MODULE 2:

Recognizing the Potential Market

P R E S E N T E D B Y: G R O U P 2
 ThE Entrepreneurial

Process
The entrepreneurial process is a step-by-step procedure in
establishing any kind of business that an entrepreneur has to
undergo. It is composed of four aspects.
1. Opportunity spotting and assessment.
2. Developing a business plan
3. Determining the capital needed
4. Running the business.
 1. Opportunity spotting and assessment

- This is the beginning of the process and is considered the most

difficult. Entrepreneurs at this point take note of interesting
trends in their environment. Consumers are reliable sources of
opportunity information because market needs originate from
them.

- Other major sources of opportunity are the glaring problems in

the environment, problems encountered by co-entrepreneurs,
new trends, processes, and developments in the environment.
 1. Opportunity spotting and assessment

- Other minor sources are feedback from distribution or business partners such
as retailers, wholesalers, manufacturers, and technical people that the
entrepreneur is working with.

- The entrepreneur's toughest job is to carefully assess the opportunity

through estimation of opportunity length, capitalization required, threats,
profitability, and calculation of real and perceived value. Entrepreneurs should
also assess if the opportunity is aligned with their personal goals and
attributes. Last, entrepreneurs should already think in advance how they will
position the product or service in the market and showcase its unique selling
proposition. This module will focus mainly on opportunity spotting and
assessment, which represent the entrepreneur's stimulus in starting a new
2. Developing a business plan

- Entrepreneurs should formulate a business plan when

they have already spotted and assessed the opportunities
for a market. A business plan is a comprehensive paper
that details the marketing, operational, human resource,
financial, strategic direction, and tactics of the business.
The business plan will be the core guide and direction of
the entrepreneur in calculating the resources needed,
assessing how to obtain these resources efficiently, and
running the business sustainably.
3. Determining the capital needed

- A big idea can never be translated into reality if the

entrepreneur's resources are limited. Therefore, it is mandatory
in the entrepreneurial process to calculate the resources
needed to establish the business and compare this against the
entrepreneur's current resources. Caution must be applied in
computing the complete set of resources needed and include
only those items that are considered as the real needs in
venture creation. Allowance must be considered as well
because there will be times that resources will be inadequate
or unsuitable.
4. Running the business

- This is the part where the entrepreneur should use the

resources allocated for the new venture. The business plan
prepared in step 2 should already have been implemented.
All aspects of the business plan should be critically
observed from operations, marketing and sales, human
resources, finance, and strategy implementation. The
entrepreneur should have a control and monitoring system
to serve as a check and balance of the formulated plans.
Table 2.1. Components and steps in the entrepreneurial process

Opportunity Developing a Determining the Running the

Spotting and Business Plan Capital Needed business
Assessment
Evaluate the identified Come up with a business Calculate the intrinsic and Practice leadership as a
opportunity description and analysis extrinsic capital needed way of life

Conceptualize and Calculate the existing Recognize critical

Perform industry analysis
measure the opportunity
capital success factors

Identify the perceived Come Calculate the difference Identify existing and
up with the
value of the opportunity to between the needed foreseeable problems
marketing plan
the company and the capital and the existing and issues
customers capital. Choose the most
cost-efficient suppliers or
service providers
Table 2.1. Components and steps in the entrepreneurial process

Opportunity Developing a Determining the Running the

Spotting and Business Plan Capital Needed business
Assessment
Identify the perceived Come up with a business
Calculate the difference
value of the description and analysis between the needed capital Identify existing and
opportunity to the and the existing capital. foreseeable problems
Choose the most cost-efficient and issues
company and the
suppliers or service providers
customers
Do cost-benefit analysis of Prepare the operations Develop contact and Employ risk-mitigating
the opportunity including plan including the relationship with suppliers controls and monitoring
risk analysis organizational plan and service providers systems

Match the opportunity with

Devise an
the entrepreneur's skills Come up with the
expansion/sustainabilit
and objectives financial plan
y strategy
Table 2.1. Components and steps in the entrepreneurial process

Opportunity Developing a Determining the Running the

Spotting and Business Plan Capital Needed business
Assessment
Scan the strengths and Identify strategies and
weaknesses of tactics
competitors
Perform monitoring and
control
Scanning the Marketing Environment

- Scanning the marketing environment is the starting point of any

new venture that involves understanding and knowing the
intricacies of the macroenvironment, microenvironment, and
internal environment. With this process of scanning the general
environment, an entrepreneur can recognize various
opportunities and at the same time understand thoroughly the
arena where the future business will operate. The process of
seeking, screening, and seizing is adapted to create the most
suited product or service for an opportunity. The general rule is
to find the opportunity first before coming up with a new product
or service, not the other way around. This is one of the mistakes
that budding entrepreneurs commit in starting a new venture.
Seeking, Screening, and Seizing

- The 3S of opportunity spotting and assessment is the

framework that most of the promising entrepreneurs use
to finally come up with the ultimate product or service
suited for a specific opportunity. An opportunity is an
entrepreneur's business idea that can potentially become
a commercial product or service in the future. The
entrepreneur serves as the catalyst of creating a value for
the customers through the new or innovated product or
service. As a reward, the entrepreneur earns profits when
the customers are satisfied and delighted.
S1-Seeking the Opportunity

- Opportunity seeking is the first step and is the

most difficult process of all due to the number
of options that the entrepreneur will have to
choose from. It involves the development of
new ideas from various sources as follows:
1. Macroenvironmental Sources
2. Micromarket
1. Macroenvironmental Sources
a. STEEPLED
- This is a mnemonic for sociocultural, technological, economic,
environmental, political, legal, ethical, and demographic factors. This
represents the general environment where the entrepreneur can identify
business opportunities from and where the future business is about to
operate. Any external factor or a combination of external factors from
these eight environmental forces can have a direct effect in opportunity
generation and business sustainability. These will be discussed further in
later sections.

b. Industry
- This is the source of current trend on what is happening in the industry
where the future business will belong to. For example, the entrepreneur
should be fully acclimated on what is happening with the rice industry if
he or she wants to establish a rice retailing business.
1. Macroenvironmental Sources
c. New discovery or knowledge
- These are new trends that can be the core business model of a
new venture. For example, the influx of mobile applications
necessitates businesses to have this platform as one of their
transaction channels.

d. Futuristic opportunities
- These are projected new opportunities that can possibly affect
the new business while it is running. For example, sari-sari stores
in the future will be able to incorporate financial transactions such
as accepting bills payment and process remittances.
2. Micromarket
a. Consumer preferences, interests, and perception
- These are the current needs and wants of potential customers that
should be discovered right away by a budding entrepreneur. This way, he
or she will be able to take a chance of the opportunity. A need is
recognized when a customer believes that there is a difference between
his or her current situation versus his or her desired condition. A want, on
the other hand, is recognized when a customer believes that there is a
specific product or service that can perfectly suit the need.

b. Competitors
- Recognizing and understanding potential competitors will aid the
entrepreneur to develop a product or service that is unique and will surely
stand out from the competition. The 4Ps of marketing (product, place,
price, and promotion) will be competitively positioned if the entrepreneur
is familiar with his or her competitors.
2. Micromarket
c. Unexpected opportunities from customers
- Oftentimes, the most brilliant ventures come from the most
unexpected opportunities. It may happen in unlikely
situations, unlikely places, and with unlikely people. Existing
problems and bottlenecks often give rise to an unexpected
opportunity. What entrepreneurs usually do is be on top of the
situation and change the market's perception of a product or
service or build a new market. In the Philippines, there are a
number of budding social entrepreneurs who turned
unnoticed products into superstar products that carry also the
value of social responsibility.
2. Micromarket
d. Talents, hobbies, skills, and expertise
- Business opportunities do not just come from outside forces, but also from
within the entrepreneur. The entrepreneur's talents, hobbies, skills, or
expertise can be a source of business opportunity. For example, if the
entrepreneur is an artist, why not sell his or her paintings? If he or she is a
musician, why not put up a bar and perform there? If he or she is an expert
in home interior design, why not make it a business?

e. Irritants in the marketplace such as deterrents, problems,

complaints, and delays
- Generally, entrepreneurs see opportunities in situations where there is a
recurring problem or sometimes when there is no more hope in solving the
problem. When customers are already sick and tired of the same old issue
or problem, that is when the opportunistic entrepreneur should come in and
make a difference.
2. Micromarket

f. Location
- Often, entrepreneurs just have to look at their ecosystem
and they will be able to spot a business opportunity right
away. For example, if the entrepreneur's location has many
schools, then a restaurant, an eatery, or probably a
computer shop might be a good business to establish. If
the entrepreneur is in an island with an awesome
beachfront, why not put up a hotel?
 methods of
generating
Ideas

- Recognizing and understanding the vast sources of

opportunities is one difficult activity to do. Also, the
methods of generating ideas may be overwhelming to
undergo through. Either one or a combination of the
methods given can be employed by the entrepreneur in
generating new ideas,
 methods of
generating
Ideas
1. Focus group discussion (FGD)
- In this method, a moderator handles a very open, free-flowing, and in-
depth discussion with a group of people who can provide insightful ideas
about a new product or service that will fill a market need.

2. Brainstorming
- Similar to an FGD, brainstorming is an activity that allows the participants
to share creative ideas using the following rules: (a) no destructive
criticism or judgment is allowed, (b) wilder ideas are accepted, (c) more
ideas are preferred, and (d) improvement of others' ideas is allowed. In
short, brainstorming is a fun discussion with lenient rules.
 methods of
generating
Ideas
3. Brainwriting or Internet brainstorming
- This is exactly the same as brainstorming except that the channel used is
not face-to-face, but in writing or online. The results of brainwriting or
Internet brainstorming usually take longer, as the answers depend on the
availability of the participants in answering the questionnaires online.
4. Problem inventory analysis
- This method is similar to the FGD except that the participants are already
given an inventory of product or service problems. The participants will just
identify from the list given the compelling problem(s) of a potential product
or service instead of generating the ideas from them.
Macroenvironmental Sources:
Examples of Findings

STEEPLED Analysis

- The result of the STEEPLED scan will aid the

entrepreneur in deciding what product or service to set
up and whether this new venture will succeed or not. The
focus of this scan is only on the macroenvironment.
Again, not all factors can have an effect on the new
venture. The important thing is for the entrepreneur to
fully scan these factors so he or she can decide if there is
a compelling business opportunity or an impending
threat.
Macroenvironmental Sources:
Examples of Findings

STEEPLED Analysis
1. Sociocultural factors
- These factors represent a general view of a locality's traditions, customs, beliefs,
norms, and perceptions. These factors affect how a person of the locality behaves and
reacts to marketing and selling activities.
- The entrepreneur should take note of the following sociocultural factors:
• Health consciousness
• Education level
• Attitudes toward imported goods and services
• Attitudes toward the person's lifestyle
• Attitudes toward product quality and customer service
• Attitudes toward saving and investing
• Emphasis on safety
• Buying habits
• Religion and beliefs
Macroenvironmental Sources:
Examples of Findings

STEEPLED Analysis
2. Technological factors
- These are composed of innovations of an existing technology or an invention of a new
one mostly on applied science and engineering research areas. Entrepreneurs should
always be up-to-date with the technological changes, as these are catalysts in improving
a product or service or replacing them entirely.
- The entrepreneur should take note of the following technological factors:
• Basic infrastructure level
• Rate of technological change
• Spending on research and development
• Technology incentives
• Legislation regarding technology
• Communication infrastructure
• Access to newest technology
• Internet infrastructure and penetration
Macroenvironmental Sources:
Examples of Findings

STEEPLED Analysis
3. Economic factors
- These factors play a vital role in the scanning of marketing environment because
economic factors directly affect any business venture. These factors include income,
expenses, and resources that can influence the cost of doing business and generating
income.
- The entrepreneur should take note of the following economic factors:
• Growth rates • Trade flows and patterns
• Inflation rates • Level of consumers' disposable income
• Interest rates • Monetary policies
• Exchange rates • Fiscal policies
• Unemployment trends • Price fluctuations
• Labor costs • Stock market trends
• Stages of business cycle
Macroenvironmental Sources:
Examples of Findings

STEEPLED Analysis
5. Political factors
- These factors are mostly induced by government policies and administrations, which
can have a strong effect in the entrepreneur's business.
- The entrepreneur should take note of the following political factors and examples:
• Government stability and likely changes
• Bureaucracy
• Corruption level
• Tax policy (rates and incentives)
• Freedom of press
• Rule of law
• Government effectiveness
• Political rights
Macroenvironmental Sources:
Examples of Findings

STEEPLED Analysis
6. Legal factors
- Related with political factors, legal factors are government laws and regulations that
can restrict or allow business activities.
- The entrepreneur should take note of the following legal factors and examples:
• Anti-trust law
• Discrimination law
• Copyright, patents / intellectual property rights
• Consumer protection
• Employment law
• Health and safety law
• Data protection law
Macroenvironmental Sources:
Examples of Findings

STEEPLED Analysis
8. Demographic factors
- These are the characteristics of the people in the target market.
- The entrepreneur should take note of the following demographic factors:
• Population growth rate
• Age distribution and life expectancy rates
• Gender distribution
• Social classes
• Family size and structure
• Minorities
S2 — Screening the Opportunity

- By now you already feel overwhelmed with how vast Sl (opportunity seeking) is,
you don't have to worry that much. This concept has been inculcated to you to see
the universe of opportunities an entrepreneur can derive from the
macroenvironmental and microenvironmental sources. The key here is in the
effective choosing or careful diligence. Entrepreneurs should start with the big
picture. This is the best way in ensuring that the entrepreneur has scanned the best
potential business to venture into. Once the compelling opportunities are identified,
S2 will be the next crucial step.

- Opportunity screening is the process of cautiously selecting the best

opportunity. The selection will depend on the entrepreneur's internal intent, i.e., the
main objective that the business will accomplish in the entrepreneur's life, and the
external intent, which will address the compelling needs of the target market. The
entrepreneur should apply due diligence and independent judgment in selecting the
opportunities that have a potential and eliminate those that are not within the scope
of the entrepreneur's risk appetite. Risk appetite refers to the entrepreneur's
S2 — Screening the Opportunity

- Time must be considered by the entrepreneur in screening the opportunities at

hand, as it is considered one of the most critical resources of an entrepreneur. Time
should only be devoted to worthwhile opportunities. Therefore, entrepreneurs must
always be sharp-eyed for real opportunities. They must be able to intelligently say
no to low-compelling opportunities and proceed with sensible ones. The crafting of a
business plan starts only when entrepreneurs already said no to many opportunities
and said yes to one forceful opportunity, to which they will devote their time and
resources.

- Detailed here are the most important elements that are always present in a
compelling opportunity. The entrepreneur should say no to an opportunity if it does
not contain any of these business opportunity elements:
1. Has superior value to customers
2. Solves a compelling problem, issue, a need, or a want
3. Is a potential cash cow
4. Matches with the entrepreneur's skills, resources, and risk appetite
The Opportunity Attractiveness Test

- The Opportunity Attractiveness Test (OAT) (Youngleson, 2009) aims to assist entrepreneurs
in ensuring that the opportunity that they will venture into is an attractive and feasible
prospect. This is not the "be all" in the road to entrepreneurial success but a framework to
measure how compelling an opportunity is. This test is designed to detail each
entrepreneurial aspect into small chunks to come up with a sound entrepreneurial decision.
The entrepreneur must answer this test realistically and avoid overestimation or
underestimation. All the risks must be accounted and assessed first. These can come from
different aspects of the business such as operations, market, economy, and finance. These
risks must be estimated and measured to determine the impact to the potential business.

- The answers in this test will be the guiding principles of the entrepreneur in writing the
business plan. The components of the OAT will be used to channel the entrepreneur's
direction in data gathering. It is vital that this test must be carefully reviewed over and over
again before finally going to the last step of seizing the opportunity. At the end of this test,
the entrepreneur should be able to at least decipher the relative attractiveness of the
business opportunity. Ultimately, the decision lies in the risk appetite of the entrepreneur
The Opportunity Attractiveness Test

- Because each venture is unique, some components of this

test might not be applicable to all businesses. It is the job of
the entrepreneur to discern which among these components
can put an equitable weight to components that are relevant
to the potential venture. The entrepreneur can also
customize this test to better suit the screening requirements
of the new venture. In summary, with the four business
opportunity elements and this OAT, the entrepreneur can't
go wrong in his or her new venture. The key is effective
diligence.
The Opportunity Attractiveness Test

1. The "concept" and the "strategy." The entrepreneur should think of the
reason for the business' existence. He or she can do this through crafting a
brief vision statement. A vision statement is simply defined as what the
business should do in the future. The entrepreneur should also devise a value
creation proposition, i.e., the value that the product or service will offer to the
target customers or the satisfaction of the needs or wants of the target
customers. This proposition should be compelling enough to influence the
behavior of the target customers. Influencing the behavior means enticing the
target customers to pay an above average or a premium price on the product
or service. The entrepreneur should also understand the importance of the
timing of the business. He or she should ask: is it really necessary to establish
the business now? Last, the entrepreneur needs to devise a differentiator or a
positioning strategy-what difference will the new business inculcate to the
target customers as compared with the rest? Is this compelling enough to
influence the behavior of potential customers?
The Opportunity Attractiveness Test

2. Opportunity metrics. These are considered as the opportunity's

critical success factors. These factors will approximately
determine the attractiveness of the new venture depending on
the total scores that it will generate and the risk appetite of the
entrepreneur. Table 2.2a-g consists of the basic metrics necessary
in starting up a business. The answers, however, require extensive
research, so the entrepreneur must be careful in answering this
metries table. Moreover, the entrepreneur can extend the scoring
system depending on the complexity of the industry and the
venture itself. In this example, the entrepreneur can put 5 as the
highest score and 1 as the lowest score. Again, the weight of each
factor should be determined by the entrepreneur.
S3-Seizing the Opportunity

- Opportunity seizing is the last step in opportunity spotting

and assessment. This is the "pushing through" with the
chosen opportunity. Entrepreneurs should make the best out
of this opportunity, and they should exert effort and full
dedication for the success of the new venture. The
entrepreneur's idea can be any type of innovations listed
here.
- Innovation is the process of positively improving an
existing product or service. It is a key driver for economic
growth. Innovation is inevitable as the world constantly
changes
S3-Seizing the Opportunity
Therefore, products and services must also adapt to these changes. There are
three types of innovations according to the degree of distinctiveness.

1. Breakthrough innovation
- These innovations, which may also include inventions, occur infrequently as these
establish the platform on which future innovations in an area are developed.
Breakthrough innovations must be protected by a patent, a trade secret, or a
copyright. Examples of breakthrough innovations include the Internet, the
computer, or the airplane.
2. Technological innovation
- These innovations occur more frequently than breakthrough innovations. These
innovations are technological advancements of an existing product or service.
These innovations need to be protected, too. In relation to the examples given,
technological innovations include the wireless fidelity or Wi-Fi, the laptop, and the
jet airplane.
S3-Seizing the Opportunity

3. Ordinary innovation
- These innovations occur ordinarily as the name
implies. They are commonly originating from market
analysis and technology pull instead of a technology
push. This means that the market has a strong
influence in the implementation of an innovation.
Relating again to the given examples, examples of
ordinary innovations are unlimited Internet plans of
telecommunications companies, a wireless mouse, and
an airbus for economical travelers.
S3-Seizing the Opportunity
- Entrepreneurs often encounter a problem in defining a "new"
product or service, or identifying its components or features.
Examples of these include drastically improving the packaging
and not the product itself, adding one extra step in the service
delivery process, or simply augmenting a product or service. The
"newness" is also independent on the eyes of the market and the
company. The entrepreneur must then establish that the new
product or service offered will provide true value to the
customers and influence their behavior. Further, the new product
or service should increase the profitability potential of the
enterprise
Product or Service Planning
and Development Process
- In the seeking process, one opportunity stood
out from a number of sources. This opportunity
was tested according to its attractiveness and
feasibility in the screening process. The last
process, called the seizing process, involves
refining and developing this opportunity. The
refining process is called product or service
planning and development process.
Product or Service Planning
and Development Process
- In the seeking process, one opportunity stood out from a
number of sources. This opportunity was tested according
to its attractiveness and feasibility in the screening
process. The last process, called the seizing process,
involves refining and developing this opportunity. The
refining process is called product or service planning and
development process.
- It has five key stages.
1. Idea stage. 4. Test marketing stage
2. Concept stage 5. Commercialization stage
3. Product development stage
Product or Service Planning
and Development Process
1. Idea stage
- In this stage, the entrepreneur determines what are the
feasible products and/or services that will perfectly suit the
opportunity. Usually, a market evaluation is conducted by
the entrepreneur to assess whether the new product or
service ideas will be accepted by the market using values
and benefits to consumers as metrics. On the other hand,
the value of the new products and/or services should also
be assessed it these will benefit the entrepreneur. Products
and services that are unappealing to the market should be
eliminated at this stage.
Product or Service Planning
and Development Process
2. Concept stage
- Once the acceptable product or service has already been identified it will
go through the concept stage. In the concept stage, the developed idea will
undergo a consumer acceptance test. This test includes getting the initial
reactions of the primary target market and the distribution channel.
Conversational interviews are conducted to understand consumer
preference on physical characteristics and attributes of a product or the
physical evidence and characteristics of a service. Both favorable and
unfavorable results will be used to devise an acceptable product or service.
These will also be used to compare the new idea with the competition with
regard to superiority or inferiority. Once all of the necessary pieces of
information are gathered, the entrepreneur can already proceed with the
next stage.
Product or Service Planning
and Development Process
3. Product development stage
- In this stage, the entrepreneur leverages on the information generated
from the prospective customers via the concept stage. Actual reactions
from prospective customers are determined. The entrepreneur will
conduct a consumer panel where the actual product samples or actual
service samples will be given or rendered to the panel of potential
customers. The participants' task is to critique the actual product or
service and record the good qualities and inferior attributes. They are
also given samples of competitors' products or services for comparative
purposes. Consumer preference will largely be based on methods such
as multiple brand comparisons, risk analysis, level of repeat purchases,
or intensity of preference analysis (Hisrich, 2010).
Product or Service Planning
and Development Process
4. Test marketing stage
- This stage validates the work done from the first three stages to
measure success in the commercialization of the product or service.
Actual sales results will be the foundation of the consumers'
acceptance level and will be the basis in commercializing the product
or service.

5. Commercialization stage
- This stage is also called the launch stage. While the product has now
begun to be distributed and sold, these may be done on a limited basis.
People involved in this stage ensure that the goals of the
product/service development process are achieved and are in line with
the business plan.
Product or Service Planning
and Development Process
- Recognizing the potential market is really one of the
most difficult tasks to do. It involves tedious research
and analysis to ensure success. This process is very
critical, especially for budding entrepreneurs whose
capitalization comes from hard-earned money. They will
not just let their fruits of labor be put to vain. Once the
3S of opportunity spotting and assessment have been
diligently done, the entrepreneur should now be ready
to prepare a comprehensive business plan that covers
marketing, operations, and financial plans.
 for
thank you

listening
presented by: Group 2

Charisse Dominguez Alcaparas

Yloisa Bensan
Lloyd Cagaoan
Gian Garcia
Leana Grace Ocal
KingDouglas Perez