There are so many concepts about the functions of an entrepreneur, due to the Complex role. His functions may vary, according to time, place, circumvention, level of economic development, sources and size, etc.
Functions of an Entrepreneur
Following are the different important functions of an entrepreneur in business:
1. Promotional Functions of an Entrepreneur
The foremost functions of an entrepreneur are to promote and establish an enterprise, after testing the business opportunities.
“To know the opportunities and to establish an industrial unit on the basis of this knowledge are the two functions of the entrepreneur.”
Following are the functions, related to the promotion of the Enterprise:
- To conceive business thoughts and ideas.
- To collect the required facts and information related to the idea and to test the viability and profitability of the idea.
- To forecast the economic analysis.
- To select suitable ownership (leadership, partnership, company, and joint ownership, organizations, etc.).
- Determination of the size of the Enterprise.
- To determine the objectives of the Enterprise.
- To determine the location of the Enterprise.
- To prepare plant layout.
- To make financial planning by estimating the requirements of capital.
- Registration and completion of other legal formalities.
- To arrange the required resources and infrastructural facilities.
- To take a decision regarding the internal organizational structure.
- Selection of equipment and production production process.
- To carry out market research.
- To start business activities.
2. Risk Bearing Functions
Other main work of an entrepreneur are to bear risks. In all types of businesses small or large, risks are quite inherent.
Without bearing risk, the operation of the business cannot be even imagined. The risk is related to capital.
In modern business, various types of risks and uncertainties always persist. Among these, some risks are such from which one can feel secured by getting insurance against these, like fire accidents, thefts, dacoity, earthquakes, labour accidents, floods, storms, tsunamis, etc.
However, some unknown risks are such which may neither be predicted nor may be insured and are to be borne only by the entrepreneur, like:
- The risk relating to fluctuations in demand and changes.
- Risks arising due to competition (changes in tastes, fashion, and demand).
- Risks of changes in the prices and various resources.
- Risks of changes in government policies.
- Risks arising from trade cycles.
- Risks arising from large changes in the business environment.
- Risks of large changes in technology.
- Risks of human relations and inefficiency.
An entrepreneur is required to take various types of decisions, on the basis of predictions and foresightedness.
If any decision or prediction of the entrepreneur goes wrong, then he may have to bear excessive losses.
Hence, we may say that “The functions of an entrepreneur are to be safe against the known risk and to be the unknown risky wisely.”
3. Contributing to Social Development
The entrepreneur should also contribute towards the composition of battery society, should make efficient use of social resources, should create more employment and should also fulfill his social responsibilities towards various sections of the society.
4. Function Relating to Management, Organisation, and Control
An entrepreneur has to perform various functions relating to management, organization, and control, along with the functions of the promotion of the enterprise.
The efficient operation of the undertaking, in sole ownership, business, the entrepreneur is often, both the owner and the manager.
Hence, he has to perform various managerial functions. But, in other patterns of business ownership, like Company, State Enterprises, and joint Sector Enterprises, etc., ownership and management are separate.
Hence, the entrepreneur has to take the services of professional managers for managerial functions.
Although in the modern age, functions of Management, organizational responsibility, and control of total activities are in the hands of professional managers, termed as technostructure, in spite of it, the entrepreneurs are regarded as the ultimate controller of these activities.
This is the reason that he has to perform various important functions of an entrepreneur, as follows:
- To decide the objectives, goals, and policies of the Enterprise.
- To prepare plans and sub-plans for each department and at each level.
- Selection of suitable pattern of the organization, according to the nature and size of the undertaking.
- To entrust the right work to the right person and to distribute all related work to various specialists and groups of persons.
- To determine the relationship between various persons working within that department and outside.
- To establish coordination between the functions and activities of various departments and sub-departments to maintain uniformity formality in the working of all departments.
- To awaken the feelings of owning towards work, among the employees working in the organization.
- To provide situations for the development of the employees.
- To improve the communication between the employees and the officers and to perform the function of leadership and directions.
- To develop a suitable control system to ensure that the work performed is in accordance with the plans.
5. Financial Functions
The Fourth main work of the entrepreneur is to manage the required finances for the undertaking, according to the nature and size of the undertaking.
Although all the factors of production have their own importance, what among this capital is the most important source, because if the capital is insufficient, then the arrangements for various other factors also become futile.
Hence, the entrepreneur should perform the following role of an entrepreneur:
- To do rational financial planning.
- To determine the financial sources to raise the funds in desired Quantum, according to financial planning.
- To arrange fixed capital and working capital, by keeping in view the short term and long term financial requirements of the undertaking.
- To determine the suitable sources of finances, like shares, and debenture, bank loans, and loans from other Financial Institutions, etc. by keeping financial requirements in view.
- To select the most economical financial resources by making a comparative study of various financial resources.
Presently, the government also provides subsidies and loans with easy terms for the establishment of enterprises.
Hence, the entrepreneur should keep this fact also, in view.
6. Functions Relating Innovations
In the context of a developed economy, by the term entrepreneur, we mean ‘innovator’.
Innovations are major functions of an entrepreneur innovation that means enforcing new methods in the business.
For business, it is not as necessary to grow, as to becoming continuously new.
Innovations can be made in only of the following spheres:
- Discovering new commodities.
- Producing new commodities.
- Making use of new methods, techniques, implements, and machinery in production.
- Bringing improvements in quality, size, color, designs, and packaging, etc.
- Searching for new uses of commodities.
- Searching for the new markets.
- Improving existing products.
- Locating new sources of raw materials and semi-finished goods.
- Developing innovations and adapt them to improve the position in the competition, to improve customer services, quality and economy in various fields.
- Introducing product diversification in high stages of economic development.
- Implementing new ideas in the field of Human Resource Management.
7. Functions Relating to Distribution
An entrepreneur is the owner of the business. He deploys various factors of production (land, labour, capital, and Organisation, etc.) in the business.
Hence, the Entrepreneur provides a suitable reward to the landowners, workers, capitalists, and managers, in return for their services, under his function relating to distribution.
Thereafter whatever remains with the entrepreneur is his share, as profit.
Thus, this is the important function of the entrepreneur, which relates to the distribution of income from the industry between various sources of production.
8. Functions Relating to Efficient Marketing
In a present-day competitive economy, similar commodities and services are being manufactured by several producers, who are also distributing them. Competition is on an international basis.
The fact is that today competition has become the base of Business.
- To make advance estimations of the demand and sale of various commodities and Services.
- Selection of the best suitable medium by studying all existing distribution sources in the markets.
- To create demand for commodities and services and to keep it maintained.
- To manage an effective sales force.
- To use advertisements to stimulate the intermediate and to make use of sale promotion sources to increase the demand for commodities and services.
Thus, an entrepreneur should undertake aforesaid and other functions also fore efficient marketing.
But, all should not be left only in the hands of the manager and employees of the marketing division.
9. Searching for New Opportunities
Establishment and operating is not the only role of the entrepreneur.
He should go on continuously searching for new opportunities for profit so that while functioning as producer or distributor, he feel the newness and my work with greater interest.
This is the most essential function of the entrepreneur.
10. Participating and Development Programmes
One of the functions of an entrepreneur is also to participate in entrepreneurial development programs, organized by the government or Non-Government organizations.
Though such participation, the entrepreneurs will gain important knowledge about various new opportunities for development.
11. Functions Relating to Project
The entrepreneur should prepare project reports and feasibility reports and should also review them, so that these may be quickly approved.
12. To Make Future of the Business
The entrepreneur should also ensure the bright future of his undertaking, by way of the successful operation of the business through rational and untiring efforts.
The specific functions of the entrepreneur in any business undertaking are to make today’s business so competent that it may create Tomorrow.