Nature and Growth of Entrepreneurship

 

Functions of entrepreneurs

Innovation involves imagination and creativity.  A person cannot be called an entrepreneur unless’ he creates something new and something different in his venture.

Innovation: entrepreneur analyze the existing condition of business’s affairs and try to reach a new level of stability by trying new and productive combinations of existing resources. They think of creative ideas and use their managerial and innovative skills to put those ideas into reality. They combine the productive factors-(land, labour, capital and enterprise), bring them together and help in the economic development of a nation.( Nation building)

Schumpeter asserts that, innovation can occur in the following forms:

• Introduction of new goods.

• The use of new method of production.

• The opening of a new market.

• The conquest of a new source of supply of raw materials; and

• The reorganization of any industry.

Assumption of Risk:

An idea that is put to reality does not always guarantee success. The Entrepreneurs Must assume the risk of success or failure of the enterprise that they wish to launch, and such risks are not insurable.

If they the idea materialize and fail, then the entrepreneur must bear the loss himself.

NB:  risk-bearing or uncertainty-bearing is the most important function of an entrepreneur. At all times he MUST tries to reduce this by his initiative, skill, and good judgement.

Idea Generation: Entrepreneurs do not immediately think of ideas and put them into practice, these Ideas can be generated through environmental scanning and market survey.

It is the function of the entrepreneurs to generate as many ideas as he can for the purpose of selecting the best business opportunities which can subsequently be taken up by him as a commercially - viable business venture.

Entrepreneurs think of a variety of ideas, apply measurable techniques to test their applicability, supplement them with empirical findings, arrive at the best alternative and apply it in practice.

The selection of an idea, thus, involves the application of research methodology by the entrepreneurs, vision, insight, observation, experience, education, training, and exposure of the entrepreneur.

Idea generation specifically implies product selection and project identification.

Organizing and Management: An entrepreneur brings together various resources of production, organizes them, and converts them into a productive unit. The entrepreneur manages the following activities:

•           Scanning of the business environment (SWOT Analysis)

•              Measuring the suitability of business idea.

Market Research and Selection of Product Line: The next important function of the entrepreneur is market research and product market research are the systematic collection of data regarding the product which the entrepreneur wants to manufacture.

Entrepreneur must conduct market research continually to know the details of the proposing product, i.e., the demand for the product, selection of product line, the price of the substitute product, the size of the customer, etc. while starting an enterprise.

• Studying the government rules, regulation, and policies.

• Performing government formalities.

Determination of Objectives: The next function of the entrepreneur is to determine and lay down the mission, vision, objectives, and goals of the business, which should be spelt out on clear terms. In other words, entrepreneur should be very much clear about future prospect of the venture.

Determination of Form of the Venture: The function of an entrepreneur in determining the form of enterprise is also important. Entrepreneur must decide the form of enterprise based upon the nature of the product, volume of investment, nature of activities, types of products, quality of product, quality of human resources, etc. The major forms of ownership organizations are sole proprietorship, partnership, joint stock company and cooperative society.

Managing of Funds: Fund raising is the most important function of an entrepreneur. All the activities of a business depend upon the finance and its proper management. It is the responsibility of the entrepreneur to raise funds internally as well as externally.

Selection of Location:

Procurement of Raw Material: Entrepreneur must identify the cheap and regular sources of supply of raw materials, which will help him to reduce the cost of production and face the competition.

Procurement of Machinery: The next function of the entrepreneurs is to procure the machineries and equipment for establishment of the venture. While procuring the machineries, he should specify the following details:

a) The details of technology

b) Installed capacity of the machines

c) After sales service facilities

Recruitment Selection and Placement of Workforce: Entrepreneur has to perform the following activities while undertaking this function:

a) Estimating workforce need of the organization

b) Laying down of selection procedure

c) Placing the employee

Another important function of entrepreneur is ‘financial planning’, which translates all other activities into monetary terms. Though an entrepreneur is more than a manager, he combines in him some managerial functions. He deals with day-to-day affairs of a going concern by directing and controlling the employees.

Decision Making: Arther H. Cole has described the entrepreneur as a ‘decision maker’. He takes various decisions regarding following matters:

❖ The determination of these objectives of the enterprise and the change of those objectives as conditions required or made advantageous.

❖ The development of an organization, including efficient relations with subordinates and all employees.

❖ Securing adequate financial resources and maintaining good relations with the existing and potential investors.

❖ The requisition of efficient technological equipment and the revision of it as new machinery appeared.

❖ The development of a market for the products and the devising of new products to meet or anticipate consumer’s demand: and

❖ The maintenance of good relations with public authorities and with the society at large.

Leading: As an entrepreneurial venture flourish, an entrepreneur takes on a new role of a leader. He acts as a visionary leader. The entrepreneur’s leading function is drawing the best out of his human resources. He must create teamwork, motivation among employees. As a leader, entrepreneurs must shift from the command-and-control style of managing to a coach-and-collaboration style.

Managing Growth: The entrepreneur must manage the enterprise’s growth. It includes such activities as developing and designing appropriate growth strategies, dealing with crises, exploring various ways for financing growth and placing a value on the venture.

Support to Social Environment: Social environment is characterized by social customs, culture, values, and beliefs. Changes are not easily acceptable in each socio-economic environment of a country. Entrepreneurs discover new sources of materials, new markets, and new opportunities and establish new and more lucrative forms of organizations. This reflects their will power, enthusiasm and energy and helps in overcoming the society’s resistance to change.

Economic Development: Entrepreneurs play an important role in accelerating the rate of economic development of developed and under-developed countries. They exploit the country’s resources (land, labour, capital, and technology) and optimize their utilization to result in development of that country.

 

Reference

Cole, A. H. (1942). The entrepreneur as a decision maker. Journal Title, Volume (Issue)

Schumpeter, J. A. (1934). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. Harvard University Press.