What is an entrepreneur and what do they do?
An entrepreneur is someone who organises a business venture, takes a risk and is responsible for the risks involved.
He decides what is made, how it is produced, finds the finance to fund the business and decides what price the product will be sold at (marketed).
Not all entrepreneurs are high profile – the plumber who comes to fix your toilet is still an entrepreneur!
The process of some products declining in importance whilst others take their place is called ‘structural change’. The end result is that some businesses (or parts of them, as is the case with Jessops) are destroyed by the new technologies but new profitable businesses develop in a way that spurs on economic growth and improves standards of living. There’s a saying amongst entrepreneurs – ‘be first or be the best’.
Role of an entrepreneur in the economy
To get a start up going, entrepreneurs need to make many important decisions – the production process, the target market, the premises, recruitment of employees, pricing policy…..a business plan will be very useful!
From society’s point of view, entrepreneurs have a crucial role in the economy – they create jobs, new products and their willingness to take risks create dynamic markets which help raise living standards. All this comes at a big risk to the entrepreneur – and the decision to expand and develop new markets involve further risks – e.g. the EasyJet brand! Making the decisions to operate, expand and develop a business is at the heart of the role of an entrepreneur.
This word ‘dynamic’ means rapidly changing. The businesses that find themselves threatened with destruction have a range of options. Many might try to fight back – R&D new/improved products which is another important element of creativity. All competing businesses, the new ‘creative’ ones or the old ones being ‘destroyed’, will have to embrace product development - matching their products to consumer preferences.
Business success is not necessarily exclusive to innovation. Many businesses base their strategies on close observation of their markets (being market orientated and using market research). Consumer preferences change over time beyond the evolution of new technologies – e.g. people seem to be moving away from ‘supermarket superstores’ and back to ‘smaller supermarkets’, therefore Tesco’s investment in their ‘Tesco Express’ line of stores. Being in touch with your customer’s wants and needs is essential (see case study examples on p.18).
The businesses who initiate change are called ‘disrupters’ – e.g. Ford have started using aluminium in their manufacturing as opposed to steel, which translates to being 13% lighter and therefore fuel efficiency. This took a considerable risk from Ford, with heavy investment in capital equipment. But they may have gained a ‘first mover advantage’ which can generate big profits!
Adding value – selling the output for more than the cost of the inputs, e.g. car manufacturers.
Entrepreneurs need to be good at creating and adding value to their product so that they can sell it at a profit. Adding value refers to what the business does to the inputs of productions in order to make the product worth buying. E.g. McCain’s oven fries process and package potatoes in such a way that make oven chips really easy and quick to make. It’d be much cheaper to DIY and make your own chips, but we pay the extra for McCain’s product as they have successfully added value.
Are entrepreneurs born or bred?
__Born? __do their qualities come naturally? There are plenty of entrepreneurs who have all the skills needed to succeed, despite little formal education/training. E.g. Richard Branson, Duncan Bannatyne and Alan Sugar all left school when they were 16! They have an instinctive grasp of entrepreneurial skills.
__Bred? __are their skills acquired? There are many formal business-related subjects, including degrees in business start-up. There are government departments and courses to develop/encourage entrepreneurs also! The ‘National Enterprise Academy’ is backed by Peter Jones (of Dragon’s Den fame) and is designed to prepare young people for an entrepreneurial career.