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NCERT Class 11 Business Studies Chapter 9 MSME and Business Entrepreneurship
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MSME and Business Entrepreneurship
Chapter: 9
| PART – ⅠⅠ |
| EXERCISES |
Very Short Answer Questions:
1. Which year the MSMED Act passed?
Ans: The MSMED act passed in 2006.
2. What is micro enterprise?
Ans: Micro-And Small enterprises refer to businesses that fall within the category of small and medium-sized enterprises.These super-small companies are generally defined as businesses that begin with minimal investment and have fewer than ten employees.
3. What is a cottage industry?
Ans: Cottage industries are also known as rural industries or traditional industries. They are not defined by capital investment criteria as in the case of other small scale industries.
4. What is meant by Village and Khadi Industry?
Ans: Khadi and Village Industries and Coir segment is another major contributor to the growth of the MSME. Many global companies are increasingly looking to Indian MSMEs for strategic partnerships of mutual benefit due to the innovative capabilities in the niche of low-cost manufacturing and local skills and capabilities.
5. Give any two characteristics of entrepreneurship development.
Ans: The two characteristics of entrepreneurship development are:
(i) Systematic Activity: Entrepreneurship is not a mysterious gift or charm and something that happens by chance It is a systematic step-by-step and purposeful activity.
(ii) Lawful and Purposeful Activity: The object of entrepreneurship is lawful business. It is important to take note of this as one may try to legitimise unlawful actions as entrepreneurship on the grounds that just as entrepreneurship entails risk, so do illicit businesses.
Short Answer Questions:
1. What is MSME?
Ans: The Micro, Small and Medium Enterprises (MSMEs) support industries as ancillary units, thereby contributing enormously to the overall industrial development of the country. Micro, Small and Medium Enterprises (MSME) contribute significantly to the development process and acts as a vital link in the industrialisation in terms of production, employment and exports for economic prosperity by widening entrepreneurial base and use of local raw materials and indigenous skills. MSME is based on the investment in plant and machinery and turnover.
2. State the meaning of entrepreneurship?
Ans: Entrepreneurship is the process of creating, developing, and managing a new business venture to generate profit. Entrepreneurship is the process of setting up one’s own business as distinct from pursuing any other economic activity, be it employment or practising some profession. The person who set-up his business is called an entrepreneur. The output of the process, that is, the business unit is called an enterprise.
3. MSME and Entrepreneurship are connected. Do you agree? Give two reasons.
Ans: Yes, MSME and Entrepreneurship are mostly connected. They encourage the growth of entrepreneurship as well as the upgrading of skills by establishing specialised training institutes. MSMEs foster entrepreneurship by providing a platform for individuals to start and grow their businesses with relatively low investment requirements. MSMEs offer funding assistance from banks and encourage entrepreneurship by establishing training institutes.
4. State the role of MSME in the development of a country?
Ans: It is interesting to note that entrepreneurship besides providing self-employment to the entrepreneur is responsible to a great extent for creation and expansion of opportunities for the other two economic activities, that is, employment and profession. And, in the process, entrepreneurship becomes crucial for the overall economic development of a nation.
Every country, whether developed or developing, needs entrepreneurs. Whereas, a developing country needs entrepreneurs to initiate the process of development, the developed one needs entrepreneurship to sustain it.
5. What are the different parameters used to measure the size of MSME?
Ans: Several parameters can be used to measure the size of MSME. These include the number of persons employed in business, capital invested in business, turnover of business, etc.
6. State the meaning of Village and Khadi industries?
Ans: The Khadi and Village Industries and Coir segment is another major contributor to the growth of the MSME. Many global companies are increasingly looking to Indian MSMEs for strategic partnerships of mutual benefit due to the innovative capabilities in the niche of low-cost manufacturing and local skills and capabilities.
Village industry has been defined as any industry located in a rural area which produces any goods, renders any service with or without the use of power and in which the fixed capital investment per head or artisan or worker is specified by the central government, from time to time.
7. State any three major problems faced by MSMEs?
Ans: In general the small businesses are faced with the following problems:
(i) Finance: One of the severe problems faced by MSME is that of non-availability of adequate finance to carry out its operations. Generally these businesses begin with a small capital base. Many of the units in the small sector lack the credit worthiness required to raise as capital from the capital markets.
(ii) Raw materials: Another major problem of MSME is the procurement of raw materials. If the required materials are not available, they have to compromise on the quality or have to pay a high price to get good quality materials. Their bargaining power is relatively low due to the small quantity of purchases made by them.
(iii) Managerial skills: These businesses are generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business. Many of the small business entrepreneurs possess sound technical knowledge but are less successful in marketing the output.
Long Answer Questions:
1. How do small scale industries contribute to the socio-economic development of india? Discuss
Ans: Small Scale Industries play a very important role in the socio-economic development of the country. These industries account for 95 per cent of industrial units, contributing up to 40 per cent of the gross industrial value added and 45 per cent of the total exports. SSIs are the second largest employers of human resources, after agriculture and produce a variety of products for the economy. These units contribute to the balanced regional development of the country by using locally available material and indigenous technology. These provide ample scope for entrepreneurship; enjoy the advantage of low cost of production; quick decision making, and have quick adaptability and are best suited to customised production.
The emergence of a large service sector has necessitated the government to include other enterprises covering both the Small Scale Industries (SSI) sector and related service entities under the same umbrella. Expansion of the small enterprises was taking place growing into medium enterprises and they were required to adopt higher levels of technologies in order to remain competitive in a fast globalising world. Thus, it was necessary to address the concerns of such enterprises as micro, small and medium and provide them with a single legal framework.
2. Describe the role of small business in rural India.
Ans: MSME in India enjoy a distinct position in view of their contribution to the socio-economic development of the country. The emphasis on MSME has always been an integral part of India’s industrial strategy.
In fact, promotion of MSME and rural industrialisation has been considered by the Government of India as a powerful instrument for realising the twin objectives of ‘accelerated industrial growth and creating additional productive employment potential in rural and backward areas.’ The following points highlight their contribution.
(i) The contribution of these industries to the balanced regional development of our country is noteworthy. Small industries in India account for 95 per cent of the industrial units in the country.
(ii) MSME are the second largest employers of human resources, after agriculture. They generate more number of employment opportunities per unit of capital invested compared to large industries.
(iii) MSME in our country supply an enormous variety of products which include 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.
(iv) MSME which produces simple productusing simple technologies and depends on locally available resources both material and labour can be set up anywhere in the country. Since they can be widely spread without any locational constraints, the benefits of industrialisation can be reaped by every region. They, thus, contribute significantly to the balanced development of the country.
(v) MSME provide ample opportunity for entrepreneurship. The latent skills and talents of people can be channelled into business ideas which can be converted into reality with little capital investment and almost nil formalities to start a small business.
(vi) MSME also enjoy the advantage of low cost of production. Locally available resources are less expensive. Establishment and running costs of small industries are on the lower side because of low overhead expenses. Infact, the low cost of production which small industries enjoy is their competitive strength.
(vii) Due to the small size of the organisations, quick and timely decisions can be taken without consulting many people as it happens in large sized organisations. New business opportunities can be captured at the right time.
3. Discuss the problems faced by small scale industries.
Ans: In general the small businesses are faced with the following problems:
(i) Finance: One of the severe problems faced by MSME is that of non-availability of adequate finance to carry out its operations. Generally these businesses begin with a small capital base. Many of the units in the small sector lack the credit worthiness required to raise as capital from the capital markets. As a result, they heavily depend on local financial resources and are frequently the victims of exploitation by the money lenders.
(ii) Raw materials: Another major problem of MSME is the procurement of raw materials. If the required materials are not available, they have to compromise on the quality or have to pay a high price to get good quality materials. Their bargaining power is relatively low due to the small quantity of purchases made by them. Also, they cannot afford to take the risk of buying in bulk as they have no facilities to store the materials. Because of general scarcity of metals, chemicals and extractive raw materials in the economy, the small scale sector suffers the most.
(iii) Managerial skills: These businesses are generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business. Many of the small business entrepreneurs possess sound technical knowledge but are less successful in marketing the output. Moreover, they may not find enough time to take care of all functional activities. At the same time they are not in a position to afford professional managers.
(iv) Marketing: Marketing is one of the most important activities as it generates revenue. Effective marketing of goods requires a thorough understanding of the customer’s needs and requirements. In most cases, marketing is a weaker area of small organisations. These organisations have, therefore, to depend excessively on middlemen, who at times exploit them by paying low price and delayed payments.
(v) Quality: Many MSMEs do not adhere to desired standards of quality. Instead they concentrate on cutting the cost and keeping the prices low. They do not have adequate resources to invest in quality research and maintain the standards of the industry, nor do they have the expertise to upgrade technology. In fact maintaining quality is their weakest point, when competing in global markets.
(vi) Capacity utilisation: Due to lack of marketing skills or lack of demand, many firms have to operate below full capacity due to which their operating costs tend to increase. Gradually this leads to sickness and closure of the business.
(vii) Global competition: Apart from the problems stated above MSME are not without fears, especially in the present context of globalisation. These enterprises face competition not only from medium and large industries, but also from multinational companies which are giants in terms of their size and business volumes.
4. What measures has the government taken to solve the problem of finance and marketing in the small scale sector?
Ans: The following measures government had taken to solve the problem of finance and marketing in the small scale sector:
(i) Collateral-Free Loans: A collateral-free business loan is a financing option where borrowers do not need to pledge assets as security.Collateral acts as security for the loan, which is why these types of loans are sometimes called secured business loans.
Public Collateral Free Loan Schemes are:
(a) MUDRA Loan under PMMY.
(b) Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
(c) Stand-Up India Scheme.
(d) Market Development Assistance Scheme for MSMEs.
(e) Bank Credit Facilitation Scheme.
(d) Coir Udyami Yojana.
(ii) Subsidies for New Businesses: Credit linked subsidy program for setting up new micro-enterprise in the non-farm sector. Margin Money subsidy ranges from 15% to 35% of project cost for projects up to Rs. 50 Lakh in Manufacturing sector and Rs. 20 Lakh in the Service sector. Subsidies are provided by the government to specific industries with the aim of keeping the prices of products and services low for people to be able to afford them and also to encourage production and consumption.
(iii) MUDRA Loans: MUDRA Yojana is aimed at supporting all kinds of income generating activities under manufacturing, processing, trading and service sectors. The MUDRA loans are provided for income generating small business activity in manufacturing, processing, service sector or trading.
(iv) Funding by SIDBI: SIDBI, an Indian financial institution, provides various financial facilities to MSMEs. It offers direct and indirect finance, microfinance, and functions like refinancing loans, bill discounting, and promoting employment.Indirect financing through refinancing the banks and/ or financial institutions for onward lending to the MSMEs.
(v) Help in Trade Fairs: Attending a trade show can provide direct sales opportunities, networking, industry insights, media opportunities and a platform for expanding your business relationships.hey bring together thousands of international buyers and sellers in one place in a short space of time.
(vi) NSIC Marketing Support: NSIC facilitates financing for marketing activities such as Internal Marketing, Exports and Bill Discounting. Large enterprises have enough resources at their command to hire manpower to take care of marketing of their products and services.
(vii) Selling on GeM Platform: Sellers gain access to a wide range of government buyers.GeM aims to enhance transparency, efficiency and speed in public procurement. To sell gemstones online, use an ecommerce platform that is simple to use, secure, and flexible.
(viii) Cluster Development: Cluster development is the economic development of business clusters. Clustering is used to identify groups of similar objects in datasets with two or more variable quantities. In practice, this data may be collected from marketing, biomedical, or geospatial databases, among many other places.
5. ‘Innovation is integral to MSME’. Discuss giving reasons to your answer.
Ans: MSMEs help in the mobilisation of local resources, like entrepreneurship skills or small savings or even some natural resources around rural areas. Entrepreneurship and innovation are recognized characteristics of SMEs. Namely, to ensure growth, development and competitive market advantage, SMEs must be innovative and creative. The objective of MSMEs is to primarily engage in manufacturing, processing, production, and preservation of goods and commodities. MSME include those dealing with manufacturing such as leather goods, farming equipment, bicycle components, engineering among others.
(i) Enhances Competitiveness: MSMEs operate in a highly competitive environment, and innovation is critical for gaining a competitive advantage.Innovation can help MSMEs improve their competitiveness by adopting new technologies to improve quality standards and processes.
(ii) Adapting to Market Trends: MSMEs help in the mobilisation of local resources, like entrepreneurship skills or small savings or even some natural resources around rural areas.It helps businesses understand where the market is heading, find new opportunities and avoid risks.
(iii) Better Use of Resources: Resource availability should be visible in real-time to make such a decision. An ideal resource allocation tool will help make this decision effectively in real-time. A small business may introduce new software to automate manual tasks – freeing up resources to invest in other areas of the business, such as product innovation, marketing or research.
(iv) Opportunities for Growth: Innovation can help you save time and money. It’s also key to your business developing a competitive advantage and creating a culture of innovative thinking and problem solving.MSMEs can tap into new markets and increase their customer base, leading to expansion and business growth.
(v) Sustainability: Sustainable innovation is a business strategy that aims to improve a business’s environmental, social, and economic impact.It might involve developing new products, services, technologies, or processes that will change the way the business runs and contribute to the long-term well-being of the planet.
(vi) Technology Adoption: Technology adoption is the process by which people or organisations accept and use new technologies. It involves learning and adapting to new technologies. One of the most significant benefits of technology for small businesses is increased operational efficiency.
6. ‘Creativity and Innovation is the key to MSME’. Justify the statement.
Ans: The statement ‘Creativity and innovation is the key to MSMEs’ is justified because creativity and innovation are essential for the growth and success of MSMEs. Technology-based startups are often regarded as high-risk, high-growth businesses, and they require an empowering environment, such as BIs, to improve their chances of success.Creativity and innovation are the heart of the spirit of enterprise which means both are play a vital role to strive the successful and viable enterprise.Local resources can remain unutilized if the number of industries and businesses around them is low. MSMEs help in the mobilisation of local resources, like entrepreneurship skills or small savings or even some natural resources around rural areas.Creative individuals can solve problems in unique ways. They aren’t afraid of new ideas. They turn challenges into chances to grow. This skill helps businesses find and use new trends, boosting their adaptability and agility. Innovation is the process of turning a new concept into commercial success or widespread use. Invention is the creation of a new idea or concept. Creativity is the act of turning new and imaginative ideas into reality. This eagerness to solve problems can lead to new ways to accomplish tasks and adds to a more efficiently run business. A society that has lost touch with its creative side is an imprisoned society, in that generations of people may be closed minded. It broadens our perspectives and can help us overcome prejudices. Creativity allows us to view and solve problems more openly and with innovation. Creativity opens the mind. This can enhance productivity, create new markets, and improve competitiveness on a global scale. Creative innovations lead to more efficient processes and improved productivity.
