Effective decision making is a necessary function of management that leads to successful problem solving and business performing. The decision making theory is the research area involving the concepts and methods of mathematics, statistics, economics, management and psychology to identify the patterns of people’s behavior during the process of various problem solution evaluations. This theory also defines how to find the most favorable solution among the possible ones. Entrepreneurial decision making is a process of rational or irrational choice among alternatives, the main aim of which is to achieve conscious result. Decision making theory includes the normative theory, which describes the rational decision making process, and the descriptive theory, which describes the practical part of decision-making process.
Decision-making in the organization can be characterized as a process of identifying and solving problems. Entrepreneurial decision making is a creative act of a manager that is aimed to solve the problems that have occurred during the business performance. Every entrepreneurial decision making passes through three stages. The first one is problem identification. This stage includes such steps: gathering and analyzing of information, clarification of its relevance, defining the conditions under which the problem will be sold, decision criteria identification, allocation of weights to criteria. The next stage is plan formation. It involves: development of alternative solutions, comparing these solutions with available resources, alternatives assessment for the social, economic and managerial effectiveness and efficiency, selection of the alternative, development of the detailed plan of the most appropriate solution. The third stage is solution implementation. It includes: delegation of the solution to the personnel or specific person, realization of the alternative and evaluation of decision effectiveness.
Therefore, a manager’s job is to make decision in several steps: to define the objectives, to evaluate problems, to gather information (main and additional), to identify the decision criteria, to develop solution alternatives, to evaluate possible alternatives and to choose the best one. To make a decision is only a half of the job, and the other is to be able to organize the implementation of the decision and to control it. Therefore, the entrepreneurial decision making is connected to the choice of the best alternative among available ones that consists of the effective and efficient set of actions, which implementation would lead to the improvement of the business performance.
An example of the entrepreneurial decision making: the enterprise has decided to enter the international market. The main problem is to identify the main strategy that the company will use to enter the international area. Will it be a multinational or global strategy? Therefore, at the first stage, the manager has to identify what the main purpose of the company in the international area is: to promote and sell standardized products around the world or to be well known in different countries because of product adaptation to the national tastes of the country. Everything also depends on the available resources. To produce and sell standardized products is cheaper than to adopt ones to the national tastes of every country. If the tastes in different countries of the enterprise’s products differ a lot, the new department should be created to research and develop the best colour, taste, design, shape, weight, etc of the exported products. This would also lead to the increase of expenses. Therefore, if the company is not very big, and its products can be unified, for example, fashion bags, the most appropriate strategy would be global one because of its low costs and limited resources usage. However, if the company works with food production, it would be better to use multinational strategy, because every nation has specific food tastes and meal traditions.
The entrepreneurial decision making process is very complex and needs lots of knowledge and experience of the manager. Every decision has its own solution because of different circumstances company works in. To simplify the process of entrepreneurial decision and make it unique, effective stages of this process performing were developed. Therefore, entrepreneurial decision making is the process of the problem solving that leads to the increase of business effectiveness.