NCERT Solutions for Class 11 Business Chapter 9 - Small Business

1. Which year was the MSMED Act passed?

Ans: 2006

2. What is a micro-enterprise?

Ans: Micro-enterprises are ones with a capital investment of less than Rs. 1 crore, and turnover less than Rs. 5 crore.

3. What is a cottage industry?

Ans: A cottage industry is a small-scale, decentralised manufacturing enterprise that is frequently run from a house rather than a dedicated facility. The amount of capital necessary to start a cottage industry, as well as the number of people employed, characterise cottage industries.

4. What is meant by Village and Khadi Industry?

Ans: Village Industries are the Industries located in rural areas with investment in fixed assets as per the rules of central government.

Khadi Industries those industries which weave handlooms from materials like cotton, wool, sik yarn etc or weave handlooms from the mixture of any two or all of these yarns.

Hence, Khadi and Village Industries are those that are based in rural areas and have a fixed capital Investment per artisan (weaver) of less than a hundred thousand rupees. The Government of India has the authority to amend the Fixed Capital Investment anytime it sees fit.

5. Give any two characteristics of entrepreneurship development.

Ans: To operate a successful firm, every entrepreneur needs to have the following abilities.

• Effective Time Management

• Visualizing Aim and Success

• Proper Listening and Communication

• Seeking Help When Needed
  
  

6. What is MSME?

Ans: The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was adopted by the Indian government, and it defines micro, small and medium enterprises as follows:

• Micro-enterprises are ones with a capital investment of less than Rs. 1 crore, and turnover less than Rs. 5 crore

• A  small enterprise are ones with a capital investment of less than Rs. 10 crore, and turnover less than Rs. 50 crore

• Medium enterprise business are ones with a capital investment of less than Rs. 50 crore, and turnover less than Rs. 250 crore
  
  

7. State the meaning of entrepreneurship?

Ans: These are persons or a group of individuals who exploit a business opportunity by bringing a new product or process to market, or by significantly enhancing an existing good, service, or method of production.

8. MSME and Entrepreneurship are connected. Do you agree? Give two reasons.

Ans: Yes, MSME and Entrepreneurship are connected to each other. 

Reasons: 

• MSMEs offer banks funding assistance. They encourage the growth of entrepreneurship as well as the upgrading of skills by establishing specialised training institutes. MSMEs are known for the provision of genuine assistance in gaining entry to domestic and international markets.
  
  

9. State the role of MSME in the development of a country?

Ans: MSMEs play a critical part in the country's overall industrial economic growth. The industry has shown great innovativeness and flexibility in surviving the current economic crisis and recession, and it has plenty of room to develop in the future thanks to its agility and dynamism. 

Role of MSME 

• Employment Opportunities: After the agriculture sector, small industries provide the largest employment opportunities.

• Optimum Utilisation of resources: Small business facilitates optimum utilization of resources through locally available resources and simple technology.

• Encourage locals: It provides and encourages local people for entrepreneurship, and makes the best use of their handicraft and other artistic skills.

• Quick decisionsIt facilitates quick and timely decisions due to the small size of the business.

• Rural Development: Through the provision of employment opportunities, encouraging locals to use their skills, regional development is made possible.

• Balanced Development: These business units can be set up anywhere at any location and region, as they are dependent on locally available resources, simple technology, and labour class people. This facilitates balanced development of the country.

• Eliminate poverty: These firms adopt labor-intensive production techniques, allowing them to employ excess/surplus rural labour. As a result, small-scale companies eliminate hidden unemployment in the agricultural sector while also providing a source of income for rural residents. As a result, they help to alleviate rural poverty.

• Acceleration of expansion: These enterprises have long been seen as a primary driver of economic growth and a source of employment.

• GDP and exports: These industries has a significant contribution to the GDP and exports, thus leading to the economic growth of the country
  
  

10. What are the different parameters used to measure the size of MSME?

Ans: The size of business units may be measured using a variety of factors. These factors include the number of people engaged in the company, the amount of money invested in the company, and the company's turnover, among others. The Government of India's definition of MSME is based on investment in plant and machinery as well as turnover.

11. State the meaning of Village and Khadi industries?

Ans: The meanings are:

• Village Industries: The Industries located in rural areas with investment in fixed assets as per the rules of central government.

• Khadi Industries: These are those industries which weave handlooms from materials like cotton, wool, sik yarn etc or weave handlooms from the mixture of any two or all of these yarns.

Hence, Khadi and Village Industries are those that are based in rural areas and have a fixed capital Investment per artisan (weaver) of less than a hundred thousand rupees. The Government of India has the authority to amend the Fixed Capital Investment anytime it sees fit.

Khadi and Village Industries Commission (KVIC) 

At the national level, the Khadi and Village Industries Commission (KVIC) is the primary implementing agency, which is a non-constitutional body established by the Government of India under the Parliament Act. KVIC's mission is to help build and grow Khadi and Village industries in rural regions by planning, promoting, facilitating, organizing, and assisting them.

The following are the KVIC's objectives:

• The primary goal is to create a vibrant rural community.

• Providing work in rural regions is a social goal.

• Producing a marketable product is the economic goal.

• The broader goal is to instill self-sufficiency among the economically disadvantaged.
  
  

12. State any three major problems faced by MSMEs?

Ans: The MSME's primary challenges include:

• 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.

• Raw materials:  Due to unavailability of certain raw materials, these enterprises have to adjust and compromise either in terms of poor quality raw material, or high price raw material. Both situations add to the problems of such enterprises.

• Managerial skills: Business run by a single person or family, which lacks managerial skills, technical skills and entrepreneurial skills. Also due to no education, things become even more difficult. Hence neither they are capable to manage the enterprises on their own, nor they can hire people for such work sue to shortage of financial resources.
  
  

13. How do small scale industries contribute to the socio-economic development of india? Discuss

Ans: Small-scale industries in India hold a unique position due to their contribution to the country's socio economic development. The following are some of the ways in which they contribute:

• India's small industries account for 95% of the country's industrial units. They account for over 40% of India's gross industrial value-added and 45% of the country's total exports.

• After agriculture, these industries provide employment to a large number of people. When compared to huge industries, they create more job opportunities per unit of capital invested.

• Our country's small enterprises produce a wide range of products, including mass-market goods, ready-made clothing, hosiery, stationery, soaps and detergents, household appliances, and so on.

• Small businesses make an important contribution to our country's balanced regional growth. Small enterprises can be established everywhere in the country that create simple items using simple technology and rely on locally available resources, including material and labour. The benefits of industrialisation can be reaped by every place because they may be extensively diffused without any geographical limits. As a result, they provide a substantial contribution to the country's balanced development.

• Small businesses offer an extensive range of business alternatives.

• Small businesses also benefit from lower production costs. Locally available resources are less expensive. Because of reduced overhead expenses, small businesses have lower start-up and operating costs. In fact, small businesses' competitive advantage is their low cost of production.
  
  

14. Describe the role of small businesses in rural India.

Ans: The following are some of the most important functions that small businesses perform in rural India.

• Employment opportunities: Cottage and rural industries are important sources of employment, particularly for persons living in rural areas. This is especially beneficial to the economically disadvantaged elements of rural communities.

• Eliminate poverty: Small-scale firms adopt labor-intensive production techniques, allowing them to employ excess/surplus rural labour. As a result, small-scale companies eliminate hidden unemployment in the agricultural sector while also providing a source of income for rural residents. As a result, they help to alleviate rural poverty.

• Equitable income distribution: Small-scale businesses have minimal capital requirements, owing to their use of labor-intensive manufacturing techniques, which encourages entrepreneurs to launch small businesses. As a result, small enterprises spring up all throughout the country, with many of them providing jobs for people in rural areas. This causes a redistribution of wealth and income in rural areas, allowing for a more equitable allocation of income.

• Acceleration of expansion: Small enterprises have long been seen as a primary driver of economic growth and a source of employment.
  
  

15. Discuss the problems faced by small-scale industries.

Ans: The following are some of the issues that small businesses face in rural India:

• Finance: Most small businesses start with a low capital basis. Many of the units in the small sector lack the creditworthiness needed to raise finance from the markets. As a result, they rely significantly on local financial resources and are frequently victims of money lenders' exploitation. These businesses usually lack appropriate operating capital, either as a result of late payments or because their cash is locked up in unsold inventories.

• Raw Materials: Obtaining raw materials is another big issue for small businesses. Because the essential materials are not readily available, they must either compromise on quality or pay a premium price for high-quality supplies. Due to the little amount of purchases they make, their bargaining power is limited. They also can't afford to incur the risk of purchasing in bulk because they don't have the space to keep the materials.

• Management skills: Small businesses are frequently promoted and operated by lone entrepreneurs who may lack all of the managerial abilities required to run the company. Many small business owners have excellent technical understanding, but they struggle to promote their products. Furthermore, they may not have enough time to complete all of the necessary tasks. At the same time, they do not have the financial means to hire competent management.\

• Labor: Because small businesses cannot afford to offer greater compensation to their employees, employees' willingness to work hard and create more is impacted. As a result, per-employee productivity is poor, and employee turnover is significant.

• Capacity Utilization: Many small businesses are forced to run below full capacity owing to a lack of marketing skills or a lack of demand, causing their operating costs to rise. Gradually, this leads to illness and the business's closure.

• Technology: The use of obsolete or outdated technology is a severe issue for the small industries, thus resulting in low productivity and insufficient output.

• Quality: Due to traditional methods of production, these enterprises struggle to maintain standardized quality.

• Global Competition: They have to face competition with large scale industries and multinational companies.
  
  

16. What measures has the government taken to solve the problem of finance and marketing in the small scale sector?

Ans: In India, the small-scale sector has played a significant role in job creation, regional development, and export promotion. The Indian government has realised that removing the two key hurdles preventing the continued development of SSls-insufficient money and ineffective market penetration-can achieve a lot more. 

The government has formed the following agencies in order to achieve this goal.

• National Bank for Agriculture and Rural Development (NABARD): NABARD was founded in 1982 with the primary goal of encouraging rural development and coordinating activities in this area. This organisation is the apex banking body that oversees the operations of rural and 'Gramin' banks. NABARD's major goal is to provide low-cost, easy-to-access finance to small, cottage, and rural businesses.

• SIDBI (Small Industries Development Bank of India): It was established to give direct and indirect financial support under several initiatives. It primarily serves the credit and financing needs of small and medium-sized businesses.

• World Association for Small and Medium Enterprises (WASME): WASME is an international non-governmental organisation that helps small and medium-sized businesses solve challenges. It has established an 'International Committee for Rural Industrialisation' with the goal of developing a model for rural industry growth and development.

• The National Commission for Enterprises in the Unorganised Sector (NCEUS): Established in September 2004, NCEUS works for the goal of enhancing the efficiency and worldwide competitiveness of small-scale businesses. It focuses on the issues that small businesses face, particularly in the unorganized/informal sector.

• Job creation programmes: In addition to the organisations described above, the government has launched a number of rural development programmes. These are

• Prime Minister's Rozgar Yojana (PMRY), 

• the Integrated Rural Development Programme (IRDP), and 

• Training of Rural Youth for Self-Employment 

These initiatives are aimed at increasing employment possibilities, developing rural communities, and empowering rural residents.

17. 'Innovation is integral to MSME'. Discuss giving reasons to your answer.

Ans: The economy is propelled forward by innovation. Technology has become a critical component that influences practically all sectors, including agriculture, manufacturing, and services, due to its rapid expansion and adoption. Innovations and technical breakthroughs have a huge impact on how enterprises and initiatives contribute to the nation's economic development as well as their global expansion.

The world is changing rapidly at the moment, and firms' competitiveness must be maintained by continual innovation, including the introduction of new technologies to improve quality standards and the development of appropriate infrastructural support. To help all firms enhance their tools and machinery, efforts have been made to build relevant laboratories, technological centres, and incubation units.

• To modernise technology, we need infrastructure support to allow businesses to generate novel concepts that are beneficial not just to MSMEs but also to the entire industrial system. 

• Business incubators are also required to assist entrepreneurs with commercialization in order to accelerate the transformation of such technology from simple ideas to profitable businesses that create jobs. 

• The Ministry of MSME's initiatives are designed to encourage and support individuals' latent creativity, as well as the adoption of cutting-edge manufacturing technology and knowledge-based innovative MSMEs or ventures.

• The Ministry of MSMEs has established 18 Technology Centers (TCs) across the country. These were known as Tool Rooms (10 no.) and Technology Development Centers (8 no.) earlier. 

• To expand the reach of the Technology Centres, the Ministry has launched 15 new TCs, with construction work currently underway in various locations across the country. 

• The Technology Centers play a critical role in assisting MSME initiatives in the country by providing access to modern technologies, technical advisory help, and skilled labour by opening doors for technical skill development to youths at all levels, from school dropouts to graduates and engineers.

To summarise, inventions occur when people think differently than the rest of the population. It must be straightforward and uncomplicated, as well as focused on a single operation, to be an effective innovation. Any technology or invention must be basic enough for the general public to grasp how it works. All of these unique ideas, as well as the desire to put them into reality, propel an exceptional intellect to success. 

The Ministry of MSME also provides its support to all such inventors and businesses, encouraging them to come out and pursue their huge aspirations of inventing something new and beneficial.

18. 'Creativity and Innovation is the key to MSME'. Justify the statement.

Ans: The reasons that justify this statement are:

• To modernise technology, we need infrastructure support to allow businesses to generate novel concepts that are beneficial not just to MSMEs but also to the entire industrial system.

• The Ministry of MSME's initiatives are designed to encourage and support individuals' latent creativity, as well as the adoption of cutting-edge manufacturing technology and knowledge-based innovative MSMEs or ventures.

• Technology Centers play an important role in corporate development and are an integral element of it.

• The scheme's main goal is to encourage and support individuals' latent creativity, as well as the adoption of cutting-edge manufacturing technologies and knowledge-based innovative MSMEs. 

• Mentoring in business and technology, networking with other firms, seed financial aid, and professional assistance will all be part of the plan to help the business succeed and develop. 

• 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. So, we can say that 'Creativity and Innovation is the key to MSME'
  
  

19. Prepare a profile of anyone MSME operating locally in your area. Prepare a questionnaire to find out:

Ans: Here in this question, for making the report we are going to take National Small Industries Corporation (NSIC). The details were from the answers received in the questionnaire:

(a) The growth prospects of the unit. 

The National Small Industries Corporation (NSIC) is a Government of India enterprise that is ISO 9001:2015 accredited and falls under the Ministry of Micro, Small and Medium Enterprises (MSME). The National Small and Medium Firms Council (NSIC) has been working to promote, assist, and support the growth of micro, small, and medium enterprises in the country. NSIC is based in the country and operates through a network of offices and technical centres. In addition, NSIC has established a Training and Incubation Center, which is staffed by professionals.

Mission: 

“To promote and support Micro, Small & Medium Enterprises (MSMEs) Sector” by providing integrated support services encompassing Marketing, Technology, Finance, and other services.

Vision: 

“To be a premier Organization fostering the growth of Micro, Small and Medium Enterprises (MSMEs) Sector”.

(b) Use of local resources and indigenous skills used.

Ans: NSIC facilitates micro, small and medium enterprises. Hence, Small scale units rely on local or indigenous resources and, as a result, can be located anywhere as long as these resources, such as labour and raw materials, are easily available.

(c) The actual problems faced by an owner of an MSME. Prepare a project report on it.

Ans: The following are some of the obstacles that are preventing MSMEs from growing:

• Finance-Related Challenges 

The lack of capital is one of the most significant issues that MSMEs in India confront. You know, one of the major causes of financial difficulties is a lack of financial literacy. The majority of MSME proprietors come from underdeveloped and impoverished areas.

As a result, they are unaware of the government's special financial privileges. They make certain irrational financial decisions as a result of their negligence, resulting in financial disasters.

Apart from that, India's MSME sector does not always have the same creditworthiness as larger corporations. It could be due to one of two factors. To begin with, most MSME owners do not have any assets in their names.

• Challenges in Marketing and Management

The MSME sector's expansion is being hampered by a lack of managerial, entrepreneurial, and marketing capabilities. We all understand how important it is to use the correct marketing methods to increase revenue and attract new clients. However, a lack of professionalism and a well-structured top management makes it impossible for businesses to compete.

In addition, a lack of education, awareness of market trends, consumer tastes, and access to new technology has stymied the sector's progress.

• Labor-Related Obstacles

A successful manufacturing company's backbone is skilled labour. Unfortunately, when it comes to trained people and labour law compliance, MSMEs encounter a lot of irregularities. Furthermore, the MSME sector's troubles are exacerbated by the lack of a competent workforce at a reasonable price.

In India, poor personnel management and inadequate training and development facilities are also major issues. The labour markets in the area are highly rigid, making it impossible for MSMEs to operate successfully. Many businesses also complain about strained labour relations and a lack of manpower planning.

(d) Marketing of products and services

Ans: One of the most significant tools for business development has been identified as marketing. In today's fiercely competitive industry, it is crucial for MSMEs' growth and survival. NSIC serves as a facilitator and has developed a number of programmes to assist businesses in their marketing efforts, both domestically and internationally. The following is a quick description of these schemes:

• Small businesses confront difficulties procuring and executing large orders on their own, denying them a level playing field with large corporations. NSIC develops consortia of Micro and Small Units that manufacture the same product, allowing them to combine their resources.
  
  

20. Find out the GI (tag)s for your state. Prepare a chart showing its unique attributes. Discuss in the class how the GI tag for the product has led to regional development.

Ans: GI (Geographical Indication) tag for the state Jharkhand is Sohrai – Khovar Painting.

Attributes of Sohrai (GI Tag of Jharkhand):

GI Tag and Regional Development 

Geographical indications tag contributes to the manufacturers' and producers' overall economic well being. Also, an increase in the secondary economic activities takes place through the marketing and promotion of Gi-labeled products, thus boosting regional economic development. Hence, the creation and preservation of GI contributes to the creation of a positive image and reputation of a product and region in the minds of consumers, thus leading to the development of that region.

Also, people all across the world are becoming more aware of various GI products from various locations and regions, and thus are becoming more eager to travel to those regions , and buy and use their products. As a result, it contributes to the expansion of that region's tourism economy.

For example, Lucknow is known for its Chikankari. When you hear the word Chikankari, the first thing that springs to mind is Lucknow. When you hear the word rosogolla, the first thing that springs to mind is West Bengal. Chikankari is a 400-year-old art form. It was designated as a Geographical Indication (GI) in August 2008, allowing the government of Uttar Pradesh to take legal action against any company making Chikan outside of Lucknow and its environs. By doing this they are getting benefits in producing the Chikankari, and thus adding to the development of that region.

NCERT Solutions for Class 11 Business Studies Chapter 9 Small Business

Small Business

Small business can be defined as a privately owned corporation, partnership, or sole proprietorship that has fewer employees and less annual revenue than a corporation or regular-sized business. The term "small" can be defined in terms of being able to apply for government support and qualify for preferential tax policy — which varies by country and industry. 

Whereas small businesses can set the same quality treatment systems found in larger corporations, they may face different challenges along the way. Instantly, small businesses tend to have fewer human resources and less up-front capital to dedicate to quality initiatives. Upper management commitment, however, can be more potent in a smaller business, and internal interactions can be made more straightforward.

Categories of Small Business

1. Small Scale Industry (Before 2006)

2. Ancillary Small Industrial Unit

3. Export Oriented Units

4. Small Scale Industries Owned by Women

5. Tiny Industrial Units

6. Small Scale Service and Business

7. Micro Business Enterprises

8. Village Industries

9. Cottage Industries

More types of businesses – Hundreds of industries, such as auto repair, dry cleaners or beauty salons, have gained access to loans and working capital through Credibly.

Characteristics of Small Scale Industries

• Ownership: They have a single owner. So it is also known as a sole proprietorship or partnership.

• Management: All the management works are controlled by who owns it.

• Limited Reach: They have restricted areas of operation. So they may be a local shop or an industry located in one area.

• Labour Intensive: Their dependency on technology is minimal because they are dependent on labours and workforce.

• Flexibility: As they are small, they are open and flexible to any changes, unlike large industries.

• Resources: They utilize local and immediately available resources. They perform better utilization of natural resources and limited wastage.
  
  

Most Popular Small Business

• Health Care and Social Assistance

• Accommodation and Food Services

• Arts, Entertainment, and Recreation

• Personal Trainers

• Site building and web design

• Local Auto Repairs

• Second hand (Online) Stores

• Pet sitting

• Cafés

• Real  estates
  
  

The Secret to Finding a Business Idea

The secret to finding an excellent business idea is you need to be systematic and thorough. You need to put up a solid list of proven and practical business ideas. Then you need to carefully assess which ones would be most likely to work for you.

How Can House Cleaning Be a Small Business?

House Cleaning is one of the most popular small businesses because everyone wants a house cleaner. The work is repetitive. But if you can show up on time and do a good job consistently (I find that the work of many cleaners deteriorates after the first few weeks), you will build a healthy clientele.

Solved Example:

Question: What kind of business is best?

Answer: People can start:

1. Handyman

2. Woodworker

3. Online dating consultant

4. Sewing and alteration specialist

5. Freelance developer

6. Personal trainer

7. Freelance graphic designer

8. Life/career coach, or many more like these.