MSME and Business Entrepreneurship - Class 11 Business Studies - Chapter 9 - Notes, NCERT Solutions & Extra Questions
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Extra Questions - MSME and Business Entrepreneurship | NCERT | Business Studies | Class 11
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Which year the MSMED Act passed?
The MSMED Act was passed and came into force w.e.f. October 2006.
What is the micro enterprise?
A micro enterprise is defined based on the investment in plant and machinery and turnover. A micro enterprise has an investment in plant and machinery that does not exceed 1 crore and a turnover that does not exceed 5 crores.
What is a cottage industry?
A cottage industry is also known as a rural industry or traditional industry. It is characterized by small-scale operations and typically involves the production of goods using traditional methods and local, often non-mechanized, equipment. Cottage industries do not have capital investment criteria like other small-scale industries and often operate out of homes or small workshops.
What is meant by Village and Khadi Industry?
Village and Khadi Industry refers to a segment within the MSME sector that includes industries located in rural areas producing goods and services with or without the use of power. These industries leverage local raw materials and traditional skills, contributing to the employment and economic development of rural areas. Khadi refers to a handwoven cloth from India, made usually from cotton, and the industries associated with its production involve both the spinning and weaving of the raw materials.
Give any two characteristics of entrepreneurship development.
Two characteristics of entrepreneurship development are:
Systematic Activity: Entrepreneurship is not random but a systematic, step-by-step activity that involves acquiring, learning, and developing skills, knowledge, and competencies through formal education, vocational training, observation, and work experience.
Innovation: Entrepreneurship involves innovation, which includes the introduction of new products, discovery of new markets, technological breakthroughs, and newer organizational forms to improve efficiency and effectiveness in business operations.
What is MSME?
MSME stands for Micro, Small, and Medium Enterprises. These enterprises contribute significantly to the economic and social development of a country, affecting various aspects such as employment, exports, and production. MSMEs are classified based on investment in plant and machinery and turnover, playing a crucial role in the industrialization by capitalizing on local skills and raw materials.
State the meaning of entrepreneurship?
Entrepreneurship refers to the process of setting up a new business or reviving an existing business, by any individual, group, or established company, to pursue new opportunities or address new markets. An entrepreneur is the person who takes the initiative, ideally to bring ideas, innovation, and new ways of doing business into a profitable venture.
MSME and Entrepreneurship are connected. Do you agree. Give two reasons.
Yes, MSME and entrepreneurship are closely connected:
Nurturing Innovation: MSMEs provide the structure and framework within which entrepreneurial activities can thrive. Entrepreneurs use these small to medium platforms to bring innovative products and services to market.
Economic Growth: Entrepreneurship stimulates economic growth by creating jobs and producing goods and services. MSMEs significantly contribute to the GDP and exports of a country, which is largely driven by entrepreneurial ventures.
State the role of MSME in development of a country?
The role of MSME in the development of a country includes:
Employment Generation: MSMEs are a major source of employment. They are labor-intensive and create substantial employment opportunities at comparatively low capital cost.
Inclusive Growth: They ensure equitable distribution of wealth and income, helping to reduce income inequalities and promoting balanced development across regions.
Export Contribution: MSMEs contribute significantly to the exports, thereby increasing the foreign exchange reserves and economic stability of a country.
What are the different parameters used to measure the size of MSME?
The size of MSMEs is generally measured using parameters such as:
Investment in Plant and Machinery: This includes the total financial investment made towards plant and machinery in the business.
Turnover: The total revenue generated by a business during a specific period.
State the meaning of Village and Khadi industries?
Village Industries are categorized as those industries that are located in rural areas, producing goods or rendering services with or without the use of power, where the fixed capital investment per head is specified by the government.
Khadi Industries involve the production of khadi, a hand-spun and hand-woven cloth, leveraging traditional skills and crafts. These industries are a subset of village industries in India.
State any three major problems faced by MSMEs?
Finance: MSMEs frequently struggle with the non-availability of adequate finance, limited access to capital markets, and high dependency on local financial resources.
Raw Materials: They often face issues with the procurement of raw materials including availability, quality, and cost fluctuations.
Marketing and Competition: MSMEs face tough competition from larger companies and multinationals. They often lack marketing expertise, leading to inadequate market reach and penetration.
How do small scale industries contribute to the socio-economic development of india? Discuss
Small scale industries (SSI) significantly contribute to the socio-economic development of India by bolstering employment and fostering economic growth. These industries are pivotal as they contribute about 40% of the gross industrial value added in India. SSIs are major employment generators; they are ranked as second largest employers after agriculture, providing jobs to millions, especially in rural areas. This sector aids in balancing regional disparities by promoting industrial activities across less developed areas, thus preventing mass urban migration. They also stimulate entrepreneurship and significantly contribute to exports, with around 45% of the total exports coming from this sector. Moreover, they often use local resources, promoting the utilization of domestic raw materials and reducing dependency on imports.
Describe the role of small business in rural India.
Small businesses play a pivotal role in rural India by fostering economic development and reducing rural-urban disparities. Firstly, they generate employment opportunities, which helps in curbing rural exodus to urban centers in search of jobs. Small enterprises utilize local resources and skills, thereby promoting local craftsmanship and traditional skills, preserving cultural heritage. They also contribute to the income of rural households, enhancing the standard of living and reducing poverty. Diversifying income sources, these businesses help stabilize rural economies, making them less dependent on agriculture, particularly important given the unpredictability of monsoon-dependent farming activities. Additionally, small businesses in rural areas facilitate the equitable distribution of income, supporting social cohesion and inclusive growth.
Discuss the problems faced by small scale industries.
Small scale industries face various challenges, often limiting their growth and efficiency:
- Finance: Access to adequate funds is restricted, as banks hesitate to lend without high collateral, impacting operations and expansion.
- Raw Materials: Procurement of quality raw materials is a struggle due to low bargaining power and lack of bulk-buying capacity, leading to higher costs and compromised quality.
- Managerial Skills: Limited by single-person management, small industries often lack expertise in multifunctional areas critical for growth, notably in marketing and financial management.
- Marketing: Effective marketing is weak due to reliance on intermediaries, leading to exploitation through low payments and delays, and poor market reach.
- Quality & Technology: Maintaining product quality and upgrading technology is challenging due to financial constraints, hindering competitiveness, particularly in global markets.
- Capacity Utilization: Inadequate demand leads to operation below capacity, increasing costs and risking sustainability.
- Global Competition: Exposure to international markets demands high standards not easily met by small-scale industries, pressing them significantly in terms of quality, innovation, and pricing.
What measures has the government taken to solve the problem of finance and marketing in the small scale sector?
The Government of India has implemented several measures to alleviate issues related to finance and marketing in the small scale sector:
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): Offers collateral-free loans to MSMEs, aiming to enhance access to financial support from banking institutions.
- MUDRA Loans under Pradhan Mantri MUDRA Yojana (PMMY): Provides loans to micro-business units to encourage self-employment and entrepreneurship without the need for collateral.
- Market Development Assistance Scheme: Supports MSMEs in marketing their products both domestically and internationally by funding participation in trade fairs and exhibitions.
- Public Procurement Policy: Mandates a minimum of 25% procurement from MSMEs by central ministries, departments, and PSUs to provide a stable market.
These initiatives are designed to address financial barriers and bolster the market presence of small-scale industries in India.
'Innovation is integral to MSME'. Discuss giving reasons to your answer.
Innovation is crucial for MSMAE survival and growth, as it allows these enterprises to stay competitive and relevant in rapidly changing markets. Innovations, whether in product development, processes, or business models, enable MSMEs to discover new markets, improve efficiency, and reduce costs. Importantly, innovation enhances product quality and variety, meeting diverse consumer demands and increasing satisfaction. Through innovative practices, MSMEs can also reach a wider customer base by leveraging digital technologies for marketing and distribution. Furthermore, innovation drives scalability, helping MSMEs grow beyond local boundaries. Overall, for MSMEs, continuous innovation is not just a strategy for expansion but a necessary approach for enduring industry challenges and seizing emerging opportunities.
'Creativity and Innovation is the key to MSME'. Justify the statement.
Creativity and innovation are pivotal in driving the growth and sustainability of MSMEs. These enterprises prosper on distinctive and original ideas, which give them a competitive edge, especially in a crowded market. Innovation leads to new products and services and improves processes, which can result in cost efficiency and enhanced productivity. Adaptability to changing market conditions is crucial, and innovation enables MSMEs to quickly pivot their strategies or offerings in response to shifts in consumer preferences or technological advancements. By fostering a culture of creativity, MSMEs can explore untapped markets, improve customer satisfaction, and ensure continual growth. Thus, creativity and innovation are not merely beneficial but essential for the survival and prosperity of MSMEs in a dynamic business environment.
You're absolutely right! Creativity and innovation are indeed vital for the growth and sustainability of Micro, Small, and Medium Enterprises (MSMEs). Let's break down the key points you mentioned:
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Distinctive and Original Ideas: MSMEs thrive on unique ideas that set them apart from larger competitors. These ideas can come in the form of new products, services, or novel approaches to solving problems.
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New Products and Services: Innovation drives the development of new offerings that can meet changing consumer demands or create entirely new markets.
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Improved Processes: By innovating their processes, MSMEs can achieve cost efficiencies and higher productivity, which contribute directly to their bottom line.
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Adaptability: The ability to adapt to changing market conditions is crucial. Innovation provides the tools necessary to pivot quickly in response to market shifts, whether they are due to consumer preferences or technological advancements.
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Customer Satisfaction: By continuously innovating, MSMEs can meet and exceed customer expectations, which is key to building and maintaining a loyal customer base.
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Exploration of Untapped Markets: Innovation often paves the way for discovering new markets that larger corporations may overlook.
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Continual Growth: A culture of creativity ensures that a business does not stagnate and continues to grow, keeping it competitive in a dynamic environment.
In essence, for MSMEs, fostering an innovative and creative culture is not just an option but a necessity to survive and thrive in today's ever-evolving business landscape.
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Understanding MSME and Business Entrepreneurship: A Class 11 Business Studies Overview
Introduction to MSME
Micro, Small, and Medium Enterprises (MSMEs) are the backbone of the Indian economy, contributing significantly to the country's GDP and exports. They are classified into various categories, and they span traditional to modern industries.
Types of MSMEs in India
- Micro Enterprises: Investment in plant and machinery up to ₹1 crore with a turnover not exceeding ₹5 crore.
- Small Enterprises: Investment in plant and machinery up to ₹10 crore with a turnover not exceeding ₹50 crore.
- Medium Enterprises: Investment in plant and machinery up to ₹50 crore with a turnover not exceeding ₹250 crore.
MSME Sub-sectors
MSME sub-sectors include handlooms, handicrafts, coir, sericulture, khadi and village industries, small-scale industries, and powerlooms.
Contribution of MSMEs to the Indian Economy
MSMEs are crucial for economic growth. They contribute approximately 29.7% of India's GDP and 49.66% of exports. They provide employment for nearly 60 million people through 28.5 million enterprises.
Regional Development and Value Chains
MSMEs aid in balanced regional development by using local raw materials and skills, hence preventing rural migration to urban areas. They act as ancillary units to large industries, forming an integral part of the value chain.
Legal Framework and Government Policies
The Government of India has implemented the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. This act provides a framework for MSME definition, credit, marketing, and technology upgradation.
Government Schemes and Initiatives
- Startup India: Aims to build a strong ecosystem fostering innovation and encouraging startups.
- MSME Conclave: Promotes technological upgradation and innovation within the MSME sector.
Challenges Faced by MSMEs
Despite their significance, MSMEs encounter numerous challenges:
Financial Constraints
MSMEs often face difficulties in accessing adequate finance, as they usually start with a small capital base. Banks require collateral security, which many small businesses cannot provide.
Procurement and Raw Material Issues
Small enterprises struggle with procuring quality raw materials at reasonable prices. Their low bargaining power and lack of storage facilities complicate bulk purchasing.
Managerial and Marketing Problems
MSMEs often lack managerial expertise and effective marketing strategies, making it difficult to compete with larger enterprises.
Quality Standards and Global Competition
Many MSMEs do not adhere to required quality standards, hindering their competitiveness in global markets.
Entrepreneurship and MSME Development
Entrepreneurship is about setting up one's own business, contributing significantly to the economy by generating employment and promoting innovation.
Characteristics of Entrepreneurship
- Systematic Activity: A step-by-step, purposeful activity that can be learned and developed.
- Lawful and Purposeful: Entrepreneurship focuses on lawful business activities aimed at creating value.
- Innovation: Entrepreneurs introduce new products, discover new markets, and implement better technologies.
- Organisation of Production: Mobilising resources to create a productive enterprise.
- Risk-taking: Entrepreneurs take calculated risks to achieve business success.
Case Study: Success Story of Romi Bags, Manipur
Khumbongmayum Dhanachandra Singh, the son of a poor tailor, founded Romi Bags in 1996 using leftover fabric to create unique purses. Through hard work and innovation, his business thrived, earning him a national award in 2007.
Importance of Intellectual Property Rights
Intellectual Property Rights (IPRs) encourage creativity and innovation, essential for MSME growth. They protect inventions, literary and artistic works, symbols, names, and designs used in business.
Types of Intellectual Property Rights
- Copyright: Protects literary, artistic, musical, and cinematic works.
- Trademark: Distinguishes goods and services of one entity from another.
- Patent: Provides exclusive rights to inventions demonstrating technical advancements.
- Design: Protects the aesthetic appearance of articles.
The Future of MSMEs in India
MSMEs have immense growth potential due to their adaptability and innovative capabilities. Government policies and strategic global partnerships can further enhance their contribution to the economy.
Emerging Trends and Opportunities
With the rise of digital platforms and globalisation, MSMEs can explore new markets and expand their reach. Emphasis on technological adoption and innovation can drive their future growth.
Policy Recommendations
To ensure sustainable growth, policies need to focus on easy access to finance, skill development, and innovation support for MSMEs.
Conclusion
MSMEs and entrepreneurship are vital to India's economic development. By fostering innovation, encouraging entrepreneurship, and overcoming challenges, MSMEs can drive the country towards socioeconomic progress and inclusive growth.
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