SESSION 1(a)

A small business may be defined in terms of its size. Size limit depends on criteria namely: The number of persons employees. The amount of capital-invested. The value of annual turnover. Different countries uses different combination of criteria or a single criteria. In India, amount of capital investment in plant and machinery is used to identify the small scale enterprises.

Small scale industry. Ancillary small Industrial Units. Export Oriented units. Small Scale Industries Owned and Managed by Women Entrepreneurs. Tiny industrial Units. Micro Business Enterprises. Small Scale Service and Business (Industry Related) Enterprises. Village Industries. Cottage Industries.

Small scale industry:Investment in plant and machinery does not exceed Rupees 5 crores. Limit enhanced by the MSMED Act, 2006.

Ancillary small Industrial Units:Investment limit is Rupees 5 crores. It must sell not less than 50 % of its output to other industrial undertakings.

Export Oriented units:Investment limit is Rupees 5 crores. It must export at least 50% of its output by the end of three years from the date of commencement of production.

Small Scale Industries Owned and Managed by Women Entrepreneurs:

Promoted by Women Entrepreneurs. She individually/jointly have share capital of not less than 51%. Investment not more than 25 lakhs.
Investment not more than 25 lakhs.

Tiny industrial Units:

Micro Business Enterprises:Small Scale Service and Business (Industry Related) Enterprises:

Investment in fixed assets of pant and machinery excluding land and building does not exceed Rupees 10 lakhs.

Village Industries:Located in rural area, which produces goods, renders any service with or without power. Investment not exceeding Rs. 50,000 per head.

Cottage Industries:

Rural or traditional industries. Not defined by capital investment criteria as in the case of other small scale industries. Organized by individuals, with private resources. Use family labor and locally available talents. Simple equipment. Small capital investment. Produce simple products.

Closely-held ownership: Capital supplied by individual or small group. So managed by individual or partnership firm or private limited company. Personal Character :- Identified with its owners. Local area of operation: Locally only with less capital and market facilities. Location: Near centers of consumption/source of raw materials. Predominance of labor: Labor intensive. Less capital investment in fixed assets. Unorganized labor: Labor intensive but employ less number of workers. So unorganized. Do not form trade unions.

Manufacturing. Wholesaling. Retailing. Services.

Development of Entrepreneurship. Introduction of new products. Limited demand. Flexibility. Personalized service. Relations with employees. Support to large enterprise.

Employment Variety of products. Balanced regional development. Use of Entrepreneurial skills and latent resources. Provision of services. Wide dispersal of income. Economical operations. Customized products. Personal touch. Support to large scale business units.

Employment. Socio-economic objectives. Accelerated industrial growth. Checking of migration of people to urban areas. Mobilization of Entrepreneurial skills. Cultural heritage.

Shortage of raw materials and power. Inadequate capital. Old technology. Lack of trained personnel. Low labor productivity. Low quality. Difficulties in marketing. Lack of professional management. Industrial sickness. Global competition.

To carry industrialization to rural areas. Small business are labor oriented and less capital utilization so generate more employment. Better utilization of local resources and skills. Raise the standard of living of people in rural area. Increase the per capita income and consumption of people. Also helps in equitable distribution of income among people. To maintain the traditional skills. Faces problems with employing modern technology and qualified managerial and technical personnel and funds.

Measures categorized into three:Protective measures. Promotional measures. Institutional measures.

Protective measures:Reservation of items for the exclusive production of small scale industries. Large scale enterprises cannot undertake the production of items in reservation list. Giving concessions(excise duty, sales tax etc.) to compete with big industries. Preference by Government in the purchase of items produced by small scale industries.

Promotional measures:

Supply of scarce raw materials at reasonable prices and setting up of raw materials depots for quick supply of materials. Setting up of common testing facilities center for a group of small scale units in a particular region. Assistance by State Small Scale Industries Development Corporations in securing orders from government departments. Preference of land allocation and power connection and also provision of power at concessional rates. Setting up of industrial estates and sheds on instalment basis. Technical assistance by central small industries organization in modernizing the method of production. Financial assistance through National Small Industries Corporation and State Financial Corporation, SIDBI-Small Industries Development Bank of India.

Institutional measures:Small Scale Industry Development Organization (SSIDO) to provide training and other services. National Small industries Corporation (NSIC) to supply machinery on hire purchase basis, arrange scarce raw materials and provide marketing facilities. District Industry Centers in all districts to serve as the local point of development of small and cottage industries. Khadi and Village Industries Commission (KVIC) for encouraging production and marketing of khadi and handicraft items. All India boards such as Central Silk Board and Coir Board to provide technical, financial and marketing facilities. SIDF and SIDBI provide financial assistance. Funds available to meet fixed and working capital requirements and updating technology. Industrial estates and parks (about 600) in semi-urban and rural areas to provide infrastructure.

Central Government issued a separate policy on August 6, 1991. Features:

Adequate finance. Recognition of tiny and service units. Improvements in loan procedures. Technological advancement. Export development centre. Marketing.

Micro, Small and Medium Enterprises Development Act enacted in 2006. 1st ever legal framework for enterprises. Provisions:

Establishment of funds for promotion, development & enhancement of competitiveness of enterprises. Notification of schemes/programmes for the purpose. Progressive credit policies and practices. Preferences in Government procurements to products and services of micro and small enterprises. Effective mechanism for mitigating problems of delayed payments to micro and small enterprises. Simplification of process of closure of business by all the three categories of enterprises.

Critically examine the latest performance of micro and small enterprises (MSES) in India (contribution to industrial growth, employment generation, exports, GDP)?

Entrepreneurship is the process that involves all actions an entrepreneur undertakes to establish an enterprise to give reality to his business ideas. It is a creative & innovative response to the environment. Entrepreneurship is associated with functions like:

Perceiving opportunities for profitable investments. Initiative in establishing a business. Bearer of risk and uncertainties. Introduction of innovations. Provision of capital. Co-ordination of different factors of production.

Entrepreneurship can be defined as a systematic innovation which consists of the purposeful and organized search for changes, & a systematic analysis of the opportunities such change might offer for economic and social transformation.

Entrepreneur is an individual who undertakes the formation of an organization for commercial purposes by recognizing the potential demand for goods and services and thereby acts as an economic agent and transforms demand and supply. Entrepreneur is the co-ordinator and organizer of resources to design a business enterprise. Entrepreneur-a risk taker, a resource assembler, an organization builder, an innovator and so on.

Entrepreneur is used to describe the people who establish & manage their own business. The process involved is called entrepreneurship. Entrepreneurship is an abstraction whereas entrepreneurs are living people. Entrepreneurship is the outcome of complex socioeconomic, psychological & other factors. Entrepreneur is the key individual central to entrepreneurship who makes things happen. Entrepreneur - actor, entrepreneurship - act. Entrepreneurship is the effective way of bridging the gap between scientific innovations & the market place by creating new enterprises. An entrepreneur is the catalyst who brings about this change.

Economic activity. Creative response to environment. Purposeful activity. Dynamic process. Risk element. Creator of organization. Gap filling function. Optimum use of resources.

What is the need Entrepreneurship ?

and

significance

of

Scouting of Entrepreneurial opportunities: Entrepreneur senses the opportunity much faster than normal persons. The competencies which an entrepreneur should have in sensing the opportunities are as follows:

Ability to sense and evaluate the enterprise opportunity. Ability to assess the strength of the opportunity. Ability to distinguish between the real and the perceived value of the opportunity. Ability to see the risks and expected returns therefrom. Ability to estimate the differential advantage of the enterprise in the competitive environment.

Generation of business idea: Business idea arises from an opportunity. It originates from real demand for any product or service that an entrepreneur should have a keen and open mind to look for opportunities and generate business idea.

The idea should enable to solve a current problem in the market. Products may be available but do not meet demand fully or in satisfactory manner or an existing product is used in combination with another, which is not available. Idea should enable the use of locally available raw materials for product and service. Idea should ensure making products that have demand, but are not freely available in the market. God idea is to start with a product that could be sold.

Converting the idea into reality: Entrepreneur takes steps to convert the feasible idea into reality. So he has to proceed for:

Gathering relevant information & expertise related to tools & techniques required to design the idea, product or service. Acquiring necessary skills to handle the idea, product or service. Studying the socio-economic environment where the idea, product or service is marketed. Arranging human, physical and other resources for putting the idea into reality.

Arranging Resources: Identification & assessment of various resources that are put into the system which have a bearing on the quality, quantity, cost and continuity of the product or the service being offered. Resources include:

Human resources. Materials. Money or capital. Machines. Technology.

Supply of capital: Some entrepreneurs starts business enterprises with their own financial resources. So they supply initial capital and undertake business risks. Technocrat entrepreneur approach financial institutions to raise risk capital for their ventures or enter into partnership with those who can contribute capital to the business.

Establishment of enterprise: Prime activity of the entrepreneur. The task of establishing an enterprise calls for mobilization of various resources. This need an initial investment in the fixed assets. Also entrepreneur have to seek government permission and clearance from various agencies, formalize several ideas into action. He has to exhibit keen acumen, sharp intellect, patience and interpersonal skills while establishing the enterprise.

Managing the enterprise: The entrepreneur has also to perform the role of a manager to manage the enterprise effectively and efficiently. Managing involves decision-making, planning, organizing, staffing, directing and controlling. Performance of these functions leads to:

Meeting of production schedule in time. Ensuring quality standards. Economy is the use of various resources. Adequate rate of returns on investment. Control of various activities.

Growth and development: An entrepreneur cannot afford to remain at his starting point. He has to look for growth potential of his products and services. He has to pursue higher goals and expand his market. He has to watch for activities of the competitor and formulate appropriate strategies of growth. It is only by the implementation of such strategies that the entrepreneur can ensure the growth of his business.

Innovation: Try to develop new technology, products and markets. Innovation implies doing things in new ways or doing new things. It involves introduction of new techniques, new goods and services, developing new markets etc. He uses his creative faculties to do new things and exploit opportunities in the market. He does not believe in status quo, he wants change.

Risk-taking : Entrepreneur assumes business risks and is prepared for the losses that may arise because of unforeseen contingencies in future. The willingness to take risks allow him to take initiative in doing new things or trying new methods of production. This helps in satisfying his achievement needs. Some risks are:

Production risks:- Losses occur by breakdown of machinery, poor weather, inefficient labor, use of faulty materials and tools or improper quality control. Market risks:- Manager may misjudge the wants of consumers by manufacturing goods which can be sold only at a loss. Loss due to bad debts, loss by advertising in improper media, loss through selection of improper trade channels etc.

Financial risks:- Reduction in sale may reduce the cash flow thereby preventing repayment of debts and resulting in bankruptcy. The business may not be able to raise funds required to meet its working capital needs and the financial reputation of the firms assets and earning may be jeopardized. Social risks:- Strikes, riots, civil commotion, political rallies etc which resist business activity and cause loss. Unintertional acts:- These cause loss to others. These may result in legal liability to others. Compensation to be paid under the Workmens Compensation Act is also an important risk. There is risk of loss of firms assets and earning power through destruction of its property by fire, windstorm or other events.

Promotion :Earlier an entrepreneur undertakes the risk of setting up a small enterprise as a sole proprietor. Now a days many entrepreneurs assumed the role of promoters of large joint stock companies. These promoters conceive the business ideas, conduct feasibility studies, take steps to get the company registered and raise capital for the company from the public and other sources. Thus, the persons who starts new basis as a role proprietary or partnership firm are known as entrepreneurs. But those connected with the incorporation of a company are often known as promoters. The promoters complete all legal formalities to get the company registered and also raise capital from the public.

Decision making : Entrepreneur is the major decision maker. He take the decisions to :

Launch an enterprise for the production, purchase and sale of goods and services. Assemble various types of resources like capital, human resources, materials, machines etc. Raise capital from various sources. Engage human resources to work for the enterprise. Design the production system o be followed by the enterprise. Procure raw materials, machines etc. from different suppliers. Distribute the products through various channels of distribution.

Business planning: For converting the idea into reality, an entrepreneur has to develop a business plan. It is a route map for the follow up of the project. It contains:

Name, address, history and details of entrepreneur. Brief summary of project. Input such as land, building, location, plant and machinery, water, materials, power etc. Financial aspects-cost of fixes assets, working capital, sources of finance, assets and liabilities. Cost of production and marketability. Total income, operative net profit etc. Technology feasibility, licensing regulations, foreign exchange requirements etc.

Information regarding marketing, present demand, new market likely to be available, foreign market, competition, marketing strategies, availability of substitutes, etc. Importance of project to national economy, availability of government support etc.

 Leadership:-

As a leader, the entrepreneur plans, organizes, directs and controls the activities of the business. While leading the workers, he coordinates their operations and motivates them for higher productivity. When the size of business grows considerably, the entrepreneur can employ professional managers for effective management of business. Organization building: Organize human resources for the efficient utilization of capital, machines, materials and other resources, use leadership quality to build a team, to accomplish desired results. With his skills, he builds an enterprise from scratch, nurtures it and makes it grow.

Innovating entrepreneurs: He introduces something new into the economy or employs a new technique of production, opens a new market, exploits a new source of raw materials and reorganizes the whole enterprise. Usually they flourish in developed economies because of open competition and less government controls, good resources for experimentation and innovation.

Adoptive or imitative entrepreneur: Found in underdeveloped countries. They adopt successful innovations of others. They face less risk. They may make some changes in the innovations made by the innovative entrepreneurs to suit the needs of the underdeveloped countries. Imitative entrepreneurs are not creative but adoptive. They are also important. Because they do objective innovation-ability to do things which have not been done before by the particular industrialist but the problem may have solved.

Fabian entrepreneur: These entrepreneurs neither fall in innovate nor in adaptive entrepreneur category. They are cautious people as they are rigid and fundamental in approach. They follow footstep of their successors. They are lazy and shy and lack the will to adopt new techniques and methods. Their dealings are determined by customs, religion, traditions and past practices. They avoid risks. They initiate change only when it becomes clear that they cannot survive without doing so.

Drone entrepreneur: These entrepreneurs are characterized by their resistance to adopt and use opportunities to make changes in their products and techniques of production. They stick to conventional ideas and products. They may suffer loss but they do not change. They follow traditional way and resist change. When their product loses marketability and their operations become uneconomical, they are pushed out of the market. They are more rigid. They are laggards. They close down their business but dont accept changes.

Intrapreneur works as an employee of the business. He does not raise any capital. He is semi-independent. He does not bear any risk of business. No guarantee of payment required to be given by the intrapreneur. He operates from within the organization. He is bound by organizational norms and rules.

Manager only runs an existing unit. He is an employee of the organization. He cannot operate independently. He take less risks of business. He is less tolerant to uncertainty. He may not be an innovator. He deals with dayto-day affairs of a going concern. He is motivated by rewards or incentives. His salary cannot be negative. He may not be receptive to change.

What are the driving forces or factors favoring Entrepreneurship ? What are the causes of slow growth of Entrepreneurship ?