Entrepreneurship: Functions of Entrepreneurship, Process of entrepreneurship, Barriers to entrepreneurship

 2.7 Functions of Entrepreneurship

The various functions of entrepreneurship are Innovation and creativity, Risk-taking and achievement and organization and management, Catalyst of Economic Development, Overcoming Resistance to Change and Market Research. These have been depicted, at a glance, with the help of the given Figure and are being discussed, in brief, below.

 

According to Bill Bernbach, co-founder of Doyle Dane Bernbach – “an idea can turn to dust or magic, depending on the talent that rubs against it’’.

• Innovation and Creativity 

Innovation generally refers to changing processes or creating more effective processes, products, and ideas. For businesses, this could mean implementing new ideas, creating dynamic products, or improving your existing services. Creativity is defined as “the tendency to generate or recognize ideas, alternatives, or possibilities that may be useful in solving problems and communicating with others. Creativity and innovation have always been recognized as a sure path to success. Entrepreneurs think outside of the box and explore new areas for cost-effective business solutions.

• Financial Risk taking and Achievement 

It is a process in which the entrepreneur establishes new job opportunities and firms, new Creative and growing organization which is associated with risk, new opportunities, and achievement. It results in introducing a new product or service to society. In general, entrepreneurs accept four types of risks namely Financial Risk, Job Risk, Social and Family Risk, and Mental and Health Risk, which are as follows:

1. Financial Risk – Most entrepreneurs begin by using their own savings and personal effects and if they fail, they have the fear of losing it. They take the risk of failure.
2. Job Risk – Entrepreneurs, not only follow the ideas as working situations but also consider the current risks of giving up the job and starting a venture. Several entrepreneurs have a history of having a good job, but gave it up, as they thought that they were not cut out for a job.
3. Social and Family Risk – The beginning of an entrepreneurial job needs a high energy which is time-consuming. Because of these undertakings, he/she may confront some social and family damages like family and marital problems resulting on account of absence from home and not being able to give adequate time to family.
4. Mental Health Risk – Perhaps the biggest risk that an entrepreneur takes is, the risk of mental health. The risk of money, home, spouse, child, and friends could be adjusted but mental tensions, stress, anxiety, and other mental factors have many destructive influences because of the beginning and continuing of entrepreneurial activity. This can even lead to depression when faced with failure

• Organization and Management 

The entrepreneurial organization is a simple organizational form that includes, one large operational unit, with one or a few individuals in top management. Entrepreneurial management means the skills necessary to successfully develop and manage a business enterprise. A small business start-up under an owner-manager is an example of an entrepreneurial organization. Here, the owner-manager generally maintains strict control over business operations. This includes directing the enterprise’s core management functions. According to Mintzberg, these include interpersonal roles, informational roles, and decision-making roles. The smaller the organization, the more concentrated these roles are in the hands of the owner-manager. The entrepreneurial organization is generally unstructured.

• Market Research 

An entrepreneur is a practical dreamer and does a lot of groundwork before taking a leap in his/her ventures. In other words, an entrepreneur finalizes an idea only after considering a variety of options, analysing their strengths and weaknesses by applying analytical techniques, testing their applicability, supplementing them with empirical findings, and then choosing the best alternative. It is then that he/she applies the ideas in practice. The selection of an idea, thus, involves the application of research methodology.

• Overcoming Resistance to Change 

New innovations are generally opposed by people because it makes them change their existing behaviour patterns. An entrepreneur always first tries new ideas at his/her level. It is only after the successful implementation of these ideas that an entrepreneur makes these ideas available to others for their benefit. His/her willpower, enthusiasm, and energy help him/her overcome society’s resistance to change.

• Catalyst of Economic Development 

An entrepreneur plays an important role in accelerating the pace of economic development of a country, by discovering new uses of available resources and maximizing their utilization. Today, when India is a fast developing economy, the contribution of entrepreneurs has increased multiple-fold.

2.8 The Entrepreneurial Process: A Step-by-Step Guide

Entrepreneurship is the act and art of being an entrepreneur or one who undertakes innovations or introduces new things, finance, and business acumen in an effort to transform innovations into economic goods. 

The most obvious form of entrepreneurship is that of starting new businesses. In more recent times, the term entrepreneurship has been extended to include elements not necessarily related to business formation activity, but it also includes specific forms of social entrepreneurship, political entrepreneurship, or knowledge entrepreneurship.

Following are the steps involved in the entrepreneurial process. This entrepreneurial process is to be followed, again and again, whenever any new venture is taken up by an entrepreneur, therefore, it is an ever-ending process.

• Market Research for a New Idea 

An entrepreneurial process begins with Market Research for a new Idea. Gathering, analyzing, and interpreting information about a market, including details about the target market, competition, and consumer preferences is a crucial factor before working a new innovative Idea. wherein the entrepreneur identifies and evaluates the business opportunities for him/her.

• Outlining Business Model

The identification and evaluation of opportunities for a newly made Idea is a difficult task. Therefore, it is crucial to create a structure for a business model on how a company creates, delivers, and captures value. Once the Outlining is done, the next step is to evaluate it.

• Detailed analysis of promising Idea 

An entrepreneur can evaluate the efficiency of an opportunity by continuously asking certain questions such as, whether the opportunity is worthy of investing, its attractiveness, proposed solutions feasibility, chances of competitive advantage, and various risks associated with it, etc. Above all, an entrepreneur must analyse his/her personal skills and capabilities to ensure realisation of entrepreneurial Goals.

• Selection of the Most Promising Idea 

Once the analysis is done at both the macro and micro level, then the entrepreneur selects the best possible option amongst the chosen few, on the basis of the key factors identified by him/her before idea generation.

• Assembling the Resource and Personnel 

The next step in the process is resourcing, wherein, the entrepreneur identifies the sources from where the finance and the human resource can be arranged. Here, the entrepreneur finds the investors for their new venture and the personnel to carry out the business activities.

• Determining the size of unit 

On the basis of the ability to manage resources, the entrepreneur determines the initial size of the business and the possibilities of expansion.

• Deciding the location of the Business and Planning Layout 

This is a significant decision. Entrepreneurs should ideally decide a location where there are Tax holidays and cheap labour and materials are available in abundance.

• Sound Financial Planning 

Once the funds are raised and the employees are hired, the business location and layout have been finalized, then efforts are made to do sound financial planning with the available financial resources in order to put it to optimum use.

• Launching the Enterprise 

Launching the enterprise by an entrepreneur can be a daunting adventure as the entrepreneur needs to stay focused and should always be open to suggestions. If he/she is a mission-driven entrepreneur, it must be remembered that building a truly great company is a marathon, not a sprint.

• Managing the Company 

Once the funds are raised and the employees are hired, the next step is to initiate the business operations to achieve the set goals. First of all, an entrepreneur must decide the management structure or the hierarchy, which is required to solve the operational problems, as and when they arise.

• Harvesting 

The final step in the entrepreneurial process is harvesting, wherein, an entrepreneur decides on the future prospects of the business, such as its growth and development. Here, the actual growth is compared against the planned growth and then the decision regarding the stability or the expansion of business operations is taken.

2.9 Barriers to Entrepreneurship

Every entrepreneur establishes a start-up with the aim of making profits and defeating its competitors. But it is not as easy as it seems. There are lots of issues, problems, or barriers that can arise and affect the smooth running of the business. Some of the major barriers to entrepreneurship are as follows:

• Environmental Barriers
  The environment has an impact on the entrepreneurs also. They can be related to the lack of resources or any other effect of nature. Various environmental barriers are as under:
• Machinery: Machines are extremely significant to carry out multiple operations. However, machinery does come costly. Also, technology keeps changing quite rapidly, and hence, machines tend to get obsolete quite often. Thus an entrepreneur needs to replace them. This process is quite difficult for the entire organization.
• Raw material: The situation can get quite distressful if there is no raw material available during the peak season of the work. This further increases the price of limited raw materials available because of an increased level of competition.
• Land and building: For an enterprise, it is necessary that proper acquisition of land is made. Then, the construction of buildings will also have to be done. However, all these can be quite expensive. When the land is rented, the fixed cost becomes a cause of worry for the entrepreneur. He needs to keep paying the rents whether he is making any profit out of business or not.
• Infrastructure support: There have to be proper roads, adequacy of power, drainage facilities, water, and other such infrastructural supports. But because of red-tapism and increased corruption, things tend to be quite complicated.
• Labour: For successful entrepreneurship, there has to be the availability of skilled labor, quality and quantity labor, and committed and loyal employees. Lack of any of these can lead to severe disruptions in the working procedure of the enterprise.

• Financial Constraints
  This is one of the most prominent barriers in the life of an entrepreneur. Such barriers are quite common. Availability of funds is of great significance. If a delay happens in gathering enough funds, then it may further delay the commencement of an enterprise. Also, various business operations need a persistent flow of funds. The availability of finance is one of the most common barriers that can affect entrepreneurship. Poor management, delay in decisions, ineffective & inefficient personnel, poor performance, etc. led to a delay in the source of finance.

• Personal Barriers
  There are some personal barriers that can leave negative impacts on entrepreneurship. These barriers are:
• Lack of motivation and encouragement: When an idea does not turn out to be fruitful, these entrepreneurs give up quite easily. Even a minor failure is enough to demotivate them.
• Inability to depend on and trust others: These entrepreneurs often find it difficult to trust others while hiring their expert services. They waste much of their time deciding upon the best service provider and then, too, cannot put their trust completely.
• Lack of patience: If an entrepreneur loses interest because of any hurdle or obstacle, then he does not have enough patience and perseverance to carry on with the entrepreneurship. Even the initial losses are enough to discourage them and shut their enterprises.
• Lack of confidence: These entrepreneurs never have enough confidence. They never trust in themselves. They are somehow convinced that they will never be able to come up with a successful business idea. They are always bothered about their inability to attract enough funding. Hence, they almost give up on their dream of being self-employed and thus do not carry on with entrepreneurship.
• Lack of vision: There should never be any limitation to what you can achieve. Some entrepreneurs, after making short progress, lose their vision and show no more interest in expanding the business.
• Sense of embarrassment/pride: Such entrepreneurs are way too proud or embarrassed to ask for help from someone.

• Society Barrier
  Sometimes society can also be a hurdle for entrepreneurship. These barriers are as follows:
• Entrepreneurial behavior
• Financial instability
• Socio-cultural norms
• Caste and religious affiliations often act as hurdles in the way of a business.
• Financial stability and family backgrounds also have to be kept in mind. These, too, can impact the operations and development of an enterprise.
• Socio-cultural norms and values often act as barriers for modern-day budding entrepreneurs. These age-old norms hamper the smooth development and progress of business enterprises.
• Degree of disapproval and approval of entrepreneurial behavior.

• Political Barrier
  The political party and political conditions also play a major role in the economy and business of that area. When there are not enough government concessions, and incentives offered, things start getting difficult for the entrepreneurs. Also, there has to be a proper socio-economic setting to make things happen the way they need to. A politician should also focus on making a society economically developed. Only then will things smoothen up for the entrepreneurs.The political barriers include:
• Government's taxation policies
• Government's interest in the economic development
• Government's incentives and concessions