Entrepreneur is a central point to process of production and all other factors like capital, land, labour cluster around him. He performs following functions.
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1. Entrepreneur initiates the business activity
He has to start the business activity by preparing a proper plan. The plan should deal with the type of goods or service to be produced, sources of raw material and credit, type of technology to be used, the markets where the products can be sold, etc. The plan should be detailed one covering all the aspects of the business.
2. Entrepreneur organises the factors of production
The entrepreneur has to collect all the other factors of production and combine them in the right proportion.
3. Entrepreneur is a decision maker
Business involves variety of decisions to be taken. The entrepreneur has to decide about the nature of product, technology, price policy, advertisement strategy, employment of labour, etc. A proper strategy has to be adopted by him to take the right decision.
4. Entrepreneur co-ordinate things effectively
A business firm consists of a number of departments. He has to co-ordinate various units effectively by having proper communication channels and supervision.
5. Entrepreneur tries to introduce innovations
According to Prof. Schumpeter, the true function of an entrepreneur is introducing innovations. Innovations imply introduction of a new product, discovering a new product, introduction of a new technology or new method of production etc. Innovation involves risk. The entrepreneur may get profit or may incur loss. Hence, few entrepreneurs try to introduce innovations. By innovating, they contribute to technological process of the economy and accelerate the growth and development.
6. Entrepreneur handles budget of his business
The entire budgeting process is the responsibility of the entrepreneur. He has to mobilize resources for the implementation of the business plan. All other factors have to be paid contractual payments. He gets the residual income, he has to make provision for future investments for expansion and diversification. He has to maintain a balance between income and expenditure.
7. Entrepreneur bears risk and uncertainty
This function distinguishes the entrepreneur from other functions while other factors need not bother about risk and uncertainties, entrepreneur has to bear risks and uncertainties while risks are insurable, uncertainties cannot be insured. E.g. risk like fire, theft, etc. can be insured. Uncertainties like changes in tastes, fashions, cannot be insured. While facing these uncertainties entrepreneur may get profit or may incur loss. Thus, risk and uncertainty bearing is one of the unique function of an entrepreneur.
Thus the entrepreneur is the pivot around which all the activities of the firm revolve around. He is the one who gives direction to the business firms & ensures its effective operation.