The Entrepreneurial Decision Process

Entrepreneurial Process

Definition: The Entrepreneur is a change agent that acts as an industrialist and undertakes the risk associated with forming the business for commercial use. An entrepreneur has an unusual foresight to identify the potential demand for the goods and services.

The entrepreneurship is a continuous process that needs to be followed by an entrepreneur to plan and launch the new ventures more efficiently

Stage one of the entrepreneurial process deals with opportunity identification. An opportunity by definition is a favorable set of circumstances which creates a need for a new product, business, or service (Barringer & Ireland, 2010). Opportunity identification. is the process by which the entrepreneur comes up with a prospective idea for a new venture. Identifying the opportunity is not simple. identification. takes research, exploration, and evaluation of current needs, demands, and trends from consumers and others (Dhenak, 2010). With researching and surveying, the product or service can develop. The organization or individual can now innovate what is lacking as long as the market exists for the opportunity to present itself.

If the market is mature the window of opportunity is closed (Barringer & Ireland, 2010). Qualities through innovation add value to a product, service, or business. The qualities are attractiveness, durability, timeliness, and fixation to the product (Barringer & Ireland, 2010).

2. Entrepreneurial decision making is not scientific decision making!

The Entrepreneurial Decision Process is a natural and logical approach which helps individuals to achieve success in new ventures. Most of the individuals have innovative and creative ideas.

 Some of them recognize the opportunity to bring their ideas in the market and start a new venture. Starting a venture takes a lot of courage. To become successful and be in business, the combination of three skills i.e. hard work, skill and perseverance is required. When entrepreneurs identify prospects, they decide whether to start new ventures.

The entrepreneurial decision process is a movement from a present lifestyle to forming a new enterprise

1.          Entrepreneurial decisions are different from managerial decisions. Managerial decision making is scientific decision making, which is based on data and calculation.

2.         Entrepreneurial decision making is based on alertness, intuition, imagination, and judgment. Different people have different thoughts and judgments about the same data, so choices will be different.

3.         The most important decision making by outstanding entrepreneurs were often not originally acknowledged by the majority of people or were even considered preposterous. 

4.        Entrepreneurs do not make decisions according to majority opinion.  Of course, the opinion of the entrepreneur might be incorrect.  But we have no way to judge correctness before the future arrives.  Majority opinion cannot be the standard for judgment.

5.         Under uncertainty and indeterminacy of the future, imagination plays a vital role in entrepreneurial decisions. Indefiniteness implies choice can make a difference in the history to come.  Imagination is not a prediction of the future, but a blueprint for the future.

For example, when Henry Ford imagined a mass market for automobiles in the early 1900s, he meant to make it happen. Without his imagination, it would have been impossible for 60% of American households to have a family car by 1930. Managerial decisions can be delegated to non-entrepreneurial people, but entrepreneurial decisions can be made only by entrepreneurs.

3. Second, entrepreneurial decision making is not finding a solution with given constraints; it is changing the constraints themselves.

A person that does not have the ability to change constraints cannot possibly become a successful entrepreneur.  So-called innovation in essence is changing constraints to do what appears to be impossible.

In fact, according to my observation, all outstanding entrepreneurs must have this kind of reality distortion field. Uncertainty means that no entrepreneur can control all external factors. 

4. Entrepreneurs have objectives beyond profit. 

Profit maximization is a standard assumption in mainstream economics.  In the real world, at least from the perspective of outstanding entrepreneurs, making money is not their sole objective, nor is it the end goal. Entrepreneurs pursue not only profits, but also great success and the realization of their dreams. For entrepreneurs, making money is a means to realize success. 

 

Joseph Schumpeter believed that entrepreneurs are driven by three non-monetary motives:

(1)     “the dream and the will to found a private kingdom,”

(2)    “the will to conquer,” and

(3)    “the joy of creating.”

(4)   To start a new venture is not an easy task. It requires a lot of courage and high energy. The persons who interested to start a new venture try to start business in their familiar area. This definitely helps them.

(5)    An individual’s culture, subculture, family, teachers, and peers have an important role to build one’s perception in starting a new company. Culture and subculture support an individual to create a new business successfully. Individuals plan enthusiastically new enterprises in these supportive environments.

(6)   Similarly, university education base is an important factor for entrepreneurial activity and company formation. At last, peers are also very significant role in the decision to form a company.

(7)   An environment which supports entrepreneurs and potential entrepreneurs for discuss ideas, problems, and solutions produces more new ventures than an area where these are not available. Possibility of New Venture Formation Even though the desirability of new venture formation is based on individual’s culture, subculture, family, teachers, and peers, the second feature of decision process has talk about the possibility of new venture formation.

(8)   Factors like government, background, marketing, role models, and finances contribute significantly to the creation of a new venture.

(9)   Government contributes by providing the infrastructural support to a new venture.

(10)                        Entrepreneurial necessary background like formal education and previous business experience help them to manage with the social, psychological, and financial risks.

(11)  An understanding of marketing like total package of product, price, distribution, and promotion also plays an important role in beginning a new company. Having a role model can be one of the most powerful influences in starting a new venture.

 

5. Developing a Business Plan: Once the opportunity is identified, an entrepreneur needs to create a comprehensive business plan. A business plan is critical to the success of any new venture since it acts as a benchmark and the evaluation criteria to see if the organization is moving towards its set goals. An entrepreneur must dedicate his sufficient time towards its creation, the major components of a business plan are mission and vision statement, goals and objectives, capital requirement, a description of products and services, etc.

 6.Resourcing:

The third step in the entrepreneurial process is resourcing, where in the entrepreneur identifies the sources from where the finance and the human resource can be arranged. Here, the entrepreneur finds the investors for its new venture and the personnel to carry out the business activities. This stage is determining and allocating resources.

7. Managing the company:

Once the funds are raised and the employees are hired, the next step is to initiate the business operations to achieve the set goals. First of all, an entrepreneur must decide the management structure or the hierarchy that is required to  solve the operational problems when they arise.

 

8. Managing the enterprise.

Once resources are secure with the entrepreneurial process business plan implementation can take place. Managing the company means examining operational issues that will occur when implementation begins and throughout the entire business plan cycle. The management process involves implementing structure and business style while determining variables for success.

Harvesting:

The final step in the entrepreneurial process is harvesting wherein, an

entrepreneur decides on the future prospects of the business, i.e. its growth and

development. Here, the actual growth is compared against the planned growth and then the decision regarding the stability or the expansion of business operations is undertaken accordingly, by an entrepreneur

Types of Start-Ups - the entrepreneurial decision process.

These are: Cottage Company, Lifestyle Firms, Foundation Companies, and High-Potential Ventures.

A Cottage Company : A cottage company is a privately held business that normally employs less than ten people.

A Lifestyle Firm :A lifestyle firm is a small venture that supports the owners and enjoys modest growth. The entrepreneur devoted limited money for research and development. This type of firm may grow after a long period to 30 or 40 employees and have annual turnover of about $2 million.

The Foundation Company :The foundation company is formed after research and development and bases the foundation for a new business area. It generally draws the interest of private investors only not the venture capital community, because this type of start-up not often goes public.

The High-Potential Venture The high-potential business enterprises may start like a foundation company, receives the great investment interest and publicity because of its rapid growth. The company could employ around 500 workforces. These firms are also called gazelles and are integral part to the economic development.

Social Startups

Social startups are aimed at creating a positive impact on society. Some social startups operate as non-profits, solely dedicated to bettering the world. Another concept worth exploring is Corporate Social Responsibility (CSR), a starting point for companies interested in making a difference.

1. How do I determine what type of startup is right for me?

Consider your interests, goals, and resources to determine the right startup type for you.

2. How do I choose the right business model for my startup?

Choosing the right business model for your startup is crucial for its success. Consider factors like your target market, revenue streams, and cost structure. Evaluate different types of startups with examples to determine which aligns best with your goals and resources.

3. What are some common challenges facing startups in different categories?

Startups in different categories face common challenges like startup ideas, retaining customers, building a strong brand presence, startup financing, and scaling operations. Additionally, each category has its specific challenges.

 

 

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The experiences of a successful woman entrepreneur

The case study presents the life and entrepreneurial journey of a woman from East Delhi who overcame significant odds to establish a successful business in the spice industry. Her story serves as a lens through which to analyze the socio-cultural and economic challenges and opportunities faced by women

The case study presents the life and entrepreneurial journey of a woman from East Delhi who overcame significant odds to establish a successful business in the spice industry   Her story serves as a lens through which to analyze the socio-cultural and economic challenges and opportunities faced by women entrepreneurs in India. It highlights issues such as lack of access to credit, gender biases, and safety concerns.

The research aimed to provide insights into the socio-cultural, economic, and legal factors that impact women entrepreneurs in the context of international trade.

The researcher scheduled her first meeting with the respondent in March 2019 and conducted interviews using an interview schedule tool with  Bommuluri Bhavana Rao open-ended questions. She also recorded a series of interviews with the same respondent. 

 1. The respondent Mrs Maheshwari lives in East Delhi. She was married in 1984 and is over 60 years of age. 

2. She comes from a lower-middle-class family in Hapur and lives with her father, mother, six sisters, and one brother. Her father did not have a stable income but she somehow struggled to finish her graduation. 

3. After marriage in 1984 she came to Delhi and stayed in Delhi ever since with her husband and two children. 

4. She was never in any full-time employment. She took training in Khadi for masala and papad making in the year 2003 when her husband met with an accident and became bedridden. 

She had no choice but to do something for her family with a husband and her two young children who were born in 1985 and 1990 respectively.

 Mrs Maheshwari  started in the year 2003 after the respondent thought of setting up a masala unit after training from Khadi Gram Udyog. (Khadi Gram Udyog is called Khadi and Village Industries Commission now and its head office is located in Mumbai).

8.Mrs Maheshwari  underwent the training under a subsidy scheme of the commission for which she had enrolled herself in the same year that is 2003. To set up a masala unit she had nothing but a gold chain which she sold and got money for the raw material.

 9. Mrs Maheshwari  told the researcher that this was a big decision of her life and during those days there were no special schemes for entrepreneurs to avail loans and credit. 

10. She mortgaged the family flat at Patparganj took a loan of rupees 6 lacs and proceeded with setting up a unit in Samaspur Village in East Delhi. 

11, She is planning to shift her residence to Greater Noida. 

13. Maheshwari, Gram Udyog started with 5 to 10 products initially and now sells about 150 products all over Delhi and NCR in 35 outlets of MORE, Nafed, Sanchta, Air Force Canteens, and Khadi outlets including outlets in CP. 

14. They had a tie-up with Big Bazaar but it did not work well for them. 

15. The turnover of 2018-19 is estimated to be One Crore INR which is a jump of 20 percent over the previous financial year. The respondent was quite confident of it when she said this. 

16. As regarding expansion plans, Mrs Maheshwari  said that she is talking to outlets in Punjab who had approached her herself, and in Allahabad, Kanpur, and Lucknow. 

17. She sees that there will be logistical problems as these outlets wanted to use smaller vehicles for transport but the respondent insisted on bigger trucks to deliver the products as she feared that the products would be damaged due to space issues in the smaller vehicles.

18.  Maheshwari Masalas are available only in outlets in Punjab. She also mentioned that it was not so easy to expand due to manpower issues as she feels that hired persons cannot do justice to the control and management of the business as she would do. 

19. Her husband who is older than her in age and who had met with an accident in 2003 sits in the factory these days as she is taking care of the marketing of the product and continuously meets people. Her children live out of Delhi and she mostly depends on labour for running her factory. 

20. She mentioned that to meet people she uses public transport to save travel costs. 

21. Mrs Maheshwari  said she had a lot of family support and according to her otherwise she would not have been able to go for exhibitions in far-off places like Chandigarh for which she had to stay away from home and family for long periods, sometimes as long as one to two months. 

22. With staying out of the house till late at night to oversee the sales in the showrooms like Khadi in CP, she said that women are very unsafe even in central areas like Connaught Place where a couple of times men misbehaved with her by asking if she would accompany her for shopping etc. 

23. One senior manager in the same trade called her to the office in the evening when everyone left and she could sense something wrong and she immediately had to rush home. The next day onwards that person made some comments about how he waited for her but she did not come despite him asking her to come to his office. 

24. Mrs Maheshwari  was of about 45 years of age then. She mentioned some more incidents when she felt unsafe and this is possibly the reason that she felt that being a woman was a drawback in being an entrepreneur. She also mentioned rampant corruption and how those responsible for payments for her goods always asked for bribes to the tune of ten percent of her cheque amount. 

25. Sometimes she gave in and sometimes she fought. And when she fought, she faced harassment. During those years she was so scared of the people that she also fell prey to a newspaper advertisement which was a fraud and duped her of Rs. 15000.

26. She attributes her wisdom to all that she learned by getting cheated in the beginning years of her entrepreneurship. 

27. For start Maheshwari Gram Udyog applied for a loan at the Bank of Baroda in 2003 under the KVIC subsidy scheme. She was told that she would not get any loan and that unless she had collateral, she could not approach the bank for a loan. 

28. She showed her flat in which she resided at IP Extension as collateral and a loan of 6 lacs and 25 thousand was disbursed, and this too not until she had met the General Manager of the Bank. She is paying her installments for this. The house is still in the bank’s name. 

29. Regarding the unit where her products are produced, she said that she rented it for 6500 in the year 2003. Today she pays a rent of 28000 for the same area.  She has 8 full-time women workers and three boys. She has about 7 to 8 temporary workers at any given point of time of which more are women. 

30. MGUL makes about 150 products today. Despite financial problems like cash flow issues, the unit is doing well. The products are registered and licensed as per the food safety standards of India and the respondent said that she knows the procedures about these.

 31. When the researcher asked the respondent about her expansion plans again, she mentioned that she is already 60 plus in age and would be difficult due to this though she was in perfect health, she had her apprehensions, including the fact that her kids are not going to continue with her work as they are in different professions. 

32. The second reason she gave was for exports she was fluent in foreign languages and has only workable English. Her main mode of communication is Hindi and therefore she feels that it might be difficult for her to carry on in the field of exports. She however was not averse to the idea of expanding to International Markets and knows reasonably well of the quality of the products required for exports. 

33. Regarding online business she tried selling her products on Amazon once but due to logistical issues like packaging single product for every single order, she did not go ahead with it as it required a lot of logistical infrastructure and of course money. 

34. She therefore confined her products of offline outlets only. Financial constraints were also mentioned by the respondent for exports to other countries. 

35. She said that though she knows that now loans and schemes are available for exporters, she also thinks that what is on paper turns different for people who are vulnerable like women when it is implemented. 

36. She says out of ten thousand applications about ten are selected and out of these ten, people who are known to bank managers or to anyone inside the system are about fifty percent. So, the loan disbursal rate is 10/10000. 

37. Digitisation had improved things but only at the middlemen level. Once processing is to be done, the officers responsible make it difficult for the common man. 

38. Regarding the drawbacks and benefits of technology, she said technology has only helped her and she never saw it as a drawback. She said that her product Bhuna Dalia is the first to show when one Google roasts Dalia and therefore it helps in marketing her products and the visibility of her products. 

39. Regarding the government schemes, the respondent said that the PM EGP scheme is a wonderful scheme. But as mentioned before, the beneficiaries do not benefit due to lack of education, and lack of awareness generation. 

40. She suggested that to improve the situation schools should have entrepreneurship skill training, and make people aware of these schemes from the school level. 

41. Regarding patenting she said she had never thought of patenting her products. 

6. Now her children are both well settled and her son and daughter-inlaw are living in the UK as engineers and her daughter is settled in Ahmedabad as an entrepreneur in exports herself. 

Kalpana Saroj – Chairperson, Kamani Tubes

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