CHAPTER -5
Entrepreneurship
Define Entrepreneur ?
A person who sets up a business or businesses, taking on financial risks in the hope of profit is called Entrepreneur.
Define Entrepreneurship ?
Entrepreneurship is the process of designing, launching and running a new business, which is often initially a small business.
ROLE AND RESPONSIBILITY:-
1.Initiator
The entrepreneur is the one who initiates the process of creating an enterprise by coming up with the idea for the business and planning out how to turn that idea into a reality.
2.Risk Taker
In an enterprise, the entrepreneur, being the owner, is the biggest risk taker. He is the one who finds the capital to back up his idea and also the person who is accountable in the face of the failure of that particular idea.
3.Reduces Risk
The most important roles of entrepreneurs to reduce the risk of an enterprise failure by bringing in people that can help the organization grow. These people can be shareholders or investors that have a stake in the company and therefore are motivated to help the company succeed.
4.Allocator
An entrepreneur procures and allocates various resources in the organization. The most important of these resources is manpower. The entrepreneur is responsible for hiring an efficient staff to help him carry out his business. This is important because a good manager can take a business to new heights, while a bad manager can destroy the business.
He is also responsible for creating an organizational structure and departments for a more efficient functioning of the enterprise.
5.Adhering to Legal Norms
To ensure that the enterprise adheres to legal norms and policies, such as obtaining a license is also the duty of the entrepreneur. Not pertaining to these can mean serious legal consequences for the enterprise. These could be in terms of financial losses for the organization or something even more serious such as shutting down of an enterprise.
6.Forecasting
The role of entrepreneurs involve acting as a forecaster. The enterprise works in a business environment and is affected by changes occurring in various aspects of this environment. It could be internal, such as strikes, machinery breakdowns, budget cuts etc. or these could be external, such as legal policy changes, political or social unrest, technological advancements, etc.
An entrepreneur must be able to correctly forecast these changes and prepare the organization to deal with these changes.
Solved Question for You
Q: Is an entrepreneur the same as a manager?
Answer: There are a lot of similarities between an entrepreneur and a manager with respect to the allocation of resources, decision making and guiding the employees. so, in a way, every entrepreneur can be a manager. However, the reverse is not necessarily true.
This is because, essentially, to be an entrepreneur, you must be the owner of the business and in a lot of cases managers work for someone else’s business.
Functions of an Entrepreneur:-
The top five functions of an entrepreneur. The functions are: 1. Decision Making 2. Management Control 3. Division of Income 4. Risk-Taking and Uncertainty-Bearing 5. Innovation.
Function # 1. Decision Making:
The primary task of an entrepreneur is to decide the policy of production. An entrepreneur is to determine what to produce, how much to produce, how to produce, where to produce, how to sell and’ so forth. Moreover, he is to decide the scale of production and the proportion in which he combines the different factors he employs. In brief, he is to make vital business decisions relating to the purchase of productive factors and to the sale of the finished goods or services.
Function # 2. Management Control:
The management control one of the chief functions of the entrepreneur. Management and control of the business are conducted by the entrepreneur himself. So, the latter must possess a high degree of management ability to select the right type of persons to work with him. But, the importance of this function has declined, as business nowadays is managed more and more by paid managers.
Function # 3. Division of Income:
The next major function of the entrepreneur is to make necessary arrangement for the division of total income among the different factors of production employed by him. Even if there is a loss in the business, he is to pay rent, interest, wages and other contractual incomes out of the realised sale proceeds.
Function # 4. Risk-Taking and Uncertainty-Bearing:
Risk-taking is perhaps the most important function of an entrepreneur. Modern production is very risky as an entrepreneur is required to produce goods or services in anticipation of their future demand.
Broadly, there are two kinds of risk which he has to face. Firstly, there are some risks, such as risks of fire, loss of goods in transit, theft, etc., which can be insured against. These are known as measurable and insurable risks. Secondly, some risks, however, cannot be insured against because their probability cannot be calculated accurately. These constitute what is called uncertainty (e.g., competitive risk, technical risk, etc.). The entrepreneur undertakes both these risks in production.
Function # 5. Innovation:
The function of the entrepreneur is to make frequent inventions — invention of new products, new techniques and discovering new markets — to improve his competitive position, and to increase earnings.
Conclusion:
The above description indicates the supreme position of the entrepreneur in an organisation. This is particularly true in the capitalistic or even mixed economy which is based on the price-profit system. In the socialistic economy, the state becomes the entrepreneur; the scope of private entrepreneur is extremely limited in such an economy.
It is to be noted that the importance of the entrepreneur has been declining with the growth of joint stock business and state-undertakings,. This is due to the fact that “risk is borne by the shareholders and the day-by- day control of the business is generally in the hands of salaried managers or managing directors”.
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