19.Role of an entrepreneur.

Entrepreneur-entrepreneurs are people who have a business idea and want to

make money working for themselves. They are the owners of a business and
without them the business would not exist.
Creating and setting up of business:
The role of entrepreneurs-

 Entrepreneurs are innovators because they try to make money out of

business idea. Such ideas might come from spoting a gap in a market, a
new invention or market research. However, many people set up a
business by copying or adapting what other business does.
 Entrepreneurs are responsible for organising other factors of production.
They buy or hire resources such as materials, labour and equipment.
Organising involves giving instructions, making arrangements and setting
up systems.
 Entrepreneurs are risk takers because they risk losing any money they put
into the business if it fails. However if the business is successful they will
be rewarded with profit.
Entrepreneurs are owners because they make all the key decision. They make
decisions on how to raise finance, product design, choice of production method
prices, recruitment and wages.
Risk and rewards for entrepreneurs: being an entrepreneur is risky. The
downside of success is business failure. If the business fails it may leave debts to
be paid off. The entrepreneur might have borrowed money to start the business
or to finance growth. Getting back to into a normal job may also be difficult
especially if the entrepreneurs left the well paid job to set up their business. The
risk of failure is a major motivator for entrepreneurs to carry on and make a
success of their enterprise even when faced with challenges.
Success and failure have an opportunity cost. The opportunity cost of an activity
is the benefits lost from the next best alternative. For the successful
entrepreneurs the opportunity cost of being an entrepreneur is likely to be
lower than the benefits of owning a business. For an unsuccessful
entrepreneurs, the opportunity cost is likely to be higher. This is why the
unsuccessful entrepreneur is likely to close the business and move on to
something else.
Other factors are business experience, personal experience, skills, lifestyle
choices, stages in setting up of business( which include Idea, research, planning
financing, location, resources and launch.)
Setting up a business in an organised and systematic way will help to reduce the
risk of failure.

Running and expanding/ developing a business:

 Financial management-this includes producing cash flow forecast,
arranging loans and overdrafts, making payments, chasing debts and
monitoring cash movements into and out of the business.
 Administration-this usually involves accurate record keeping. It may be
necessary to send out invoices, keep stock records, process wage slips,
deal with the tax authority and comply with legislation.
 Marketing- initially, depending on the nature of the business, marketing
might involve obtaining an online business listing, developing an
attractive website, using an email campaign distributing leaflets, placing
advertisement in a newspaper, organising promotions or giving special
offers. It will also involve in developing relationships with customers.
However, as the business develops there may be a need to carry out
more market research, investigate new distribution channels, raise the
profile of the business by using social media and invest in some
sophisticated promotions to retain market share, launch new products
and penetrate new markets.
 Purchasing- entrepreneurs need to get the best quality resources at the
lowest possible price. Many businesses owners will develop relationship
with the supplies. However, it will also be important to explore new
opportunities in the supply chain. Purchasing may require entrepreneurs
to develop negotiating skills so they can reduce their cost.
  Managing people- if a business is successful it will probably need staff to
help out which will involve spending time on recruitment, selection and
training. Entrepreneurs need to develop skills in managing people and
motivating staff. The entrepreneur will need to monitor product quality
and consistency, consider health and safety issues in the factory and
ensure that production levels match orders.

Intrapreneurship: Intrapreneurs are employees usually in large

businesses, who use entrepreneurial skills to find and develop
initiatives that will have financial benefits of their company.
However, unlike entrepreneurs, Intrapreneurs carry no financial risk.
If their initiatives fail, the employer shoulders the financial burden.
Advantages of employing Intrapreneurs :
 Intrapreneurs can drive innovation in a business and uncover
new commercial opportunities which can help a business gain a
competitive edge and increased profits significantly. In some
cases, the discoveries and inventions made by intrapreneurs can
have huge positive impact on the business.
 It is a means of satisfying the self actualization needs of
ememployees. Self actualization is the highest level of need
according to Maslow’s hierarchy of needs. If staff adopt this role
they are being given the opportunity to be creative and reach
their full potential which will help to motivate staff and
hopefully raise their productivity.
 Benefit by getting the opportunity to experiement and be
creative without having to meet the cost of failure which should
improve their job satisfaction and help them develop
entrepreneurial skills which they might use in the future.
 A number of awards can be won by a business if they develop
unique or ground-breaking product. These awards are
prestigious and can help to enhance the image of a business.
 Receiving one of these awards can also attract free PR which will
help to promote the business.

Barriers to entrepreneurship:
 Lack of finance- the main problem solution is that providers of
capital in loans may be reluctant to lend money to
entrepreneurs. This is because the failure rate can be high for
new businesses and financial institutions cannot afford to lose
money.
 Lack of entrepreneur capacity- to be successful in business
people have to be equipped with the necessary entrepreneurial
skills and characteristics. Running a business requires a wide
variety of talents and skills and needs considerable energy and
commitment.
 Becoming an employer-employers have responsibilities to their
employees, for example:- employees have to be paid regular
wage, they may be entitled to sick pay and other benefits, health
and safety issues have to be considered, employees have to pay
National Insurance contributions, new employees may have to
be trained, which is expensive.
Other factors include- legal barriers(red tape), corrupt and
unsupportive environment, lack of ideas, aversion to risk and fear
of failure.

Anticipating risk: entrepreneurs know that if their business fails

they could lose their investment and they may not find another job
easily. Even if entrepreneurs are successful they are likely to take
futher risks in the future. For example if s business may grant trade
credit to a particularly to new customer for a highly lucrative order.
However, there is a risk that the customer might not pay once the
order has been delivered. Entrepreneurs can take measures to
reduce the amount of risk that take, for example, before launching
a brand new product nationally, they could test it out in a smaller
market. Entrepreneurs can also deal with risk by using quantitative
techniques such as decision trees when making important
decisions. Using quantitative techniques often helps to measure
the possible outcomes of actions which makes them easier to
evaluate.
Anticipating uncertainty- Dealing with uncertainty is more of a
problem for entrepreneurs as they have no control over the nature
or timing of some events. There is nothing that business can do to
prevent uncertain events from happening but they may be able to
make some preparation to deal with their consequences, should
they occur. For example, businesses may set aside funds to deal
with unexpected events. Entrepreneurs might also use methods
such as PESTLE analysis and SWOT analysis, risk assessment and
scenario planning to to reduce uncertainty, prepare for unexpected
events and improve the quality of decision making.