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Entrepreneurial Decisions in Setting Up A Business Enterprise

The document discusses the key decisions an entrepreneur must make when setting up a new business enterprise. The entrepreneur must first select a line of business by choosing a type of manufacturing, trading, or service industry to enter. They must then analyze the proposed business to estimate profitability based on costs and potential sales. The entrepreneur must also decide the optimal size of the business unit based on factors like production techniques, the target market size, available financing, and management competency. Starting on a small scale and gradually increasing is advisable when risks are high or an untested idea is being pursued. However, an initially large scale is also possible if the entrepreneur is willing to assume the associated risks.

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JITENDRA BISWAL
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35 views

Entrepreneurial Decisions in Setting Up A Business Enterprise

The document discusses the key decisions an entrepreneur must make when setting up a new business enterprise. The entrepreneur must first select a line of business by choosing a type of manufacturing, trading, or service industry to enter. They must then analyze the proposed business to estimate profitability based on costs and potential sales. The entrepreneur must also decide the optimal size of the business unit based on factors like production techniques, the target market size, available financing, and management competency. Starting on a small scale and gradually increasing is advisable when risks are high or an untested idea is being pursued. However, an initially large scale is also possible if the entrepreneur is willing to assume the associated risks.

Uploaded by

JITENDRA BISWAL
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SETTING UP A BUSINESS ENTERPRISE

The process of setting up a business enterprise is known as promotion and the


persons who carry out this process are called promotion. Promotion of a
business enterprise involves several decisions. Promotion of a new business
enterprise is like the birth of a child. The person who has a business idea and
takes steps to launch a business enterprise is known as an entrepreneur.

Entrepreneurial Decisions in Setting up a Business Enterprise


An entrepreneur has to take the following decisions in order to establish an
enterprise.
1. Selection of line of business: The entrepreneur has to decide the
type of business in terms of manufacturing, trading or service. Then he has to
select the types of goods and services he will produce and distribute. He
should then analyze and estimate the profitability of the proposed business
on the basis of operating costs and sales revenue. Marketing research should
be carried out to find out the number of customers and their needs. Decisions
regarding product design, pricing policy, marketing and distribution channels
should be made.
The selected line of business must be such that the expected rate of return
must be fair keeping in view the risks involved and the amount of investment
required in the enterprise. Also, the degree of risk must be such which is
acceptable to the entrepreneur. The selected line of business must also be
technically feasible i.e. it should be possible for the promoter to arrange for
the required finance, technology, labor, material etc.
2. Size of the unit: Decision regarding size of the unit is very
important. The optimum size is one at which the average cost per unit is
minimum. The entrepreneur should aim at the optimum size keeping in view
the nature of the product, technique of production, the extent of market,
availability of finance, competence of management etc. Large scale
operations offer the advantages of economies of scale but require huge
capital investment. When risk involved is high or a new idea is to be tried, it
is advisable to start the business on a small scale and gradually increase the
size. However, the initial size of the business can also be large provided the
entrepreneur is willing to assume the risks associated with it.

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