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MSME and Business Entrepreneurship

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  • Last Updated : 16 Jun, 2022
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The size of a business in small industries and business establishments is a major issue. Several parameters can be used to measure the size of business units. These include the number of people employed in a business, capital invested in a business, the volume of output or value of the output of a business, and power consumed for business activities. The definition used by the Government of India to describe MSME is based on investment in plants and machinery. 

The definition and classification of MSME are as per the MSMED (Micro, Small, and Medium Enterprises Development) Act of 2006, (Revised Classification applicable w.e.f 1st July 2020):

Classification

Micro

Small

Medium

Manufacturing Enterprises and Enterprises rendering Services

Investment in Plant and Machinery or Equipment: Not more than Rs.1 crore and

Annual Turnover: Not more than Rs. 5 crore

Investment in Plant and Machinery or Equipment: Not more than Rs.10 crore and

Annual Turnover: Not more than Rs. 50 crore

Investment in Plant and Machinery or Equipment: Not more than Rs.50 crore and

Annual Turnover: Not more than Rs. 250 crore

Role of Micro, Small and Medium Enterprises :

1. Provide Employment: Being labour-intensive, MSMEs provide additional employment to men and women. After agriculture, MSMEs constitute the most employed people in India. The farmers and other landless labours who remain unemployed or idle during a part of the year have also been provided with employment in any micro, small or medium business around them.

2. Variety of Products: MSMEs offer a variety of products to the consumers, such as mass consumption goods, stationery, readymade garments, plastic and rubber goods, soaps and detergents, etc. 

3. Improves Economic Condition: MSMEs are established mainly in rural and semi-urban areas, which generally belong to the economically poor section of society. The establishment of industries around these sections leads to improvement in employment, which helps in improving the overall economic condition.

4. Low Cost of Production: Generally, MSMEs produce simple products with the help of simple technology and take local resources, both labour and material, into consideration, which helps them to maintain a low cost of production.

5. Promotion of Artistic and Creative Sense: Businesses set up in rural area promotes the artistic and creative sense of rural people, which has been suppressed for all these years. The use of natural products and the rural sense of using those products are promoted by MSMEs.

6. Rural Development: Establishment of industries around economically weaker sections leads to improvement in infrastructure, health facilities, safe drinking water, etc. It also results in sustained growth and regional disparity.

7. Mobilisation of Local Resources: Local resources can remain unutilized if the number of industries and businesses around them is low. MSMEs help in the mobilization of local resources, like entrepreneurship skills or small savings or even some natural resources around rural areas.

Problems associated with Micro, Small, and Medium Enterprises:

1. Finance: One of the major problems for MSMEs is the arrangement of funds required for the business. They do not have enough creditworthiness for taking funds from the capital market, so they heavily rely on local financial resources that charge them heavy interest.

2. Raw Materials: Being relatively small, MSMEs cannot buy raw materials in bulk, as they do not have their production unit at big scale, and due to the small quantity of purchase, their bargaining power becomes relatively low. Often, sellers take large orders and in the situation of scarcity, small business suffers the most as they do not get the raw materials.

3. Managerial Skills: MSMEs are generally managed by a single person having limited managerial skill, which is not enough to run a business.

4. Labour: Due to the low level of salary, employees are less willing to work hard and produce more. MSMEs cannot afford to pay high salaries and due to this reason, they fail to hire talented people.

5. Marketing: Marketing of the products is the most prominent activity as it holds the responsibility to generate revenue. In most cases, marketing is the weaker area of MSMEs as they lack the amount of money and infrastructure required for marketing.

6. Quality: MSMEs mainly focus on cutting costs and keeping prices low. It does not concentrate on meeting the quality standards, which leads to dissatisfaction in consumers with the company and the product.

7. Capacity Utilisation: MSMEs fail to operate at full capacity due to a lack of marketing or lack of demand. It increases their operating cost and leads to sickness.

8. Technology: The use of outdated technology is often a reason why MSMEs fail to do well in the market. It leads to low productivity and uneconomical production.

9. Sickness: Due to some internal and external reasons, MSMEs are gradually turning out to be sick. Lack of skilled labour, low salary, shortage of funds, etc. leads to sickness in the industry.

10. Global Competition: Competitors of MSMEs are not only from the local or national market, but also from the global market. It often becomes very difficult for small businesses with outdated technology and a lack of marketing to compete with big giants.

MSME and Entrepreneurship Development:

Entrepreneurship can be defined as a process of setting up a new business or profession, bearing most of the risk, and enjoying most of the rewards. The person or group of people who set up such businesses are called entrepreneurs. It is setting up a business with some innovative and new idea that is directly related to solving some sort of problem in society. It also plays a very significant role in the overall economic development of a nation, creates employment and expands the various professions prevailing in the economy.

Characteristics of Entrepreneurship:

1. Systematic Activity: Entrepreneurship is a step-by-step process. Entrepreneurs should have some skill, temperament, knowledge, and most importantly, a purpose to get into entrepreneurship. It is not something that can happen by chance.

2. Lawful and Purposeful Activity: Entrepreneurship businesses should not be carried forward with illegal practices. The business should be lawful and abide by all the Government’s rules & regulations. One can not try to legitimize unlawful actions as entrepreneurship on any grounds. 

3. Innovation: Innovation is the heart of entrepreneurship. Entrepreneurship involves the creation of value by offering something new and innovative that can solve larger problems in society. 

4. Organisation of Production: Entrepreneurship involves creating a combined utilization of diverse factors of production, land, labour, capital and technology. Entrepreneurs are responsible to mobilize these resources into a productive unit or firm in a response to a perceived business opportunity. 

5. Risk-taking: In comparison to other businesses, entrepreneurs are believed to take high risks. With no assured payoffs, quitting of jobs, challenging market conditions, friction at the time of entry, etc. make an entrepreneur’s position very risky.

Intellectual Property Rights (IPRs):

Intellectual Property is a type of intangible property that comes into existence as a product of the human mind. All inventions are a product of human creativity and skill. It can be anything, including music, technology, books, paintings, songs, symbols, names, images, or designs used in business. All inventions are once an ‘idea’. When that idea is converted into an actual product, it becomes intellectual property. One can own the right to use the intellectual property that he/she invented. The government of India has conferred legal rights on such intellectual property. One can apply to the concerned authority under the Government of India to get such rights, i.e., Intellectual Property Rights. After which, the owner of that property has been granted the right to use, sell or rent it like any other physical property. 

Types of Intellectual Property Rights (IPRs):

1. Copyright: Copyright is the prohibition to copy. It is provided to an original idea expressed by the creator or author. It is provided to creators of literary, artistic, musical, sound recording and cinematography. Copyright is given to the creator as an exclusive right to prohibit the unauthorized use of content in the form of reproducing and distributing copies of the same. 

2. Trademarks: Trademarks are the identification of an individual, product, company, organization, etc. Trademarks help us in differentiating the products of one company from another. If any company holds a trademark in the form of words, colour combinations, labels, logos, etc., its competitors can not use the same or similar trademark to sell their products. 

3. Geographical Indication: Any natural, agricultural, or manufactured products originating from a definite geographical area can be provided with the Geographical Indication, given that, quality, reputation, or other characteristics are essentially attributable to its geographical origin. Geographical Indication represents the goodwill of that geographical area, which has been there for centuries.

4. Patent: A patent is a type of Intellectual Property Right that is provided to scientific inventions, which show technical up-gradation over the already known products. When we use our ability and skill to create something unique and new which did not exist until now can be called an invention. When an invention is patented, then the inventor gets an exclusive right to exclude all others and prohibit them from using the invented product. 

5. Design: Any shape, pattern, or arrangement of lines or colour combination that is applied to any article is called a design. The design also comes under Intellectual Property Rights as protection is given to aesthetic appearance or attractive features.

6. Plant Variety: That variety of plants that are bred and developed by farmers can also become Intellectual Property. Farmers can opt in to register them and gain Intellectual Property Rights over those breeds of plants developed by them.

7. Semiconductor Integrated Circuits Layout Design: A semiconductor is used to make computer chips. Semiconductor Integrated Circuits Layout Design can be registered as an Intellectual Property Right as per the guidelines laid down in the Semiconductor Integrated Circuits Layout Design (SICLD) Act 2000 and the Semiconductor Integrated Circuits Layout-Design (SICLD) Rules 2001. 


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