functions of an entrepreneur.docx

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Assignment | Functions Of An Entrepreneur 1

FUNCTIONS OF N ENTREPRENEUR

Who is an Entrepreneur?

“ ntrepreneur is a ‘proprietary capitalist’ that is a supplier of

capital and at the same time working as a manager intervening

between the labour and consumer He effectively coordinates

productive resources to attain profit and growth ”

Main functions of an Entrepreneur

An entrepreneur performs all the necessary functions which are essential from the

point of view of operation and expansion of enterprise. The main functions of an

entrepreneur are as follows:

1. Idea generation:-

Idea generation is an important function of an entrepreneur.

Innovative idea, new concept, product or service also incremental value

addition.Sources of new ideas –

Consumers,

Existing companies,

R&D,




Employees,

Dealers & retailers.

Methods of generating new ideas –

Brain storming, GD, data collections, feedback,

Invitation of ideas through advertisements,

Mails or internet,

Market research,

Commercializing inventions,

Business contests, fests, business Bazigar on Star TV-

contest business plans.

2. Planning

Planning is also an important function of entrepreneur. In the direction of

setting up of an enterprise, entrepreneur prepared a blue print of proposed project

in a systematic format. He determines the goal of the business, formulates

policies, analysis the markets, makes forecasts and figures out programme of

work to be done.

In the business plan the entrepreneur summaries three things:

i. What are the entrepreneur’s goals and objectives?

ii. What strategies will the entrepreneur use to obtain these goals and

objectives?

iii. How will the entrepreneur implement these strategies?




As regards the proposed projects, planning involves the following activities:

a) Scanning of the business environment.

b) Measuring the suitability of business idea.

c) Selection of product line.

d) Determination of type of business organization

e) Estimation of capital need.

f) Selection of capital resource

g) Selection of location

h) Studying of government rules, regulation and policies.

i) Performing government formalities.

j) Studying the availabilities of labour force

k) Study of the market and market strategy to be adopted.

The plan should describe the match between the entrepreneur’s ability and

requirements for producing and marketing a particular product. It should define

strategies for production and marketing, legal aspect and organization, and

accounting and finance.

Another important function of entrepreneur is financial planning ; which

translate all other activities into monitory terms. He has to prepare a cash

budget which tells him how much money he need before he opens for business

and how much money he need to keeps the enterprise operating.




3. Risk taking

Risk taking is a way an entrepreneur works.

Richard Cantillon states that entrepreneur is an agent who buys means of

production at certain prices and sells them at uncertain prices.

Thus, Cantillon introduces elements of direction and speculation into the

functions of an entrepreneur.

Knight describes him as the bearer of uncertainty. There is difference between

risk and uncertainty. A risk situation occurs when the entrepreneur is required

to make a choice between two or more alternatives whose potential outcomes

are not known and must be subjectively evaluated. As a risk taker, the

entrepreneur has to make decisions in conditions of uncertainty, balancing

potential success against potential loss. Uncertainty is defined as risk which

cannot be calculated. The entrepreneur, according to Knight, is the

economic functionary who undertakes such responsibility which, by its very

nature, can neither be insured nor salaried.

The entrepreneur performs the function of reducing uncertainty in his plan of

investment and expansion of the enterprise.

J.B. Say also stresses risk-taking as the specific function of an entrepreneur.

4. Team building

TEAM building isn't merely something entrepreneur does because it creates

harmonious work groups, or is fun to do. It is a way to bring out the power of




collaboration among individuals. It is a proven method for blending the talents,

skills, and inherent creativity of diverse people. This collaboration is behind

the strategic decision to empower the work groups to leverage skills, time, and

resources for their own benefit and that of the organisation.

Much of the problem of making teams successful in the workplace stems from

past perceptions of what teams are, and ignorance of the powerful principles

underlying them. Teams are a formal way to actualise collaboration.

Collaboration is at the heart of successful decision-making, but somehow this

fact eludes many organisations. In teams, the sum total of collaboration is

greater than what could have been achieved individually. To test this, think of

some decision you need to make, then ask someone for his or her thoughts. If

an entrepreneur wants to really expand the possibilities, get several people

together and ask them to discuss the issue. Then take notes. Later, look at your

notes and see how many new facts and ideas have been added.

Thus, team building is a process of awareness building. It's helping an

entrepreneur to understand that they are greater collectively than individually.It is an understanding that most of our decisions will be better when some

degree of collaboration is applied.

5. Innovation:

J. Schumpeter has made substantial contribution to the literature of

entrepreneurship. He says that an entrepreneur is basically an innovator and he

introduces something new in the economy. He sees profitable opportunities and

exploits them. According to Schumpeter, the entrepreneur is one who carries

http://www.entrepreneur.com/tradejournals/article/173422647_1.html

http://www.entrepreneur.com/tradejournals/article/173422647_1.html




out new combinations of means of production. The process of innovation may

be in the form of:

i. Introduction of a new product.

ii. Use of new methods of production.

iii. Opening of a new market.

iv. The conquest of new source of supply of raw material.

v. A new form of organization.

Schumpeter also entrusts the function of sound management and control for the

survival as well growth of the production unit. Further he also distinguishes

between an inventor and innovator. An inventor discovers new methods and

new materials whereas an innovator utilizes inventions and discoveries in order

to make new combinations and thus produces better goods which give him

more profits and satisfaction than before.

A distinction has also been made between a manager and an innovator by

Schumpeter. A manager performs the function of looking after day to dayaffairs of his going concern while an innovator changes the factor combinations

to enhance productivity and profits. Schumpeter said that the basic function of

an entrepreneur was to innovate. He was never a risk-bearer. He said that

though the basic function of an entrepreneur is to innovate, this function must

always appear mixed up with other kinds of activity. He wrote: Everyone is an

entrepreneur only when he actually carries out new combinations and loses that

character as soon as he has built up his business, when he settles down to

running it as other people runs their business .




Generally speaking the organizational innovativeness is related to the

innovativeness, personality, attitude and background characteristics of

organizational members. This is more so in case of innovations.

Stephen Loveless and Barry Bozeman offered an explanation that the influence

of an innovator on the organization is more than the influence of mere

members of the organization.

An entrepreneur who is successfully performing the function of innovation

would be more supportive than adopters.

It is not true that inventions can be carried out only by large firms due to their

strong financial, technical and managerial base. The world's most useful

inventions have been made by the small firms.

Large firms may have strong base but they lack flexibility. They cannot react

rapidly to new demands and exploit them but small firms can do this.

6. Decision maker:

Some writers are of the view that the qualities of the entrepreneur are to take

decisions regarding the activities of the concern. He is expected to take

decisions about the type of business to be done and the way of doing it. Arthur

H. Cole describes an entrepreneur as a decision maker and describes thefollowing functions of an entrepreneur.

i. The determination of objectives of an enterprise and the change of

those objectives as conditions required or made advantageous,




ii. The development of an organisation including efficient relations with

subordinates and all employees,

iii. Securing adequate financial resources, the relations with existing and -

potential investors,

iv. The acquisition of efficient technological equipment and the revision

of it as new machinery appears,

v. The development of a market for the products and the devising of new

products to meet or anticipate consumer's demand,

vi. The maintenance of good relations with public authorities and with

society at large.

7. Organisation & Management Marshall

Recognized organization and management of the enterprise as the important

functions of an entrepreneur.

When the organization grows bigger, the entrepreneur effectively delegates

authority and finds responsibility at various levels of management. The

network of decision making becomes more complex.

The organisational structure may become highly complex with the expansion

of business but the central function of an entrepreneur remains the same. It is

the entrepreneur who has to perform the function of expansion and contraction

of the total business and its branches.

Harbinson does not denote the entrepreneur in Schumpeter's sense but, he says

that the entrepreneur harnesses new ideas of different innovations to the best

advantage of the organisation. The entrepreneur may or may not try new




combinations of resources but he must be a good administrator. He is at the

helm of affairs and is the final judge in the conduct of his business.

The function of organisation and management includes :

i. Planning of an enterprise,

ii. Co-ordination, administration and control,

iii. Routine type of supervision.

The entrepreneur is in essence an institution which comprises of all people

required to perform various functions. The task of such people is to innovate,

adjust or combine various factors of production, and expand on account of

change in demand and market conditions. They must foresee the opportunities

and must also be in a position to make opportunities out of a given situation.

8. Market research

With effective market research, an entrepreneur can determine the need for

his service, a product's likelihood to sell, target-market demographics, and

desirable store locations. There are numerous ways to uncover this information

from online research to focus groups to counting customers. To help he meet

his target market's needs, he can put together a collection of our best market-

research articles and resources.

It is conducted to estimate the demand and market share of the proposed

product/service in future.

Demand analysis and market share is based on number of factors -

consumption pattern, availability of substitute goods/service, competition etc.




A preliminary discussion with consumers, retailers, distributors, competitors,

suppliers is carried to understand consumer preferences, existing and potential

demands, strategy of competitors, and practices of distributors, retailers etc.,

present and prospective consumers, geographic and seasonality distribution of

the demand, marketing mix of competitors, accepted marketing mix of

consumers.

9. Leading

As an entrepreneurial venture grows, an entrepreneur takes on a new role – that

of a leader. He must assume the visionary leadership.

The entrepreneur’s leading function is drawing the best out of other

individuals. He must create team work among employees. As a leader,

entrepreneurs must shift from the traditional command-and-control style to

coach-and-collaboration style.

10. Other functions

Peter Kilby has listed the following functions of an entrepreneur:

i. Perceiving market opportunities.

ii. Gaining command over scarce resources.

iii. Purchasing inputs.

iv. Marketing the products.

v. Dealing with bureaucrats.

vi. Managing human resource within the firm.




vii. Managing customers and supplier relations.

viii. Managing finance.

ix. Managing production.

x. Acquiring and overseeing assembly of factory.

xi. Industry engineering.

xii. Upgrading process and products.

xiii. Introducing new production techniques and products.

xiv. Capital formation.

xv. Market expansion.




services. He has to market each product and service, after ensuring appropriate

returns (profits) of the investment. Only a properly managed organisation yields

desired results. Once the enterprise achieves its desired results, the entrepreneur

has to explore another higher goal for its proper growth and development.

The entrepreneur is not satisfied only with achieving a set goal but constantly

strives for achieving excellence.




My References-

“The Dynamics of Entrepreneurial Development and

Management”- Vasant Desai.

“Fundamentals of Entrepreneurship”- G. S. Sudha

“Entrepreneurial And Small Business Management”

- M. B. Shukla

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