In the modern world of a developed market economy, the concept of "entrepreneurship" can often be heard in everyday life. Privatization of property has led to huge growth in medium and small businesses in the Russian Federation. The relevance of entrepreneurship among young people is particularly observed, as is the departure from wage labor. Entrepreneurship is closely linked to financial well-being and is associated with many as the starting point for success. That is why today various works devoted to the topic of entrepreneurial activity and types of entrepreneurship are so popular.
Different approaches to the concept of entrepreneurship
The scientific term “entrepreneurship” was first mentioned by the British economist R. Cantillon back in the 18th century and was understood as the activity of buying and selling certain goods at risk. Later, the concept became widespread in various fields of science. Based on this, today there are a large number of different interpretations of the term.
The French scientist A. Turgot considered capital to be the main factor in the successful existence of a business, as this is one of the types of small and medium-sized enterprises. Its task is profit as the initial principle of economic development.
In the understanding of the American economist R. Khizrich, entrepreneurship is a kind of production of a new product endowed with value and aimed at further profit.
According to the law of the Russian Federation, entrepreneurship is a branch of a market economy, understood as free activity of citizens, focused on making a profit and realized on their own responsibility. Moreover, the entrepreneur is not a legal entity.
The essence of entrepreneurship
In the scientific literature, entrepreneurship and its types are considered as material activity of an individual to meet the needs of society, carried out in risky conditions. The entrepreneur assumes the risk of financial losses in the event of a badly formed business or a drop in demand for the goods and / or services provided.
Thus, entrepreneurship:
- The process of developing something unique and meaningful;
- A process involving the economic and social responsibility of an entrepreneur;
- A process that results in financial income.
Concept of entrepreneur
Every entrepreneurial activity has a subject, and one of the types of small businesses is an entrepreneur. But it is important to distinguish an entrepreneur from a business owner. In the latter case, it is any person in the company who has taken the responsibility to manage and organize the business, as well as willing to take risks both with the property of the company and his own. The goals of the owner and entrepreneur may be polar. So, the task of the owner is to increase capital, and the entrepreneur is to succeed in the market, develop a company that will bring a positive systematic income.
Entrepreneurs carry out business activities, entering into market interaction with other entities. The current state of affairs on the market obliges the entrepreneur to possess not only knowledge of economic science, but also other industries. In addition, he must be armed with some character traits. Thus, the entrepreneur can be described as an active, entrepreneurial, independent, responsible, willing to take the risk of the intellectual.
The Austrian economist I. Schumpeter believed that the entrepreneur is not just a profession, but a mindset, a property of character. This is the person who is driven by the desire to fight, the desire for victory, creativity. But the intellectual abilities of the entrepreneur, according to him, are limited, but inventive. And, despite the fact that an entrepreneur is able to analyze a sufficiently large number of possible consequences of risk, he cannot look wider, looking for many options for achieving the goal.
However, this is not enough. An entrepreneur can be either an individual or a legal entity. It is worth considering that there are a lot of types of legal entities in entrepreneurship. In the event that he works as an individual (private) entrepreneur (IP), he may not have his own property, but attract borrowed funds or rent space and equipment for profit. If an entrepreneur belongs to collective entrepreneurship, then he carries out his activities as a legal entity. In this case, he is the owner of capital invested in property put into circulation, and having the right to dispose of it, attracting labor and material and technical resources.
Signs of entrepreneurial activity
Entrepreneurship is a kind of economic activity that has a number of distinctive features due to the economic nature.
Among the signs and characteristics of the types of entrepreneurship are distinguished:
- Initiative;
- Risk in terms of income;
- Commercial responsibility;
- Active search;
- The combination of factors of production.
Initiative is the desire to seek alternatives to benefit by satisfying the needs of consumers. Any entrepreneur starting a business is confident in his success due to some advantages. Any initiative requires a high level of freedom, otherwise, when the actions of the subjects are regulated, activity decreases.
Uncertainty in the activities of the entrepreneur is caused by changes in the market: demand, prices and consumer reactions to the offered goods or services. Vulnerable to changing entrepreneurial market conditions create risk. His desire to increase income is a decisive factor in his decision-making. Consequently, the magnitude of the risk that the entrepreneur assumes directly depends on the further financial well-being of the business.
It should be emphasized that riskiness, as a character trait, has nothing to do with commercial risk, which is a feature of types of entrepreneurship. A good entrepreneur takes all possible options to minimize risk and, as an option, turns to an insurance agency. Another way to reduce risk is to share responsibility with other entrepreneurs, however, in this case, profit is also shared, which undermines initiative.
Active search, as a sign of entrepreneurial activity, means that an entrepreneur in risky conditions carefully analyzes all possible alternatives, choosing the most profitable ones, which leads to progressive shifts in productive forces and an increase in the efficiency of social production.
Pursuing material benefits from resources, the entrepreneur resorts to improving the rationality of their use. The combination of production factors allows to increase the efficiency of resources, which consists in finding the most rational option for combining factors by replacing one factor with another.
Organizational forms of entrepreneurial activity
As already mentioned above, an entrepreneur can be both an individual and a legal entity. According to the Civil Code of the Russian Federation of January 1, 1995, the structure of organizational forms of entrepreneurial activity by legal status for individuals and legal entities, and by the purpose of activity, into commercial and non-profit organizations.
An individual is an entrepreneur, carrying out his activities on his own responsibility. In other words, he is an individual entrepreneur.
A legal entity is an organization having its own property, which they dispose of by law. Legal organizations are further divided into commercial and non-profit.
Commercial entrepreneurship and its types
This type of business is due to the exchange of goods, i.e. sale of goods. From the definition it follows that the organization buys the goods, carries out their transportation, advertising, and then sells it at the most favorable price (20-30% of net profit). Commercial activity is the basis of shops, markets, exchanges, exhibitions, trading bases, etc.
Commercial organizations include:
- Business partnerships and societies;
- Unitary enterprises;
- Production cooperatives.
The most common type of commercial activity is the work of business partnerships and companies. Such activities are characterized by equity participation, i.e. Each entrepreneur has his own share of ownership. However, there is a difference between partnerships and societies. The former are based on the principles of membership and pooling of capital, while the latter are based only on pooling of capital. Partnership entrepreneurs have a common responsibility, while members of the company risk only their contribution.
Nonprofit Entrepreneurship
What types of businesses are nonprofits? The main ones are presented below:
- Production;
- Financial credit;
- Mediation
- Insurance.
Based on the term itself, nonprofit entrepreneurship has nothing to do with trade. Non-profit organizations receive income through production or by offering services. Next, each of the subspecies is considered.
Manufacturing enterprise
The main objective of the production activity is the production of goods for subsequent sale to commercial organizations or directly to consumers. It is worth considering that the manufacturing business rarely refers to the types of small business. Recently, there has been a high increase in production volumes, which in turn leads to higher quality goods and lower costs.
Financial credit business
This business and its types is characterized by a special means of sale - securities, currency or national money. Securities include stocks, bonds, etc.
The meaning of financial affairs is the sale and purchase, but not of goods, but of material assets and securities. The entrepreneur’s income is the difference between the actual value of a particular money (deposit) or security and the cost at which he sells it to the consumer (credit).
The whole system of institutions is the basis of financial and credit business and its types. These include: commercial banks, currency exchanges, stock exchanges, financial and credit companies.
Intermediary business
Unlike commercial, manufacturing, and financial credit enterprises, the intermediary entrepreneur does not manufacture, does not resell goods, currency, or securities and does not provide credit. However, he is an aggregator of two parties interested in these operations. Most often, this is a type of small business. It helps to negotiate and conclude a deal, accelerates the process of purchase and sale, sale of services and financial resources.
Insurance business
In this case, the type of business entity is risk.
A person who insures life, property and other, provides a contribution and receives payment if circumstances arise described in the contract that was concluded with the insurance company. If the insured event does not occur, the financial contribution is not reimbursed to the insured.
Other types of business
Today, two more types of small and medium-sized businesses are gaining popularity: advisory and venture. Both varieties are associated with intellectual capital. In the case of advisory entrepreneurship, the buyer acquires advice or recommendations in any field of activity, while venture entrepreneurship sells research and development for implementation.