MSME & Business Entrepreneurship Notes PDF

# MSME And Business Entrepreneurship ## Micro, Small & Medium Enterprises ## Learning Objectives After studying this chapter, you should be able to: - Explain the meaning and nature of MSME in India. - Appreciate the role of MSME in India. - Analyze the problems faced by MSME in India....

# MSME And Business Entrepreneurship ## Micro, Small & Medium Enterprises ## Learning Objectives After studying this chapter, you should be able to: - Explain the meaning and nature of MSME in India. - Appreciate the role of MSME in India. - Analyze the problems faced by MSME in India. - Discuss the role of innovation and entrepreneurship for MSMEs. ## Case Study: Romi Bags of Manipur - Khumbongmayum Dhanachandra Singh grew up in a poor family, learning tailoring from his father. - He created a unique purse from leftover fabrics, which sparked interest among friends. - This led to the establishment of his business, “Romi Bags,” in 1996. - Khumbongmayum received the National Award for bag making under Micro and Medium Enterprises in 2007. - His story emphasizes grit, perseverance, and the importance of listening and learning. ## Introduction To MSMEs - MSMEs are crucial for economic development, contributing to production, employment, and exports. - They account for approximately 29.7% of GDP and 49.66% of exports. - The sector employs nearly 60 million people through 28.5 million enterprises. - MSMEs complement large industries and support indigenous skills and entrepreneurship development. - They produce a diverse range of products, including handicrafts, coir, and khadi. ## The Diversity of the Indian MSME Sector - MSME Tool Rooms contributed components for India’s Mangalyaan and Chandrayaan missions. - Their role extends beyond small businesses, impacting significant national projects. ## Definition of MSMEs - The Government of India defines MSMEs based on investment in plant and machinery and turnover. | Type of Units | Investment in Plant and Machinery | Turnover | |---|---|---| | Micro Enterprises | Less than 1 Crore | Does not exceed 5 Crore | | Small Enterprises | Between 1 Crore and 10 Crore | Does not exceed 50 Crore | | Medium Enterprises | Between 10 Crore and 50 Crore | Does not exceed 250 Crore | - **% Share of MSMEs:** - Micro Enterprises: 99.4% - Small Enterprises: 0.52% - Medium Enterprises: 0.1% ## Legislative Framework - The emergence of a large service sector led to the inclusion of various enterprises under a unified framework. - The MSMED Act, 2006 was enacted to address definitions, credit, marketing, and technology upgrading for MSMEs. - This Act encompasses medium-scale enterprises and service-related entities. ## Summary of MSME and Cottage Industries ## Definition of Industries - **Industry:** Any industry located in a rural area producing goods or services, with fixed capital investment defined by the government. - **Cottage Industries:** Also known as rural or traditional industries, organized by individuals using family labor, simple equipment, and indigenous technology without strict capital investment criteria. ## Role of MSME in India - **Contribution to Socio-Economic Development:** MSMEs play a vital role in India’s industrial strategy, preventing rural migration and reducing income inequalities. - **Government Support:** Promotion of MSMEs is seen as a means to achieve accelerated industrial growth and create employment in rural areas. ## Key Contributions of MSME - **Balanced Regional Development:** - Account for 95% of industrial units in India. - **Employment Generation:** - Second largest employers after agriculture, providing more job opportunities per unit of capital. - **Diverse Product Supply:** - Produce a wide range of goods including: - Mass consumption items. - Readymade garments. - Processed food. - Handlooms and handicrafts with export value. - **Locational Flexibility:** - Can be established anywhere, contributing to balanced regional development. - **Entrepreneurship Opportunities:** - Encourage local talent to start businesses with minimal capital and formalities. - **Cost Efficiency:** - Benefit from low production costs due to local resources and lower overhead expenses. - **Agility in Decision Making:** - Small size allows for quick decisions and capturing new business opportunities. ## Problems Associated with MSME - **Challenges in Realizing Potential:** MSMEs face several operational challenges compared to larger industries. ### Major Problems Faced by MSME - **Finance:** - Difficulty in obtaining adequate financing, often relying on local resources and facing exploitation by money lenders. - **Raw Materials:** - Challenges in procuring quality raw materials, leading to compromises on quality and production capacity. - **Managerial Skills:** - Often run by individuals lacking comprehensive managerial skills, affecting marketing and operational efficiency. - **Additional Issues:** - Remote locations with poor infrastructure, lack of market intelligence, and inadequate access to modern technology. ## Summary of Key Points ## Challenges Faced by MSMEs - **Professional Management:** - MSMEs often lack the resources to hire professional managers. - **Marketing:** - Effective marketing is crucial for revenue generation. - Many small organizations struggle with marketing, relying heavily on middlemen. - Middlemen may exploit small businesses through low prices and delayed payments. - Direct marketing is often unfeasible due to inadequate infrastructure. - **Quality:** - Many MSMEs do not meet industry quality standards. - Focus is often on cost-cutting rather than quality improvement. - Limited resources hinder investment in quality research and technology upgrades. - **Capacity Utilization:** - Many firms operate below full capacity due to marketing deficiencies or low demand. - This leads to increased operating costs and potential business closure. - **Global Competition:** - MSMEs face competition not only from larger industries but also from multinational corporations. ## Entrepreneurship Development - **Definition of Entrepreneurship:** - The process of establishing a business distinct from other economic activities. - Requires specific temperamental, skill, and knowledge competencies that can be developed through education and experience. - **Lawful and Purposeful Activity:** - Entrepreneurship should focus on lawful business practices. - The goal is to create value for personal profit and social benefit. - **Innovation:** - Innovation can lead to cost savings or revenue enhancement. - It involves creating value by combining production factors to meet societal needs. - Every entrepreneurial act contributes to income and wealth generation. - **Systematic Activity:** - Entrepreneurship is a calculated risk rather than a chance occurrence. - Entrepreneurs assess risks and strive for success while avoiding high-risk situations. ## Intellectual Property Rights (IPR) - **Importance of IPR:** - IPR plays a significant role in the global economy. - Intellectual property is present in various forms, including inventions, designs, and artistic works. - **Definition of Intellectual Property:** - Refers to creations of the human mind, such as inventions, literary works, and business symbols. - Divided into two categories: - **Industrial Property:** Includes patents, trademarks, and industrial designs. - **Copyrights:** Covers literary and artistic works. ## Startup India Scheme - 2016 - **Objective:** - To foster a strong ecosystem for innovation and startups in India. - **Goals:** - Promote an entrepreneurial culture and values in society. - Raise awareness about entrepreneurship and its benefits. - Encourage educated youth and professionals to pursue entrepreneurship. - Support underrepresented groups, including women and economically backward communities, to achieve inclusiveness and sustainable development. ## Summary of Intellectual Property Rights (IPR) ### Overview of Intellectual Property - **Intangible Nature:** Intellectual property (IP) cannot be defined by physical parameters. - **Evolving Scope:** The definition of IP is continually changing, incorporating new forms such as: - Geographical integrated circuits. - Undisclosed indications. - Protection of plant varieties. - **Types of Intellectual Property Rights in India:** - Copyright. - Trademark. - Geographical Indication. - Patent. - Design. - Plant Variety. - Semiconductor Integrated Circuit Layout Design. ## Importance of IPR for Entrepreneurs - **Encourages Innovation:** Promotes the creation of groundbreaking inventions (e.g., cancer cure medicines). - **Incentivizes Creators:** Provides motivation for inventors, authors, and creators. - **Control Over Work:** Allows creators to distribute their work only with permission, preventing income loss. - **Recognition:** Helps authors and creators gain acknowledgment for their contributions. ## Types of Intellectual Property ### Copyright - **Definition:** The right to "not copy"; protects original expressions of ideas. - **Automatic Protection:** Arises as soon as the work is created; registration is not mandatory but beneficial for enforcement. - **Protected Works:** - Literary: Novels, poems, computer programs. - Artistic: Paintings, sculptures, logos. - Dramatic: Screenplays, musical works, films. ### Trademark - **Definition:** A word, name, or symbol that identifies goods from a specific source. - **Purpose:** Distinguishes products in the market and protects company reputation - **Categories:** - **Conventional Trademark:** Words, logos, packaging. - **Non-Conventional Trademark:** Sound marks, smell, and taste. ### Geographical Indication (GI) - **Definition:** Identifies products originating from a specific geographical area, attributing quality or reputation to that origin. - **Examples:** - Nag Mircha. - Darjeeling Tea. - Kashmiri Pashmina. - **Consumer Awareness:** Increasing recognition of geographical origin and its associated characteristics. ### Patent - **Definition:** Protects scientific inventions (products and processes) showing technical advancement. - **Exclusive Rights:** Grants the right to exclude others from making, using, or selling the invention. - **Patentability Criteria:** - **Novelty:** Must be new and not previously known. - **Non-obviousness:** Should not be obvious to someone skilled in the field. - **Industrial Applicability:** Must be usable or manufacturable in industry. ## Summary of Patent and Small Scale Industries ### Patent Overview - **Patent Definition:** A patent can only be filed for an invention, not a discovery. - **Invention vs. Discovery:** - **Invention:** Creation of something novel (e.g., telephone by Alexander Graham Bell). - **Discovery:** Recognition of an existing phenomenon (e.g., gravity by Newton). - **Non-Patentable Items:** - Scientific principles and natural laws. - Abstract theories and frivolous inventions. - Methods of agriculture, treatment, and traditional knowledge. - Incremental inventions without increased efficacy. - Inventions related to atomic energy. - **Patent Purpose:** To encourage innovation in science. - **Patent Rights:** - Grants exclusive rights for 20 years. - Requires permission for commercial use through Licensing. - Creates a temporary monopoly; after expiration, the invention enters the public domain. ## Design Protection - **Design Definition:** Includes shape, pattern, and color arrangement applied to articles. - **Protection Duration:** Valid for 10 years, renewable for an additional 5 years. - **Post-Validity:** Once expired, the design enters the public domain. ## Plant Variety - **Definition:** Grouping of plants based on botanical characteristics, bred by farmers. - **Purpose:** - Conserves and improves plant genetic resources. - Promotes investment in R&D. - Recognizes farmers as cultivators and breeders. ## Semiconductor Integrated Circuits - **Definition:** Integral components of computer chips, containing transistors and circuitry on semiconductor material. - **Importance:** Protecting intellectual property is crucial for business innovation and growth. ## Role of Small Scale Industries (SSIs) in India - **Economic Contribution:** - Accounts for 95% of industrial units. - Contributes up to 40% of gross industrial value added. - Provides 45% of total exports. - **Employment:** Second largest employer after agriculture. - **Regional Development:** Utilizes local materials and indigenous technology. - **Entrepreneurship:** Offers low production costs, quick decision-making, and adaptability. ## Role of Small Business in Rural India - **Income Generation:** Provides multiple income sources in non-agricultural activities. - **Employment Opportunities:** Especially for traditional artisans and weaker sections of society. ## Key Terms - **Entrepreneur:** The individual (subject). - **Entrepreneurship:** The process (verb). - **Enterprise:** The creation (object). ## Exercises ### Very Short Answer Questions - Year of MSMED Act passage? - Definition of micro enterprise? - What is a cottage industry? - Meaning of Village and Khadi Industry? - Two characteristics of entrepreneurship development. ### Short Answer Questions - Definition of MSME? - Meaning of entrepreneurship? - Connection between MSME and entrepreneurship with two reasons. - Role of MSME in national development. - Parameters for measuring MSME size. - Meaning of Village and Khadi industries. - Three major problems faced by MSMEs. ### Long Answer Questions - Contribution of small scale industries to socio-economic development. - Role of small business in rural India. - Problems faced by small scale industries. - Government measures for finance and marketing in small scale sector. - Discussion on the importance of innovation in MSME. - Justification of creativity and innovation as key to MSME. ### Projects/Assignments - Profile a local MSME and prepare a questionnaire covering: - Growth prospects. - Use of local resources and skills. - Problems faced by the owner. - Marketing strategies. - Research GI tags for your state and prepare a chart of unique attributes, discussing regional development impacts in class.