MEI610 Study Guide
Unit 3: Business Skills for Entrepreneurs
3a. Compare and contrast models for effective decision-making, including how to decide upon an exit strategy
- What are the differences between reflective and reactive systems?
- In what situations might an entrepreneur use heuristics?
- What are the decision-making steps?
Decision-making is important to entrepreneurship because entrepreneurs need to make decisions about their business every day. Stakeholders should be considered in decision-making. Stakeholders are all the individuals or groups affected by an organization's decisions, such as customers or employees. When considering decision-making, the reflective system is local and analytical, while the reactive system is quick, impulsive, and intuitive, which relies on emotions or habits to provide cues on what to do next. Because of this, programmed decisions are those repeated over time where a set of rules guides the process. Heuristics are mental shortcuts to help reach a decision based on reactive decision-making. Non-programmed decisions are those that are not made often.
The steps to the decision-making process include:
- recognizing that a decision needs to be made;
- generating multiple alternatives.;
- analyzing the alternatives;
- selecting an alternative;
- implementing the selected alternative; and
- evaluating its effectiveness.
There are many barriers to decision-making, such as escalation of commitment and time constraints. One of the big decisions entrepreneurs make is their exit plan. An exit plan strategy is important and might involve selling or liquidating the business.
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3b. Develop effective negotiation skills, such as building rapport, to meet organizational and personal goals
- What are the five conflict styles in negotiation?
- How does a reservation point impact a negotiation?
- What is the difference between integrative and distributive strategies in negotiation?
There are five main conflict styles: competition, collaboration, accommodation, avoidance, and compromise. A competition or competing style focuses on winning, while a collaboration style focuses on working with others to ensure all parties' concerns can be addressed. A competing style is best used when an emergency or quick decision needs to be made, and collaboration should be used when the issues are negotiated and the relationship is important. An accommodation style means you do what the other person desires and is best used if you don't care about the issue. An avoidance style means ignoring the issue, which often happens when something is trivial. A compromise style is when some solution is important, even if it isn't the ideal one. This is best used when time is short. Deciding on which to use depends on the specific situation. A distributive strategy is one where the negotiator wants to "win it all", while an integrative strategy attempts to create value and find solutions that benefit most or all parties.
The bargaining range is a negotiation between the seller's reservation point and the buyer's reservation point. It is the zone of possible agreement, where a middle ground might be found. The reservation point refers to the bottom and upper limit of a negotiation. In other words, it is the point that a party will not go beyond.
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3c. Apply skills to help sustain an entrepreneurial venture, such as how to manage projects and determine resources
- How does networking help entrepreneurs?
- What are the types of networking groups, and how are they different?
- What is the triple bottom line in project management?
Networking means finding and establishing relationships with professionals with whom an entrepreneur can exchange information, ideas, and products. It is an important skill as part of being an entrepreneur because the people an entrepreneur meets while networking could be potential customers or investors. As part of networking, there can be open, closed, and hybrid groups. Open groups have fluid membership and focus on social or personal causes, while closed groups have a formal and more structured purpose. Hybrid groups tend to have low barriers to membership, but there are some barriers to ensure members are serious. Examples of these organizations might be trade associations.
Many entrepreneurs may need to manage projects. This considers the triple constraints: schedule, cost, and scope. Project management is often viewed through the lens of the PMBOK guide, which includes ten knowledge areas. Other needed skills include managing people and teams and understanding how to respond to challenges such as high burn rates or lack of sales.
In the United States, the Small Business Administration offers mentoring and financial assistance to businesses.
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Unit 3 Vocabulary
This vocabulary list includes terms you will need to know to successfully complete the final exam.
- closed groups
- bargaining range
- heuristics
- hybrid groups
- networking
- open groups
- reactive system
- reflective system
- reservation point
- stakeholders