Entrepreneurship: Concept

and Functions
Define enterprise and entrepreneur.
Enterprise : An Enterprise is a business entity established by an
entrepreneur for

a. producing goods and (or) services

b. providing employment opportunities
c. adding value to the national income
d. improving exports
e. providing the economic development of the country.

Entrepreneur : An entrepreneur is

a. an innovator of new ideas

a. to creates new products or services
b. or improve the existing products or services
b. exploits an opportunity
c. commercializes his innovation

Under whose hands lies the entrepreneurship in the

countries following socialism.
In the countries wherein socialism is dominant, the government or the
state owns the entire entrepreneurship activity.
What are the merits and demerits of being an entrepreneur?
Merits

a. They can work as per their choice and on any idea and not confined to
someone’s instructions.
b. For the entrepreneurs who love to take high risks, the entire process is
an exciting adventurous journey.
c. The luxury of being your own boss and freedom working under
someone else.
d. Their earnings will be worth of their own efforts. They’ll not be judged
by a fixed salary for their worth.
e. The feeling contributing a product or service that is unique and
original

Demerits

a. Owing to the fact that the enterprise will be entirely innovative and
first of its kind, it is difficult to find employees with the right
experience. They’ve to tackle the employees who may not have much
insight into what is happening or the employees with little or not
experience on the given task.
b. A consistent income like salary is not guaranteed.
c. The entrepreneur being the decision maker, he has to be much more
cautious as even a small wrong decision taken can have huge impact
on the enterprise.
d. An entrepreneur has to work much more than regular working hours
and should be ready to tackle any emergencies at any time.
e. The benefits of a salaried job like medical insurance, holidays etc will
not be available, especially during the initial phase of starting the
enterprise.

How do you distinguish an entrepreneur and

entrepreneurship?
Entrepreneur Entrepreneurship

An entrepreneur is a person or a group of persons who Entrepreneurship refers to all actions executed
establishes an enterprise, take the risks, accumulates all by the entrepreneur to establish an enterprise.
the resources required to carry out production or perform
 Entrepreneur Entrepreneurship

services and creates an innovative product or service.

Entrepreneurship is the process of innovating

An entrepreneur is a person or group of persons who try new products or services and streamline the
to innovate new products or services. resources required to commercialize these
products or services.

Entrepreneur will be constantly trying to innovate and Entrepreneurship is the process followed to
bring about changes with respect to factor proportions. create value.

Elaborate entrepreneurial functions of an entrepreneur.

An entrepreneur should possess the following following
entrepreneurial functions.

a. Innovation: An entrepreneur should be innovative enough to bring

about the change in a product or service or means of production or
raw material used in the production. They should innovate and bring
about a change in one or more of these. They should innovative
enough to recognize the commercial value in their innovation and
extract economic advantage from it.
b. Risk-Taking: They should be ready to face any unexpected risk while
going through the entrepreneurship process. The should be intelligent
enough to diversify the risk in
1. production
2. investment
3. expansion of the enterprise
c. Building of Organization: The entrepreneur should have enough
organizing and managing skills to utilize the resources with minimum
loss and bring down the production costs. Being the sole decision
maker for the enterprise, the entrepreneur should be able to make
decision regarding which parts of the business need to expanded and
where the investment should go to.

The need of entrepreneurship is inevitable for a country’s

economy. How do you justify this fact?

In the developing countries like India, Entrepreneurship plays

significant role in theEconomic Development of a country. In
India, after the Government has make economic reforms in the
economy, the role of entrepreneurs has increased considerably. The
more the number of innovative entrepreneurs, the better is the rate of
economic development in the country. This is the reason why the
growth rate has been slower before the economic reforms and the
growth rate has increased after the economic reforms.

Life-line of any country: Entrepreneurs will provide a measure of

the development of a country as they contribute to the trade, whose
measure in-turn represent the progress of a country.

Source of Innovation: Entrepreneurs innovate new ideas,

improvements to the existing products or services and opens the
possibilities of new markets. They bring about a change to increase the
productivity of available resources. Thereby they contribute to the
economic development of a country.

Growth Spirit : The entrepreneur molds the changing environment

to the advantage of the enterprise. They help in overcoming the
challenges posed for the automation and the complexities of advanced
technology.
Increased profit margins: Entrepreneurs with their innovative
methods and practice reduce the cost of product/operation and
 increase the profits. There by they lay the foundation for future growth
and development.

More Jobs: Entrepreneurship involves establishment or expansion

of an enterprise. This creates more employment opportunities.

Social Gain: As entrepreneurship results in improved products and

services at a reduced cost, there by improving the standard of living. It
facilitates optimum utilization of the scarce resources, and encourages
peace and prosperity in the society.

Arun wanted to start a mobile phone manufacturing

industry in Pune. What’re the various commercial functions
that he should posses to accomplish his goal?

The following are the commercial functions any entrepreneur should

posses to start an enterprise.

Production: Production, being the key commercial function for any

undertaking, involves manufacturing of goods or delivering the
services. Regardless the size of the enterprise, the activities performed
in production can be classified as

i. Manufacturing
ii. Ancillary or support activities (the activities that support the primary
activities)
iii. Advisory

Depending on the size of the enterprise, these activities can be

performed by a single person or a number persons grouped into
separate departments.

Finance: Finance being the most important commercial function of

any enterprise, all the business activities are focused around finance.
 An entrepreneur should plan for the inflow of funds and arrange them
on a need basis. Finance plays a key role right from setting up of
enterprise, running the enterprise and also during the expansion of
the enterprise.
Marketing: Marketing involves the deliver of goods and services
from the enterprise to the end user. Marketing is an important step to
promote the activities of the enterprise. Entrepreneur should have a
good marketing plan to overcome the competition and take a top
notch position in the market.
Personnel: The commercial function involves

i. Recruiting the workforce

ii. Development and training
iii. Salaries
iv. Working atmosphere
v. Welfare like safety, health etc

Accounting: The commercial function would help the entrepreneur

to gauge the financial position of the enterprise at any point of time, by
just going through the accounting records. It involves systematic
recording of all the financial transactions of the enterprise.
What are all the various managerial functions to be
possessed by an entrepreneur?
Planning: Planning is the primary and essential managerial function,
an entrepreneur should possess. A good planning helps the
entrepreneur to initiate actions required to achieve their goal.
Planning reflects the decision making mentality of the entrepreneur
regarding various tasks in achieving his goal. A plan should have
answers to the following questions for each of the tasks.

1. What should be done?

 2. When should be done?
3. How should we do it?
4. Who should do it?

Organizing: All the employees in an organization work towards

achieving the objectives or goals set for the enterprise by the
entrepreneur. An entrepreneur will organize the various tasks in an
enterprise through

i. arranging
ii. coordinating
iii. controlling
iv. directing
v. and guiding.

Staffing: The organizational process requires various duties

performed by various levels of staff. The human resources department
of the enterprise will recruit the staff. Staffing basically involves

i. Human Resources(HR)
ii. manpower planning
iii. recruiting the employees
iv. selection and appointment of employees
v. human resources development
vi. promotion for good performers
vii. transfer based on the requirement (to various department or divisions
in the enterprise)
viii. appraisal or promotions
ix. Fixing of the salaries

Directing: The entrepreneur should be capable of directing the staff

towards organizing and executing the planned activities, in the most
 efficient manner.
Leadership: The entrepreneur should be capable of leading his team
to achieve the organizational goals while ensuring the overall
satisfaction for both the enterprise and all the stake holders. As a
leader the entrepreneur influences, guides and directs his/her staff
towards achieving this goal.
Communication: Communication means exchange of

a. emotions
b. feelings
c. ideas
d. information
e. knowledge

with others.
On average, 75% to 90% of an entrepreneur’s time goes in
communicating with others. So, effective communication is a very
critical managerial function that an entrepreneur should exhibit.
Motivation: An entrepreneur should be capable of motivating his
staff. Effective motivation inspires the staff to exhibit increased levels
of performance. The entrepreneur motivate his staff in a manner
which is

i. competitive
ii. comprehensive
iii. flexible
iv. and productive.

While motivating his staff, the entrepreneur should keep in mind the

i. economic
ii. ego
iii. psychological
iv. safety
v. social

factors for his staff.

Supervision: Entrepreneur should be capable of supervising the
subordinate to ensure that

a. work is getting done as per the given instructions

b. All the available resources are being utilized with at most efficiency
c. Take the appropriate action whenever there is a deviation from the
planned organizational goal.

Co-ordination: The entrepreneur should co-ordinate the work done

in various divisions of the enterprise, to ensure that all the divisions
are working towards the organizational goals and according to the
plan. Corrective actions should be initiated whenever there is any
deviation from the plan.
Controlling: Controlling involves

i. Setting measurable standards

ii. Measuring the current performance
iii. Comparision of the actual performance with the set standards
iv. Measure the deviations
v. Take the appropriate measures to bring the performance to the level of
standards

Give a brief explanation of the promotional functions of an

entrepreneur.

The following are the various essential promotional functions to be

exhibited by the entrepreneur.
 Discovery of an idea: The entrepreneur should be innovative to
discover innovative ideas and commercially exploit them. The ideas
could be related

i. Innovative or more effective utilization of natural resources

ii. An innovative venture with high profitability
iii. Opportunities to tap more profitability from an existing enterprise.

After innovating the idea, the entrepreneur discusses the feasibility of

his idea with the experts in those areas. Once approved further
analysis can be carried out.
Exhaustive investigation/analysis: After confirming the
feasibility of commercial prospects of an idea, the entrepreneur will do
a thorough analys of various factors and come up with estimates. The
following are the primary components which require estimates.

i. money
ii. man power
iii. materials
iv. machiner
v. power requirement

Accumulation of resources: After confirming the feasibility of the

commercial implementation, the entrepreneur will will start

i. gathering the business partners

ii. if the product/service is innovative he should apply and get the patent.
iii. Identify and acquire the location
iv. Gather the machines
v. Contact the vendors for raw material supply.
 Financing the proposition: After estimating the investment
requirement into various factors of implemenation, the entrepreneur
will start looking into various sources of financing. He will decide

i. Long term
ii. Short term

financing options.
He will also decide about the type of the financing sources like

i. Debenture
ii. Loan
iii. Share

Describe the process that one should follow to setup an

enterprise.

1. Self-Discovery: One should first discover that one has potential to

become an entrepreneur and what it takes to be an entrepreneur. A
careful analysis
i. What makes one enjoy?
ii. What are their strengths?
iii. What are their weaknesses?
iv. What is their experience?
v. How closely they can relate their expertize to commercially viable
opportunities.
2. Identifying the opportunities: The next step is to identify the
opportunity. This can be done through careful analysis of
i. Wants
ii. Needs
iii. Day to day problems
iv. Day to day challenges
 and then tackle those which are not yet addressed or which require
significant improvement.

3. Generate the ideas and Evaluate them: In this step innovative

ideas to address the opportunities in the previous step are generated.
The entrepreneur’s experience and creativity plays a critical role in
this step. The various ideas thus generated as further filtered down to
one.
4. Planning: In this step the entrepreneur entrepreneur performs
extensive research and determines the various resources to convert his
ideas into a commecial enterprise. He then prepares a business plan to
market his venture.
5. Raising the initial capital: The business plan is then discussed
with various partners, investors and venture capitalists. To convince
the fund contributors and gain their confidence, the entrepreneur
might required to present a prototype of the product or service or he
may have to test-prove the marketing strategy.
6. Start-Up: In this phase the entrepreneur will
i. Start the enterprise
ii. Building a customer base
iii. Ensuring that the marketing is going good.
iv. Develop a plan for carrying out the regular operations of the
enterprise.
7. Growth: In this phase teh entrepreneur will
i. Develop a stretegic plan
ii. Implement the plan
iii. Making changes to accommodate the changes in the market
8. Harvest: In this phase, once the enterprise is stable and running
profitably, the entrepreneur will sell out his enterprise and harvest the
rewards. After this many entreprenerus start focussing on their next
 venture to tackle new problems/wants/needs/challenges. It is an
ongoing process.

Why is entrepreneurship critical for any economy? State the

advantages.

The economic development of any nation depends on the rate of

innovation in the econimic field. The innovation is inherent to
entrepreneurs. So, the primary need of entrepreneurship in any
economy is to promote Economic Development. This is clear from the
fact that during the first four decades after independence, where in the
number of entrepreneurs were very low, the rate of economic
development was very slow. But once the number of entrepreneurs
have increased significantly, the economic development has boomed
in India. The key players in the entrepreneurshp are as follows.
Ownership Country/Society

Private Entrepreneurs Capitalist and developed countries.(America/UK

Government Socialist/Communist countries(China)

Both government and private entrepreneurs Developing countries like India

Not encouraged due to inherent risk Under developed countries.

The following are the advantages of entrepreneurs for any country.

1. They are the life-line of the country: The economic development

of any country is closely tied up with the number of entrepreneurs. As
 entrepreneurs promote development through their innovation, they’re
in-turn promoting the development of the country’s economy./li>
2. Promotes Innovation: Innovation of new or improved products or
services is the inherent characteristic of the entreprenerus. This opens
up new
i. Products
ii. Services
iii. Technology
iv. Markets

The take risk, bring their ideas to reality and contributes to economic
development.

3. Change of environment and subsequent growth: The

entrepreneurs adopts the changing environment/technology into their
enterprise. There by they increase productivity by adopting the
automation. The changes the entire environment and directs eveyone
to adopt the growth process.
4. More revenue generation: As entrepreneurs always strive towards
betterment of products/services, the demand is increased, the cost is
reduced and profits are increased. There by they contribut to the
economy and promote economic deelopment.
5. More employment opportunities: Establishment of a new
enterprise always create more number of jobs. Further, when these
enterprises grow in size, they provide more employment
opportunities.
6. Social Benefits: Entrepreneurship, through its inherent
characteristic of innovation brings in better products/services at
reduced prices (For example a person can afford a better phone at
reduced prices). Thus the society will be able to increase standard of
living. Entrepreneurship also ensures that all the available resources
 are utilized in the most optimum ways. They also peace and prosperity
as they provide a solution to the most critical problem of any nation
i.e., unemployment.

In what way the managerial functions of an entrepreneur

are different from his/her entrepreneurial functions?
Managerial Functions Entrepreneurial Functions

Managerial functions are the ones which an entrepreneur Entrepreneurial functions are the core
should exhibit once he has started an enterprise. These are functions an entrepreneur should possess
essential to sustain an enterprise and move an enterprise to start an entrepreneur. Only a person who
towards its goal. The following are the managerial functions. exhibits these functions

1. Innovation
1. Communication 2. Risk-taking
2. Controlling 3. Capability to establish an organization
3. Coordination
4. Directing towards goal can become an entrepreneur.
5. Leadership
6. Motivation
7. Organizing
8. Planning
9. Staffing or recruiting
10. Supervision

These functions help the entrepreneur motivate others towards These functions motivate the entrepreneur
the goal. himself to start the enterprise.

Essential for an enterprise to be started and

Can be acquired through training or can be executed with the
the enterpreneur should exhibit these
help of others.
functions

It is not essential that the enterpreneur should perform all The entrepreneur should possess all these
these functions. Depending on the nature of the enterprise functions to start an enterprise.
only few of these are required. Also, the enterpreneur can
recruit others (managers) to perform these functions.

These functions should be performed as long as the enterprise Required only to start an enterprise.
is running.
What is your opinion about innovation being the core
function of an entrepreneur?
Entrepreneurship involves spotting an opportunity and evaluate its
economical viability and convert it into economically profitable
enterprise. It is the innovative function of an entrepreneur that helps
him to come up with innovative ideas and products to economically
exploit an opportunity. Thus innovation is at the core of the
entrepreneurial functions. It helps an entrepreneur to challenge the
status quo of the existing products or services, improve them to by
adding more value and strive for consumer satisfaction.
It is only when innovation is put into a product or service, a person
becomes an entrepreneur. Otherwise, a person is just a regular
business man. The economic success of a nation depends upon the
rate of innovation in the economic field. This in turn depends upon the
number of people in the society who exhibit innovative function. In
India, after independence, there were very less number of innovations,
for the first forty years. It is only after the innovative spirit of
entrepreneurs started to boom, the country started to move ahead
economically. Thus entrepreneurs are at the core of economic
development.
Why should we encourage the entrepreneurs, though they
sometimes result in a loss of a country’s valuable natural
resources?
Entrepreneurs, in pursuit of their goal, take risk. But the amount of
risk is minimized to a greater extent when there is very good planning.
Usually entrepreneurs will not deploy all the funds centrally at one
place. They diversify their investment in various areas. Also,
entrepreneurs, by nature, have the ability to gauge uncertainities likely
to occur in the future. In case of any disaster, they usually will have a
 plan to mitigate the effects. So, they should be encouraged though
there is always a possibility of the economic loss.

On the other hand, entrepreneurs are innovative. They are always

exploring for new ventures and improving the products and services.
Unless they’re in the business where in natural resources are
experminted, there is no significant impact on the environment. As the
nature of the businesses is shifting towards the service oriented
approach, they seldom cause any loss to the Nation’s natural
resources. They usually have a plan to encounter unforseen
contingencies thus minimizing the loss. Moreover, the benefits of the
innovation far outweigh the loss that is likely to occur. Also, there is
always risk associated with any venture. But when there is success in
their attempts to experiment with the natural resources, there is huge
impact on the economic condition of a nation. So, they should always
be encouraged, provided they’ve extreme measures to mitigate any
losses that’re likely to occur. Also, the government policies ensure that
the entrepreneurs take appropriate whenever there is an impact on the
ecological system. For instance, when the entrepreneurs have to
establish an enterprise in a forest area where there is endangered wild
life, they should first ensure that the wild life is rehabilitated before
they establish their enterprise. Similarly, when they’re establishing an
industry in a place close to a lake or river, they should ensure that the
industrial wastage is treated well before releasing it out. When these
precautions are taken, there won’t be any loss of natural resources and
there is significant improvement in the economic development of a
country.
State the steps that you would follow to create an
enterprise?

1. Self-discovery:
 i. Identify what makes us motivate
ii. Our expertize in the area being explored
iii. Potential opportunities in that area
iv. Our core strengths
v. Weaknesses
2. Spotting the potential opportunities A careful
examination/study of the surroundings for
i. ideas
ii. challenges
iii. needs
iv. problems

of people in the society.

3. Formation of ideas and looking for viable

opportunities: With the experience at hand innovate a solution to
improve a product or service.
4. Prepare a plan: Prepare a plan that includes
i. Evaluation of the available resources and exploiting them
ii. Business plan
iii. Marketing plan
5. Accumulation of funds : Depending upon the nature of venture
prepare prototype of the product or conduct a sample marketing.
Presenting this to the partners or investors or venture capitalists,
gather the required funds to start up the enterprise.
6. Launch the enterprise :
i. Start the enterprise
ii. Increase the reach to the customers
iii. Make changes in the strategy depending upon the various dynamic
factors.
7. Expansion plans: Improve the business by adopting the changes as
per the changes in the market.
8. Reaping the benefits : Reap the fruits of the enterprise by selling it.
Repeat the process by spotting a new venture.

What is the significance of an entrepreneur in the overall

development of a country?
The entrepreneur contributes to the overall development of a country
through the following.

a. Available resources (which might have been lying idle till now) are put
to use through their creative thinking, thus adding/improving the
sales and there by contributing to the national economy.
b. Balanced regional development. They establish the enterprise in under
developed areas, there by contributing to the development of those
areas.
c. Concentration of economic power is reduced. The wealth is distributed
among many individuals instead of few.
d. Demand for a product or service is increased both in-house and
abroad
e. Employment oppotunities are created at a larger scale.
f. Foreign exchange reserves are increased when an enterprise dealing
with exports is established.
g. GNP of a nation is increased.
h. Higher standards of living, by reducing the cost products or services
through their innovation.