Identifying and Recognising Opportunities
Most importantly, entrepreneurs recognize an opportunity and turn it into a successful business. Barringer and Ireland (2012) defined an opportunity as a favourable set of circumstances that creates a need for a new product, service, or business. Most business ventures are started in one of two ways. Some ventures are either internally stimulated or externally stimulated. In the latter, an entrepreneur decides to launch a firm, look for and recognizes an opportunity, and then starts a business. In the former, an entrepreneur recognizes a problem or an opportunity gap and creates a business to fill it.
Irrespective of which of these two ways an entrepreneur goes into a new business, opportunities are hard to spot. Identifying a product, service, or business opportunity that is not merely a different version of something already available is difficult. Entrepreneurs make a common mistake in the opportunity recognition process by taking a currently available product or service that they like or are passionate about and then trying to build a business around a slightly better version of it. The best approach to opportunity recognition is to identify a product or service that people need and are willing to buy, not one that an entrepreneur wants to make and sell.
Barringer and Ireland (2012) opine that opportunity has four important qualities. It is (1) attractive (2) durable (3) timely and (4) anchored in a product, service, or business that creates or adds value for its buyer or end user. In order for an entrepreneur to take advantage of an opportunity, its window of opportunity must be available. The window of opportunity describes the time period in which a firm can realistically enter a new market. Once the market for a new product is established, its window of opportunity opens.
Distinction between a Business Idea and a Business Opportunity
The starting point of a new business creation process is an idea of a product or service which can be used to satisfied an identified need of individuals, families or organizations. An aspiring entrepreneur can have an idea which he/she believes is a great idea that would be an instant success in the market. Not all such ideas can translate into viable business opportunities. For a business idea to transform into a business opportunity, such idea must offer a viable solution to a problem experienced by potential consumers and for which they are willing to pay.
A business idea and business opportunity can be likened to a production process which is inputs transformation output process. A business idea represents the input stage while a business opportunity represents the output stage. An entrepreneur may have a business idea that he or she believes would be an instant success in the market. Not all such business ideas (input stage) can be transformed into viable business opportunity (output stage). The question we may want to ask is, ‗what makes the transformation possible?‘ Such a business idea must offer a viable solution to a problem experienced by potential consumers and for which they are willing to pay. The idea is the conception stage of a product or service while the opportunity is the stage at which the product or service gives satisfaction to consumers and the entrepreneur makes profit from such a venture.
Barringer and Ireland (2012) define an idea as a thought, an impression, or a notion. An idea may or may not meet the criteria of an opportunity. This is very important because many entrepreneurial ventures fail not because the entrepreneurs that launched them didn‘t work hard, but rather because there was no real opportunity to begin with. For a business idea to be good, it is necessary to understand whether the idea fills a gap and meets the criteria for an opportunity. On the other hand, Kirzner (1979) believes opportunity comes from a dysfunction in a market: ―An opportunity is a market imperfection or an economical imbalance which can be exploited by an individual who restores market equilibrium. Here the opportunity is considered as a profit which comes from an existing demand and available resources‖.
Sources of Business Opportunity
Business opportunities have to be sought out as they do not present themselves for anyone to pick. Ability to spot these business opportunities is what distinguishes an entrepreneur from all others.
There are all sorts of business opportunities to explore and which are already present in the market, but not all of them will make a perfect match for such an individual.
There are various sources from where the would-be entrepreneur could get ideas; from which he will then choose and develop into viable business opportunities. Inegbenebor (2006) identified several ways by which an entrepreneur can spot business opportunities by examining various sources from which useful ideas can be generated.
(i) Copy of existing successful business forms: This is the commonest source from which useful business ideas can be generated. It is a good source if and only if there are no entry barriers. The business that is already in existence is a model that can be copied or modified significantly by ensuring that the product or service is more convenient, less expensive, faster and easier to handle.
(ii) Personal or other people’s human experience: One‘s human experience whether pleasant or unpleasant may be use to stimulate a creative response or solution to a problem. For example, many people who buy street food may not be aware of the health hazards of their actions. But the fact that there is such a risk can enable an entrepreneur to come up with the idea of producing a product that does not entail such health risk and promoting it in such a way that consumers will perceive the merit of the new product over the existing ones.
(iii) Work Experience: As a result of work experience, aspiring entrepreneurs may become conversant with problems associated with existing products, target market not yet attacked, difficulties experienced by customers, limitations of suppliers, etc. Through work experience, creative solutions to problems may emerge for which potential customers are willing to pay for and in turn yield profit to the entrepreneur.
(iv) A Hobby: An activity done regularly in one‘s leisure time for pleasure, for example, singing, playing football, etc can be converted into a profit yielding venture.
(v) Franchise: This is when a license is granted by a government or company to a person or group, allowing him/them to use or sell certain products. This may create opportunity for the individual or group to attack a market that is currently not being served.
(vi) Vocation: Possession of vocational skills or professional skills, for example, hairdressing, catering, etc suggests ideas of services that can be rendered.
(vii) Consultants: The vast experience and knowledge gained by consultants in the course of seeking solutions to the problems encountered by organizations is a major source of business idea.
(viii) Joint Effort: As the saying goes, two good brains work better than one. Two individuals may come together in an attempt to spot business opportunities in the environment. This move may then lead them to forming a partnership.
Some Possible Business Ideas:
Conducting a Market Survey Inegbenebor (2006) opines that a great business idea is not necessarily a good business opportunity An idea has no definite form. To give it form requires the entrepreneur to:
Market survey or market research is a systematic way of gathering, analyzing and interpreting marketing data that will aid the entrepreneur in making marketing decisions. The information gathered helps the entrepreneur to decide on the nature of product or service that will suit the needs of customers, the target market to be selected and the most appropriate way to position the business relative to competition. Market survey provides answers to two main questions namely:
(i) Market Question and
(ii) Competition Question
(i) Market Question:
(ii) Competition Question Who are the competitors?
The specific objectives of the market survey need to be stated clearly in order to conduct a market survey effectively. The specific objectives of the survey will highlight the type of data that need to be collected thereby saving a lot of time, energy and resources. Market research data is usually divided into primary or secondary sources. Primary data involve first-hand information through the use of questionnaire, interviews, observation or a combination of these methods. Secondary data is collected from existing records in the organization or from various published sources such as the publications of trade associations, annual reports of companies, official publications of the Central Bank of Nigeria, National Bureau of Statistics, and other regulatory agencies of government.
It is usually difficult or very expensive to examine the entire population of potential customers and competitors. To avoid this problem, a sample must be chosen to be representative of the population of interest. To guarantee the validity and reliability of the data in making decisions, care must be taken in choosing the sample. The idea behind this to ensure objectivity that will guarantee the quality of the data and hence of the decisions based on them.
The starting point of marketing is assumed to be at the point of creating the idea of a particular business venture. An entrepreneur‘s first commitment to his business is the determination of a felt need of a defined customer or consumer. This is done by deliberately judging and evaluating the environment.
Environmental scanning is the process of evaluating the environment with a view to identifying business opportunities. Environmental scanning helps the entrepreneur to identify goods and services that are needed, the extent of the demand, the nature of competition in that market and the chances of taking deep advantages to make the business successful and profitable. Market research is one of the tools of environmental scanning.
Another marketing challenge facing the entrepreneur is the issue of producing and delivering the products or services in the form of quality that will adequately satisfy the taste and desires of the consumer. Therefore, one of the functions of marketing involves making input into the processes of production, packaging and effective delivery of the goods and services to the satisfaction of buyers and consumers. Until these basic requirements are met by the entrepreneur, marketing would become a major problem against business success.
It is possible for an un-informed small business owner to go into the business of producing goods and services without this necessary background market information. Atuma (2012) outline the following marketing issues which should agitate the mind of any entrepreneur: What goods and services are needed by the society in which the entrepreneur is interested in operating?
What kind of goods are being demanded: industrial or consumer, perishable or durable, retail or wholesale?
What motivates the buyers, consumers or decision makers?
What economic, social, technological, cultural or legal factors determine or affect the demand for the goods and services under consideration by the business?
What market communication platforms are necessary to position the products in the market? What is the position of the product in the value chain?
How will the image of the business be enhanced by the product?
What level of quality standard is planned for the product?
What will be the most effective distribution channel for the product in the market?
How best will be the goods be packaged for best appeal to buyers, users or consumers?
The analysis of these issues and the adoption of appropriate and rational position about them will constitute what is generally referred to as marketing strategy: a set of decisions and actions designed to achieve market goals and targets. Market strategies drive and direct the actions of the entrepreneur.
(i) Product: what to produce, what value will the product convey and bestow to the consumer, what quality is embedded, what size, what standards, what expectation in terms of services, are embedded?
(ii) Price: what is the price to charge? How competitive and quality embedded? How affordable is it considering the status of the buyer or consumer?
(iii)Place: what logistics are needed to make the product available? What are the channels of distribution and the network in place? What delivery arrangements are needed?
(iv) Promotion: what efforts are needed to bring awareness of the product in terms of value, availability, utility in use and ownership? How can incentives be provided for current users and potential consumer? This is related to advertising to enhance sales.
(v) People: who are involved in the whole marketing effort? Are distributors required? Are retailers required? Are agents needed in the marketing effort?
This includes advertising, sales promotion, publicity, and personal selling. Adverting – is a personal form of promotion and involves transmitting standard messages to large numbers of intended receivers.
Sales promotion – involves activities which are essentially used to complement advertising and personal selling. It can be in the form of exhibitions, point – of – sale displays, or demonstrations. Publicity – is concerned with the presentation of the firm‘s image, its products, services or ideas in a favorable light to the public.
Publicity is free but although publicity people get paid, they seek to attract public attention to a company and its product without paying media costs.
Personal selling – aims to marry specific products with specific customers on a person – to – person basis to secure ownership transfers.
Consideration for Choosing a Business Opportunity
An entrepreneur that wants to start a business must consider one of these three critical decisions namely: the first is whether to take the plunge at all. The second dwells on the type of business to start and the last is to decide on how to proceed on the new venture in terms of basics such as financing, organization and lifestyle adjustment. However, the second decision which required a choice of the opportunity to exploit to set up is usually by far the most difficult and tasking decisions that an entrepreneur will ever make. A potential business owner can usually identify several business opportunities, each of which is attractive for one reason or the other.
Some of the factors to be considered in choosing a business opportunity are:
(i) Business Experience: this is a fundamental ingredient for the success of any business venture. To succeed in the undertaking, the entrepreneur must possess the relevant and appropriate experience required to excel in his/her chosen niche. There exists a wide array of differences in the practices and mode of operation in the different industries in the economy. For instance, there are differences in the purchasing practices, production processes, customer relations practices, ethics and modes of relating with the relevant government agencies. Also the technicalities and concepts used vary from industry to industry. Overcoming these problems will usually be easy for an entrepreneur who has had some years of working experience in the chosen industry.
(ii) Skills Required for the Successful Operation of the Business: Every business requires certain skills for successfully running it. Different businesses require different constellation of skills or group of skills. But for each group of skills, there will be one skill which is core and critical for success. The entrepreneur must therefore choose a business for which he/she has the relevant core skills. Though it may be possible to acquire such skills by employing experienced workers, the risk of being cheated and exploited is high if the entrepreneur does not have the relevant skills required.
(iii) Financial Capability: Just as it is with every form of business, the financial implications is very important. Funds will be needed to provide the relevant raw materials to be used for production. Furthermore, there will be need to acquire the relevant technology and skills which also borders on finance. Without adequate finance, the entrepreneur is unlikely to succeed in the chosen business.
(iv) Risk Profile of the Entrepreneur: The entrepreneurs‘ tolerance for adventure in a new livelihood is an important component in choosing a business. We all have different risk levels or tolerance levels. Therefore, the entrepreneur must ensure that he/she selects a business within his/her acceptable risk class.
(v) Support from Friends and Family Members: Usually many businesses fail because of the inability of the entrepreneur to gain the support and encouragement of their families and friends. The support of family members is particularly crucial in the early stage of the business.
(vi) The Owners Personal Interest: If the entrepreneur loves the kind of activities that the business will entail, the easier it is for the business to succeed. At all times, the entrepreneur must ensure that there is no conflict between the chosen business venture and his/her preferred life-style.
(vii) The Desired Level of Income: The income expected from the business venture must be adequate to meet the entrepreneurs need for housing, clothing, food, recreation, entertainment etc. While the business owner may accept a reduced standard of living at the initial stage, in the long run, the business must have the potential of providing the desired level of income for the owners.
(viii) Legal or Regulatory Constraints: In some cases, the law specifies the minimum professional training and/or experience that is required to operate certain types of businesses. Persons desiring to operate such businesses are required to obtain a license from the appropriate authorities.