Economics

15 Roles And Functions Of An Entrepreneur In An Enterprise

Production process was very simple in olden days. A single person carried on all the activities relating to the production of commodities and services. But many changes came into being after industrial revolution. Factors of production are owned by different persons. Therefore, one individual is needed to bring co-ordination among different factors of production. He is called the entrepreneur. There are some important roles and functions of an entrepreneur in an enterprise.

According to Benham, “Organizer is a person who controls the policy of the firm”. Entrepreneur is a person who brings co-ordination between different factors of production by supervising and managing the industry. He is also called the organizer.There are some important roles and functions of an entrepreneur in an enterprise which are discussed below.

Important Roles And Functions Of An Entrepreneur In An Enterprise

An entrepreneur performs different functions from the beginning of the production to the marketing stage. The following are the important functions of an entrepreneur.

1. Preliminary work: The entrepreneur starts preliminary work regarding the establishment and organization of the industry. He formulates a definite plan regarding the methods of production, size of output to be produced, and location of the industry and nature of the commodities to be produced etc. Hence the entrepreneur is the first person who prepares preliminary work for starting and managing the industry.

2. Starting of Production: The entrepreneur takes decisions regarding the starting of production. He takes all steps for the smooth and uninterrupted functioning of production process.

3. Mobilization of capital: The entrepreneur also takes steps for mobilizing capital from different sources. He raises loans from the banks, friends and relatives. He also issues shares and debentures to secure the required capital. He also raises loans through pledge and hypothecation of his industry to a bank.

4. Innovations: Schumpeter described the entrepreneur, as an innovator. The entrepreneur innovates new methods of production and new market areas. He also initiates steps for improving the technology of the industry.

5. Co-ordination: The entrepreneur acts as a coordinator. He co-ordinates the different activities of factors of production. He hires the services of the factors of production and employs them in production. He brings co-ordination in the activities of factors of production. In his absence, it is not possible to bring co-ordination between different factors of production.

6. Organization of labor force: The entrepreneur recruits right type of men and places them at the right place in production. He introduces division of labor and allots work according to the necessity, merit and ability. He supervises the activities of laborers and inspires them to work hard.

7. Supply of tools and machines: The entrepreneur provides Latest tools and up-to-date machinery for the laborers. He makes efforts for getting maximum level of output and profits.

8. Marketing Mechanism: He takes steps for promoting the demand for his output. For this he utilizes the services of information and publicity agencies. He influences the marketing behavior of ale consumer through attractive publicity and advertisement.

9. Anticipation of Market Changes: The entrepreneur always pays attention on the tastes and fashion of the consumers. He introduces changes in production and produces commodities suitable to the changing needs, fashions and habits of the consumers. Sometimes he himself influences the mind of the consumers by offering a variety of commodities.

10. Division of Labor: The entrepreneur introduces division of labor in industry. He appoints right men in right place. He increases the quality and quantity of output and reduces the expenses to a great extent.

11. Risk Taking: The entrepreneur laces several types of risks while organizing production. He insures expected risks. He may not insure certain kinds of unexpected risks. He hears risk arising due to the unfavorable conditions in the market. As far as possible he takes steps for overcoming the risks and minimizing his losses.

12. Uncertainty bearing: The entrepreneur bears uncertainty in production and marketing of his commodities. Sometimes he gets enormous profits. Sometimes he gets abnormal losses. He must be ready to face the unexpected happenings. He must behave just like a rock in an ocean during a typhoon.

13. Distribution of Profits: The entrepreneur pays rewards to the different factors of production. Sometimes he may get losses. All the proceeds secured from his output are not profits. The residue remained after paying the rewards to the different factors is considered the profit of the entrepreneur.

14. Creation of values: The entrepreneur plays an important role in a capitalist economy. The formation of several firms and industries is based on his ideas. New firms and industries are established due to his ability and caliber. The wealth of a nation increases due to his untiring and industrious policies.  That is why the entrepreneur is described the creator of values.

15. Produces output on least-cost-basis: The entrepreneur combines different factors of production with a view to produce output on least-cost-basis. He compares the marginal productivity of different factors. He substitutes the factors which have great marginal productivity in the place of those factors which have low marginal productivity. He continues to combine different factors of production until their marginal productivity remains equal. He adopts this policy for carrying production with least costs.

16. Scientific management: The entrepreneur introduces the techniques of scientific management. He utilities the services of different factors and other equipment up to their optimum capacity. He purchases raw-materials at cheaper rates. He enters into contracts with the suppliers of raw-materials. He adopts latest management methods and gets profits.

In this way the entrepreneur plays a dominant and significant role in production. The entire efficiency of production depends on his success and dynamic leadership qualities. He must be a courageous, risk taking and uncertainty bearing person. Therefore, the entrepreneur is described as captain of the industry, considering his functions. Economic development of a country depends to a great extent on the dynamic entrepreneurs. But unfortunately such entrepreneurs are not available in large number in underdeveloped countries. That is why the governments in these countries have been entering into the field of production as entrepreneur.

Difference Between Entrepreneur And Manager

It may be remembered that managers are not entrepreneurs. They are appointed on salary basis. Their activities are not linked to the profit or loss of the firms. Only those persons who take risk and bear uncertainty are considered entrepreneurs. Manager makes decisions and takes risks of his area of operations in his division whereas entrepreneurs take the risks of the entire business managed by managers. There are differences in functions of an entrepreneur with those of a manager.  Examples of entrepreneurs are companies or firms which provides goods and services to us. In modern economy, functions of an entrepreneur are performed to a great extent by the managers of the industrial firms. It is difficult to recognize the entrepreneurs in modern joint stock companies. 

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