Unit 27:

Identifying Entrepreneurial Opportunities

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 Table of Contents
Introduction......................................................................................................................................3

Determining and evaluating different sources of entrepreneurial ideas and innovation.................4

Provide a comprehensive evaluation of Drucker’s 7 sources of systematic innovation providing

specific examples.............................................................................................................................5

STEEP Analysis...............................................................................................................................7

Different types of innovation...........................................................................................................7

The need of identifying specific customer types for targeting new ideas.......................................8

Porters Five Forces model...............................................................................................................9

Competitor analysis and Industry life cycle....................................................................................9

Present data needed to support gap analysis in the evaluation of a particular entrepreneurial idea
.......................................................................................................................................................10

Interpret data appropriately to provide evidence of market potential............................................12

Apply a SWOT framework to gather evidence to support an objective assessment of a specific

entrepreneurial idea.......................................................................................................................14

Pestel analysis of Healthy Cafe based on smoothie industry in UK..............................................15

Conclusion.....................................................................................................................................18

Reference.......................................................................................................................................19

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Introduction
Entrepreneurs are assets to an economy as they add to the growth of a country’s economic
growth. But entrepreneurship is a challenge itself because there is a probability to be failed in
the newly developed business. The idea of launching a new smoothie business will be named as
“Healthy Café” in this report. That’s why the entrepreneur has to go through some steps to
evaluate the business idea. In this report, all the topics have been covered which are undergone
by the entrepreneur. At first the different sources of business innovation ideas are described
through the Drucker’s model and steep analysis and then the five forces model introduced by
porter is discussed to measure the potentiality of the smoothie industry. A SWOT analysis and
pestel analysis are also briefly explained by the perspective of smoothie industry. At last the
research process of evaluating the potentiality is also depicted in the report.

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Determining and evaluating different sources of entrepreneurial
ideas and innovation
The concept of entrepreneurship largely depends on passion. That’s why he or she has a gist for
searching new business ideas and implement them in the competitive market. There are some
key sources by which the “nestle juice” can get some ideas of innovative business plan. These
are briefly discussed below:

Figure 1: Some possible sources of entrepreneurial ideas (Elenurm et al, 2012)

Individual interest and hobby: It is the primary source of any business idea. Personal interest
and hobby can lead an entrepreneur to become successful. For example, interest in traveling can
get one into a new business like travel agency or of anyone has an interest in cooking he/she can
open a cooking channel. That’s how personal interest and hobby play an important role in
developing business ideas.

Survey of consumers: Another important source of entrepreneurial idea is conducting the

customers survey. It helps in generating new business ideas. As the entrepreneurs have to offer
the products according to the wish of customers so that they can analysis the preference of the
customers by survey, interviews, questionnaires etc.

Dreams and brainstorming: It is a method of problem solving because nowadays the customers
prefer such organizations which are able to solve the problems of customers. This process
basically starts with a statement of problem. Therefore, dream is also a part of developing
business ideas. So it should not be ignored.

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Mass and social media: Various mass media such as newspaper, television, magazine, internet
provide useful information to the business idea makers. By looking up to several advertisement
sites or commercials one can get some idea. For example, the trend for gymnastics in the young
people can lead one to develop a fitness care center.

Personal knowledge and experience: It is the most vital source of developing business ideas
because experiences in a place of work results a successful entrepreneurship business. For
example, if an individual has worked as a manager of a big five-star hotel for several years, it is
very obvious to have practical knowledge of how to maintain the business activities. This might
help him to start a restaurant business then eventually grow it into a five-star hotel.

Provide a comprehensive evaluation of Drucker’s 7 sources of

systematic innovation providing specific examples
A new business idea or plan is generated by an entrepreneur. The risk-taking attitude is needed to
gain more profit. Innovation is correlated with entrepreneurship ideas because it helps to turn the
business idea into a complete business. There are 7 sources of systematic innovation delineated
by Peter F Drucker. These are presented below:

Figure 2: Drucker’s Seven Sources of Innovation (Swaim et al, 2011)

The source which is identified by Drucker at first is the unexpected occurrence which can
occur by chance. For example, the innovation of fire and dynamite are the prominent ones. The

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second source is incongruities which can lead to innovation whenever supply is in disproportion
with demand. The third one is market structure which can also give a chance of innovation. For
example, the way google has shaped the search engine market. The fourth source is necessity.
The common proverb goes as necessity is the mother of invention and innovation also. The
innovation of Microscope is an example of this source. Human beings try to innovate things
which can fulfill their needs. The fifth one is demographics which is used to satisfy the needs of
lifestyle such as the innovation is smoke which is dangerous to health although. The sixth one is
the changing perception. For example, previously the fat people were regard as healthy people
but nowadays the perception has been changed so the healthy and low calories foods are
invented by the human beings. Finally, the new knowledge is the last source which is obvious.
For example, the invention of artificial intelligence, Nano technology, robotics etc.

STEEP Analysis
As the macro environment affects a business in many ways and it is not controllable by the
business so that an analysis called STEEP analysis is used to get an idea to evaluate how
appropriate the macro environment is for the newly developed business. So, for analyzing the
macro environmental elements, Steep analysis of Smoothie industry has been conducted and it is
discussed in below:

Social factors: The people in UK are becoming more health-oriented day by day. So, the
demand for healthy products is also increasing in the same way. For this reason, the firm is
taking this advantage to grow by inaugurating healthy smoothie which can meet the demands of
the customers.

Technological factors: In the current business world, many modern technologies have been
introduced such as automation, research and development speed, life cycle of products, various
incentives related to technologies etc. An entrepreneur can take modern technology such as
online platforms and automation technology to generate a business idea.

Economic factors: The consumers buying capability is very much related with the economic
condition. So, an entrepreneur should consider the changes in economic factors like foreign
exchange rate, GDP rate, inflation and deflation rate, income per capita etc. to generate new
business idea.

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Environmental factors: The development of environmental system such as ecosystem factors
i.e. food, soil, pollution and regulations made by the government can help the entrepreneur to
successfully generate new product ideas to serve the market.

Political factors: The political factors such as political stability, tax and international trade law,
political legislations can also help to generate different innovative ideas to the entrepreneur. For
example, Brexit has opened up a range of opportunities for the entrepreneurs to come up with
new business ideas.

Different types of innovation

 Product and process innovation: The term product innovation is referred as the
development of brand-new products and introducing them into the market. It also implies
the modification of the products so that it become more exclusive to the consumers. On
the contrary the process innovation refers to the advanced technologies which can be
brought in the operation process of the product so that it becomes more efficient and
effective.
 Incremental and big bang innovation: When a product needs some sort of change or
modification to strengthen the usefulness of the particular product the incremental
innovation is needed. Generally, it is done in the existing products of the company. But
big bang innovation implies the whole change of a product that means when the products
cannot be modified enough then the big bang innovation is needed for that. It means a big
change of the product (Fores & Camison, 2016).

The need of identifying specific customer types for targeting new

ideas
It is very obvious that a business cannot satisfy all the customers with their products and that’s
why a company segments their products according to different factors. Market segmentation is
segmenting the base of the customers considering the characteristics of the product.
Segmentation can be done through behaviorally, geographically and demographically.

Behavioural segmentation: It is done by segmenting the base of the customers by various

behavioural attributes. (Dolnicar, 2018). The other variables are occasions, benefits, loyalty

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status, user rate, the attitude towards the products etc. So the business should consider these
behavioural factors.

Demographic segmentation: This type of segmentation is mainly done by segmenting the

market based on gender, earnings, age, family size, occupation, education, family life cycle etc.
It is the most popular segmentation used by the business. Smoothie business has used this
segmentation based on age because the main customers are around 40-50 years.

Geographic segmentation: Different geographical units such as nationality, regional position,

states etc. are considered while segmenting the market. A company might to decide to run their
business in one or a few geographical areas or to operate in all areas.

According to the business plan of Healthy Café, it will adopt the demographic and behavioural
segmentation to serve the customers. They have used the variable attitude from behavioural
segmentation and age group of 40-50 from demographic segmentation. As people more than 40
years are more health conscious than the young people in UK so it indicates the behavioural and
demographic segmentation.

Porters Five Forces model

It is very important to analyse the attractiveness of the business from the perspective of a new
entrants and in this regard porters five forces model helps to analyse the forces define in the
industry (Carraher, 2018). Here the analyse of the macro factors using porters five forces model
are described from the perspective of Healthy Cafe:

Rivalry in the industry (Moderate): It means the number and strength of the competitors in the
industry where the business belongs to. As smoothie industry is not very much mature the rivalry
power is comparatively low here. If Healthy Cafe can provide quality and healthy drinks so that
it can eventually overcome the existing rivalry.

Probability of new arrivals (High): The chance of coming new entrants is very high for
smoothie industry because the capital and resource is less than the other industries so any one
can easily try to engage in such business. For this reason, Healthy Cafe has to create a brand
image to the consumers.

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Bargaining Power of suppliers (Low): The bargaining power of suppliers in smoothie industry
is very low because the ingredients which are required to make the drinks are very available to
all over the country. But Healthy Cafe should maintain long term relationship with the suppliers
to maintain the reputation.

Bargaining Power of buyers (Low): It is comparatively low because of the smoothie market
where the consumers cannot easily switch to other brands. The reason behind this is there are
few smoothie shops operating in UK and the customers have limited options to switch to others.

Threat of substitutes (Low): The threat of substitutes is low in the case of Healthy Cafe. As
there are few industries which are engaged in health-conscious products so that the customers
cannot find the substitutes for that. So it is low for Healthy Café (Carraher, 2018).

Competitor analysis and Industry life cycle

Competitors analysis is a very important part before launching a new business. By competitors
analysis the position of the rivalry’s and other existing companies can be estimated. By the
competitor analysis an entrepreneur can estimate the existing and future opportunities and threats
that may be faced. A secondary research states that the number of smoothie shops in UK is
almost 250 which is not adequate to serve the huge markets (IBISWorld - Industry Market
Research, Reports, and Statistics, 2020). Demand of the existing smoothie shops is growing day
by day because the elderly people are becoming more health conscious. So in this situation, a
smoothie shop in the market will get favorable outcomes from the customers as there are not
enough smoothie bars in the country. So, there is large market gap. A new business of smoothie
can use this opportunity to grow in this industry.

Present data needed to support gap analysis in the evaluation of a

particular entrepreneurial idea
Gap analysis plays a crucial role in evaluating the business idea because it estimates the
comparison between the actual and desired performance. In this report it has been previously
mentioned that “Healthy Cafe” is going to be established as a new business. The products that
will be offered by the firm is healthy juice, fresh fruits and vegetables. To appropriately evaluate
the business plan, the firm has to undergo with primary and secondary research within a certain

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time work frame. To show the project planning with the schedule a Gantt chart is prepared which
visually express the time framework for each task. This will also help to understand the start
dates and end dates of a project. Here the Gantt chart is shown below:

Tasks Jan 15- Jan Feb1- Feb 10- Feb March Marc April
25 20-30 10 20 20- 29 1-10 h 20- 1-10
30
Designing the research
planning
Research method
selection
Primary data
collection
Secondary data
collection
Data analysis and
presentation
Finalization

Figure 3: Gantt Chart (Self-created)

From the Gantt chart it can be said that it took almost 85 days to complete the whole research
work of the entrepreneurial idea. The information which are found through the primary and
secondary research are given below:

Primary research: This research process is based on the survey of 30 people in UK who are
actively involved in smoothie business. To conduct the survey some questions are prepared
which are given below:

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 Questionnaire

a) What is the average number of customers in a week?

b) Which age customers mostly prefer the smoothie shop?
c) Is there enough scope to grow the smoothie business in UK?
d) What is the average sell of a smoothie shop you operate?
e) What is the average production and operating cost?
f) How is the current competition in smoothie industry?
g) Is the number of shops is enough to provide service to all the customers?

Outcomes of the survey: By the primary survey, it came out that the average number of the
customers in a week is 120 people and people from 40-50 age are the main customers because
they are health conscious. As there are limited shops of smoothie in UK so there is an
opportunity to grow the business here. The average sell of a smoothie shop is near 1000$ and the
production and operating cost of daily basis is 10$. The current competition is very low but there
is possibility of increasing the competition as many young entrepreneurs get interested in
smoothie business. So from the overall primary research it can definitely said that launching
Smoothie zone is a good option for start-up.

Secondary research: To evaluate the entrepreneurial idea primary research is not enough.
That’s why a secondary research is also given below:

Revenue in 2019 $87 million

Number of business 289
Annual growth rate 8.3%

Table 1: Secondary research data (IBIS World - Industry Market Research, Reports, and
Statistics, 2020).

From the given chart, it is shown that only 280 businesses of smoothie all over the UK have been
operating which is comparatively lower than the other industries and the revenue is $87 million.
The the growth rate (8.3%) indicates the potentiality to enter the business because the higher
growth rate implies more attractiveness for the entrepreneurs and the probability of success rate

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is more than failure in this sector. The employment is 1025 and if the business of smoothie grow
then the employment rate will also increase.

Interpret data appropriately to provide evidence of market potential

To evaluate the market potentialities, big data analysis and social media have been introduced.
The interpretation is presented here:

Interpretation of big data analysis: Basically, a huge amount data is implied by big data which is
used for different research purposes. A big data analysis is presented here:

Figure 5: Food industry composition of the UK (IBISWorld - Industry Market Research,

Reports, and Statistics, 2020)

By the given figure it is noticeable that growth of catering and alcoholic business is less than the
non-alcoholic business. That’s why there is an opportunity of growing the business of smoothie
shops. For an instance, it has a growth rate of 7.4% in 2017 whereas the growth rate of alcoholic
drink is 4.4% which proves that it has a great potential to evaluate such business in UK.

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Interpretation of internet forums and social media responses: For more data about the
probability of the pioneering thought web discussions and online life have been utilized. The
data is given below:

Responses Yes No

Do you feel that the smoothie business has enough possibility to enter? 57% 43%
Is it will be a nice thing to open a smoothie shop in your area? 67% 33%
Do you think that nowadays people become more health-orientated? 71% 29%
Is the number of smoothie shops is adequate for the people? 46% 54%

From the social response of the general people it can be said that there are 57% people who think
that smoothie business has enough potentiality to enter but 43% think in negative. About 67&
people are very interested in visiting a new smoothie bar but only 33% are not delighted in that
fact. 54% people want new smoothie shops in there are whereas 46% do not want. So it can be
said undoubtedly that the social responses of UK people are favourable to the smoothie shop and
it carries potentiality to evaluate the business plan.

Apply a SWOT framework to gather evidence to support an

objective assessment of a specific entrepreneurial idea
Prior to propelling the item in the market, the business visionary must survey the
acknowledgment of the item to the purchasers. For this situation, swot examination can be a
powerful instrument to recognize the qualities, shortcomings, openings and dangers. From this
analysis an entrepreneur can gather evidence of the entrepreneurial ideas, the competitiveness of
the product, the reliability of the product and the outcome of introducing the product. The swot
analysis framework of Smoothie industry is discussed below:

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 Strength Weakness Opportunity Threat

Figure 6: SWOT analysis framework (Gurel and Tat, 2017)

Strength of “Smoothie industry”:

 As the number of competitors are comparatively less than other industries so there is a
market gap and it is potentially strong so it is the first strength of Smoothie industry.
 The products they are offering to the customers are very healthy and at the same time in
reasonable price so customers who are health conscious are the main strengths of
Smoothie industry.
 The low bargaining power of suppliers and customers are another strength of them
because it will allow them to charge the actual price.
 For establishing this business, the amount of capital and resource is not very huge
compared to other industries. So it can be a great strength to them.

Weaknesses of “Smoothie industry”:

 As the operation area of Smoothie industry is not very huge so it lacks the opportunity to
provide the customers with products fully.
 The initial cost of start-up the business is huge because the area of operation is
comparatively less than the others.
 As Smoothie industry is new so there is a lack of skilled employees. It may cause the
employee turnover and profit loss.

Opportunities of “Smoothie industry”:

 The rivalry in the smoothie business is lower than different ventures so if Healthy Cafe
can give greatness items to the shoppers, they can charge somewhat higher.

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  Smoothie industry can use the modern technologies to strengthen the operation process
and grow all over the country.
 It is in a prominent industry so the customers get attracted by the healthy products and
can expand the business very quickly.

Threats of “Smoothie industry”:

 Though the competition in the industry is not so much superior but the availability of the
materials can increase the competition at any time so it is a threat for Smoothie industry.
 Moreover, the legislations and laws regulated by the government in the standard of food
is another threat of it.

So these are the outcomes of the swot analysis. By this analysis it can be definitely said that if
Healthy Café can fruitfully use the strengths and opportunities it can easily overcome the
weaknesses and threats.

PESTEL analysis of Healthy Cafe based on smoothie industry in UK

Pestel analysis is conducted in below on the smoothie industry to understand the effects of macro
factors which are not controllable by the organization.

Political

Economi
Legal
cal

PESTEL
analysis

Environ
Social
mental

Technolo
gical

Figure 7: PESTEL Analysis (Shengelia, 2016)

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Political factors: The political factors are quite comfortable for the growing smoothie industry
in the UK (Shatskaya, 2016). Many political factors such as tax rates, stability of the country,
financial stability, labour law are preferable for the smoothie industry.

Economic factors: By analyzing the economic factors, it has been revealed that the main points
to consider include the GDP, foreign exchange rate, disposable income, interest and inflation rate
etc. (Yuksel, 2012). These factors help to grow the industry. There is an increasing trend of
consumption of healthy drinks because the disposable income of UKs people is increasing. So
this can be opportunity for the smoothie industry.

Social factors: The main social factors include shopping trends of consumers, beliefs and
attitudes, health, population growth rate, behavior etc. People have become more health-
conscious nowadays so it can be an opportunity to expand the business of smoothie industry.

Technological factors: The modern technology can help in operation process to produce more
quality products. By the advanced technology, healthy café can maintain the effectiveness. So it
can be helpful for smoothie industry.

Environmental factors: Environmental issues have a great impact on smoothie industry because
the government has been pressurizing the companies to adopt ways that are beneficial for society
(Nurmi and Neimela, 2018). So it is beneficial for smoothie industry as they are assuring the
customers with better quality.

Legal factors: Smoothie industry can be badly affected by the legal factors such as tight rules
and regulation, policies and legislations implemented by the government etc. (Johnsen, 2016).
Because like the other industry it cannot follow the strict rules and regulations. In the same way,
any adverse change in legal factors can affect adversely this industry.

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Conclusion
Several factors must be mulled over while beginning another business. Business visionaries
ought to evaluate the possibility, gainfulness and different variables. An individual can different
administration instruments that would help in such manner. A portion of these apparatuses, for
example, STEEP analysis, Drucker’s model, Gantt chart, SWOT analysis, pestel analysis,
competitor analysis etc. which are used to evaluate the business potentiality of Healthy Cafe.
When the business is fully operational, it must be firmly checked to guarantee supportability. By
the full analysis, it is revealed that smoothie business has great scope to shine in UK as the
people become more health orientated and they hope to see more smoothie bars in their city.

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