ED 307

Entrepreneurial
Opportunity Analysis
Presented by:
Prof.B.Manchanda
JIMS-VK
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Learning Objectives

• After going through this presentation,

you should have a good understanding
of:
• Entrepreneurial Opportunity
• Meaning of Opportunity Analysis
• How do Entrepreneurs recognize ideas?
• Advantages and Disadvantages of Opportunity
Analysis
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Entrepreneurial Opportunities

• Opportunity is actually a word we use when talking

about a situation in which we can do something that
we want to do. Possibility is when we talk about
something that may happen or be true.
• Economic definition: Any idea for a new product,
service, raw material, market, or production process
that can be successfully exploited so as to generate
economic benefits for stakeholders.
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Entrepreneurial Opportunities

• Opportunities come from many sources

- Start-ups
• Current or past work experiences
• Hobbies that grow into businesses or lead to
inventions
• Suggestions by friends or family
• Chance events
• Change
 8-5

Entrepreneurial Opportunities

•Opportunities come from many

sources
- Established firms
• Needs of existing customers
• Suggestions by suppliers
• Technological developments that lead to
new advances
• Change
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Entrepreneurial Opportunities

• Discovery phase
- Period when you first become aware of a
new business concept
- May be spontaneous and unexpected
- May occur as the result of deliberate search
for
• New venture projects
• Creative solutions to business problems
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Opportunity Recognition Process

• Opportunity evaluation phase

- Evaluating an opportunity (Can it be developed
into a full-fledged new venture?)
• Talk to potential target customers
• Discuss it with production or logistics managers
• Conduct feasibility analysis
- Market potential
- Product concept testing
- Focus groups
- Trial runs with end users
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Characteristics of Good Opportunities

Good Business
Opportunity

Attractive Value creating

Achievable Durable

Before launching opportunity as a business

•Consider the resources available to undertake it
•Consider the characteristics of the entrepreneur
pursuing it
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Opportunity Analysis

• Opportunity Analysis refers to establishing

demand and competitive analysis, and studying
market conditions to be able to have a clear
vision and plan strategies accordingly.
Opportunity Analysis is a vital process for the
growth of an organization and needs to be
performed frequently. Thus, it is a tool to detect
and evaluate the desirability of a business
opportunity.
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Opportunity Analysis

• Be it individuals or corporate, opportunities are

always available. As an Individual you have
the opportunity to become a Sports
professional, Health professional, Engineer or a
Management professional.
• The type of profession you choose, and the
variables that you weigh for making your
decision, is the process known as Opportunity
Analysis.
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Opportunity Analysis
• Opportunity Analysis refers to establishing
demand and competitive analysis, and studying
market conditions to be able to have a clear
vision and plan strategies accordingly.
Opportunity Analysis is a vital process for the
growth of an organization and needs to be
performed frequently. Thus, it is a tool to detect
and evaluate the desirability of a business
opportunity.
 8 - 12

Opportunity Analysis

• Just like you look at career opportunities,

and then decide to follow one career of
your choice, companies too have many
opportunities lying in front of them.
• By the use of Opportunity Analysis, the
Company can make the right decision,
thereby advancing in its goal of earning
more profits.
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Opportunity Analysis

• It is a detailed review of the prospects for

a product within a potential market.
• The Entrepreneur starting a business shall
go for an Opportunity Analysis for a
particular product to help him forecast
whether market demand conditions will
support launching the product into that
market.
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How do Entrepreneurs recognize ideas?

• “By noticing a need that is not now being

met and filling it – preferably in a way no
one else is currently doing.” (Baron and
Shane, 2008)

• Why do some see these needs, and what

does it take to act on seeing these needs?
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How do Entrepreneurs recognize ideas?

• Right Person, Right Place, Right Time

• Better access to crucial information—
information helpful in recognizing
opportunities or formulating new ideas
• Better able to utilize information—to
combine it or interpret in ways that reveal
the opportunities overlooked by others
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How do Entrepreneurs recognize Ideas?

• An example of Opportunity Analysis is

the “Stay Healthy” frenzy which has
gripped many nations.
• More and more people are realizing that
by staying healthy they can have a more
enjoyable life as compared to being obese
or having the wrong habits. This resulted
in the rise of Organic Farming.
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How do Entrepreneurs recognize ideas?

• Fast food chains like Subway and others

came up just to give the customers
“Healthy food” like they wanted.
• Nike and Adidas focused exclusively on
fitness. Fitness equipment shops opened
up and business of Gymnasiums, Yoga,
Zumba ,etc. boomed.
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How do Entrepreneurs recognize ideas?

• Because of a simple opportunity in the

business of “Staying healthy”, so
many products from so many different
sectors were formed. Just so that
businesses could profit from this
opportunity.
• This is how Opportunity Analysis works.
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Advantages of Opportunity Analysis

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Advantages of Opportunity Analysis

• Growth of Company – As more and more

opportunities are explored and established, the
company will grow.
• Better margins – As the Company starts
growing because of capitalizing on new
opportunities, it will start having better margins
because it has entered new segments.
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Advantages of Opportunity Analysis

• Brand building – With better margins and a

faster growth, company can easily invest in
brand building activities and get a better brand
reputation then ever.
• Economies of scale – As the business is
growing all round, it achieves economies of
scale with the fixed costs remaining the same
and only the variable cost growing. Thus, the
revenues and margins keep on increasing.
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Disadvantages of Opportunity Analysis

• However, although there are advantages, there are

several disadvantages of Opportunity Analysis as well.
• Taking the wrong decisions – As an individual,
many a times we take wrong decisions in the
stock markets when we invest in a poor stock just
because we are greedy or we thought of too much
growth. A similar thing can happen in case of
Opportunity Analysis, wherein a company invests
heavily in a product which probably does not perform
well in the market.
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Disadvantages of Opportunity Analysis

• Loss of reputation – A successful opportunity

can lead to building reputation. On the other
hand, an opportunity which failed, can affect
the company’s reputation in a negative manner
also.
• Dead investments – If Opportunity Analysis is
not done properly, and you invest in a product
which does not grow, then the investment is
also a dead investment and does not do much in
terms of ROI.
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Human cognition and opportunities

•Three Key processes

• 1. Idea generation – the production of ideas
for something new 2. Creativity – the
generation of ideas that are both new and
potentially useful
• 3. Opportunity recognition – the process
through which individuals conclude that they
have identified something new that has the
potential to generate economic value.
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Recognizing Entrepreneurial Opportunities

• Entrepreneurship – new value creation

• New value can be created in:
- Start-up ventures
- Major corporations
- Family-owned businesses
- Non-profit organizations
- Established institutions
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Opportunity Analysis Framework

Adapted from Exhibit 8.2 Opportunity Analysis Framework

Sources: Based on J. A. Timmons and S. Spinelli, New Venture Creation, 6th ed.
(Burr Ridge, IL: McGraw-Hill/Irwin, 2004); and W. D. Bygrave, “The
Entrepreneurial Process,” in W. D. Bygrave, ed., The Portable MBA in
Entrepreneurship, 2nd ed. (New York:Wiley, 1997).
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Question

What is the starting point for any new business venture?

A) The resources to pursue the opportunity
B) The presence of an entrepreneurial opportunity
C) An entrepreneur or entrepreneurial team willing and
able to undertake a social responsibility
D) The creation of a business concept
 8 - 28

Entrepreneurial Opportunities

• Opportunities come from many sources

- Start-ups
• Current or past work experiences
• Hobbies that grow into businesses or lead to inventions
• Suggestions by friends or family
• Chance events
• Change
 8 - 29

Entrepreneurial Opportunities

• Opportunities come from many sources

- Established firms
• Needs of existing customers
• Suggestions by suppliers
• Technological developments that lead to new advances
• Change
 8 - 30

Entrepreneurial Opportunities

• Discovery phase
- Period when you first become aware of a new business
concept
- May be spontaneous and unexpected
- May occur as the result of deliberate search for
• New venture projects
• Creative solutions to business problems
 8 - 31

Opportunity Recognition Process

• Opportunity evaluation phase

- Evaluating an opportunity (Can it be developed into a full-
fledged new venture?)
• Talk to potential target customers
• Discuss it with production or logistics managers
• Conduct feasibility analysis
- Market potential
- Product concept testing
- Focus groups
- Trial runs with end users
 8 - 32

Characteristics of Good Opportunities

Good Business
Opportunity

Attractive Value creating

Achievable Durable

Before launching opportunity as a business

•Consider the resources available to undertake it
•Consider the characteristics of the entrepreneur
pursuing it
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Entrepreneurial Resources

• Major challenge for entrepreneurial firm is lack of

resources
- Money
- Human capital
- Social capital
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Entrepreneurial Resources

• Financial Resources
- Early-stage financing
• Personal savings, family, and friends
• Bank financing, public financing, venture capital
- Debt
- Equity
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Financing New Ventures

Exhibit 8.4 How different types of new ventures are

financed: Informal investment versus venture capital
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Entrepreneurial Resources

• Financial resources (Going Concern)

- Later-stage financing
• Angel investors
• Venture capital
- Equity financing
• Commercial banks
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Example

• The challenge of financing a business venture

significantly increases if you are a 20 year old
entrepreneur.
• The key to successfully raising capital is to open your
mind and expand your choices.
- Look beyond your parents or personal credit cards
• A solid business plan and a good business concept will
attract some business angels.

Source: Advani, Asheesh. “Can Young Entrepreneurs Get Funding?,” www.entrepreneur.com. February 13, 2006.
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Entrepreneurial Resources

• Human capital
• Social capital
• Government resources
- Small Business Administration
- Government contracting
- State and local governments
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Entrepreneurial Leadership

• Launching a new venture requires a special kind of

leadership
- Courage
- Belief in one’s convictions
- Energy to work hard
• Three characteristics
- Vision
- Dedication and drive
- Commitment to excellence
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Entrepreneurial Leadership

• Vision may be entrepreneur’s most important asset

- Ability to envision realities that do not yet exist
- Exercise a kind of transformational leadership
- Able to share with others
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Entrepreneurial Leadership

• Dedication and drive are reflected in hard work

- Patience
- Stamina
- Willingness to work long hours
- Internal motivation
- Intellectual commitment to the enterprise
- Strong enthusiasm for work and life
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Entrepreneurial Leadership

• To achieve excellence, venture founders and small

business owners must
- Understand the customer
- Provide quality products and services
- Pay attention to details
- Continuously learn
- Surround themselves with good people
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Example

• Here are 10 management lessons from a young entrepreneur,

Scott Smigler, the founder of Exclusive Concepts Inc.:
1. It’s all about perseverance
2. Understand the value of mentorship and teamwork
3. Stick to your niche
4. Stay on top of news that affects your clients
5. Communication is key
6. Capitalization is crucial
7. Communication unwavering honesty and integrity
8. Stay on top of the curve
9. Take ownership in your clients’ success
10. Never stop marketing Source: Pierce, Sarah. “10 Management Lessons From a Young
Entrepreneur,” www.entrepreneur.com. December 17, 2003.
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Entrepreneurial Strategy

• Best strategy for the enterprise will be determined to

some extent by
- A viable opportunity, resources, and entrepreneur(s)
- Other conditions in the business environment
• Can use various tools and techniques to determine
strategic choices
- Five Forces analysis
- Value chain analysis
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Entry Strategies

• Getting a foothold in the market

- Pioneering new entry
• Creating new ways to solve old problems
• Meeting customer’s needs in a unique new way
- Imitative new entry
• Strong marketing orientation
• Introduce same basic product or service in another segment
of the market
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Entry Strategies

• Getting a foothold in the market

- Adaptive new entry
• Offer product or service that is “somewhat new and
different”
• Aware of marketplace conditions and conceive entry
strategies to capitalized on current trends
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Generic Strategies

• How new ventures can achieve competitive

advantages
- Overall cost leadership
• Simple organizational structures
• More quickly upgrade technology and integrate feedback
from the marketplace
• Make timely decisions that affect cost
- Differentiation
• Use new technology
• Deploy resources in a radical new way
- Focus
• Niche strategies fit the small business mold
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Combination Strategies

• A key issue is the scope of a small firm’s strategic

efforts relative to those of its competitors
- Pursue combination strategies
• Combine best features of low-cost, differentiation, and focus
strategies
• Flexibility and quick decision-making ability of a small firm
not laden with layers of bureaucracy
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Question

Why do companies launch new competitive actions?

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Model of Competitive Dynamics

Sources: Adapted from Chen, M-J. 1996. Competitor analysis and interfirm rivalry: Toward a theoretical integration. Academy of Management Review,
21(1): 100-134; Ketchen, D.J., Snow, C. C., Hoover, V.L. 2004. Research on competitive dynamics: Recent accomplishments and future challenges.
Journal of Management, 30(6): 779-804; and Smith, K.G., Ferrier, W.J., & Grimm, C.M. 2001. King of the hill: Dethroning the industry leader. Academy of
Management Executive, 15(2): 59-70.
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Five “Hardball” Strategies

• Devastate rivals’ profit sanctuaries

• Plagiarize with pride
• Deceive the competition
• Unleash massive and overwhelming force
• Raise competitors’ costs

Exhibit 8.7 – Five “Hardball” Strategies

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Strategic and Tactical

Competitive Actions
Actions
• Entering new markets
Strategic • New product introductions
Actions • Changing production capacity
• Mergers/Alliances

• Price cutting (or increases)

Tactical • Product/service enhancements
Actions • Increased marketing efforts
• New distribution channels
Exhibit 8.8 – Strategic and Tactical Competitive Actions
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Likelihood of Competitive Reaction

• How a competitor is likely to respond will depend on

three factors
- Market dependence
- Competitor’s resources
- The reputation of the firm that initiates the action (actor’s
reputation)
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