries with some examples. džƚƌĂĐƚŝǀĞ 'ĞŶĞƚŝĐ/ŶĚƵƐƚƌŝĞƐ DĂŶƵĨĂĐƚƵƌŝŶŐ ŽŶƐƚƌƵĐƚŝŽŶ /ŶĚƵƐƚƌŝĞƐ /ŶĚƵƐƚƌŝĞƐ /ŶĚƵƐƚƌŝĞƐ e.g. Nurseries e.g. Mining e.g. Iron & Steel e.g. Building Fish culture Farming Fertilizer Roads Cattle breeding Fishing Vanaspati Canals Poultry farms Quarrying Electronics Dams    Fig. 1.3: Classification of Industries Based on the Nature of the Activity. When we talk of the nature of activity, we can also include the Service Industry. These are the industries which do not produce any tangible products but provides a service like tourism industry, entertainment industry etc. Check Your Progress B 1) Distinguish between business and industry. ………………………………………………………………………… ………………………………………………………………………… ………………………………………………………………………… ………………………………………………………………………… ………………………………………………………………………… ………………………………………………………………………… 17     Foundation of 2) Fill the missing texts inside the box numbered? Indian Business ,uman EŽŶͲ Economic Activities ϭ Ϯ Wrofession ϯ ϰ ommerce xtraction ϱ ϲ ϳ 3) To which category of industry the following activities belong: Activities Category of Industry i) Fishing in the sea ………………………………………. ii) Raising coal from a mine ………………………………………. iii) Weaving of cloth ………………………………………. iv) Construction of a dam ………………………………………. v) Preparing of wooden furniture ………………………………………. vi) Cattle breeding ………………………………………. vii) Development of railway track ………………………………………. viii) Producing rail engine ………………………………………. 1.6 COMMERCE You have learnt that the business activities are classified into: 1) industry, and 2) commerce. You also learnt that the industrial activities are concerned with the production of want satisfying goods and services. Unless these goods and services are made available to those who need them, they may not fulfill their objectives i.e., satisfying human wants. Therefore, the goods produced by the industries should be made available to the consumers at right place right time, right quantity, right price and in right manner. Here comes the activity of commerce to fulfill all these requirements. All the activities which establish link between the producers of goods and consumers of these goods, and maintain a smooth and uninterrupted flow of goods between them come under commerce. A smooth and uninterrupted flow of goods and services from producer to consumer is beset with many barriers and hindrances. For instance, goods 18    produced by one may be consumed by another. In such a case, unless the Introduction to Business producer and consumer identify each other, there is no scope for exchange of goods between them. This is the hindrance of person. Similarly, for buying a product, consumers should have the knowledge about the existence of that product, its features, etc. Therefore, there is a need to provide such information to the consumers. This is the hindrance of knowledge. The hindrance of time arises out of the time gap between the time of production and the time of consumption. In many cases goods are produced at one place while they are consumed at another place. So, the goods should be carried from the place of production to the place of consumption. This gives rise for the hindrance of place. Commerce eliminates all these hindrances and facilitates the exchange of goods between producers and consumers. Later, in this section, you will learn in detail how these hindrances are eliminated through various business activities which form part of commerce. In a nutshell, commerce is mainly concerned with the purchase and sale of goods, and also embraces all those functions which are essential for maintaining smooth and uninterrupted flow of goods and services between the buyers and sellers. Thus, there are two main aspects in commerce: i) purchase and sale of goods, and ii) activities essential for the smooth and uninterrupted flow of goods. Therefore, we can classify the whole range of commerce activities into two categories: 1) Trade – activities of purchase and sale. 2) Aids to Trade – activities which facilitate the smooth and uninterrupted flow of goods. Let us learn them in detail. 1.6.1 Trade You have already learnt that the human activities engaged in buying and selling of goods and services come under trade. Therefore, trade includes sale, transfer or exchange of goods and services with the intention of earning profit. The objective of trade is to make goods available to those persons who need them and are willing to pay for them. Thus, trade plays a major role in establishing contact between the producers and the consumers and eliminates the hindrance of person. A person who is engaged in trade is called ‘trader’ or ‘middleman’. Various traders operate in between producers and consumers and remove the hindrance of person. We can classify trade into two broad categories; 1) internal trade, and 2) external trade. 1) Internal Trade: When the trade takes place within the boundaries of the country, you can call it ‘internal trade’. It means that both buying and selling should take place within the country. Payment for the same is generally made in national currency. This internal trade is also termed as inland trade or national trade or home trade or domestic trade. On the basis of the scale of operations, we can classify internal trade into: a) wholesale trade, and b) retail trade. 19     Foundation of a) Wholesale Trade: Buying and selling in relatively larger quantities Indian Business is called wholesale trade. A person who is involved in wholesale trade is called wholesaler. b) Retail Trade: This refers to buying and selling in relatively smaller quantities. A person engaged in retail trade is called a retailer. Let us now discuss in some detail how these wholesalers and retailers operate and eliminate the hindrance of person. A wholesale trader buys goods in large quantities from the manufacturers and sells in relatively smaller quantities to the retailers. Thus, the wholesale traders constitute a link between the producers on the one hand and the retailers on the other hand. Retailers, who buy goods from the wholesalers, sell them in smaller quantities to the consumers. Thus, retail traders establish link between wholesale traders on the one hand and consumers on the other. Thus, the wholesalers and retailers establish a link between the producers and consumers and eliminate the hindrance of person. However, sometimes producers may take the services of only either wholesalers or retailers, or may establish a direct link with the consumers. The whole chain of traders/middlemen operating in between producer and consumer is referred to as ‘channel of distribution’. 2) External trade: This is also called ‘foreign trade’ or ‘international trade’. When the trade takes place across the boundaries of a country, you can call such trade as external trade. In other words, external trade refers to the trade between nations. This trade could be in the form of exchange of one commodity for another or for money. We can classify foreign trade into three categories: a) import trade, b) export trade, and c) re-export trade. a) Import Trade: when a country buys goods from another country, it is called ‘import trade’. For example, India bought machinery from the USA. This is an import trade for India. b) Export Trade: when a country sells goods to another country, it is called ‘Export Trade’. For example, India sells leather goods to Russia, and tea to USA. For India such selling of goods shall be termed as ‘Export trade’. c) Re-export Trade: This is also called ‘entrepot trade’. When the goods are imported from one country and the same are exported to another country, such trade is called ‘re-export trade’. Re-export is done by those countries which have ports that are conveniently situated to serve as distributing points for neighbouring countries. Such countries import large quantities of goods and re-export the same to the neighbouring countries. 1.6.2 Aids to Trade Activities which facilitate the trade are called ‘aids to trade’. Thus, all human activities which eliminate the hindrances and facilitate the flow of goods from producers to consumers come under aids to trade. They are also called 20 ‘auxiliaries to trade’. The whole range of activities coming under aids to trade    may be classified into five categories: 1) transportation, 2) warehousing, Introduction to Business 3) insurance, 4) advertising, and 5) banking. Let us learn them. 1) Transportation: Generally, all the goods are not consumed at the same place where they are produced. Therefore, goods are to be moved from the place of production to the place where they are demanded. The activity which is concerned with such movement of goods is called ‘transportation’. Thus, transportation eliminates the hindrance of place and creates place utility to goods. Transportation can be of three types: a) Land transportation — road, rail b) Air transportation — aeroplane c) Water transportation — boat, ship 2) Warehousing: Goods may not be consumed immediately after production. Normally there will be time gap between production and consumption. This is the hindrance of time. Therefore, goods once produced should be preserved properly till they are consumed. Particularly, perishable goods like milk, meat, vegetables, flowers, etc., should be preserved very carefully. Otherwise, they get spoiled and become useless. For this reason warehousing is recognised as yet another aid to trade. Warehousing refers to preservation of goods to make them available as and when needed by consumers. Thus, warehousing eliminates the hindrance of time and provides time utility to goods. 3) Insurance: The goods may be destroyed while in production process, or in transit due to accidents, or in storage due to fire or theft, etc. The businessmen would like to cover these risks. Insurance companies come to their rescue in this regard. They undertake to compensate the loss suffered due to such risks. For this purpose, the business has to take an ‘insurance policy’ and pay a certain amount regularly, called ‘premium’. Thus, insurance eliminates the hindrance of risk. 4) Advertising: Exchange of goods is possible only when the consumers have the knowledge about the existence of a product. This is the hindrance of knowledge. This hindrance is eliminated through advertising. Through advertisement, producers communicate all information “about their goods to the prospective consumers’ and create in them a strong desire to buy the product. Thus, advertising facilitates the flow of goods between producers and consumers by bringing the knowledge about the products to the consumers. Advertising is done through TV, radio, newspapers, magazines, hoardings, wall posters, etc. 5) Banking: Banking facilitates the flow of goods by removing the hindrance of finance and credit. Now-a-days we cannot think of business without banks. To start the business or to run it smoothly we require money. Banks supply money. A bank is an organisation which accepts deposits of money from the public, withdrawal on demand or otherwise, and lends the same to those who need it. Banks also provide many services required for the business activity. 21     Foundation of Look at Fig. 1.4 for classification and sub-classification of commerce. Indian Business ommerce drade Aids to Trade Internal Trade xternal Trade tholesale Zetail /mport Export Re-export Trade Trade Trade Trade Traders dransportation tarehousing anking /nsurance Banner Fig. 1.4: Classification of Commerce Check Your Progress C 1) What is the difference between commerce and industry?.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 2) What is the difference between internal trade and external trade?.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 3) How is trade different from commerce?.................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... 22    4) A list of hindrances are given below. State the names of the business Introduction to Business activities which eliminate them Hindrance Name of the Business Activity i) Hindrance of distance...................................................... ii) Hindrance of time...................................................... iii) Hindrance of risk...................................................... iv) Hindrance of finance...................................................... v) Hindrance of knowledge...................................................... vi) Hindrance of person...................................................... 5) State whether the following statements are True or False. i) Trade is concerned with buying and selling of goods. True )DOVH ii) A person who buys and sells in smaller quantities is called wholesaler. True )DOVH iii) When goods are sold in another country, it is called export trade. True )DOVH iv) Activities which facilitate buying and selling come under aids to trade. True )DOVH v) Import trade refers to buying goods in one country and selling the same in another country. True )DOVH vi) Internal trade refers to buying and selling within the national boundaries. True )DOVH vii) Retailer establishes link between wholesaler and consumer. True )DOVH viii) External trade is also called home trade. True )DOVH 1.7 MICRO, SMALL AND MEDIUM SIZE ENTERPRISES The Ministry of Micro, Small and Medium Enterprise (MSME) is the apex body for the formulation and administration of rules, regulations and laws relating to micro, small and medium enterprises in India. The sector provides a wide range of services and is engaged in the manufacturing of over 6,000 products – ranging from traditional to hi-tech items. MSME sized enterprises in both the manufacturing and service sector can obtain MSME registration or SSI registration under the MSMED Act. MSME registration provides a variety of benefits such as rate of interest charged would be very less, tax subsidies, capital investment subsidies and other support from the government sector. Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. , defines Micro, small and medium enterprises based on the investment. 1) The investment in plant and machinery for those engaged in manufacturing or production, processing or preservation of goods, and 23     Foundation of 2) The investment in equipment for enterprises engaged in providing or Indian Business rendering of services. The guidelines with regard to investment in plant and machinery or equipment as defined in the MSMED Act, 2006 are: Table.1.3: Micro, Small and Medium Enterprises Nature of Investment in plant and Investment in equipment activity of the machinery excluding land and excluding land and building Enterprise building for enterprises engaged for enterprises engaged in in manufacturing or production, providing or rendering of processing or preservation of services (loans up to Rs 1 goods crore) Micro Not exceeding Rs.25.00 lakhs Not exceeding Rs.10.00 lakhs Small More than Rs.25.00 lakhs but More than Rs.10.00 lakhs does not exceed Rs.5. crore but does not exceed Rs.2 crores Medium More than Rs. 5 crore but does More than Rs. 2 crores but not exceed Rs. 10 crore does not exceed Rs.5 crores Given the government of India’s latest ‘Make in India’ push, along with a significant jump in the FDI flows, the Indian MSMEs sector is poised for rapid growth and integration with major global value chains. Benefits of Registration as MSME or Udyog Aadhar To promote the growth of Micro Small & Medium Enterprises, the government of India gives various concessions and extends financial assistance exclusively to the units or enterprises which qualify to be a micro, small or medium enterprises. Under MSME all kinds of enterprises can obtain registration, like manufacturers, the service providers are also eligible for MSME benefits. Hence, they are also required to get Udyog Aadhar Registration. The MSME registration is not statutory. However, the MSME registration process in India has been conceptualised to provide maximum benefits to all types of enterprises. After registration, any enterprise becomes qualified to reap the benefits offered under the MSMED Act. x Easy availability of loan x Government procurement priority x Low-interest overdraft x Concessional electricity x Rebate in taxes (under the MSMED Act, 2006) x 50% discount on IP Protection x MSME Conciliation Centre. 24    Banking Laws, Excise Law and the Direct Taxes Law have incorporated the Introduction to Business word MSME in their exemption notifications. Therefore, the registration certificate issued by the registering authority is seen as proof of being MSME and is required to avail the benefits sanctioned for MSMEs. 1.8 LET US SUM UP The whole range of human activities can be classified into: 1) economic activities, and 2) non-economic activities. Economic activities are further divided into: 1) business, 2) profession, and 3) employment. Business is concerned with production and/or exchange of goods and services carried with the primary objective of earning profits. Activities concerned with the rendering of personalised services of a specialised nature come under profession. Employment refers to the activity assigned to a person by the employer under an agreement or rules of service. The main features of business activity are: 1) dealings in goods and services, 2) production and/or exchange, 3) regularity in dealings, 4) profit motive, 5) element of risk, and 6) enterprise. Besides earning profit, business also serves certain economic, social, and human objectives. Business activities are classified into: 1) industry, and 2) commerce. Industrial activities are classified into four categories: 1) extractive industries, 2) genetic industries, 3) manufacturing industries, and 4) construction industries. Commerce is classified into: 1) trade, and 2) aids to trade. Activities concerned with buying and selling come under trade. Activities which facilitate buying and selling, and maintain smooth flow of goods and services come under aids to trade. These are: 1) transportation, 2) warehousing, 3) banking, 4) insurance, and 5) advertising. Organisation makes the business proposition into a reality. It brings together required components, puts them on work systematically, and coordinates and controls their activities effectively to achieve the objective of earning profit. There are four basic forms of business organisation: 1) sole proprietorship, 2) partnership, 3) company, and 4) cooperative society. All business starts with an idea. A person who conceives the idea of doing a particular type of business, mobilise the resources and bring the organisation into existence is called an entrepreneur. Certain common elements in the character of entrepreneurs include independence, hard work, desire to achieve goals, open-mindedness, optimistic outlook etc. Micro, Small and Medium Enterprises (MSME) are classified in two Classes: Manufacturing Enterprises i.e. the enterprises engaged in the manufacture or production of goods pertaining to any industry or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. Service Enterprises refer to the enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment. 25     Foundation of Indian Business 1.9 KEY WORDS Advertising: An activity by which the product and its qualities are made known to the public for stimulating demand. Aids to Trade: Activities which facilitate the smooth and uninterrupted flow of goods and services from producers to consumers. Banking: An activity of mobilising money deposits from public and giving loans to the needy. Business Organisation: Bringing together various components of business such as workforce, raw-materials, machines, capital, energy, etc., putting them on work systematically, and coordinating and controlling their activities to achieve the objectives of business. Business: An activity of production and/or exchange of want satisfying goods and services carried with the primary intention of earning profits. Commerce: Activities related to purchases and sales of goods, and those concerned with maintaining a smooth and uninterrupted flow of goods and services between buyers and sellers. Construction Industry: Industry engaged in the construction of buildings, bridges, roads, dams, canals, railway lines, etc. Economic Activities: Activities which are undertaken by human beings for earning money or livelihood. Economic activities: Economic activity can be defined as any activity that involves money or the exchange of products or services. Employment: Activity of working with an employer under agreement or rules of service. Entrepreneur: A person who conceives the business idea, brings the organisation into existence, carries on the business activity, and is prepared to bear the risk of loss. Export Trade: Selling goods in another country. External Trade: Purchase and sale of goods and services across the boundaries of a country. Extractive Industry: Industry engaged in the discovery and extraction of natural resources like minerals, animals, plants, trees, etc. from the surface or beneath the surface of earth or air or water. Genetic Industry: Industry engaged in reproduction and multiplication of plants and animals with the objective of earning profit from their sale. Human activity: Those works which are performed by human beings in order to satisfy their needs are acknowledged as human activities. Import Trade: Buying goods from another country. 26    Introduction to Industry: Activities engaged in the production of goods and services by Business utilising available material resources. Insurance: Covering risk of loss arising from events like fire, accident, etc., by paying certain premium to insurance company. Internal Trade: Purchase and sale of goods and services within the boundaries of a country. Manufacturing Industry: Industry concerned with the conversion or transformation of raw-materials and semi-finished goods into finished products. Non-Economic Activities: Activities which are undertaken by human beings due to love and affection, social obligation, religious obligation, patriotism, physical requirement, etc., but not for earning money. Profession: Activity which involves the rendering of personalised services of a specialised nature based on professional knowledge, education, and training. Re-export Trade: Importing goods from one country and exporting the same to another country. It is also called Entreport trade. Retail Trade: Buying goods from wholesalers in large quantities and selling these in small quantities to consumers. Secondary economic sector: Secondary sector is a segment related with the goods produced by the raw materials of primary sector such as construction, generation and distribution of clean water, electricity, and gas. Tertiary economic sector: Tertiary sector refers to the service providing activities, like teaching work, Doctor etc, for the reason that they are providing us only service. Trade: Activities concerned with the buying and selling of goods and services. Transportation: Activities engaged in the moving of goods from one place to another. Warehousing: Activities engaged in the preservation of goods to make them available as and when needed by consumers. Wholesale Trade: Buying goods from producers in large quantities and selling them to retailers in smaller quantities. 1.10 ANSWERS TO CHECK YOUR PROGRESS A) 5 (1) Business (2) Employment (3) Employment (4) Profession (5) Business (6) Profession (7) Business 6 (1) False (2) False (3) True (4) False (5) False (6) True (7) True (8) True (9) False (10) True (11) False B) 2 (1) Economic Activities (2) Employment (3) Business (4) Industry (5) Genetic (6) Manufacturing (7) Construction 27     Foundation of 3 (i) Extractive (ii) Extractive (iii) Manufacture (iv) Construction Indian Business (v) Manufacture (vi) Genetic (vii) Construction (viii) Manufacture C) 4 (i) Transportation (ii) Storage (iii) Insurance (iv) Banking (v) Advertising (vi) Trade 5 (i)True (ii) False (iii) True, (iv) True (v) False (vi) True (vii) True (viii) False 1.11 TERMINAL QUESTIONS 1) What are human activities? What are its two types? 2) What are differences between economic and non-economic activities? 3) What is business? Explain its features and objectives. 4) Explain the different types of employment? 5) State the differences among business, profession and employment. 6) What are the different types of industries on various basis. 7) What is Trade? Explain various types of Trade? 8) What are different aids to Trade? 9) What are Micro small and medium size enterprises (MSME)? State the benefits of registration as MSME or Udyog Aadhar. Note: These questions will help you to understand the unit better. Try to write answers for them. But do not send your answers to the university. These are for your practice. 28     Technological UNIT 2 TECHNOLOGICAL INNOVATION Innovation and Skill Development AND SKILL DEVELOPMENT Structure 2.0 Objectives 2.1 Introduction 2.2 Innovation 2.2.1 Meaning of Innovation 2.2.2 Meaning of Invention 2.2.3 Meaning of Creativity 2.2.4 Difference among Creativity, Invention and Innovation 2.2.5 Importance of Innovation 2.3 Technological Innovation 2.3.1 Process of Innovation 2.3.2 Types of Innovation 2.4 Make in India v/s Made in India 2.5 Digital India 2.6 Skill Development: Approaches and Strategies 2.6.1 Skill Development Initiatives 2.6.2 National Skill Development Corporation 2.7 Start-up India and Incubator 2.8 Let Us Sum Up 2.9 Key Words 2.10 Terminal Questions 2.0 OBJECTIVES After studying this unit, you will be able to: x discuss the concept of innovation and explain different types of innovation x describe the meaning of technological Innovation x examine the issues and challenges of innovative activities x describe the concept of technological innovation x explain the various government initiatives for skill development; and x identify government skill development approaches in India. 2.1 INTRODUCTION Technology is the most widely used word globally and has taken different forms. Technology includes invention, innovation, R&D, technology development, technological strategies etc. With new technological development coming up everyday, ‘Innovation’ too has gained importance. It is being 29    Foundation of discussed in every walk of life. The concept of innovation in unorganised Indian Business form has existed for ages but has developed in organised form only in the 20th century. This unit focuses on different aspects of innovation and technological innovation and how does it help in facilitating various activities in different sections of society. In this unit you will learn how has technology evolved and how has the concept of innovation taken its present form. In subsequent sections you will learn various aspects of innovation and different types of innovation. You will also learn concept of technological innovation and various government initiatives for skill development. This unit will also help you to identify such challenges. The process of innovation will help you in understanding the role of innovation in the present context and how it can help the business in developing competitive advantage. You will also learn various government initiatives for skill development which has facilitated the innovative activities. 2.2 INNOVATION Innovation in its current connotation is a "new idea, creative thoughts, and new imaginations in the form of mechanism or technique". Innovation refers to the application of better solutions that meet new necessities, tacit needs, or existing market needs. Thus Innovation involves purposeful application of information, thoughts and scheme in deriving better or dissimilar values from resources, and includes all procedure by which new ideas are created and transformed into constructive products. 2.2.1 Meaning of Innovation The word innovation comes form the latin word LQQRYDWLRQHP noun of action from innovare, is to make something new. Now an important question arises: Can a bright idea be used only once? The answer to this question is ‘No’. there are many ideas which have been used for centuries and can be revised with a new thought process and more flexibility. Take the example of a tooth brush. We all have been using it since our childhood. If we go back a little and try to think, we will see that our ancestors used neem sticks (datoon) for cleaning their teeth. The ‘idea’ was to clean teeth and over the period the neem stick has evolved into a tooth brush. The same idea is now used in the form of battery operated tooth brushes where you do not have to manually clean the teeth. If we see the whole process, we find that at different ages and at different stages the same idea was used in different innovative ways. Another example can be of mobile/ cell phones. This is an example where an idea has taken different forms and evolved in the present form. A decade back no body would have thought of receiving mails on a mobile phone. But now it is an integral part. Now, the question arises ‘what is an innovation?’ If we go by the business dictionary ‘Innovation is the process of translating an idea or invention into a good or service that creates value for which customers will pay’ (business dictionary.com). At this point another question arises ‘How can an idea be called as an innovation?’. An idea can only be called an innovation when it is replicable, economical and satisfies a specific need e.g. nasofilters. Nasofilters is a respiratory nasal filter that sticks to your nose and prevents entry of harmful air/pollutants (PM 2.5) and they are economical than the traditional anti pollution masks. There are number of such innovations. 30    Technological 2.2.2 Meaning of Invention Innovation and Skill Development The words innovation and invention partly cover semantically but are actually quite different. Invention can refer to a type of musical masterpiece, a false hood, a discovery, or any product of the imagination. The sense of invention most probable to be confused with innovation is “a device, contrivance, or process originated after study and experiment,” frequently amazing which has not beforehand been in existence. 2.2.3 Meaning of Creativity Creativity is the act of turning new and creative ideas into reality. It is featured by the ability to recognise the world in new ways, to find unknown patterns, to make connections between apparently unrelated phenomena, and to gather solutions. Basic elements of the concept of creativity include: intelligence, intensive interest, knowledge, originality (ideas), creative instinct, non-conformity, courage, and persistence. 2.2.4 Difference among Creativity, Invention and Innovation Invention is an idea for a novel product or process. Innovation is the introduction of new products, processes or services into the market place. Technological innovation is a sub-set of innovation i.e. the introduction of new products, processes or services based on new technologies. The technological innovation begins with invention. We will discuss technological innovation in the subsequent section. The first step is the idea of the invention and the research to reduce the idea to practice. This often results in a functional proto-types, which can be used for filing a patent. The next step is the research and development of the proto-type into a commercially designed product. Finally, the product is produced and sold. The distinction between invention and innovation is an important one, for the transformation from ideas into a successful product is actually difficult. This transformation is the heart of the complex process of innovation. The hard fact is that only a few inventions are successfully innovated, with fewer inventions developed into new products, and still fewer new products succeed commercially. Table 2.1: Difference among Creativity, Invention and Innovation S. No Creativity Invention Innovation 1. Creativity is novel ideas that Creating something Making the invention are communicated, useful, and new into a product form appealing. 2. Creativity is a fuzzy idea and A new to the world Innovation is about can not be clarified until it is discovered or changing a pattern for made into a prototype created doing something 3. Based on thinking up new Based on primary Based on broad set of thing scientific skills strategic marketing and technical skills. The above discussion clearly shows that innovation refers to the introduction of a new product. It basically improves an existing concept or idea using a 31    Foundation of step-wise process to create a product which is commercially viable. Indian Business Innovation helps an idea to develop into a successful concept. This requires a specific process. For an innovation to be successful one must understand the process of innovation thoroughly and have a strong support system. Before we discuss the process of innovation, let us see the importance of innovation. 2.2.5 Importance of Innovation Innovation helps in solving problems e.g. providing customer services virtually (using online complaints, suggestions etc). It also in new ways , for example helps in adapting to change to the situations where rapid changes are happening like in technological arena. This also helps the business to remain relevant. The opportunities available to businesses worldwide due to globalisation can be tapped using innovation. It is important for the businesses to innovate so as to enter the foreign markets with new products. Innovation helps organisations to face the competition. We all know that the world is becoming more and more competitive. To sustain in the global market one must make strategic and innovative moves. Innovation is important and critical to ensure smooth running of organisations due to evolving work place dynamics. As you are aware that the tastes and preferences of customers keep on changing, therefore, innovation facilitates in satisfying the consumers in new ways. It is true that innovation is important but it also has certain challenges and risks associated with it. Technological failure is one of the major challenges of innovation. To overcome this challenge, it is important for the organisations to carry out number of trials for the new product before it is implemented. The other risk is the financial burden on the organisation. Innovation comes with a cost. Usually an innovative product gives the returns in the long run, therefore the organisation face a major challenge of finance. The organisations, therefore, are required to assess their financial position before taking up any innovative procedure. The other challenge is the market failure. It is very much possible that an innovative product despite many trials does not give the returns as expected. Redundancy is another challenge for an innovative product. The market changes constantly with new technology coming up every now and then. By the time the innovative product is launched in the market, it becomes redundant due to technological up- gradation. Therefore , it is imperative for the organisations to keep abreast with the technology to avoid such risks. Lack of structural and financial capacity of implementation is another challenge for organisations. This challenge is usually for the start-ups as they do not have a sound base. In this case they can look for the partners who are sound. Organisational risks are associated with innovation. Usually an organisation tend to focus all its attention on the innovation. This hinders day to day activities of the organisation. Therefore, it is important for organisations to have separate innovation centres so that the daily activities of the organisation are not hindered. There are unforeseen risks associated which are unprecedented like political events etc. The organisations need to have a contingency plan for the same rather than being over ambitious. The challenges are definitely a part and parcel of an organisation but when overcome, these turn into opportunities. Innovation does help the organisations in many ways. It provides experience to the organisation. It, therefore, becomes more creative and the innovative organisations. Innovation does provide name and 32 recognition to the innovating organisation.   Technological 2.3 TECHNOLOGICAL INNOVATION Innovation and S