Entrepreneurship Management-Opportunity Recognition

Entrepreneurship Management
Opportunity Recognition
Identifying and Recognizing
Opportunities
An opportunity is a favorable set of circumstances that creates a need for a new
product, service, or business.
An opportunity has four essential qualities: it is (1) attractive, (2) durable, (3) timely,
and (4) anchored in a product, service or business that creates value for its buyer or
end user.
For an entrepreneur to capitalize on an opportunity, its window of opportunity must

be open.
a. The term “window of opportunity” is a metaphor describing the time period in
which a firm can realistically enter a new market.
It is important to understand that there is a difference between an opportunity

and an idea.
a. An idea is a thought, impression , or notion. It may or may not meet the criteria of
an opportunity. This is a critical point because,, many businesses fail not because
the entrepreneurs that started them didn’t work hard, but because there was no real
opportunity to begin with.
Ways to identify an opportunity
• Observing Trends
• Solving a Problem
Observing Trends
1. Economic Forces
For example, a drop in interest rates typically leads to an increase in new home
construction and furniture sales.
2. Social Forces
The persistent proliferation of fast-food restaurants, for example, isn’t due primarily
to people’s love for fast food but rather to the fact that people are busy: the number
of households with both parents working remains high.
Some of the recent social trends that allow for new opportunities are the following:
– The aging of the population, The increasing diversity of the workforce, The globalization
of industry, The increasing focus on health care and fitness, The proliferation of
computers and the Internet, The continual increase in the number of cell phone users,
New forms of music and other types of entertainment
3. Technological Advances
Once a technology is created, products emerge to advance it. For example,
RealNetworks was created to add video capabilities to the Internet.
Advances in technology frequently correlate with economic and social changes to
create opportunities. For example, the creation of the cell phone
4. Political Action and Regulatory Changes
Political action and regulatory changes also provide the basis for opportunities. For
example, new laws create opportunities for entrepreneurs to start firms to help
companies comply with these laws.
Solving a Problem
Sometimes identifying opportunities simply involves noticing a problem

and finding a way to solve it.
These problems can be pinpointed through observing trends and through

more simple means, such as intuition, serendipity, or chance.
Some business ideas are clearly gleaned from the recognition of problems
in emerging trends.
For example, Symantec Corp. created Norton antivirus software to rid
computers of viruses.
At other times, the process is less deliberate. An individual may set out to
solve a practical problem and realize that the solution may have broader
appeal.
At still other times, someone may simply notice a problem that others are
having and think that the solution might represent an opportunity.
– A serendipitous discovery is a chance discovery made by someone with a prepared
mind.
Personal Characteristics of the
Entrepreneur
1. Prior Experience
2. Cognitive Factors
– Opportunity recognition may be an innate skill or a cognitive process.
(Entrepreneurial Alertness).
3. Social Networks – The extent and depth of an individual’s social network
affects opportunity recognition.
4. Creativity – Is the process of generating a novel or useful idea.
Techniques for Generating New
Business Ideas
• Brainstorming
• Focus Groups
• Surveys
• Other Techniques - Customer advisory boards, attend trade shows,
conferences, and gatherings of industry personnel
Encouraging and Protecting New
Ideas
• Establishing a Focal Point for Ideas - by designating a specific
person to screen and track, idea bank
• Encouraging Creativity at the Firm Level
• Protecting Ideas from Being Lost or Stolen
– Intellectual property is any product of human intellect that is
tangible but has value in the marketplace. It can be protected
through tools such as patents, trademarks, copyrights and trade
secrets.
Feasibility Analysis
• Product/Service Feasibility
• Industry/Market Feasibility
• Organizational Feasibility
• Financial Feasibility
Concept statement
Before a company undertakes a feasibility analysis, a
concept statement should be developed.
A concept statement is a preliminary description of a
business and includes the following:
- A description of the product or service being offered
- The intended target market
- The benefits of the product or service
- A description of how the product will be positioned
relative to similar ones in the market
- A description of how the product or service will be sold
and distributed
Product/Service Feasibility
• Concept Testing
A concept test entails showing a representation of the product or
service to prospective users to gauge customer interest, desirability,
and purchase intent.
• Usability Testing
A concept test is usually followed by the development of a prototype
or model of the product or service.
Typically, a basic prototype is developed and is used to gauge
customer interest and to conduct usability testing.
Usability testing requires that users of a product perform certain
tasks in order to measure the product’s ease of use and the user’s
perception of the experience.
Industry/Market Feasibility
Industry Attractiveness
– Are large and growing
– Are important to the customer
– Are fairly young rather than older and more mature
– Have high rather than low operating margins
– Are not crowded
overall attractiveness of the industry can be known through primary and
secondary research.
Market Timeliness
– whether a prospective business is planning to introduce a breakthrough
new product or service or one that is an improvement on those currently
available.
– whether to try to capture a first-mover advantage
Identification of a Niche Market

– A niche market is a place within a larger market segment that represents a
narrower group of customers with similar interests.
Organizational Feasibility
• Management Prowess
– A firm should candidly evaluate the prowess,
or ability, of its management team.
• Resource Sufficiency
Financial Feasibility
• Capital Requirements
• Financial Rate of Return

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Entrepreneurship Management

For an entrepreneur to capitalize on an opportunity, its window of opportunity must

It is important to understand that there is a difference between an opportunity

Sometimes identifying opportunities simply involves noticing a problem

These problems can be pinpointed through observing trends and through

Identification of a Niche Market

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