BUSINESS, TRADE AND COMMERCE
Introduction
A business which operates on a small scale and required less capital, less labour and less machines is called small business.
The goods are produces on a small scale. This business is operated and managed by the owner of the business. In India, the
village and small Industries sector consists of both traditional Handlooms, Handicrafts, khadi and Village Industries. Modern
small Industries: Small scale industries and Power looms.
According to The Micro, Small and Medium Enterprise Development (MSMED) Act, 2006, a small-scale enterprise defined
as one where the investment in Plant and Machinery is more than Rs. 25 lakhs but does not exceed Rs. 5 crore.
The definition used by the Government of India to describe small Industries is based on the investment in plant and machinery.
It can be divided as follows:
Role of small scale industries in socio economic development of India
India is a developing country and in developing countries the scope of small industries are very wide. It is contributing to the
socio-economic development in the following ways:
1. Contribution in GDP: Small industries in India account for 95% of the industrial units in the country. They contribute almost 40%
of the gross industrial value added in the economy.
2. Contribution in Exports: 45% of the total exports from India come from small scale industries. Gems and jewellery, handicrafts,
sports goods, etc. are some items of exports from small scale sector.
3. Employment Generation: Small industries are the second largest employers of human resources after agriculture and generate
more number of employment opportunities per unit of capital invested compared to large industries.
4. Variety of Production: Small industries produce a wide variety of products ranging from mass consumption goods, readymade
garments, hosiery goods, stationery items, soaps and detergents, domestic utensils, leather, plastic and rubber goods, processed
foods and vegetables, wood and steel furniture, paints, varnishes, safety matches, etc. to the sophisticated items like electric and
electronic goods, drugs and pharmaceuticals, agricultural tools and equipment and several other engineering products. Handlooms,
Handicrafts and other products from traditional village industries add to this diverse production from SSIs.
5. Regional Balance: Small industries contribute significantly to the balanced development of the country as they produce simple products
using simple technologies and depend on locally available resources both material and labour and can be set up anywhere in the country.
6. Entrepreneurship Development: Small industries provide an opportunity for entrepreneurship development in the country. The latent
skills and talents of people can be transformed into business ideas with little capital investment and almost nil formalities to start a small
business.
7. Low Cost of Production: Small industries have the advantage of low cost of production as they use locally available resources which are less
expensive. Establishment and running costs of small industries are lower because of low overhead expenses.
8. Quick Decision Making: Due to the small size of the organizations, quick and timely decisions can be taken without consulting many
people. New business opportunities can therefore be captured at the right time.
9. Customized Production: Small industries can design the product as per the tastes/preferences/needs of individual customers. They can
provide customized production of even non-traditional products such as computers and other such products. They can produce according
to the needs of the customers as they use simple and flexible production techniques.
10. Personal Touch: Small industries have an inherent strength of adaptability and a personal touch and therefore maintain good personal
relations with both customers and employees. The government does not have to interfere in the functioning of a small scale unit.
Role of small business in rural India
1. Provides Employment in Rural Areas: Cottage and rural industries provide employment opportunities in the rural areas as these are
labour oriented enterprises. In Indian rural areas ample labour is available.
2. Improve Economic Condition: Small business provide multiple sources of income to the rural households. SSI improves economic
conditions and standard of living of people living in those Areas.
3. Prevent migration: Development of rural and village industries can also prevent migration of the rural population to urban areas in
search of employment.
4. Utilization of Local Resources: SSI use local resources e.g. coir, wood and other products.
5. Equitable distribution of rational Income: Small Scale Industries and cottage Industries ensure equitable distribution of national
income. This helps to reduce the gap between rich and the poor in the country.
6. Balanced Regional development: These enterprises are often dependent on local source of production. This way, industries do not
just limit themselves to a particular place but diversify. This helps in balanced regional development.
Problems of Small Business
1. Finance: There is limited finance availability with these enterprises that makes the day to day working difficult. Also raising finance
from banks is a challenge because of these enterprises' poor credit worthiness.
2. Raw materials: Availability and procurement of raw material is another major problem faced by the Small-Scale Industries. Their
bargaining power is relatively low due to the small quantity of purchases.
3. Managerial skills: Small Scale Industries are generally promoted and operated by single person, who may not possess all the managerial
skills required to run the business. They are also not in a position to afford professional managers.
4. Labour: Productivity per employee is relatively low and employee turnover is generally high due to low remuneration. It also faces lack of
specialization.
5. Marketing: In most of the cases, marketing is a weaker area of small organization’s; therefore, exploitation of middlemen is very more.
6. Quality: Many small businesses do not follow the desired standards of quality due to shortage of finance and resources.
7. Capacity utilization: Many of the small-scale Industries are operating below full capacity due to lack of marketing skills or demand. It
will cause to increase its operating cost and leads to sickness and closure of the business.
8. Technology: Most of the Small-Scale Industries use outdated technology, resulting in low productivity and uneconomical production.
9. Sickness: Due to many internal and external problems, most of the Small-Scale Industries are in the edge of sickness.
10. Global competitions: Most of the Small-Scale Industries face competitions not only from medium and large industries, but also from
Multinational Companies in the areas of quality, technology, finance, managerial skills etc.
MSME and Entrepreneurship Development
An entrepreneur is a person who undertakes a venture with some profit potential and involving a considerable amount of risk and
therefore, entrepreneurship is the venture undertaken by the entrepreneur. The most obvious example of entrepreneurship is the starting
of a new business.
Entrepreneurship can be of varying degrees and is not necessarily alike. It can be categorized into various subcategories, starting with small
and home businesses to multidimensional industries that were started from the ground level.
Characteristics of Entrepreneurship
1. Ability to take Risks: This is the first and foremost trait of entrepreneurship. Starting any business involves a considerable amount of
risk of failure. Therefore, the courage and capacity to take the said risk are essential for an entrepreneur.
2. Innovation: In a world, where almost everything has been done, innovation is a priceless gift to have. Innovation basically means
generating a new idea with which you can start a business and achieve a substantial amount of profits. Innovation can be in the form
of a product, i.e., launching a product that no one is selling in the market. It can also be in the form of process, i.e., doing the same work
in a more efficient and economical way. An easy example of product innovation could be the launching of touch screen cell phones when the
world was still using a keypad on cell phones.
3. Visionary: Every entrepreneur needs to be a visionary. Without a vision for the future of his venture, he or she would just be working
aimlessly without reaching any point of success.
4. Leadership: An entrepreneur has a vision. However, it takes a lot of resources to turn that vision into reality. One of these resources are
the people that the entrepreneur hires to perform various functions like production, supplying, accounting, etc.
5. A single person cannot perform all the tasks and therefore it is important to bring some more people to do it. This also makes leadership
very important as a leader provides the required direction to the efforts of the employees. Without proper leadership, everyone would be
working independently without achieving the desired results.
6. Open Minded: A good entrepreneur realizes that every situation can be a business opportunity. Thus, can be utilized for the benefit of the
organization. For example, Paytm realized the significance of demonetization and recognized that the need for online transactions was
more than ever during this time and so it utilized and grew massively during this period.
7. Confident and Well Informed: An entrepreneur needs to be confident about his ideas and skills. This confidence also inspires the confidence
of the people working for him as well as the other stakeholders involved in his business.
8. Flexible: An entrepreneur should be flexible and open to change according to the situation. To be on the top, a businessperson should be
equipped to embrace change in a product and service, as and when needed.
9. Know your Product: A company owner should know the product offerings and also be aware of the latest trend in the market. It is essential
to know if the available product or service meets the demands of the current market, or whether it is time to tweak it a little. Being able to
be accountable and then alter as needed is a vital part of entrepreneurship.
Startup India Scheme
Startup India Scheme is an initiative by the Government of India for generation of employment and wealth creation. The goal of Startup
India is the development and innovation of products and services and increasing the employment rate in India. Benefits of Startup India
Scheme is Simplification of Work, Finance support, Government tenders, Networking opportunities.
Aims and Objectives of Startup Scheme:
1. Trigger an entrepreneurial culture.
2. Create awareness about the charms of entrepreneurship among the youth.
3. Encourage more dynamic startups by motivating educated youth as a good career.
4. To support the startups in various stages such as pre-startup stage, nascent (beginning stage) and early post startup stage.
5. To promote underrepresented target groups such as women, back communities, scheduled castes, scheduled tribes etc.
Startup India Action Point:
1 Simplification and hand-holding: Formalities simplified and extended support to the startup ventures.
2. Startup India Hub: To create a single point contact for the entire startup system and to enable knowledge exchange and access to funding.
3. Legal support and fast tracking Patent Examination: To give protection for patents, trademark and designs of innovative startups through
SIPP (Startups Intellectual Property Protections).
4. Easy Exist: In the event of failure and wind up of operations, procedures are adopted to reallocate capital and resources towards more
productive avenues. Thus, the entrepreneurs can easily exit from the business if required.
5. Incubator setup: The government envisages setting up of incubators across the country in PPP mode (Private Public Partnership).
6. Tax exemption: The profit of startup initiatives are exempted from Income Tax for a period of 3 years.
Ways to fund startup:
1. Boot Strapping:Self-financing by the promoters from their personal savings and resources.
2. Crowd Funding: Pooling resources by a group of people for a common goal especially through internet platforms.
3. Angel Investment: Angel investors are the individuals with surplus cash who have keen interest to invest in startups. They also offer
mentoring or advice along with capital.
4. Venture Capital: Venture capitalists provide professionally managed funds to companies and startups that have huge potential. It is also
called risk capital as it is invested in new ventures. e.g., Accel Partners, Blume Ventures etc.
5. Business Incubators and Accelerators: Incubators provide funds for startups in the early stage of its business, whereas accelerators help
the startups to run or to take a giant leap in business. E.g., Angel Prime, Khosla Labs, Startup Village etc.
6. Microfinance and NBFCs: Microfinance is a category of financial services targeted at individuals and small business who lack access to
conventional banking or who have not qualified for a bank loan. e.g., BSS Microfinance P Ltd. , Asirvad Microfinance Pvt. Ltd. etc.
Intellectual Property Rights (IPR)
Intellectual Property is a category of property that includes intangible creations of human intellect. The most prominent types of intellectual
properties are trade secrets, copyrights, patents, trademarks etc. All inventions begin with an idea. Once the idea becomes an actual product,
that idea is treated as an intellectual property. The legal rights conferred on such
products (idea) are called IPR. Once it is allotted to a person by the Govt. authority, he/she can rent, give or sell it to others.
Intellectual property is divided into two categories: Industrial properties like trademarks, industrial designs etc. and copyrights which includes
literary and artistic works such as novels, poems, plays, films music, photographs, drawings, paintings, sculptures, architectural designs etc.
Importance of IPR:
1. Path-breaking inventions: It encourages new inventions in all segments. e.g., Cancer cure medicines.
2. Incentive: It incentivizes inventors, authors, creators etc. for their work.
3. Helps to prevent loss of income: It allows the inventor to sell the rights to third parties and thus he/she can generate income.
4. Recognition: It helps authors, creators etc. to get recognition for their work.
Types of Ips:
1. Copy Right: It is the right to “not copy” conferred upon the creators of literary, artistic, musical, sound recording, films etc.
2. Trademark: Any word, name, or symbol that gives an identity to goods or service made by an individual, company, organization etc.
3. Geographical Indication: GI is an identification which identifies agricultural, natural or manufactured products originating
from a definite geographical territory. Eg: Banaras Brocades, Kashmiri Pashmina Woolen Shawl, Nagpur Orange etc.
4. Patent: It is an exclusive right granted by the government to prevent others from making, using, offering for sale, selling or importing
the invention. For an invention to be patentable, it must be new, non-obvious (not easily discoverable) and having an industrial application.
5. Design: It includes shape, pattern etc. that is applied to any article. Eg: Design of a car, house, bottle etc. The term of protection of a design
is valid for 10 years, which can be renewed for further 5 years. After that it will come under public domain.
6. Plant Variety: It is a type of variety which is bred and developed by farmers. Eg: hybrid versions of potatoes, rice, pepper etc. This lead to the
growth of seed industry.
7. Semiconductor Integrated Circuits Layout Design: It is used to perform electronic circuitry function. e.g., Computer Chip.