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.