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MSME AND BUSINESS ENTREPRENEURSHIP209(v) MSME provide ample opportunityfor entrepreneurship. The latentskills and talents of people canbe channelled into business ideaswhich can be converted into realitywith little capital investment andalmost nil formalities to start asmall business.(vi) MSME also enjoy the advantageof low cost of production. Locallyavailable resources are lessexpensive. Establishment andrunning costs of small industriesare on the lower side because oflow overhead expenses. Infact,the low cost of production whichsmall industries enjoy is theircompetitive strength.(vii) Due to the small size of theorganisations, quick andtimely decisions can be takenwithout consulting many peopleas it happens in large sizedorganisations. New businessopportunities can be captured atthe right time.9.5 Problems Associated With MSMEThe potential of MSME is often notrealised fully, because of severalproblems related to size and operations.We shall now examine some of themajor problems that small businesseswhether in urban or in rural areasare encountering in their day-to-dayfunctioning.MSMEs are at a distinctdisadvantage as compared to largescaleindustries. The scale of operations,availability of finance, ability to usemodern technology, procurement ofraw materials are some of these areas.This gives rise to several problems.The problems majorly includeremote location with less developedinfrastructural facilities, lack ofmanagerial talent, poor quality,traditional technology and inadequateavailability of finance. The problemsof exporting small scale units includelack of adequate data on foreignmarkets, lack of market intelligence,exchange rate fluctuations, qualitystandards, and pre-shipment finance.In general the small businesses arefaced with the following problems:(i) Finance: One of the severeproblems faced by MSME is that ofnon-availability of adequate financeto carry out its operations. Generallythese businesses begin with a smallcapital base. Many of the units in thesmall sector lack the credit worthinessrequired to raise as capital from thecapital markets. As a result, theyheavily depend on local financialresources and are frequently thevictims of exploitation by the moneylenders. These units frequently sufferfrom lack of adequate working capital,either due to delayed payment of duesto them or locking up of their capital inunsold stocks. Banks also do not lendmoney without adequate collateralsecurity or guarantees and marginmoney, which many of them are notin a position to provide.(ii) Raw materials: Another majorproblem of MSME is the procurementof raw materials. If the required2021-22Chapter 9.indd 20913-01-2021 09:43:19

210BUSINESS  STUDIESmaterials are not available, they haveto compromise on the quality or haveto pay a high price to get good qualitymaterials. Their bargaining power isrelatively low due to the small quantityof purchases made by them. Also, theycannot afford to take the risk of buyingin bulk as they have no facilitiesto store the materials. Because ofgeneral scarcity of metals, chemicalsand extractive raw materials in theeconomy, the small scale sector suffersthe most. This also means a waste ofproduction capacity for the economyand loss of further units.(iii) Managerial skills: Thesebusinesses are generally promoted andoperated by a single person, who maynot possess all the managerial skillsrequired to run the business. Manyof the small business entrepreneurspossess sound technical knowledgebut are less successful in marketingthe output. Moreover, they may notfind enough time to take care of allfunctional activities. At the same timethey are not in a position to affordprofessional managers.(iv) Marketing: Marketing is oneof the most important activitiesas it generates revenue. Effectivemarketing of goods requires a thoroughunderstanding of the customer’s needsand requirements. In most cases,marketing is a weaker area of smallorganisations. These organisationshave, therefore, to depend excessivelyon middlemen, who at times exploitthem by paying low price and delayedpayments. Further, direct marketingmay not be feasible for small businessfirms as they lack the necessaryinfrastructure.(v) Quality: Many MSMEs do notadhere to desired standards of quality.Instead they concentrate on cutting thecost and keeping the prices low. Theydo not have adequate resources toinvest in quality research and maintainthe standards of the industry, nor dothey have the expertise to upgradetechnology. In fact maintaining qualityis their weakest point, when competingin global markets.(vi) Capacity utilisation: Due to lackof marketing skills or lack of demand,many firms have to operate below fullcapacity due to which their operatingcosts tend to increase. Gradually thisleads to sickness and closure of thebusiness.(vii) Global competition: Apart fromthe problems stated above MSME arenot without fears, especially in thepresent context of globalisation. Theseenterprises face competition is not onlyfrom medium and large industries, butalso from multinational companieswhich are giants in terms of their sizeand business volumes.9.7 MSME and EntrepreneurshipDevelopmentEntrepreneurship is the process ofsetting up one’s own business asdistinct from pursuing any othereconomic activity, be it employmentor practising some profession. The2021-22Chapter 9.indd 21013-01-2021 09:43:19

MSME AND BUSINESS ENTREPRENEURSHIP211person who set-up his business iscalled an entrepreneur. The output ofthe process, that is, the business unitis called an enterprise. It is interestingto note that entrepreneurshipbesides providing self-employmentto the entrepreneur is responsibleto a great extent for creation andexpansion of opportunities for theother two economic activities, thatis, employment and profession. And,in the process, entrepreneurshipbecomes crucial for overall economicdevelopment of a nation.Every country, whether developedor developing, needs entrepreneurs.Whereas, a developing country needsentrepreneurs to initiate the processof development, the developed oneneeds entrepreneurship to sustainit. In the present Indian context,where on the one hand, employmentopportunities in public sector andlarge-scale sector are shrinking, andon the other, vast opportunities arisingfrom globalisation are waiting to beexploited; entrepreneurship can reallytake India to the heights of becoming asuper economic power. Thus, the needfor entrepreneurship arises from thefunctions the entrepreneurs performin relation to the process of economicdevelopment and in relation to thebusiness enterprise.The following are the characteristicsof entrepreneurship:(i) S y s t e m a t i c A c t i v i t y :Entrepreneurship is not a mysteriousgift or charm and something thathappens by chance! It is a systematic,step-by-step and purposeful activity.It has certain temperamental, skilland other knowledge and competencyrequirements that can be acquired,learnt and developed, both by formaleducational and vocational trainingas well as by observation and workexperience. Such an understandingof the process of entrepreneurship iscrucial for dispelling the myth thatentrepreneurs are born rather thanmade.(ii) Lawful and Purposeful Activity:The object of entrepreneurship islawful business. It is important totake note of this as one may tryto legitimise unlawful actions asentrepreneurship on the grounds thatjust as entrepreneurship entails risk,so does illicit businesses. Purpose ofentrepreneurship is creation of valuefor personal profit and social gain.(iii) Innovation: From the point ofview of the firm, innovation may becost saving or revenue-enhancing. Ifit does both it is more than welcome.Even if it does none, it is still welcomeas innovation must become a habit!Entrepreneurship is creative inthe sense that it involves creationof value. By combining the variousfactors of production, entrepreneursproduce goods and services that meetthe needs and wants of the society.Every entrepreneurial act resultsin income and wealth generation.Entrepreneurship is creative also inthe sense that it involves innovationintroduction of new products, discoveryof new markets and sources of supply2021-22Chapter 9.indd 21113-01-2021 09:43:19

212BUSINESS  STUDIESof inputs, technological breakthroughsas well as introduction of newerorganisational forms for doing thingsbetter, cheaper, faster and, in thepresent context, in a manner thatcauses the least harm to the ecology/environment.(iv) Organisation of Production:Production, implying creation of form,place, time personal utility, requiresthe combined utilisation of diversefactors of production, land, labour,capital and technology. Entrepreneur,in response to a perceived businessopportunity mobilises these resourcesinto a productive enterprise orfirm. It may be pointed out that theentrepreneur may not be possessingany of these resources; he may justhave the ‘idea’ that he promotes amongthe resource providers. In an economywith a well-developed financial system,he has to convince just the fundinginstitutions and with the capital soarranged he may enter into contractsof supply of equipment, materials,utilities (such as water and electricity)and technology. What lies at the coreof organisation of production is theknowledge about availability andlocation of the resources as well asthe optimum way to combine them. Anentrepreneur needs negotiation skillsto raise these in the best interests ofthe enterprise.(v) Risk-taking: It is generally believedthat entrepreneurs take high risks.Yes, individuals opting for a careerin entrepreneurship take a biggerrisk that involved in a career inemployment or practice of a professionas there is no “assured” payoff. Inpractice, for example, when a personquits a job to start on his own, hetries to calculate whether he or shewould be able to earn the same levelof income or not. To an observer, therisk of quitting a well-entrenched andpromising career seems a “high” risk,but what the person has taken is acalculated risk. They are so sure oftheir capabilities that they convert 50per cent chances into 100 per centsuccess. They avoid situations withhigher risks as they hate failure asanyone would do; they dislike lowerrisk situations as business ceases tobe a game/fun! Risk as such morethan a financial stake, becomes amatter of personal stake, where lessthan expected performance causesdispleasure and distress.9.9 Intellectual Property Rights(Ipr)Over the past two decades, intellectualproperty rights have grown to a staturefrom where it plays a major role inthe development of global economy.Intellectual property is everywhere,i.e., the music you listen to, thetechnology that makes your phonework, the design of your favouritecar, the logo on your sneakers, etc. Itexists in all the things you can see—allare the products of human creativityand skill, such as inventions, books,paintings, songs, symbols, names,images, or designs used in business,etc. All inventions of creations beginwith an ‘idea’. Once the idea becomes2021-22Chapter 9.indd 21213-01-2021 09:43:19

MSME AND BUSINESS ENTREPRENEURSHIP213Startup India SchemeThe objective of Startup India Scheme is to build a strong ecosystem for nurturinginnovation and startups in the country. The scheme specifically aims to:(i) trigger an entrepreneurial culture and inculcate entrepreneurial values in thesociety at large and influence the mindset of people towards entrepreneurship,(ii) create awareness about the charms of being an entrepreneur and the processof entrepreneurship.(iii) encourage more dynamic startups by motivating educated youth, scientistsand technologists to consider entrepreneurship as a lucrative, preferred andviable career, and(iv) Broad base the entrepreneurial supply by meeting specific needs of underrepresented target groups, like women, socially and economically backwardcommunities, under represented regions to achieve inclusiveness andsustainable development to address the needs of the population at the bottomof the pyramid.an actual product, i.e., IntellectualProperty, one can apply to the authorityconcerned under the Governmentof India for protection. Legal rightsconferred on such products are called‘Intellectual Property Rights’ (IPR).Hence Intellectual property (IP) refersto products of human mind, hence,just like other types of property, theowners of IP can rent, give or sell it toother people.Specifically, Intellectual property(IP) refers to the creations of thehuman mind, like inventions, literaryand artistic works, symbols, names,images and designs used in business.Intellectual property is dividedinto two broad categories: industrialproperty, which includes inventions(patents), trademarks, industrialdesigns and geographical indications,while the other is copyrights, whichincludes literary and artistic works,such as novels, poems, plays, films,musical works, artistic works, such asdrawings, paintings, photographs andsculptures and architectural designs.The most noticeable differencebetween intellectual property and otherforms of property is that intellectualproperty is intangible, i.e., it cannotbe defined or indentified by its ownphysical parameters. The scope anddefinition of intellectual property isconstantly evolving with the inclusionof newer forms. In recent times,geographical integrated circuits andundisclosed indications, protectionof plant varieties, information havebeen brought under the protectionof semi-conductors and umbrella ofintellectual property. The followingtypes of Intellectual Property Rightsare recognised in India: Copyright,Trademark, Geographical Indication,Patent, Design, Plant Variety,Semiconductor Integrated CircuitLayout Design. In addition to this,2021-22Chapter 9.indd 21313-01-2021 09:43:20

214BUSINESS  STUDIEStraditional knowledge also fall underIP. You must have often taken homelyremedies passed on from yourgrandparents and great-grandparentsas cure for an ailment. These homelyremedies are traditional medicinesthat have been practiced in India forpast several centuries. They are alsoknown as ‘Traditional Knowledge’.Some examples of Indian traditionalmedicinal systems are Ayurveda,Unani, Siddha and Yoga. TraditionalKnowledge (TK) means the knowledge,systems, innovations and practices oflocal communities across the globe.Such wisdom has been developed andaccumulated over the years and hasbeen used and passed down throughseveral generations. A TraditionalKnowledge Digital Library (TKDL)has been developed by Governmentof India, which is essentially a digitalknowledge repository of TraditionalKnowledge that has existed in ourancient civilization, especially aboutmedicinal plants and formulationsused in Indian systems of medicine.This rich body of knowledge helpsprevents wrongful patenting of ourtraditional knowledge.Another type of IP is Trade Secrets.You must have heard about thepopular beverage, Coca Cola. Butdo you know that the recipe of thisbeverage is only known to threepeople in the whole world? This secretinformation is termed as a ‘TradeSecret’. A trade secret is basicallyany confidential information whichprovides a competitive edge. Tradesecrets in India are protected underthe Indian Contract Act, 1872.9.9.1 Why is IPR Important forEntrepreneurs?It encourages creation of new, pathbreaking inventions, such as cancercure medicines. It incentivisesinventors, authors, creators, etc., fortheir work. It allows the work createdby a person to be distributed andcommunicated to the public only withhis/her permission. Therefore, it helpsin the prevention of loss of income. Ithelps authors, creators, developersand owners to get recognition for theirworks.9.9.2 TypesofIPsIPRs are extremely essential forfostering creativity and contributetowards the economic growth of anation. Such rights allow creatorsand inventors to have control overtheir creations and inventions. Theserights create incentives for artists,entrepreneurs and inventors to furthercommit the necessary resourcesto research, develop, and marketnew technology and creative works.The changing global economy iscreating unprecedented challengesand opportunities for continuedprogress in human development. Thereare business opportunities to marketor sell IP worldwide. Geographicalborders present no impediments—consumers enjoy near immediateaccess to almost everything. At suchexciting times, it is critical that we areaware about the importance of IPRsand how it affects daily life.2021-22Chapter 9.indd 21413-01-2021 09:43:20

MSME AND BUSINESS ENTREPRENEURSHIP215Let’s understand each IP now.CopyrightCopyright is the right to “not copy”.It is offered when an original idea isexpressed by the creator or author. Itis a right conferred upon the creatorsof literary, artistic, musical, soundrecording and cinematographic film.The copyright is an exclusive right ofthe creator to prohibit the unauthoriseduse of the content which includesreproducing and distributing copies ofthe subject matter. The unique featureof copyright is that, the protection ofwork arises automatically as soonas the work comes into existence.The registration of the content isnot mandatory but is essential toexercise exclusive rights in case of aninfringement.What is protected under Copyright?Literary workPamphlets, Brochures, Novels, Books, Poems, Song Lyrics,Computer ProgrammeArtistic workDrawings, Paintings, Sculpture, Architectural Drawings,Technical Drawings, Maps, LogosDramatic workIncluding Dance or Mime, Screenplay, Musical Work, SoundRecording, Cinetographic filmsTrademarkA trademark is any word, name, orsymbol (or their combination) thatlets us identify the goods made by anindividual, company, organization, etc.Trademarks also let us differentiatethe goods of one company fromanother. In a single brand or logo,trademarks can let you know manythings about a company’s reputation,goodwill, products and services. Atrademark helps in distinguishingsimilar products in the market fromits competitors. A competitor cannotuse the same, or similar trademarkto sell their product in the marketas the same fall under the conceptof deceptive similarity which may bedefined as phonetic, structural orvisual similarity. Trademark may becategorised as Conventional and NonConventional trademark—(i) Conventional Trademark: Words,colour combination, label, logo,packaging, shape of goods, etc.(ii) Non-Conventional Trademark:Under this category those marksare considered which were notconsidered distinctive previouslybut started getting recognitionwith the passage of time, i.e.,sound mark, dynamic mark, etc.Besides these, smell and tasteare also considered for protectionas trademarks, in some parts of the2021-22Chapter 9.indd 21513-01-2021 09:43:20

216BUSINESS  STUDIESworld, but they are not recognised astrademarks in India. The registration oftrademark is not mandatory under theTrademark Act 1999, but registrationof trademark helps establish exclusiverights over the mark. To registerthe mark you can visit http://www.ipindia.nic.in which is the website ofthe Indian Trademark Registry.to the geographical origin of productsand accord much care to the specificcharacteristics present in the productsthat they purchase. In some cases,there is a difference between “place oforigin” and “geographical indications”which suggests to consumers, that theproduct will have a particular qualityor characteristic, that they may value.Geographical IndicationPatentA Geographical Indication (GI) isprimarily an indication which identifiesagricultural, natural or manufacturedproducts (handicrafts, industrialgoods and food stuffs) originatingfrom a definite geographical territory,where a given quality, reputation orother characteristic are essentiallyattributable to its geographical origin.GIs are part of our collective andintellectual heritage that need tobe protected and promoted. Goods

MSME AND BUSINESS ENTREPRENEURSHIP 205. 9.1 i. ntroduction. 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 widenin