ABU DHABI INDIAN SCHOOL – BRANCH 1, AL WATHBA

GRADE – 11 CM BUSINESS STUDIES

Chapter 9 – Entrepreneurship and SMALL BUSINESS (Revision Notes)

ENTREPRENEUR
“A person who sets up a business or
businesses, taking on financial risks in the
hope of profit.”
ENTREPRENEURSHIP
The people who create these
businesses are
called entrepreneurs. Entrepreneurship has
been described as the "capacity and willingness to develop, organize and manage a business venture
along with any of its risks in order to make a profit".
Entrepreneurship development
It is the process of improving the skills and
knowledge of entrepreneurs through various training and
classroom programs. The whole point of entrepreneurship
development is to increase the number of entrepreneurs.
It is the process of preparing the entrepreneurs to face
business uncertainties and risks through proper education,
training, motivation, orientation and reorientation.
Characteristics of Entrepreneurship
1. Systematic Activity: : Entrepreneurship is a systematic, step by step and purposeful
activity. It has certain temperamental, skill, knowledge and competency requirements that can
be acquired , learnt and developed from training , observation and work experience.
2. Lawful and Purposeful Activity: The purpose of entrepreneurship is creation of value for
personal profit and social gain. The object of entrepreneurship is lawful business.
3. Innovation: Entrepreneurship is creative in the sense that it involves creation of value. By
combining various factors of production, entrepreneurs produce goods and services that meet
the needs and wants of society. Innovation may be cost saving or revenue enhancing.
4. Organization of Production:
Production requires the combined utilization of diverse factors of production, land , labor
,capital and technology. Entrepreneur, in response to a perceived business opportunity
mobilizes these resources into a productive enterprise or firm.
5. Risk taking: As the entrepreneur contracts for an assured supply of the various inputs of his
project, he incurs the risk of paying them off whether or not the venture succeeds. There is
no assurance of profit to the entrepreneur.
Process of Entrepreneurship Development.
Entrepreneurship does not emerge spontaneously. Rather, it is the outcome of a dynamic process of
interaction between a person and his/her environment.
1. Opportunity Scouting: Entreprenurial opportunities have
to be actively searched for. One may rely on personal
observation discovery or invention and published reports
surveys etc.
2. Identification of Specific Product Offering: While
environment scan leads to the discovery of more
generalised buisness opportunities , there is a need to
identify a specific product or service idea. Deciding on the
product offering ,makes the highest demand on the
entrepeneur’s creativity and innovativeness.
3. Feasibility Analysis: The product offering idea must be technically feasible, that is it should be
possible with the available technology to convert the idea into a reality. In other words, the idea
must be economically feasible too. It will be decided whether the business will be organized as a
proprietary concern/ partnership firm/ company or a cooperative entity.
4. Business Plan : An entreprenuer must compile these findings in the form of a business plan that
would be submitted to the State Finance Corporation of the area. The business plan may be
appraised by the funding instituition.
5. Start-Up :Upon the project approval , the entrepreneur can proceed for project commissioning.
Entrepreneurial functions do not come to an end with the business start-up. He often looks after
its day-to-day operation and strives for its stability and growth,
Question: Is entrepreneurship development important for existing entrepreneurs?
Answer: Entrepreneurship development programs are developed for both aspiring as well as existing
entrepreneurs. This is because these programs are also designed to help the entrepreneur expand
their existing enterprise. These programs are more effective on the existing entrepreneurs. It is
because they already know a lot about their markets and industry. Hence can effectively apply the
learnings in their business and analyze the results more quickly,
Need for Entrepreneurship Development
• It aims at eradicating unemployment: unemployment is the single greatest problem for most
governments. Due to technological advancements, more and more people are losing their jobs. If
this trend is left strong, unemployment could spiral out of control and cause revolutions. That’s
why governments are stepping in to equip more people with building business skills to reverse this
trend.
• Governments are spearheading entrepreneurship development programs to promote
industrialization: Industrialization is key to the faster development of any country. A developed
country means the rate of unemployment is significantly low.
• To educate people on the ups and downs of entrepreneurship:
Entrepreneurship development programs seek to educate the populace about the up and downs of
entrepreneurship. It’s meant to prepare them physically and psychologically to navigate the
unreliable entrepreneurship path.
• Entrepreneurship development programs are intended to shine a light on enterprise social
responsibility: Enterprise social responsibility is the interaction of the enterprise with the
surrounding community. For example, businesses need to operate per the social culture of the
surrounding communities and create jobs for the community. Enterprises are also obliged to
 cater to the surrounding communities by extending basic services like water, electricity and
social amenities.
• Entrepreneurship development programs seek to discover and train prospective
entrepreneurs: Entrepreneurship development programs aim to identify them, equip them with
the necessary skills, and fund their businesses. This practice can create a lot of employment to
the general public.
• Entrepreneurship development programs are geared towards teaching potential entrepreneurs
excellent communication skills: Communication is vital to the success of any enterprise. Without
communicating the goals of your business efficiently, comprehensively and with engagement, your
business growth prospects will be affected. These programs seek to train potential
entrepreneurs on the most efficient communication skills to spur faster enterprise growth.
START UPS:
The term startup refers to a company in the first stages of operations. Startups are founded by one
or more entrepreneurs who want to develop a product or service for which they believe there is
demand.
Start-Up India Scheme:
The Start-Up India Scheme is a flagship initiative of Indian Government with a primary objective of
promotion of start-ups, generation of employment opportunities and wealth creation. It was launched
on January 16, 2016 by the Hon’ble Prime Minister of India Shri Narendra Modi.
Aims of Start-Up Scheme
• To cultivate an entrepreneurial values and culture.
• To create awareness about the charms of being an entrepreneur.
• To encourage more dynamic start-ups by motivating educated youths, scientists and
technologists.
• To support the early phase of entrepreneurship development.
• To meet specific needs of under represented target groups like women, socially and
economically backwards communities etc.
Ways to Fund Start-Ups
• Self-Financing – Starting a business from personal savings and resources. It is a good option
of funding , if the initial investment is small and handy.
• Crowd Financing – It is the practice of pooling of resources by a group of people for a common
goal.
• Angel Investment (Private Investment) : Angel investors are individuals with surplus cash and
have a keen interest to invest in upcoming start-ups. They offer mentoring or advice along
with the capital.
• Venture capital : Venture capitals are professionally managed funds who invest in companies
that have huge potential.
• Business Incubators and Accelerators: Incubators are like a parent to a child, who nurture
the business providing shelter tools, training and network to a business. Accelerators are
more or less the same thing; Incubator helps a business to walk whereas accelerators help to
run a giant leap.
• Microfinance and NFBCs: - NFBCs( Non- Banking Financial Corporations) provide loans to
individuals who seek loans without necessarily imposing any legal requirements like conventional
banks and credit repair services do.
Intellectual Property rights (IPR) can be used to protect the technology, brand name, design and
creativity behind the concept. It gives the creator sole ownership of the concept, in a similar way to
owning physical property like a house or car.
TYPES OF IPR
o Copyright (or author’s right) is a legal term used to describe the
rights that creators have over their literary and artistic works.

o Trademark; a symbol, word, or words legally registered or established by use as representing a

company or product. Trademark may be categorised as Conventional and-Non-Conventional
trademark—
(i) Conventional Trademark: Words, colour combination, label, logo, packaging,
shape of goods, etc.
(ii) Non-Conventional Trademark: Under this category those marks are considered which were
not considered distinctive previously but
started getting recognition with the passage
of time, i.e., eg ; colors , shapes, holograms ,
moving images , sounds , textures e
tc..
o Patent; A patent is an exclusive right granted for an invention. Patent can only be filed to get
rights over an invention and not discovery. Patent creates a temporary monopoly. Once the term
of a patent expires, the invention is in public domain which means it is free for use by people.
o A trade secret is any practice or process of a company that is generally not known outside of
the company.
o Design :A ‘design’ includes shape, pattern, and
arrangement of lines or colour combination that is
applied to any article. It is a protection given to
aesthetic appearance or eye-catching features. The
term of protection of a design is valid for 10 years,
which can be renewed for further 5 years after
expiration of this term, during which a registered
design can only be used after getting a license from its
owner and once the validity period is over, the design is
in public domain.
o Plant Variety : It is a type of variety which is bred and developed by farmers. This helps in
conserving, improving and making available plant genetic resources. For example, hybrid versions
of potatoes.
 o Geographical Indication: (GI) is primarily an indication which identifies agricultural, natural or
manufactured products (handicrafts, industrial goods and food stuffs) originating from a
definite geographical territory, where a given quality, reputation or other characteristic are
essentially attributable to its geographical origin.
SMALL BUSINESS
What is the definition used by government of India for
Small Scale Industries?
Answer: A small-scale industry is a business created on a
small budget. It produces its goods using small machines
,less power and less labor. It is located within a single
place. As per as per MSME Act 2006 , ( Micro , Small
and Medium Enterprise) , Small Industries can be
classified into:
1. Manufacturing Industry – It is engaged in manufacturing or producing goods and
services.
2. Service Industry – It is engaged in providing services.
The definition used by the Government of India to describe MSME is based on the investment in
plant and machinery and turnover. It is depicted in the table given below:

Village Industries: 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.
Cottage Industries : 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.
Role of small business in rural India.
The following are some of the major roles played by small scale businesses in rural India.
❖ Small Scale Industries in India account for 95% of the industrial units in the country.
❖ Small scale industries are the second largest employers of human resources, after agriculture.
❖ Small industries in our country supply an enormous variety of products which include mass
consumption goods, readymade garments, hosiery goods, stationery items etc.
 ❖ Small industries produce simple products using simple technologies and depend on locally
available resources both material and labour.
❖ Small industries provide ample opportunity for entrepreneurship.
❖ Small industries enjoy the advantage of low cost of production.
❖ Due to the small size of the organisations, quick and timely decisions can be taken.
❖ Small industries are best suited for customised production, designing the products as per the
needs and preferences of individual customers.
❖ Small Industries have inherent strength of adaptability and a personal touch and therefor
maintain good personal relations with both customers and employees.
Problems faced by small scale industries.
Major problems faced by the small scale industries are:
❖ Finance: One of the severe problems faced by SSIs is that of non-availability of adequate
finance to carry out its operations. Many of the units in the small sector lack credit
worthiness required to raise capital from the capital markets.
❖ Raw materials: Another major problem of small business 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.
❖ Managerial skills : Small business is generally promoted and operated by a single person, who
may not possess all the managerial skills required to run the business.
❖ Labour : Small business firms cannot afford to pay higher salaries to the employees , which
affects employee willingness to work hard and produce more.
❖ Marketing : In most cases, marketing is a weaker area of small organisations. These
organisations have to depend excessively on middlemen , who at times exploit them by paying
low price and delayed payments.
❖ Quality : Many small business organisations do not adhere to desired standard of quality.
Instead they concentrate on cutting the cost a and keeping
❖ the prices low.
❖ Capacity utilisation : Due to lack of marketing skills or lack of demand many small business
firms have to operate below full capacity due to which their operating costs tend to increase.
❖ Technology : Use of outdated technology is often stated as serious lacunae in the case of
small industries , resulting in low productivity and uneconomical production.
❖ Sickness: The causes of sickness are internal and external. Internal problems include lack of
skilled and trained labour and managerial and marketing skills. Some of the external problems
include delayed payment , shortage of working capital etc..
❖ Global Competition: Due to Privatisation , liberalisation and globalisation competition is not
only from medium and large industries , but also from multinational companies. It is difficult
to withstand he quality standards , technological skills ,financial creditworthiness , managerial
and marketing capabilities of large and multinational industries.