Lesson 2. Concept of entrepreneur, Entrepreneurship, Functions of entrepreneur
Entrepreneur plays a vital role in the economic development of a nation. Economic development refers to the income levels and its stability. This chiefly depends on its entrepreneurs. An Entrepreneur is a kind of individual who aims at achieving his goals and who possesses knowledge, skills, inventiveness, drive and spirit of innovation. An entrepreneur always finds opportunities and transforms opportunities into achievement and gains economic benefits. Entrepreneurship involves process of manufacture, innovation in production, usage of new materials, and market etc. An entrepreneur does have that mental attitude to foresee risk and uncertainty with a view to achieve a specific motive.
2.2. CONCEPT OF ENTREPRENEUR
The word “Entrepreneur” is derived from the French verb ‘entrepredre’ which means ‘to undertake’. It means Between Takers. Entrepreneur is another name of Risk Taker. An entrepreneur is an individual who takes moderate risks and brings innovation. Entrepreneur is a person who organizes/ manages the risks in his/her enterprise. “Entrepreneur is an individual who takes risks and starts something new”
During the early 16th century the Frenchmen who organized and led military expeditions were referred to as ‘Entrepreneurs’. During the early 18th century French economist Richard Cantillon used the term entrepreneur for business. Since that time the word entrepreneur means one who takes the risk of initiating a new organization or introducing a new thought, product or service to society.
An entrepreneur is an individual who takes moderate risks and brings innovation. An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome. An entrepreneur is "one who undertakes an enterprise, especially a contractor, acting as an intermediary between capital and labour."
According to J.B. Say, “An Entrepreneur is the economic agent who unites all means of production; land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit”. Thus, an entrepreneur can be considered as a person who possesses the initiative skill and drives to set up a business or enterprise on his own and ultimately achieves his desired goals. He brings social change. He looks for opportunities, and finds his own way mainly for economic gains. An entrepreneur is generally a highly calculative individual who always undertakes risks in order to achieve his goals.
According to Joseph Schumepeter, “An entrepreneur in an advanced economy is an individual who introduces something new in the economy, a method of production not yet tested by experience in the branch of manufacture concerned, a product with which consumers are not yet familiar, a new source of raw material or of new market and the like”.
According to Cantillon “An entrepreneur is the agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future”.
To conclude, an entrepreneur is the person who undertakes risk, combines various factors of production, exploits the supposed opportunities, and creates wealth and employment.
2.4 CONCEPT OF ENTREPRENEURSHIP
The term ‘entrepreneurship’ is associated with the term ’Entrepreneur’. Though, they apparently look same, conceptually they are different. Entrepreneurship is the process of finding opportunities in the market place, planning for the resources required to convert these opportunities into success and to achieve long term gains. It involves creating capital by exploiting resources in new ways to initiate and operate an enterprise. Entrepreneurship can be defined by describing what entrepreneurs do. For example: "Entrepreneurs use individual inventiveness, and take on calculated risk to create new business ventures by raising capital to apply inventive new ideas that resolve problems, meet challenges, or satisfy the needs of a clearly distinct market." But the entrepreneurship is not limited to business and profit: "Entrepreneurship involves bringing about change to achieve some benefit. This benefit may be financial but it also involves the satisfaction of knowing you have changed something for the better.”
"Entrepreneurship is essentially the act of creation requiring the ability to recognize an opportunity, shape a goal, and take advantage of a situation. Entrepreneurs plan, persuade, raise resources, and give birth to new ventures."
According to Cole “Entrepreneurship is the purposeful activity of an individual or a group of associated individuals undertaken to initiate, maintain and aggrandize profit by production or distribution of economic goods and services”.
According to Higgins “Entrepreneurship is meant the function of foreseeing investment and production opportunities, organizing an enterprise to undertake a new production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique, discovering new resources or raw materials and selecting top managers for day to day operations of the enterprise”.
The above definitions highlight risk factors, innovative ideas and resource organizing aspects and an individual or group of people who achieve goal through production or services. To conclude ,entrepreneurship is a set of activities performed by an entrepreneur.
2.5 FUNCTIONS OF ENTREPRENEURS
An entrepreneur always seeks opportunity. He also manages and coordinates production and services. He has to start with a small scale enterprise. He not only finds the business opportunities but also utilizes the other resources like 5 Ms-man, money, machine, materials and methods. However, the main functions of the entrepreneurs are as under:
1. Idea generation: This is the most essential function of the entrepreneur. Idea generation is possible through the vision, insight, observation, experience, education, training and exposure of the entrepreneur. It specifically implies proper selection of product and identification of project. Ideas can be generated through surrounding environment and market survey. It is the chief function of the entrepreneurs to generate as many ideas as possible so as to select the best business opportunities for a commercially-viable business venture.
2. Determination of objectives: Another function of the entrepreneur is to determine and lay down the objectives of the business. Entrepreneur should be quite clear regarding the following things:
(i) The nature of business
(ii) The type of business
This indicates whether the enterprise belongs to the category of a manufacturing concern or a service-oriented unit or a trading business. Thus, the entrepreneurs can attempt to venture in accordance with the objectives determined by him.
3. Raising of funds: Fund raising is the most essential function of an entrepreneur. All the actions of a business depend upon the financial support and its apposite management. It is the sole accountability of the entrepreneur to raise funds from both, internal and external agencies. In this regard, he should be aware of the different sources of funds and the official procedure to raise funds. He should be well aware of different government sponsored schemes such as PMRY, SGSY, REGP, etc.
4. Procurement of raw materials: Another important function of the entrepreneur is to procure raw materials. Entrepreneur has to find out the cheap and regular sources of supply of raw materials, which will enable to reduce the cost of production.
5. Procurement of machinery: The next function of the entrepreneurs is to procure the machineries and equipments for establishing the new venture. While procuring the machineries, he should specify the following details:
(a) The details of technology
(b) Capacity of the Installed machines
(c) Details of the manufacturers and suppliers
(d) After-sales service
(e) Warranty period of the machineries and instruments
All these details are to be minutely observed by the entrepreneurs.
6. Market research: Another important function of the entrepreneur is market research and analysis of product. Market research involves the systematic data collection regarding the product which the entrepreneur wants to manufacture. It has to be done indefatigably in order to know the details of the product, i.e. the demand for the product, the supply of the product, the cost of the product, the customers, etc. while initiating an enterprise.
7. Determination of form of enterprise: Entrepreneur has to consider the nature of the product, level of investment, nature of activities, types of product, quality of product, quality of human resources, etc. to decide the form of enterprise. The principal forms of ownership organizations are sole proprietorship, joint venture, Joint Stock Company and cooperative society. Determination of ownership right is crucial on the part of the entrepreneur to obtain legal title to resources.
8. Recruitment of manpower: Entrepreneur has to perform the following activities while undertaking this function:
(a) Estimating manpower need of the organization
(b) Forming selection procedure
(c) Devising scheme of reimbursement
(d) Forming the rules of training and development
9. Implementation of the project: Entrepreneur has to work on the implementation of the project. The acknowledged project is to be implemented in a time-bound manner. All the activities from the initial stage to the final stage are to be accomplished by him in accordance with the implementation schedule to manage cost and time, as well as to manage competition. Thus, implementation of the project is an important function of the entrepreneur.
To conclude with, all these functions of the entrepreneur can precisely be put into the following categories:
(ii) Risk bearing
Mohanty, S.K. 2009. Fundamentals of Entrepreneurship. Prentice Hall of India Pvt. Ltd., New Delhi.
Prasad, R. 2003. Entrepreneurship - Concepts and Cases. ICFAI Publications,Hyderabad