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©2008 Prentice Hall Ideas and Opportunities Dr Jan Alpenberg, Youth Unlimeted, Toronto 2-1
©2008 Prentice Hall What is an idea? Something to do… Somewhere to go… How to do things… When to do things… Why to do things… 2-2
©2008 Prentice Hall What is a business idea? A business idea is a summary of ideas that will answer the following questions: –Who is my customer? Who is going to buy my product/service? –How is my idea unique? –How to create value for the customer? –Profit will follow… if we do this well! 2-3
©2008 Prentice Hall 2-4 What is An Opportunity? (1 of 2) Opportunity Defined –An opportunity is a favorable set of circumstances that creates the need for a new product, service, or business idea. –Most entrepreneurial firms are started in one of two ways: Some firms are internally stimulated. An entrepreneur decides to start a firm, searches for and recognizes an opportunity, then starts a business. Other firms are externally stimulated. An entrepreneur recognizes a problem or an opportunity gap and creates a business to fill it.
©2008 Prentice Hall 2-5 What is an Opportunity? (2 of 2) An opportunity has four essential qualities
©2008 Prentice Hall 2-6 Window of Opportunity –The term window of opportunity is a metaphor describing 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, and new entrants flow in. At some point, the market matures, and the window of opportunity (for new entrants) closes.
©2008 Prentice Hall 2-7 Three Ways to Identify An Opportunity
©2008 Prentice Hall 2-8 First Approach: Observing Trends (1 of 2) Observing Trends –The first approach to identifying opportunities is to observe trends and study how they create opportunities for entrepreneurs to pursue. –There are two ways that entrepreneurs can get a handle on changing environmental trends: They can carefully study and observe them. They can purchase customized forecasts and market analyses from independent research firms.
©2008 Prentice Hall 2-9 First Approach: Observing Trends (2 of 2) Environmental Trends Suggesting Business or Product Opportunity Gaps
©2008 Prentice Hall 2-10 Trend 1: Economic Forces Economic Forces –Economic forces affect consumers level of disposable income. –When studying how economic forces affect opportunities, it is important to evaluate who has money to spend and who is trying to cut costs. An increase in the number of women in the workforce and their related increase in disposable income is largely responsible for the number of boutique clothing stores targeting professional women that have opened in the past several years. Many large firms are trying to cut costs. Entrepreneurs have taken advantage of this trend by starting firms that help other firms control costs.
©2008 Prentice Hall 2-11 Trend 2: Social Forces (1 of 2) Social Forces –Changes in social trends provide openings for new businesses on an ongoing basis. –The continual proliferation of fast-food restaurants, for example, isnt happening because people love fast food. It is happening because people are busy, and have disposable income. –Similarly, the Sony Walkman was developed not because consumers wanted smaller radios but because people wanted to listen to music while on the go.
©2008 Prentice Hall 2-12 Trend 2: Social Forces (2 of 2) Examples of Social Forces That Allow For New Business Opportunities Family and work patterns. The aging of the population. The increasing diversity in the workplace. The globalization of industry. The increasing focus on health care and fitness. The proliferation of computers and the Internet. The increase in the number of cell phone users. New forms of entertainment.
©2008 Prentice Hall 2-13 Trend 3: Technological Advances Technological Advances –Given the rapid pace of technological change, it is vital that entrepreneurs keep on top of how new technologies affect current and future business opportunities. –Entire industries have emerged as the result of technological advances. Examples include the computer industry, the Internet, biotechnology, and digital photography. –Once a new technology is created, new businesses form to take the technology to a higher level. For example, RealNetworks was started to add audio capability to the Internet.
©2008 Prentice Hall 2-14 Trend 4: Political and Regulatory Changes Political and Regulatory Changes –Political and regulatory changes provide the basis for new business opportunities. For example, laws that protect the environment have created opportunities for entrepreneurs to start firms that help other firms comply with environmental laws and regulations. Similarly, many entrepreneurial firms have been started to help companies comply with the Sarbanes-Oxley Act of The act requires certain companies to keep all their records, including messages and electronic documents, for at least five years.
©2008 Prentice Hall 2-15 Second Approach: Solving a Problem (1 of 2) Second Approach: Solving a Problem Sometimes identifying opportunities simply involves noticing a problem and finding a way to solve it. These problems can be pinpointed through observing trends and through more simple means, such as intuition, serendipity, or chance. Some business ideas are clearly initiated to solve a problem. For example, Symantec Corp. created Norton antivirus software to guard computers against viruses.
©2008 Prentice Hall 2-16 Second Approach: Solving a Problem (2 of 2) Businesses Created to Solve a Problem
©2008 Prentice Hall 2-17 Third Approach: Finding Gaps in the Marketplace Gaps in the Marketplace –A third approach to identifying opportunities is to find a gap in the marketplace. –A gap in the marketplace is often created when a product or service is needed by a specific group of people but doesnt represent a large enough market to be of interest to mainstream retailers or manufacturers. This is the reason that small clothing boutiques and specialty shops exist. The small boutiques, which often sell designer clothes or clothing for hard-to-fit people, are willing to carry merchandise that doesnt sell in large enough quantities for Wal-Mart, GAP, or JC Penney to carry.
©2008 Prentice Hall 2-18 Personal Characteristics of the Entrepreneur Characteristics that tend to make some people better at recognizing opportunities than others Prior ExperienceSocial Networks Cognitive FactorsCreativity
©2008 Prentice Hall 2-19 Prior Industry Experience –Several studies have shown that prior experience in an industry helps an entrepreneur recognize business opportunities. There are several explanations for this. By working in an industry, an individual may spot a market niche that is underserved. It is also possible that by working in an industry, an individual builds a network of social contacts who provide insights that lead to recognizing new opportunities.
©2008 Prentice Hall 2-20 Cognitive Factors –Studies have shown that opportunity recognition may be an innate skill or cognitive process. –Some people believe that entrepreneurs have a sixth sense that allows them to see opportunities that others miss. –This sixth sense is called entrepreneurial alertness, which is formally defined as the ability to notice things without engaging in deliberate search.
©2008 Prentice Hall 2-21 Social Networks (1 of 3) Social Networks –The extent and depth of an individuals social network affects opportunity recognition. –People who build a substantial network of social and professional contacts will be exposed to more opportunities and ideas than people with sparse networks. –In one survey of 65 start-ups, half the founders reported that they got their business idea through social contacts. Strong-Tie Vs. Weak-Tie Relationships –All of us have relationships with other people that are called ties. (See next slide.)
©2008 Prentice Hall 2-22 Social Networks (2 of 3) Nature of Strong-Tie Vs. Weak-Tie Relationships –Strong-tie relationship are characterized by frequent interaction and form between coworkers, friends, and spouses. –Weak-tie relationships are characterized by infrequent interaction and form between casual acquaintances. Result –It is more likely that an entrepreneur will get new business ideas through weak-tie rather than strong-tie relationships. (See next slide.)
©2008 Prentice Hall 2-23 Social Networks (3 of 3) Strong-Tie RelationshipsWeak-Tie Relationships These relationships, which typically form between like- minded individuals, tend to reinforce insights and ideas that people already have. The relationships, which form between casual acquaintances, are not as apt to be between like-minded individuals, so one person may say something to another that sparks a completely new idea. Why weak-tie relationships lead to more new business ideas than strong-tie relationships
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