Identification and Selection of Business Opportunity

The First Prime Minister of India, Pandit Jawaharlal Nehru, had emphasized that real progress must ultimately depend on industrialization. Throughout the world, industrialization has indeed become the magic word of the mid-twentieth county.

Industrialization is widely recognized not only as one of the important factors for socio-economic transformation and for achieving industrial self-sufficiency, but also for the accelerated development of other sectors such as agriculture, transportation, trade and services. This means that any sector alone can not be developed without developing other potential sectors, which may directly or indirectly influence it. Business opportunity identification is a process which accelerates economic growth, effects structural changes in the economy, particularly in respect to resource utilization, production functions, income generation, occupational patterns, and population distribution and foreign trade, and induces social change.

Well-trained entrepreneurs can bring industrialization to a developing country like India. Thus, entrepreneurship is one of the most important factors of industrialization in the process of economic growth. Nowadays aspiring entrepreneurs can get information regarding various investment opportunities from the internet, business magazines, financial institutions, government, commercial organization, friends and relatives. It is their ingenuity skill and foresight that can guide them to choose the best business opportunity. The entrepreneur has to select a feasible and rewarding opportunity in order to make it an enterprise.

Search for Business Ideas

What are the motivational factors that drive an entrepreneur to launch a business? Business opportunity may be defined as an attractive project idea which an entrepreneur accepts as the basis for his investment decision. When you are offered with a business opportunity, it is astute to ask yourself a pair of vital questions before getting involved. First, is this business opportunity something that you are interested in?  Making sure that it is a job that you possess enthusiasm plus effort for will be one of the initial techniques to the success or failure of your particular business opportunity.

Second, you will need to do a little real idea and even potentially market research to choose if the business opportunity is practicable in the customer market.
Is this anything that clients will like to obtain and what you can do with it to outperform your opponents? Discovering the replies to those inquiries may facilitate you to select if your business opportunity is good economic investment. At last, you truly ought to be sincere with yourself as to whether or not you own the acquaintance plus ability plan to decide on a specific business opportunity. Be truthful with yourself on this one since you surely do not want your business opportunity to fail owing to something that you could have fixed.

Evaluation of Business Idea

You have what you believe to be a great idea for a business. You've noticed a need for some product or service that isn't currently available, and you've observed a company that isn't providing a product best suited for the needs of their customers. You want to evaluate your idea to determine whether it can actually succeed. These steps can help with that evaluation.

1.Define your product or service. Be specific in your definition. What exactly will you be offering prospective customers? How will it be produced and/or provided? How will it be delivered to the customer? How much will it cost? What are the options? What is the warranty? 2. Describe your customers. Who will buy your product or service? Will your customers be businesses or consumers? Why will they buy from you rather than your competitor(s)?

3. Identify your competitors. Learn about their products, services and company. You can get plenty of information from the company through annual reports, financial statements, industry publications/reports and marketing materials. Analyze the competitor's marketing materials. Those materials will tell you what they think are the advantages of their products to the customers. Is your product or service better than that of the competition?

4. Define your competitive advantage.

What makes your product or service better than your competitors' offering? You can gain a competitive advantage in a multitude of ways. You could offer cheaper prices, better quality, faster service or a longer warranty. Perhaps you have a proprietary technology or method of doing business that provides your business with a competitive advantage. Competitive advantage is only an advantage in the short term. Competitors will see that advantage and act to overcome it. Successful companies continually look for an advantage over their competitors. If you don't have some advantage, why would prospective customers buy from you?

5. Create A Projected Financial Statement.

The projected financial statement forces you to think specifically and accurately about the costs of running the business, building the product, selling and delivering the product or service. Without this information, you are going into business without knowing whether the business is even feasible. To be successful, you must be able to sell your product or service at a price that covers the costs directly associated with producing and delivering that product or service to your customers PLUS contribute towards paying other operational costs not to mention providing a profit to the business. The best way to know whether you can make enough money is to create a profit and loss statement projecting or estimating your revenue and expenses. Creating this statement is as simple as calculating projected revenue minus projected expenses.

6.How Will You Communicate The Availability Of Your Product Or Service To Your Prospective Customers? Internet advertising , direct mail, radio, television, print advertising, trade shows and outdoor bill boards are all tools a business can use to educate and inform prospective customers about the availability of your product or service. The challenge is to find out which tools are the most efficient and effective in generating interest and sales.

7. Describe The Things That Could Go Wrong To Negatively Impact Your Business. Loss of suppliers, inadequate sales, insufficient profit, product defects, customer dissatisfaction, government regulation and new, better competitors are examples of things that could go wrong. What might go wrong with your business? How will you handle those problems should they arise?

8. Decide. After Completing These Steps, Is Your Business Idea Sound? Does your product or service have an advantage in the market? How quickly can the competition adapt to your entry to the market? Can you generate enough from sales to cover expenses and earn a profit? If your business idea holds up under this level of scrutiny, go for it.

Model of Opportunity Recognition Process

Education

Prior Knowledge of Markets and Customer Problems Entrepreneurial Alertness Outcome: Successful Opportunity Recognition

Experience

Personal Experience

Work Experience

Networks

SOURCE: From Alexander Ardichivili and Richard N. Cardozo, A Model of the Entrepreneurial Opportunity Recognition Process, Journal of Enterprising Culture, Vol. 8, no. 2, June 2000.

The above figure indicates that the key to recognizing an opportunity lies in the knowledge and experience of the individual entrepreneur and, where appropriate, the entrepreneurial business. This prior knowledge is a result of a combination of education and experience, and the relevant experience could be work related or could result from a variety of personal experiences or events. The entrepreneur needs to be aware of this knowledge and experience and have the desire to understand and make use of it. The other important factors in this process are entrepreneurial alertness and entrepreneurial networks. There is an interaction between entrepreneurial alertness and the entrepreneurs knowledge of markets and customer problems. Those entrepreneurs who can recognize meaningful business opportunities are in a strategic position to successfully complete the product planning and development process and launch new ventures.

A feasibility study looks at the viability of an idea with an emphasis on identifying potential problems and attempts to answer one main question: Will the idea work and should you proceed with it? Before you begin writing your business plan you need to identify how, where, and to whom you intend to sell a service or product. You also need to assess your competition and figure out how much money you need to start your business and keep it running until it is established. Feasibility studies address things like where and how the business will operate. They provide in-depth details about the business to determine if and how it can succeed, and serve as a valuable tool for developing a winning business plan.

A well-prepared feasibility study can be effective evaluation tool to determine whether or not an entrepreneurial idea is a potentially successful one. What does a feasibility study include? It should give a description of the important elements of the entrepreneurial venture and the entrepreneurs analysis of the viability of the following elements. 1) Detailed product description 2) Identify the target market (Who, Where, how many) 3) Describe where the product will be distributed (location, size, channels etc.) 4) Price determination 5) Promotion plans

Why Are Feasibility Studies So Important? The Information You Gather And Present In Your Feasibility Study Will Help You: List in detail all the things you need to make the business work; Identify logistical and other business-related problems and solutions; Develop marketing strategies to convince a bank or investor that your business is worth considering as an investment; and Serve as a solid foundation for developing your business plan. Even if you have a great business idea you still have to find a costeffective way to market and sell your products and services. This is especially important for store-front retail businesses where location could make or break your business. For example, most commercial space leases place restrictions on businesses that can have a dramatic impact on income. A lease may limit business hours/days, parking spaces, restrict the product or service you can offer, and in some cases, even limit the number of customers a business can receive each day.

The Components of a Feasibility Study Description of the Business: The product or services to be offered and how they will be delivered. Market Feasibility: Includes a description of the industry, current market,
anticipated future market potential, competition, sales projections, potential buyers, etc.

Technical Feasibility: Details how you will deliver a product or service (i.e.,
materials, labor, transportation, where your business will be located, technology needed, etc.).

Financial Feasibility: Projects how much start-up capital is needed, sources of

capital, returns on investment, etc.

Organizational Feasibility: Defines the legal and corporate structure of the

business (may also include professional background information about the founders and what skills they can contribute to the business).

Sources of Information

Hobbies or Personal Interests Abilities, skills and work experience Familiar and unfamiliar services and products External environmental opportunities in the legal-political, economic, demographic, sociocultural and technological sectors

Ideas for So Entrepre neurial Venture

Limitations of what is available at present Approaches that are different and novel Breakthroughs and Advances Niches that are unfilled Changes and trends

Potential Sources Of Entrepreneurial Ideas

Above given table illustrates some of the more common sources and what to look for while exploring them. Let us look more closely at the four sources of ideas. 1. Personal Interests Or Hobbies Many entrepreneurial ventures were formed because of an entrepreneurs love of doing something such as restoring antique automobiles, etc. A successful entrepreneurial business might be built around ones personal interests in a particular product or activity.

2. Work experiences, knowledge, and skills By tapping into the knowledge of a particular industry or market gained by working in it, an entrepreneur can pinpoint areas of potential opportunity. For example if you have ever travelled, you have undoubtedly seen those suitcases with wheels. Now was not that a great idea! Robert Plath created the first wheeled suitcase, the Travelpro Rollerboard, because in his job as an airline pilot he was constantly carrying his bags from one place to another, and he was looking for a more convenient, comfortable way to do so.

In the process of using his work-related experience, he created not only a new product but also a new industry!

3. Products And Services Currently Available (Both Familiar And Unfamiliar) What products do you use everyday? Do they do everything that you wished they would? What about products you are not familiar with? Can you take what you are familiar with and apply it to those unfamiliar ones? Answer to the above questions are sources of idea generation to an innovative entrepreneur.

4. External Environment
Positive trends or changes that provide unique and distinct possibilities for innovating and creating value in the entrepreneurial context. These opportunities can be found in the technological, societal culture, demographics, economic and legal-political sectors. Those were the potential sources of entrepreneurial ideas, but what are the specific things that an entrepreneur should look for? Basically, he should look for changes and trends, unfilled niches, breakthroughs and technological and scientific advances, different and new approaches, and limitations of what is currently available. Any of these could provide a potential idea for an entrepreneurial venture.

But, perhaps this is not enough. Even with the wide variety of idea sources, an entrepreneur may have difficulty in coming up with an idea for his own entrepreneurial venture. At this point, he may want to use some different, more structured approaches to help generate ideas. There are four different structured approaches that he might use:

(i) Environmental Scanning Entrepreneurs' knowledge is critical to building sustainable competitive advantage in the 21st century (Lerner and Almor, 2002; Anand, Glick, and Manz, 2002). Because of increased globalization, rapid technological changes, and increased competition, entrepreneurs are facing new and unexpected challenges. These changes have significantly increased the quality and quantity of information that entrepreneurs must consider when making decisions.

Environmental scanning is the way in which management gathers relevant information about events occurring outside the company in order to guide the company's future course of action.

It is the search to identify trends that create business opportunities and pose challenges to the continued success of the organization (Costa and Teare, 1994). Environmental scanning is also more than gathering information. It is the process of using environmental information in decision making (Lester and Waters, 1989).  It is a means of improving the organizational ability to deal with a rapidly changing environment (Jain, 1984).  The external environment of the firm refers to both its task environment (competition, customers and suppliers), and general environment (economic, regulatory, technological, and socio-cultural factors).

(ii) Creativity and Creative Problem Solving

   This is the capability for combining ideas in a distinct manner or making unusual connections between them. It means cross-thinking by seeing new angles, connections and approaches. The whole area of creativity has been extensively researched and studied, resulting in a lot of information-all of which can not be covered here.  Here are a few specific techniques.

A The checklist method

The checklist method involves the development of a new idea through a list of related issues or suggestions. The following questions demonstrate how the checklist method is used: Put to other uses? New ways to use as-is? Adapt? What else like this? What could I copy Modify? New twist? Change meaning, color, form, shape? Magnify? What to add? Minify? What substitute? Smaller? Substitute? What else instead? Other material? Rearrange? Other pattern?

b Free association
Free association is another form of creative problem solving and is one of the simplest and yet most effective methods. It is helpful in developing an entirely new slant to a problem. First, a word or phrase related to a problem is written down. Then other ones are written down and so on. Each new word attempts to add something new to the ongoing thought processes. This creates a chain of ideas ending with a new product idea. The product planning and development process is crucial to an entrepreneur's success. One must first establish evaluation criteria by assessing the market opportunity and size. One must evaluate current competing producers, prices, and marketing efforts.

New idea should have synergy with existing management capabilities and marketing strategies.  The proposed product or service idea should be able to be supported by and contribute to a company's financial wellbeing.  One should evaluate the compatibility of a new product's production requirements with existing plant, machinery, and personnel. Entrepreneurs should be concerned with formally evaluating an idea throughout its evolution.  The idea stage involves identifying new product or service ideas while eliminating impractical product or service ideas.

c Attribute listing In this an entrepreneur develops a new idea by looking at the positive and negative attributes of a product or service.

(III) BRAINSTORMING A method of shared problem solving in which all members of a group spontaneously contribute ideas. Brainstorming is a group problem-solving technique that is intended to help members develop innovative new approaches to a problem in an unthreatening environment.

First developed by A.F. Osborne in 1941, brainstorming in its most basic form involves stimulating all the members of a group to express a variety of ideas, which are built upon and recorded for future reference. Critical judgment of the ideas is reserved until later in the process, when the ideas are evaluated, combined, improved, and changed until the group reaches a final resolution of the problem.

There are three critical factors that determine the success of a brainstorming effort. First, the group must strive to produce a large quantity of ideas, as this increases the likelihood that they will happen upon the best possible solution.

Second, the group must be certain to withhold judgments of the ideas as they are expressed, since the negative thinking of one group member can make others less willing to participate and thus derail the whole process. Third, the group leader must create a positive environment for the brainstorming session and channel the creative energies of all the members in the same direction.

(iv) Focus Groups

A focus group is a marketing research tool in which a small group of people (typically eight to ten individuals) engages in a roundtable discussion of selected topics of interest in an informal setting. The focus group discussion is typically directed by a moderator who guides the discussion in order to obtain the group's opinions about or reactions to specific products or marketing-oriented issues, known as test concepts. Many small businesses find focus groups to be useful means of staying close to consumers and their everchanging attitudes and feelings. By providing qualitative information from well-defined target audiences, focus groups can aid businesses in decision making and in the development of marketing strategies and promotional campaigns.

5. The Role Of Intuition We can not leave our discussion of generating ideas without looking at the role of intuition. Intuition is a cognitive process whereby we subconsciously make decisions based on our accumulated knowledge and experiences. Intuition exists in three forms. The most widely known type of intuition is referred to as ordinary intuition. Ordinary intuition is a feeling or an instinct that is not particularly rooted in anything tangible. We all have them, and in some cases they seem to be accurate, but businesses are not built on gut feelings. Secondly, expert intuition is a trained response to a specific stimulus.  Years of practice precede demonstrations of spectacular reactive skills, especially in sports.

Strategic intuition is not a feeling or a reaction. It is a clear thought that comes together in what is best described as a flash of insight. The tools of the trade for strategic intuition are recognizing trends, presence of mind, and freeing oneself from attachment to a predetermined conclusion.

Strategic intuition is not to be confused with expert intuition. Both processes work in the same way with past memories, knowledge or experience being pulled off the shelves of your brain to be used and combined in a current situation. However, expert intuition refers to an extremely fast process that occurs in the mind of an expert in their field after years of experience, where they can enter a situation and just by looking at the situation recognise familiar signs that indicate to them the best strategy to take.  Expert intuition works fast, in familiar situations, and is easier to study as you know when the expert will probably use it.

Strategic intuition, on the other hand, draws on experiences and knowledge that the person may not have personally had themselves, but has stored in their memory from others.  It is a much slower process that occurs in new situations, and is much more difficult to study as strategic intuition flashes of insight can happen at any time of any day. Expert intuition, like strategic intuition, does not start with a goal and then list and weigh up options to decide how best to reach that goal. Instead each decision comes into the persons mind as a single idea. The age-old analytical model of listing options and weighing them up in order to decide which action to take is incorrect in explaining how real life ideas and decisions are made.  Decision making is actually intuitive. Experts do not first set a goal and then try to reach it, they look to recognise which goals are reachable and then go ahead and work on those that are. Experience helps us to recognise the existence of opportunities and once the opportunity is recognised, they go to work on it.

6. Other Sources of Business or Product Ideas I. II. Emerging new technologies and scientific know-how Trade fairs and trade journals

III. Social and economic trends IV. Changes in the consumption pattern V. Market characteristics

VI. Product profile VII. Import and exports VIII. Stimulation of sick units