Module 2: The Entrepreneurial Process
CHAPTER TWO
Specific Objectives:-
Students will be able to:-
1. Discuss sources of entrepreneurial opportunities
2. Evaluate opportunities from given information
3. Describe a business concept
4. Assess the sources of business concepts
Opportunity Identification
The entrepreneur must decide, through careful assessment and research, whether pursuing a
good idea is as a result of a visible viable opportunity. The opportunity that exists for the
entrepreneur may not be limited. This means that the entrepreneur must focus on the ones
that best fits the enterprise’s competencies and seize them before competitors beat him or her
to it.
A continuous scanning of the landscape must be done by an entrepreneur. This means that he
or she must not be ‘bogged down’ with excessive involvement in internal operations. The
entrepreneur should give himself or herself enough time to maintain an external focus so as to
heighten the chance of seizing the right opportunities.
Entrepreneurs view change as an opportunity. They do not like things to remain the same.
Opportunities emerge as a result of changes in various factors. Here are some of the sources
of opportunities listed below:
1. Changing demographics –shift in factors such as population, size, age ethnic
make-up, birth rates, employment rates and death rates may present new
opportunities for the entrepreneur. Entrepreneurs must continuously watch
these changes to see what their next big move could be.
In the Caribbean, incomes are rising, literacy rates are increasing, more
women are entering the workforce and the population is generally getting
older. With these wide and varied changes, there are increasing opportunities
for entrepreneurial ventures in the areas of education, women-related
businesses, childcare and child support services, health, and health-care
services, especially for older patients, and health and lifestyle services based
on growth in the fitness and nutritional needs.
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Migration rates have been increasing in many Caribbean countries over the
last decade. Entrepreneurs can now seize the opportunity of offering a unique
service that will help prospective emigrant go through their process smoothly.
2. Emerging markets – the pace at which the business world is changing has
offered entrepreneurs opportunities in many non-traditional areas. Attention is
often given to the emerging economies of India, Indonesia, Malaysia, Mexico,
Colombia, Poland, and Kenya. They are emerging economies powerhouses
that feature a strong measure of entrepreneurship, innovation, and small
business.
The market and the vast capabilities and knowledge base factors have seen
them approach and even surpass traditional strong countries like US, Britain,
and other European nations. As these countries realize increasing wealth, they
present new markets and opportunities for entrepreneurs all over the world.
The Caribbean Single Market Economy (CSME) and the Caribbean Forum
(CARIFORUM), for instance, have allowed entrepreneurs to market their
products and services to areas external to their home countries, thus increasing
the potential size of their markets.
3. New Technologies – the advent of computers and the internet has seen an
exponential explosion in entrepreneurial opportunities.
The birth of new technologies provides opportunities for the entrepreneur to
upgrade production processes or improve existing product or service offering.
This should make him or her relevant and more competitive in the market.
New technologies may give an entrepreneur an opportunity to ‘tap’ into a new
market.
These technologies continue to open the door to new opportunities and
continued technological developments.
New knowledge that creates opportunities for example energy conservation
leading to development of ‘green products’, ‘green marketing,’ technological
developments.
4. Regulatory changes – Heath Tarbert et al that ‘Regulation is becoming a
driver of strategy. History tells us that periods of significant regulatory
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changes are usually followed by periods of increased mergers and acquisitions
activity, new products, and other changes in industry dynamics.
Regulatory changes may come in the form of tax breaks, entirely new tax
regimes, introduction of new regulations etc. The entrepreneur will seize any
opportunity that may come as a result of any change.
For instance, in the US, deregulation of the television industry saw the
proliferation of cable television which opened up hundreds of channels that
were used as the media to advertise a surplus of goods and services.
Changes in industry and market structure: regulatory changes governing a
particular industry for example changes in quotas, licences; changes in
technology or techno-structural changes; changes in taste and social values.
5. Social changes – are defined as the behavioural changes people make that
collectively benefit society, especially societal structures. A social change will
lead to a shift in demand towards goods and services that will support that
change.
Examples of social change range from the simple: more people voting,
recycling, or donating to charity; to the complex: reduced domestic violence,
lower student drop-outs rates and increased entrepreneurship and social
inclusion of the poor.
The explosion of the social media or social networking phenomena, for
instance, has seen myriad businesses opened and thriving solely using these
media. Facebook, YouTube, Instagram, Pinterest, LinkedIn, Twitter,
WhatsApp, Messenger and Tumblr are just a few of the media used by today’s
trendy entrepreneurs as opportunities to start businesses.
Additionally, the multiple uses of today’s smartphones have also engaged the
minds of innovative persons in developing applications (apps) geared specially
for that specific medium.
Thinking ‘green’ may be another factor contributing to the creation of new
opportunities. Recycling, eco-tourism, health clubs are just a small sample of
the types of opportunities available to the enterprising individual due to
changes within the society. Many firms are changing their products or the
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processes they use in order to demonstrate a positive attitude to the
environment in an increasingly sensitive society.
The Evaluation of Opportunities
There are many factors that must be investigated before an opportunity is taken. Below are
some of these issues that will allow the conscientious and prudent entrepreneur to decide
what qualifies as a good business opportunity.
1. Market issues - this will reflect changes in the industry and market structure, level of
competition, level of technology, legislation to regulate the market. It would
incorporate trends in the market that will provide opportunities or threats, new market
opportunities as well as, new product development or new uses for existing products.
The market issues entail the following:
(i) The innovation must meet a real and clearly defined market need. The target
market must be able to see an immediate benefit. There are persons who will buy a
good or service because they were persuaded by a strong sales promotion. However,
persuading a person to buy when there is no compelling need, will by no means build
a strong market.
The matter of the need to conduct a thorough market research cannot be
overemphasized here.
(ii) Regulation changes regarding the target market or the structure of the market
should be observed.
(iii) The target market must perceive that the benefit of the innovation surpasses the
price that is to be paid. More specifically, the features of the product or service such
as the core benefit, quality, design, packaging and after sales service should be
perceived as being of supreme value, allowing the entrepreneur to increase price to a
certain extent without reducing sales.
(iv) The window of opportunity (the time that the entrepreneur estimates that the
opportunity will be open for), must be long enough for the innovation to be created
and reach the target market so that the target profit can be made.
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(v) The target market must be reachable. Marketing communication efforts must be
able to reach the target market. These efforts include but not limited to advertising,
promotion, direct marketing, telemarketing, and personal selling. Communication
should be able to flow smoothly, forward, and backward.
2. Economic issues- the entrepreneur needs to be able to state how the business is going to be
earning its income. Bearing in mind that there may be similar businesses in the local and
wider marketplace, they must be mindful of the impact that these can have on the success or
failure of their proposed business operations.
The economic issues will incorporate economic factors such as exchange rate issues;
economic cycles (boom and recession); growth rates of markets; income levels; level of
unemployment; demand and supply conditions in the market.
There must be a favourable return on investment. There must be the prospect of a minimum
profit potential and growth potential that are seen as acceptable. If the market is small, a
product or service that will bring ‘repeat sales’ would be fantastic.
The projected profit and growth potential must be sufficient to attract needed investors.
The entrepreneur must consider the stage of the economic cycle that the country is in. Some
opportunities are best taken in a particular part of the cycle. An entrepreneur who is in a
country that is in a recession, could not think of offering creative investment plans.
3. Competitive advantage is what sets the organization apart from its competitors.
Competitive advantage is introducing an innovative idea or product into the marketplace is no
guarantee of financial and entrepreneurial success. The entrepreneur needs to evaluate the
competitive advantage of the situation in order to determine the viability and sustainability of
the venture. If there are indeed direct competitors, they need to be known, together with their
strengths, their weaknesses, and their likely response to their perceived competition.
(i) The customers must see their needs solved by the introduction of the new product or
service at a price that they will be willing to pay. That being the case, is there the possibility
that the entrepreneur can supply the product as the lowest cost producer, with the lowest
marketing and distribution costs?
(ii) It would be advantageous to have exclusive control of the product or have a unique
product from that existing in the marketplace. If this not the case, and without control over
such areas as product development and prices, competitive advantage will be lost.
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4. Management issues – people make the difference in the success or failure of any
entrepreneurial venture. Ideally, the entrepreneurial team ought to have a
combination of business skills and the technical and industry expertise to make a
success of the enterprise.
(i) Organizing the business requires developing and building relationships with a host
of different stakeholders – customers, suppliers, other players within the industry,
team members, governmental and private agencies, networking associations. It would
soon be discovered that there is no need to develop strategic alliances along the way
to help traverse this challenging path.
(ii) Integrity and honesty are characteristics which should describe the management
team. While it may take some time to source and assemble the team, there ought
to be an uncompromising stance taken by all concerned to ensure that the
entrepreneurial venture is not tainted by shady and questionable character issues.
Furthermore, management must understand that in some cases the competitive advantage
is temporary while changes in the environment are continual. It is therefore imperative
that, management engage inactions to develop new competitive advantages.
Developing a Business Concept
Many entrepreneurs approach the would-be financiers with great ideas but still get turned
away. Often, they are told, ‘It’s just not a business,’ or ‘It’s a great idea but you don’t have
what it takes to run a business like this!’ Entrepreneurs need to do a feasibility study and
develop a compelling business concept.
The business concept is a bridge between an idea and the business plan. It enables the
entrepreneur to consider some key details that will bring a clearer definition to the enactment
of the idea. It forms the basis for a business plan.
The business concept clearly expresses an idea for a business that includes basic information
such as the nature of the product or service that is to be offered, demography of target
consumers and a unique selling proposition that will give a company an advantage over its
competitors.
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A business concept may involve a new product or simply a novel approach to marketing or
delivering an existing product. Once a business concept is developed, it is incorporated into a
business plan or developed further using the business model canvas.
Therefore, the business concept is a refining of the idea to bring out a clear and concise
picture of the business and its competitive advantage. The concept may involve the
provision of details for a new process, new market and not only related to a new product or
services.
From an Idea to a Business Concept
The business concept can be expressed as a concise description of what the entrepreneur
envisions the business to be.
The business concept provides information such as:
What is the product or service being offered?
What benefit(s) will the product or service provide?
Who are the expected consumers?
Why will these customers buy the product or service?
What distribution channels will be used?
Who will sell the product or service?
Who are the competitors?
How will consumers pay for the product or service?
Benefits of the Business Concept
Provides specifics on key areas of the plan that will provide direction for a more
thorough treatment in the business plan
Highlights key areas for research
Allows the entrepreneur to relate the business idea to prospective stakeholders such as
customers, suppliers, and creditors, in an effective manner
Enables the entrepreneur to foresee challenges so that structures can be put in place to deal
with them
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Sources of Business Concepts
Sources of business concepts include:
New products – a business concept may be based on a new product that the
entrepreneur wants to place on the market.
There are currently many needs of the market which at present are not being met, and
the aim is to understand these needs and to find solutions to them.
Need to store more music digital format that would replace the cassette tape and CDs?
The MP3 player was created.
Need to more from the bulky desktop computer to something more portable?
The world saw the creation of laptops and tablets.
The key here is to keep looking for ways to constantly improve an existing product.
Also new products to may be introduced into a niche market or a complimentary
product to an existing product.
New service – a business concept may be based on a new service that the entrepreneur
wants to introduce to the market.
Want to obtain an airline boarding pass without the hassle of having to get one at the
airport?
Simple – one can be printed directly from one’s computer long before arriving at the
airport.
The key here is to keep looking for ways to constantly improve an existing situation.
New processes – the business concept may be for a new process that the business
hopes to introduce into manufacturing.
For example for example enhanced production techniques; new method of producing
a good or service via specialized machinery.
New processes, another source of business concepts, help in improving efficiencies
and reducing wastage. They help in reducing costs and in improving ways in which
businesses may operate. If, in introducing a new process, the business has the
Schumpeterian approach in causing market disruption and having the advantage of
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being the market leader, then introducing new processes would be a major advantage
to the business.
New markets – a business concept may be surrounding a new market that has been
discovered. For example, sourcing new geographical areas via online technology,
introducing product to both local and overseas as well as market segmentation.
Within the Caribbean, the CARICOM Single Market and Economy (CSME), for
instance, has allowed goods to be traded duty-free and without restriction throughout
the region. The courageous entrepreneur can take full advantage of such opportunity.
In addition, the changing demographics, as discussing earlier can be sources of
business concepts for the enterprising and innovative entrepreneur.
New Organizational Structures / Forms
A decision on a new organization structure may be a basis for the preparation of the
business concept.
L. Gratton (2004) in her publication The Democratic Enterprise, noted that today’s
companies are becoming less hierarchical, flatter, more fluid and even more virtual
structure or flexible form.
New Sales / Distribution Channels
An entrepreneur may see the opportunity to take advantage of a new sales or
distribution channel that will offer more convenience to the customers.
Entrepreneurs should note economist Peter Drucker’s statement: ‘the greatest change
will be in distribution channels, not in new methods of production or consumption.’
In today’s world, the Internet and the World Wide Web have forever changed the way
products are distributed to end users. Manufacturers of smartphones have enabled
end users to make purchases directly from their mobile units – a fact that today’s
entrepreneurs ought to keep in mind when considering the ease with which their
products can reach their final destinations.
New Development Paradigm
a new development paradigm will be source for a business concept. This will
communicate the new platform from which the enterprise plans to operate wile
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thrusting forward. The thinking that the new generation is technologically savvy will
influence how the designer thinks when providing products or services to fit its needs.
For instance, there has been an increase in online textbooks as this is believed to
better suit this new generation of children.
For example creating new standard, new models, new ways of doing business such as
shopping via websites and facilitating delivery to any part of the world.
Mass media – ideas from social media, websites and magazines and television.
Customer feedback – suggestions, complaints or requests from customers. Example
customers requesting delivery services.
Hobbies / Interests – Ideas come from what a person enjoys or is skilled at. Example a
student who enjoys baking starts a small pastry business.
Trade fairs/ exhibitions are organized events where businesses display and
demonstrate their products or services to potential customers, investors and other
businesses.
* real life exposure to business ideas
Awareness of trends and technology
opportunities for partnerships
Steps in Developing a Business Concept from an Idea.
Identify potential market
Decide on target market
Identify customer segment within the market
Identify segment characteristics
Decide on target segments.
Identify customer needs or preferences.
Decide on marketing mix factors such as pricing.
Identify media, promotional and sales channels.
Develop a marketing plan.
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After assessing the sources of business concept for example seek to define new ways of
delivering a product that the consumer already has a need or desire for. This can be
illustrated in the following example adapted from [Link] [Link] which
describes the possible sources of the business concept.
New methods of delivery involve
use of websites, conducting
research through links, upload
assignments, online discussions, The product is the same;
Delivery of the curriculum in 24-hour access to material however the change is in the
a flexible, less restrictive
delivery and use of the process
format than traditional
classrooms
Business Concept Innovation:
Online Learning
The strength of the business concept is the competitive advantage that it would provide.
Stakeholders and investors want to see the benefits that would be provided.
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