Meaning of Enterprise:

Organisation or Enterprise means to plan a business, to start it and run it.

It means to bring the factors of production together, assign each its proper task, and pay them remuneration when the work is done. It implies not only running of a business, but also shouldering the loss, if any. The man who undertakes all this work is called an organiser, or, more commonly, an entrepreneur. Organising and risk-taking are the two main functions of the entrepreneur.

Difference between a Capitalist and an Entrepreneur:


The capitalist is the owner of capital. He invests capital, and receives interest on it. The business may earn a profit or run at a loss, the capitalist must get his interest. Thus he runs no risk. It is he entrepreneur alone who shoulders the risk. The whole loss, if any, falls, on him just as the whole profit, if any, goes into his pocket.

In theory, therefore, the capitalist and the entrepreneur are two different persons. But, actually, they may be one and the same person. In real life, the entrepreneur usually invests in the business some of his own money. He is thus partly a capitalist too, and earns interest, besides his profit, if any. Hence a man may be both a capitalist .and an entrepreneur. In modern business the two have been differentiated.

Importance of Organisation:

In modern times, business is a very complicated affair. Nationwide, and even international, influences act on it. Even a small happening in some remote corner of the world might bring it disaster. Owing to such complexities, the work of organisation has become very important. The success of a business depends on sound “organisation. It must be carefully planned, and the plan must’ be properly executed. This is a whole-time job. Somebody must devote all his time and energy to it. Hence the great importance of the work of an organiser.


The three factors—land, labour, and capital—lie scattered. One person has land but no capital; another has capital but no land. The labour has neither; he has only his labour to offer. So all the factors of production lie apart from one another. Somebody must bring them together if production is to go on. This is what the entrepreneur does.

Hence organisation is a very important factor of production. Unless business properly organised, it cannot be a success. Only through a proper organisation of business will the other factors of production make their best contribution in the work of production. Otherwise labour may be misdirected or land and capital wasted. Land may be very fertile and labour may be very efficient. But if the organiser is inefficient or incapable, the productivity of land and the efficiency of labour will be of no avail.

Functions of Entrepreneur:

There are several important functions which the entrepreneur performs, of which the following are the chief ones


Conceiving and Initiating:

It is the entrepreneur who conceives the plan of a business. Either alone or with the help of friends he puts it into execution. He thus gives the business a start.


Having decided which industry to enter, where to start it, what and how much to produce, and how and where to sell, the entrepreneur must now tackle the practical part of the problem. First of all he must make the necessary financial arrangements. Then he must buy machinery and get it installed; he must hire labour, and assign them suitable jobs; he must buy the raw materials and organise each process of manufacture; and finally, he must make satisfactory arrangements to market the produce.

Directing and Supervising:

The entrepreneur cannot just stop after organis­ing the business. He has to direct production into the most profitable channels. He has to supervise every little detail so as to ensure maximum production.


The entrepreneur may have some assistants to help him but he must keep the final control of business in his own hands. Being responsible for the birth of the business; he cannot leave its destiny in the hands of anybody else.



The entrepreneur has to take the consequences of his enterprise. He has to pay all the other factors of production in advance. It may be that he is rewarded with a handsome profit, or it may be that he suffers a heavy loss. Whatever the consequences, he must bear them. He has the final responsibility.


To introduce innovations is another important function of an entrepreneur. Innovation by the entrepreneur implies a variety of things. It may mean the introduction of a new method of production or improvement in the old method. It may consist of the introduction of a new commodity like the transistor radio sets or of a new maker of an old product like yet another brand of tooth paste.

Innovation may refer to the discovery of new materials, fresh sources of old materials, or new uses for materials and final goods. It also includes the opening of new markets. Innovation may take the form of new techniques in administration, finance, marketing, or human relations inside the business and public relations outside. In short, an entrepreneur initiates, organises, directs and supervises controls and undertakes the risk of the business, and introduces innovations.


Who is an Entrepreneur in a Joint-stock Company?

In-a limited joint-stock company, the shares are usually held by a large number of persons, scattered all over the country. If the company fails, the shareholders lose their money. To the extent of the capital invested by him, a shareholder is an entrepreneur. In the industry of today, the number of shareholders is very large.

They are supposed to elect from amongst themselves a small number of directors who conduct the business on their, behalf. Shareholders are only sleeping partners. Thus, the shareholders who are the real entrepreneurs have little or no control over the business.

In India, till; the abolition of the managing agency system in April 1970, generally the managing agents used to be the real entrepreneurs in several lines of industrial activity. We might .say that-in big corporations; entrepreneurship is shared by some of the shareholders and the chief executive officers.


Qualities of a Successful Entrepreneur:

We have already said that modern business is a very complicated affair. In order to organize and run it successfully, the entrepreneur must possess qualities of a very high order. The man at the helm of the business must be a really superior person and possess outstanding organizing ability. The entrepreneur must be a successful leader of men. He must win and retain the loyalty of men with whom he has to work. He must inspire confidence in them. He must understand human nature, so that he can make each person do his best.

He must also understand his business. He has to buy machines; he has to buy raw materials. He must be an expert in judging the quality of both, if he is not to be deceived. He must also know the art of marketing. A successful entrepreneur must have general knowledge of the world at large. This is essential not only for the purchase of materials and machinery, but also for the sale of goods and for taking important business decisions.

Another important quality of a successful entrepreneur is that he must be a good innovator. In fact, the amount of profits he earns depends, to a large extent, on his ability to introduce innovations. There are ups and downs in a business. He must have the courage to face them. He must take advantage of the favorable opportunities. He will have, therefore, to take bold decisions sometimes. But he must do so cautiously. A single mistake may spell disaster. ‘Prudent boldness’ is what is needed.

In short, a successful entrepreneur must be capable and well-informed, a successful leader of men, a keen judge of things, courageous and prudent. Above all, he must be gifted with a large measure of practical commonsense. He is a superman. Few entrepreneurs come up to this standard in real life. There are not many Fords, Nuffields, Tatas and Birlas in the world.