Q. Define an Entrepreneur. Explain the characteristics and functions of entrepreneur.
Ans. MEANING OF ENTREPRENEUR: The word ‘Entrepreneur’ is derived from the French word ‘entreprendre’ which means to undertake. Thus, entrepreneur is the person who undertakes the risk of new enterprise.
The meaning of the term entrepreneur varies from person to person and from period to period. To a layman, an entrepreneur is a person who starts his own budiness or industry and organises different factors of production and marketing processes for the purpose of earning profits. It has also different meaning from different area of subject. To an economist, an entrepreneur is a person who combines the different factors of production for enhancing his values and initiates changes. To a psychologists, he is a person who ventures in the dark and deep area of uncertainty and unknown opportunities and explores new possibilities. To a businessman, he is a person who peruses his capabilities aggressively and explores new opportunities amidst changing environment. In many countries, the entrepreneur is often associated with a person who starts his own new and small business. Business may be manufacturing, transport, trade and other self employed vocations in the service sector.
DEFINITION OF AN ENTREPRENEUR: An entrepreneur is someone who utilises land & labour, invests in capital and resources and aims at producing goods or delivering services.
1) Richard Cantillon was the first person to use the term entrepreneur to refer to economic activities. He defined an entrepreneur as– “An entrepreneur is the agent who buys factors of production at a certain price in order to combine these into a product with a view to sell it at uncertain prices.”
2) According to F.H. Knight, “Entrepreneurs are a specialised group of persons who bear risk and deal with uncertainty.”
CHARACTERISTICS OF AN ENTREPRENEUR: Some common characteristics of the entrepreneur can be commitment, leadership, risk bearing, motivator, confident etc. The important features are as follows:
1) Calculated Risk Taker: Every business situation involves the possibility of profit or loss. An entrepreneur always goes for a calculated risk taker. He accepts the risk as a challenge. He acoids the low risk situation due to absence of challenge but ar the same time he does not involve himself in highly risky situation as he knows the chances of failure. He maintains the balance between two situations and goes for achievable/affordable challenges. He prefers to take realistic risk because he wants to succeed. So, an entrepreneurs are not risk taker rather they are risk eliminators. They work in such a way that obstacles that come in the way of their project can be removed.
2) Desire for Responsibility: This is a fundamental characteristic of an entrepreneur who feels deep sense of personal responsibility for the results of the project he starts. He prefers to control over the resource, which he uses for achieving self determined goals.
3) High level of Energy: or Hard working: Entrepreneur is more energetic than the ordinary man. Hard work and long working hours are common feature of an entrepreneur. They are inspired by inner urge and by the motivational stories of great achievers. The young intelligent and creative entrepreneur like to work 12 hours or more a day just to avoid having to work 8 hours a day for some one else.
4) Innovator: An innovative entrepreneur sees the opportunity for introducing a new technique or a new product or a new market. He explores new market and organises the enterprise. He exploits the invention commercially and thus produces new and better goods which give him profit and satisfaction.
5) Creative: Creativity is a special ability to find new ideas implementing such changes in an acceptable way. Further successful innovation depends upon the creativity. It is one of the most important requirements of an entrepreneur to be creative.
6) Commitment and Determination: Entrepreneurs generally have high level of energy due to which they are committed to the successful execution of their plan. They are devoted to their business with a deep sense of determination for success. Both commitment and determination is generally seen in their action.
7) Future orientation (Vision): Entrepreneur looks beyond the present and concerns himself with considering what can be done in the future rather than brooding on what was done in the past. They do not like to sit back. They stay focused on the future. They work with a vision for growth, committed to constructive change.
8) Self confidence and Optimistic: Entrepreneurs direct their abilities towards the accomplishment of goals with ups and down in the strength. They have to face many ups and down in the business. But they believe in themselves and handle the situation confidently. They work with a positive approach and optimistic attitude. Entrepreneurs not only maintain their confidence and optimism, but they also raise the level of their team members also.
9) Organiser: An entrepreneur knows now to bring together the right people for accomplishing a task. He effectively and efficiently combines jobs and people and transforms his vision-into reality.
10) Integrity and Reliability: Entrepreneurs do not like to be controlled by others. They prefer to work independently specially for themselves. They like to take initiative for solving the problem. They always own the responsibility for the outcome of the project with which they are associated.
11) Socially Responsible: Entrepreneur remains fully aware abut his responsibility towards society. He understands that fact the society also expects from him. He tries to do so by creating employment opportunities, by creating new product, innovative products, quality products, fair price and quality assurance etc. He does things in an effective and efficient way. Proper Utilisation of resources made by him, i.e. also considered as a contribution to society. So, the old concept of making profit for only himself is no more followed or accepted these days.
12) Flexibility: Entrepreneur keeps himself updated regarding changes in the environment. He is capable of adapting himself to the varying demands of business and customers. He clearly understands that rigidity (inability to change) may lead to failure in today fast changing global economy.
13) Technically Competent: Technological change is the prime mover in the process of economic growth. Inventions and innovation have led the process of development in the world. The success of an enterprise largely depends upon the adoption of the present prevailing technology. Entrepreneurs are technically competent these days. They generally have a reasonable level of technical knowledge. They keep themselves updated in the changing pattern of production, suited to their requirement.
14) Communication Ability: Communication plays an important role in the success of an enterprises. Entrepreneurs these days possess the quality of good communication. They are well equipped with the importance of communication and the use of latest technology in the process of communication.
15) Tolerance for Ambiguity: Entrepreneur tend to have a high tolerance for ambiguity, especially in the face of uncertainty and unknown outcomes. They handle the uncertainty with their will and skill by making bold decisions. They face the adversity bodly and bravely.
FUNCTIONS OF AN ENTREPRENEUR: Entrepreneur is a person who performs many useful functions. He undertakes a venture, assumes risks and earns profits. Some of his most important functions are as under:
1) Assumption of Risk: Risk taking or uncertainty bearing implies assuming the responsibility for loss that may arise due to unforeseen contingencies of the future. A business risk also involves the risk due to possibility of change in the taste of consumers, technique of production, new invention etc. The entrepreneur has to bear these high degree of risks. He assumes all possible risks of the business. Thus, risk assumption and risk bearing is the most important function of an entrepreneur. He tries to reduce risk with his initiatives, knowledge and skills and good decisions.
2) Business Decision: Entrepreneur has been stated as a decision maker also. He has to decide the nature and type of goods to be produced or services to be rendered in the society. He decides the specific industry into which he will work and get a reasonable return. He has to decide the best possible method of production. He makes suitable changes in the size of business, its location, technique of production and does everything that is needed for the maintenance and development of the business.
3) Managerial Functions: Entrepreneur has to perform a lot of managerial functions in his enterprise. There are different types of managerial functions that an entrepreneur has to perform and these are based on the size and activities of the enterprises. These functions include formulation of production plan, arrangement of finance, purchase of raw material. procurement of production facilities, organisation of sales, personnel management and so on. Further administrative functions of recruitment, selection, etc. This is considered to be very tough job. However, in a large establishment, these managerial functions can be delegated to the paid subordinates.
4. Functions of Innovation: According to Schumpeter, an entrepreneur is basically an innovator who introduces new combinations of means of production. It is the entrepreneur who conceives the idea for the improvement in the quality of product line. He considers the economic viability and technological feasibility of the total project. It is this function of the entrepreneur which injects the elements of dynamism into the economic system.
Thus, Generally, an entrepreneur performs many useful functions for the development of the society and it satisfies the needs of the various stakeholders in the enterprises.
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