Basics of Entrepreneurship | Entrepreneurial Skills

Basics of Entrepreneurship and Entrepreneurial Skills: Hello Friends !!! I am Lokesh Dhakar from quickstudyhelper.com. In today’s post, we are going to read depth details about ‘Basics of Entrepreneurship and Entrepreneurial Skills’. If you want to know about entrepreneurship then read this article.

Table of Contents

Introduction: Basics of Entrepreneurship and Entrepreneurial Skills

An entrepreneur is a person who takes financial risks and sets up a business enterprise with the aim of earning profits. Entrepreneurial skills are the basic skills that help an entrepreneur to start, develop, finance and successfully run a business. Every entrepreneur who is starting a business must have a complete knowledge of the various aspects of his/her business, not only for the success of his venture; but also for its growth and expansion.

Let us learn about the various types of businesses, meaning and characteristics of entrepreneurship development and its benefits.

Identifying Various Types of Business

A business enterprise is an activity to provide goods and services to customers and consumers in exchange of money. The aim of all business enterprises is to earn reasonable profits so that they can sustain themselves and expand the area and scope of their activities.

Some of the most common types of businesses are descried here.

Manufacturing Business

A manufacturing business involves the transformation of raw materials into finished goods with the help of labour, machines with factory overheads. These types of businesses buy raw materials with the intention of using them for making a new product. The manufactured goods can then be sold directly to the customers or to another manufacturing company where it will be used as a raw material to make some other goods. Companies that manufacture automobiles, washing machines, refrigerators, computers, electronics, paper, textiles and petrochemicals are examples of manufacturing business.

Merchandising Business

A merchandising business buys products at a lower wholesale price and sells the same at somewhat higher retail price. These are also known as the “buy and sell” businesses. Merchandising businesses make a profit by selling products at prices higher than their purchase costs. A merchandising business sells a product without changing its form. Grocery stores, convenience stores, chemist shops, distributors, other resellers, etc. are examples of merchandise businesses. These are the most common type of businesses we deal with in our day- to-day life.

Service Business

A service business is a type of venture that provides intangible products (products with no physical form) called services. These type of businesses offer services like professional skills, expertise, advice, etc. Banks, accounting firms, schools, law firms, repair shops and salons are examples of service type businesses. Hotels, restaurants, multi specialty hospitals and clinics, tutorial services, publishing and animation firms, movie making organizations and counseling services are some other businesses that come under this category.

Hybrid Business

Hybrid businesses are companies that may be classified in more than one type of business. A restaurant, for example, combines ingredients in making a fine meal (manufacturing), sells a bottle of cold drink (merchandising) and attends to the customer orders (service). In effect, any business that makes use of two or more modes to accomplish the same end, can be categorized as a hybrid business. For example, Reliance Fresh is a chain of grocery stores that also sells grocery online. Hence it can be called a hybrid firm.

Forms of Business Organizations

A business organization is an entity or company that sells goods and services to its customers or consumers in exchange for other goods or services or in exchange of money. Every business organization is a legal entity owned by individuals, group of individuals or some organization. Based on the type of their ownership, businesses can be divided into following types.

Private Limited (Ltd.) Company

A private Limited (Ltd.) Company is a type of privately held small business entity. This type of business entity limits the owner’s liability to their shares, limits the number of shareholders from 2 to 50 and restricts the shareholders from publicly trading their shares.

Public Limited (Ltd.) Company

A public limited company is a form of business organization that operates as a separate legal entity from its owners. It is formed and owned by shareholders. Shares of a public limited company are listed and traded at a stock exchange market freely. Shareholders of a public limited company have a limited liability, restricted only to their shares. These companies are headed by a board of directors which may comprise of 2 to 12 members.

Sole Proprietorship

A sole proprietorship is a form of business entity where a single individual handles the entire business organization. He is the sole recipient of all the profits and the bearer of all the losses. There is no particular law that governs a sole proprietorship businesses.

Partnership Business

A partnership business is owned by two or more people who contribute resources into setting P and operating the entity. The partners divide the profits of the business among themselves. In Unlimited Liability partnerships, all partners have unlimited liability. However, in Limited Liability Partnerships, partners have limited liabilities. Creditors cannot go after the personal assets of the limited partners to settle the debt.

Co-operatives

A co-operative is a form of voluntary organization, wherein the members work together for the promotion of the interests of its members. There is no restriction to the entry or exit of any member. It is governed by the Cooperative Societies Act.

Some other type of businesses or companies are Franchise, Liaison Office, Branch Office, Project Office, Subsidiary Companies (partially or wholly owned companies), etc.

What is Entrepreneurship Development?

We know that an entrepreneur is a person who creates and runs a business in the hope of getting a profit. Entrepreneurship development is the process of improving the knowledge and skills of the entrepreneurs. In other words we can say that Entrepreneurship development is the process of enhancing an entrepreneur’s ability to develop, manage and organize a business venture, while keeping in mind the risks associated with it.

Distinguishing Characteristics of Entrepreneurship

Some unique characteristics of entrepreneurship that distinguish it from other types of activities are:

It is a dynamic economic activity: Entrepreneurship is an economic activity because it involves setting up and operation of a business for wealth creation. It is also regarded as a dynamic activity as the wealth creation is performed continuously in the midst of an uncertain business environment.
Needs constant innovation: Entrepreneurship involves a continuous search for new ideas and innovative methods to make the most efficient use of the available resources and opportunities.
Profit potential: Profit potential is the ability of an entrepreneurial venture to generate profits. If an entrepreneurial venture cannot generate viable profits it will not be called a business venture. It will simply be classified as a leisure activity.
Risk bearing: An entrepreneur has to have patience to see his efforts bear fruit. In the intervening period (time gap between the conception and implementation of an idea and its results), an entrepreneur has to assume risk. If an entrepreneur does not have the willingness to assume risk, entrepreneurship would never succeed.

Role of Entrepreneurship and Entrepreneurial Skills

Entrepreneurship is crucial for a nation and its economy. Entrepreneurial ventures can change the way we live and work. If successful, their innovations may improve our standard of living, and in addition to creating wealth, they will also create jobs and improve the conditions to make a prosperous society.

Entrepreneurship creates new businesses based on innovative ideas: New goods and services offered by entrepreneurial ventures stimulate growth in the related businesses, pushing up the overall growth of an economy.
Entrepreneurship adds to the National Income: Entrepreneurial ventures generate new wealth. New and improved products, services or technology from entrepreneurs enable new markets to be developed and new wealth to be created. These adds to the national income.
Entrepreneurship helps bring about Social Change: Innovative ventures set up by entrepreneurs break away from tradition and indirectly support freedom by reducing the dependence on obsolete systems and technologies. This results in an improved quality of life, improved morale and greater economic freedom.
Entrepreneurs help in Community Development: Entrepreneurs regularly nurture ventures by other like-minded individuals. They also invest in community projects and provide financial support to local charities.

Rewards of Entrepreneurship and Entrepreneurial Skills

The biggest reward of becoming an entrepreneur is the personal satisfaction that comes from having the freedom to make your own business decisions and then act on them. Here are a few ways that an entrepreneur is rewarded through his efforts:

Making your own rules: When you own a business, you get to be your own boss. You can make your own rules to run the company. The freedom it gives is immensely satisfying.
You have the freedom to follow your own schedule: It gives you the freedom to do things at your pace and in the way that is most satisfactory to you.
Creates employment opportunities for others: By setting up a business you not only give employment to the people but also encourage others to set up similar ventures, leading to the proliferation of employment opportunities.
Unlimited Growth Opportunities: A successful venture may provide an entrepreneur with enough wealth to expand his business or create a new business.

I hope you have liked this article and you have learned a lot about ‘Basics of Entrepreneurship and Entrepreneurial Skills’. If you have any questions you can comment.

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