Midterm: The Decision Making Process PDF

MIDTERM: THE DECISION MAKING PROCESS MR. ARNALDO D. BERNABE AN INTRODUCTION TO DECISION MAKING PROCESS As an entrepreneur, entrepreneur must make different types of decisions on the everyday basis. entrepreneur must choose directions. Also, entr...

MIDTERM: THE DECISION MAKING PROCESS MR. ARNALDO D. BERNABE AN INTRODUCTION TO DECISION MAKING PROCESS As an entrepreneur, entrepreneur must make different types of decisions on the everyday basis. entrepreneur must choose directions. Also, entrepreneur must solve problems. entrepreneur must take actions. The decision- making process is one of the most critical processes in an entrepreneur company. THE MOST COMMON USED APPROACHING IN THE DECISION-MAKING PROCESS IS ACCORDING THE FOLLOWING STEPS: 1.) Recognize the problem – the gap An entrepreneur has the desired state and have an existing state. Here are some questions you need to answer as a part of this step in your decision-making process:  What are the most critical desired states for your small business?  How close is your small business to these states?  Why are you close or not close to the desired states?  What are the most significant problems here? 2.) Analyze the problem In entrepreneur analysis, need to find causes and how the problem impact on small business. 3.) Define possible solutions This is the step when entrepreneur need to start brainstorming all possible solutions for a given problem, or problem an entrepreneur wants to solve with that solutions. 4.) Analyze all possible solutions This step will need to give the rankings of all possible solutions from the best ones at the top to the worst ones at the end of the list for each problem an entrepreneur discovers at the beginning of the decision- making process. 5. Select the best solution for the application Now is time for the real decision. The final result from the decision- making process is a selection of the best possible solution to the problem. 6. Implement the decision Entrepreneur need to implement the solution and check the results to see if the specific solution really solves the identified problem.  AS YOU CAN SEE THE OVERALL PROCESS DESCRIBED ABOVE CAN BE DIVIDED INTO THE FOLLOWING FOUR PARTS (SEE PICTURE BELOW.)  ENVIRONMENTAL FACTORS AFFECTING ENTREPRENEURI AL DEVELOPMENT Positive influences constitute facilitative and conducive conditions for the growth of entrepreneurship, whereas negative influences create inhibiting conditions to the growth and development of entrepreneurship. Marketing Environment - The marketing firm operates within a complex and dynamic external environment. “A company’s marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. Components of Marketing Environment - The marketing environment is made up of the internal and external environment of the business. Internal Environment - The internal environment of the business includes all the forces and factors inside the organization which affect its marketing operations. These components can be grouped under the Five M’s of the business, which are: 1) Men 2) Money 3) Machinery 4) Materials The internal environment is under the control of the marketer and can be changed with the changing external environment. This environment includes the  sales department,  marketing department,  the manufacturing unit,  the human resource department, etc. External Environment - The external environment constitutes factors and forces which are external to the business and on which the marketer has little or no control. The external environment is of two types: Microenvironment – The micro-component of the external environment is also known as the task environment. It comprises of external forces and factors that are directly related to the business. Actors in the Microenvironment The Company - In designing marketing strategies, marketing division must take other company’s divisions into account. Suppliers - Suppliers are other business organizations and individuals who provide the organization with raw materials, parts, components, supplies, or services required to produce and supply products to customers. Intermediaries - Marketing intermediaries help the company to promote, sell, and distribute its products to final buyers. Competition - The marketing concept states that to be successful, an organization must provide greater customer value and satisfaction than its competitors. Customers - Customers are crucial and most important actors in the organization’s microenvironment. Publics - A public is any group that has an actual or potential impact on an organization’s ability to achieve its objectives. The range of public is as follows:  Financial publics - influence the company’s ability to obtain funds. Media publics - carry news, features, and editorial opinion.  Government publics - Management must take government developments into account.  Citizen-action publics - A company’s marketing decisions may be questioned by consumer organizations, environmental groups, etc.  Local publics - include neighborhood residents and community organizations.  General public - The general public’s image of the company affects its buying.  Internal publics - include workers, managers, volunteers, and the board Macro Environment - The macro environment includes the major societal forces that affect not only the organization, but also on its competitors and on elements in the micro-environment. The macro environment tends to be harder to influence than the microenvironment, but this does not mean that organizations must simply remain passive; the inability to control does not imply the inability to influence. It is commonly denoted by the mnemonic PESTEEL forces.  Political Environment  Economic Environment  Social and Cultural Environment  Technological Environment  Ecological Environment  Ethical Environment  Legal Environment Macroeconomic Forces Political Environment - The political environment can be one of the less predictable elements in an organization’s marketing environment. Economic Environment -The economic environment consists of factors that affect consumer purchasing power and spending patterns and is basically about the level of demand in the economy and is the most visible aspect in the macro environment. Social and Cultural Environment - Of all the elements making up the macro environment, perhaps socio-cultural factors are the most difficult to evaluate, and hence pose the greatest challenge to the marketing organization Technological Environment - The technological environment is perhaps the most dramatic forces that create new technologies, creating new product and market opportunities. Ecological Environment - Ecological Environment is concerned of issues as to how the organization interacts with and affects the natural environment or the ecology. Ethical Environment - Marketing Ethics are moral philosophies/principles that define right or wrong behavior in marketing. Legal Environment - Changes in the political environment often lead to changes in legal environment and in the existing laws enforce. ENTREPRENEURSHIP DOES NOT GROW WITHOUT ENVIRO NMENTAL SUPPORT. 12 common factors of the environment affecting entrepreneurship are. 7) The proximity of universities and research institutions. 1) Venture capital Availability. 2) Presence of experienced 8) Availability of infrastructural entrepreneurs. facilities. 3) Technically skilled labor force. 9) Accessibility of transportation. 4) Accessibility of suppliers. 10) Receptive population. 11) Availability of supporting 5) Accessibility of customers or new services. markets. 12) Attractive living conditions. 6) Favorable governmental policies. 1. Venture Capital Availability  Venture funding of some form is usually essential if a new venture is to be started. Cooper (1970) points out that most new firms were financed locally because: a)The founders did not know potential investors in other areas. b)Investors in the local area were more likely to understand and be sympathetic to technologically oriented businesses. c)Potential local investors could easily check into the background of the aspiring entrepreneur. Often, they knew the individual personally. d)Investors could keep in close touch with the new firm. e)Presentations and proposals to local investors did not need to Organizations - “technical entrepreneurship in a particular area appears to be related closely to the incubator organizations (established firms) already there. 3. Technically Skilled Labor Force - Labor skilled in a particular area of the new venture facilitates the formation of new companies. 4. Accessibility of Suppliers - good access to suppliers has likely had a positive impact on the decision to start a company. several authors (Cooper 1970, Shapero 1972, Schollhammer and Kunloff 1979) 5. Accessibility of Customers or New Markets - A market structure may be a strong barrier for entrepreneurs to have access to the market. 6. Favorable Government Policies - Taxation rates, played a role in attracting able young men and women to regions, and sometimes in giving the firms located their competitive advantages in recruiting and retaining these people. 8. Availability of Land or Facilities - Mahar and Coddington (1965) emphasize the importance of low-cost facilities for newly formed companies since they have little capital with which to operate. 9. Accessibility of Transportation - Mahar and Coddington (1965) emphasize the importance of airline transportation while Schary (1979) says that industry type, competition, general and specific location, firm size, product, markets, energy, and regulation affect the importance of transportation to businesses in the certain areas of the world. Cooper (1973) observes that transportation costs may not be very important with many high-technology products but the ability to work closely with customers is sometimes essential. 10. Receptive Population - A supportive population would promote the law, labor and materials supply, financing, distribution and selling of goods or services and promotion of the firm and the product. 11. Availability of Supporting Service - Support services are auxiliary activities that are vital for the operation and survival of new ventures. 12. Attractive Living Conditions - The cultural, climatologically, and recreational IMPORTANCE OF PLANNING Planning is very important to every venture. It is more important to the entrepreneur's venture because of the uncertainty of success and less room to make mistake.... In front of each goal, the entrepreneur writes the strategy and tactics to achieve that. This would not take long depending on the size of the venture. There are two primary reasons for writing a business plan.  The first is to organize yourself, set priorities and identify the steps needed to achieve them.  Secondly, a business plan is a principal means of showcasing your business to investors. However, not all companies need to develop a formal plan. WHAT IS A BUSINESS PLAN? A business plan is a means of ensuring systematic planning in entrepreneurship. It is an important tool for starting a business and planning expansions of well-established businesses. Business plans are usually written documents, but in the electronic age, they also take the form of PowerPoint slides or other styles of graphical presentation. Whatever the form, business plans typically cover several major areas:  Executive summary: A quick overview of the business and the detailed information to follow in the plan  Business description: What the new business will do, how it will make money, and why it will be successful against its competitors  Market analysis: Typically, a quantitative presentation of the market for a company's goods or services and the competition in the marketplace  Structure and management: The principal executives of the company and how the firm will be organized  Marketing: The strategies the company will use to reach out to prospective customers and build up sales  Finances:: Money the company has on hand and anticipated near-term and long-term income and expenses A business plan may include an explicit funding request that specifies how much it needs from lenders or financiers to take the steps envisioned in the plan. Planning as an Organizational Tool - The preparation of a business plan forces a company's founders to confront the realities of building a successful business. Covering each of the planning topics requires you to articulate who will do what in the new company and identify the strengths and weaknesses of your ideas. The importance of a business plan - A well-written business plan is an important tool because it gives entrepreneurs the ability to lay out their goals and track their progress as their business begins to grow. Formulating a business plan should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business in on the right path and worth putting money into. Business plans typically include detailed information that can help improve the business’s chances of success, like a market analysis, competitive analysis, customer segmentation, marketing, logistics and operations plans, cash flow projection and an overall path to long-term growth. Though it may sound tedious and time-consuming, business plans are critical to success. “To God be all the Glory, Honor, and Praise Forevermore!”