Definition, types, functions and essence of entrepreneurship

The essence of entrepreneurship is that it is a key component of the modern economic system. Thousands of new organizations appear annually that produce wealth, provide services to the population, and ensure the filling of the state budget through tax revenues.

The essence of entrepreneurship

Entrepreneurship is an independent or collective activity of citizens, which is carried out at your own risk and under full responsibility. The main goal is to maximize profits. Business (as it is commonly called entrepreneurship) involves the production of goods or the provision of services. You can describe entrepreneurial activity with the following features:

• The entrepreneur freely and independently determines the scope of activities and ways of implementing his own business.
• Starting a business involves risk and uncertainty about the outcome.
• Independence in matters of managerial decision making.
• Emphasis on innovation and creativity.

When considering the nature of entrepreneurship, subjects also need to pay attention. Both individuals and groups (with the possibility of employing hired labor) can engage in this activity. It can be residents and non-residents of the state (as well as stateless persons), not limited by law in the right to do business.

Entrepreneurship as a system

To understand what the essence of entrepreneurship is, it is worth considering it as a system. It includes such components:

• Objects - manufactured products or services rendered. That is, it is all that is the result of the enterprise that meets the needs of the consumer.
• Subjects - individuals or legal entities engaged in entrepreneurial activity, as well as consumers and state regulatory bodies.
• The external environment is a microenvironment that can be influenced by the entrepreneur (suppliers, consumers, competitors, etc.) and an independent macroenvironment (nature, demography, legislation, and so on).
• Internal environment - mission, organizational system, line of activity, personnel and so on.

Principles

The nature and role of entrepreneurship is determined on the basis of business principles. Namely:

• free choice of direction, industry and form of activity;
• voluntary involvement in the activities of others;
• independence in the formation of an activity program that does not contradict the law;
• free hiring of workers in compliance with labor laws;
• use for the benefit of the enterprise of all resources not prohibited by law;
• free disposal of profit, which remains after payment of taxes and fees;
• free and independent implementation of foreign economic activity.

Entrepreneurship Development Conditions

Considering the essence of entrepreneurship, it is important to determine the conditions under which it will function and develop. Here are some significant points to pay attention to:

• a variety of forms of ownership and management;
• economic, political and social stability;
• freedom of production and consumption;
• the equilibrium position of all market participants;
• openness of the wound;
• protection of private property and the rights of entrepreneurs by the state;
• observance of legislative norms in society;
• sparing tax system;
• availability and favorable credit conditions;
• state support for entrepreneurship;
• the possibility of insuring commercial risks;
• the prospect of entering foreign markets.

The essence and functions of entrepreneurship

In the economy and society, entrepreneurship performs a number of important functions:

• General economic. An entrepreneur produces goods and provides services to the public. As a result, the economic entity makes a profit, part of which goes to pay taxes.
• Resource. Effective use of material and intangible resources, as well as the production of new ones.
• Innovative. In the process of entrepreneurship, research and development are carried out.
• Creative. It implies an original approach to making management decisions.
• Social. The entrepreneur provides society with goods and services, as well as jobs. In addition, this function is manifested in the fact that everyone has the right to engage in entrepreneurial activity.

Entrepreneurial Functions

The study of the essence of entrepreneurship implies an understanding of the role of its main subject - the entrepreneur. In order to effectively conduct business and maximize profits, an entrepreneur must perform the following functions:

• To make effective innovative decisions in typical and non-standard situations.
• Generate ideas and bring them to life.
• Take risks and take responsibility for the result.
• Identify the needs of potential buyers.
• Assess the level of solvency of consumers.
• Search for the best markets and determine the best marketing methods.
• Determine the need for raw materials and supplies and find optimal sources.
• Implementation of optimal technology for the production of goods (services).
• Cost minimization.
• Determination of the optimal organizational structure of the enterprise.

Business Classification

In addition to the nature and functions of entrepreneurship, its types also require detailed study. The classification is as follows:

• By subjects: activities of individuals; activities of legal entities.
• By field of activity: production (production of specific goods or the provision of services); commercial (conducting transactions of sale of tangible and intangible assets); financial (purchase and sale of currency and securities); advisory (business services).
• By ownership: private (individuals or groups of individuals conduct work and manage property); state (property belongs to the state); municipal (property belongs to cities, towns, and so on); other types (associations, foundations, religious organizations, and so on).
• In scale: small; average; large.
• For the main purpose: commercial (for profit); non-profit (does not have a profit goal).

Small Business: Feature

The essence of small business can be described by a number of restrictions. Firstly, it is less than 100 employees. Secondly, the annual turnover should not exceed 800 million rubles. This is the most common form of doing business in the world. In the leading countries of the world, small enterprises account for 2/3 of newly created jobs. At the same time, they produce about 40% of GDP and are pioneers in the field of innovative technologies. The table describes the advantages and disadvantages of small enterprises.

Regulatory framework

The essence of entrepreneurship in the economy is such that it is one of its fundamental categories. Therefore, business issues are regulated and monitored at the state level. These are the legal acts that affect entrepreneurial activity:

• Constitution - defines the foundations of entrepreneurship as an integral part of a market economy.
• Civil Code - contains fundamental information about the conditions and forms of doing business.
• Labor Code - governs the relationship between the entrepreneur and employees.
• Tax Code - establishes the principles and procedures for paying taxes and fees.
• Federal laws - regulate issues of working with securities, the functioning of banks, as well as licensing features of certain types of activities.

Stages of creating a new enterprise

To start their own business, the future businessman must understand the concept and essence of entrepreneurship. The creation of a new enterprise is a complex multi-stage process, which includes the following items:

1. Formation of ideas regarding the creation of a business in a particular field of activity.
2. Setting the goals of the future enterprise (tactical and strategic).
3. Making an informed decision to open an enterprise.
4. Selection of reliable professional co-founders.
5. Identification of sources of financing business.
6. Drawing up constituent documents.
7. Carrying out organizational activities related to the opening of a new enterprise.
8. Drawing up a detailed business plan.
9. Registration of an enterprise in state bodies.
10. Registration of the enterprise for tax accounting.
11. Registration in the funds.
12. Opening of settlement accounts in banking organizations.
13. Conclusion of agreements for the supply of raw materials or other resources for entrepreneurial activity.
14. Market research to determine the marketing strategy for products.
15. Conclusion of contracts for the supply of products (provision of services).
16. Accounting for income and expenses.

Enterprise Culture

A significant role is played not only by the economic essence of entrepreneurship, but also by the culture of doing business. It includes such elements:

• the legality of the operation of the enterprise, operations and transactions;
• Strict and strict observance of the duties prescribed in the legislation, as well as in contracts;
• honest and fair attitude to competitors, partners and consumers;
• compliance with professional ethics adopted in the field of activity;
• observance of customs and moral standards accepted in society;
• maintaining the required level of knowledge and continuous training;
• motivation of employees to increase professionalism;
• development of own management style;
• the introduction of new forms of production and organization of labor corresponding to the time and situation on the market;
• compliance of the material remuneration of partners and employees with their contribution to the enterprise;
• awareness of the value of man and personality;
• creating safe and comfortable working conditions.