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Chapter 2

Recognizing Opportunities and Generating Ideas Part I. Chapter 2. Modified from: Barringer & Ireland (2006). What is an Entrepreneurial Opportunity?. A favorable set of circumstances that creates the need for a new product, service or business An opportunity has five essential qualities:

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Chapter 2

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  1. Recognizing Opportunities and Generating Ideas Part I Chapter 2 Modified from: Barringer & Ireland (2006)

  2. What is an Entrepreneurial Opportunity? • A favorable set of circumstances that creates the need for a new product, service or business • An opportunity has five essential qualities: • Attractive • What makes this venture good for an ENT to start? What value does the ENT/investor extract from the opportunity? • Durable • How is the opportunity competitively sustainable (e.g., not easily imitated, unique in some why that allows for a competitive advantage)? • Timely (window of opportunity is open) • What environmental, market, or industry trends suggest now is the time for the opportunity? • Anchored in a product, service, or business that adds valueto buyer/end user • What value do customers extract from this business? Does it solve a problem or fulfill a need? Does it save them time/money? • Adds value to necessary network partners (e.g., those providing resources necessary for venture success) • How does the opportunity add value to others that you need to help make you firm work—your resource providers?

  3. Three ways to Identify an Opportunity 1. Observing Trends in External Environment • Economic • Social • Technological • Political/Legal 2. Solving a Problem 3. Finding Gaps in the Marketplace

  4. Trend 1: Economic Forces • State of the economy • Consumers’ level of disposable income • Spending patterns (e.g., who has money to spend and who’s cutting costs) • An increase in the number of women in the workforce and their related increase in disposable income • Many large firms are trying to cut costs • Entrepreneurs have taken advantage of this trend by starting firms that help other firms control costs • Increasing gas prices

  5. Economic Trend: Teen Affluence • In 2002, teenage shoppers spent over $170 billion — double the amount just 10 years earlier • Over the past five years, teen purchases … have grown [more] than the teen population, rising from $122 billion annually in 1997 to $170 billion last year (The Sun Herald, 2003).

  6. Economic Trend: Fuel Prices Higher Gas Prices: The Next Motorcycle Sales Boom Is In Sight “…it’s evident we’ll see motorcycle sales continue to increase in the coming months.” Source: Mehren, 2004 Electric Bikes Provide Greener Commute “The surging cost of gasoline and a desire for a greener commute are turning more people to electric bikes as an unconventional form of transportation. … they’re flying off the shevles…” Source: cnn.com, 2008

  7. Trend 2: Social Forces • Changes in social trends continually provide openings for new businesses • The proliferation of fast-food isn’t because people love fast food • It’s because people are busy, and have disposable income • The Sony Walkman was not developed because consumers wanted smaller radios but because people wanted to listen to music while on the go

  8. Trend 2: Social Forces—Examples • Family/work patterns • Childcare • Scheduling • Aging of the population • Healthcare • Financial management • Increasing diversity in the workplace • Training • Globalization of industry • Transportation • Taxation • Regulatory compliance • Online shopping • Focus on health care and fitness • Weight management • Trainers • Computers and the Internet • Hardware/software/training • Shopping alternatives • Number of cell phone users • New technology/complimentary products • New forms of entertainment • Video games • DVR • Laser tag • Fantasy sports teams • Online entertainment

  9. Social Trend: Health Conscious Consumers Inside Story: 10 Candy Trends “Fueled by popularity of the Atkins diet and a health-conscious uprising in America, products that are low in fat, carbs, sugar and calories are hitting retail shelves at lightening speed.” “ACNielsen reports that in 2002, diet candies grew the fastest, claiming 23 percent of the $24 billion candy market.” Source: Carneal (2004), American Wholesale Marketers Association

  10. Social Trend: `Tween Market Kiddie calls are on the horizon for the growing 'tween market “’Tweens [ages 8-12] constitute a lucrative retail market … 23 million members … Retail studies say this demographic is on the leading edge of the most-consumer-oriented generation in history. They increasingly have disposable income, and their voice now factors heavily into family purchases.” “ … when they shop for themselves, ‘tweens ignore toys … preferring clothes, video games and electronics.” “ The world's No. 2 toymaker [Hasbro, Inc.] is going after the … 'tween market with a walkie-talkie-like device that resembles a mobile phone.” Source: St. Louis Tribune, February 12, 2005

  11. Trend 3: Technological Advances • Technological Advances • Entrepreneurs must keep on top of how new technologies affect current and future business opportunities • Industries have emerged due to technological advances • Computer industry, Internet, biotechnology, digital photography • Once developed, new firms form to take technology to higher level • RealNetworks was started to add video capability to the Internet • Massively Multiplayer Online Role Playing Games (MMORPG) • EverQuest • World of Warcraft • Second Life

  12. Technological Trend: Computers USB drives go beyond storage “... a new company called U3 … said it would promote the next generation in flash drive technology.” “Keychain drives are going beyond … storage … They're going to … [run] applications … [like] PowerPoint [,] … and ScanDisk.” “A few companies have already endorsed the idea: McAfee … antivirus software vendor [and] ... Zone Labs … the firewall maker …” Source: Hesseldahl (2005), Forbes • Economics of MMORPGs • “…supply-and-demand market exists for virtual items … that it crosses over with the real world. [This includes:] … • The purchase of in-game items for real-world currency • Exchanges of real-world currencies for virtual currencies • Source: Castronova, E. Synthetic Worlds: The Business and Culture of Online Games. University Of Chicago Press.

  13. Text message essay baffles British teacher Monday, March 3, 2003 Posted: 10:17 AM EST (1517 GMT) The girl's essay began: "My smmr hols wr CWOT. B4, we used 2go2 NY 2C my bro, his GF & thr 3 :- kids FTF. ILNY, it's a gr8 plc." Source: CNN.com Technological Trend: Email

  14. Trend 4: Political Action and Regulatory Changes • Political action and regulatory changes provide the basis for new business opportunities • EPA laws create opportunities to start firms that help other firms comply with environmental laws and regulations • Non-smoking legislation in Ohio and other states • Legalization of gambling in some states • Periods of war/conflict

  15. Legal/Political Trend: Legal Unrest Source: CBSnews.com High Condition (Orange). A High Condition is declared when there is a high risk of terrorist attacks. Visitors wait in line to be fingerprinted and photographed at the U.S. Customs check point at San Francisco International Airport in San Francisco. Source: US Department of Homeland Security

  16. Legal TrendSocial Trend FCC to investigate incident at end of halftime show Howard Stern Show Taken Off Clear Channel Stations Whoops! Source: CNN.com Tuesday, February 3, 2004 Posted: 7:58 AM Source: Clear Channel Communications, Inc. Press Release Wednesday February 25, 2004 Legal/Political Trend:FCC Indecency Regulations Breached

  17. How Are Opportunities Identified?#2 Solving a Problem • Sometimes involves noticing a problem and finding a solution • Problems identified via observing trends and intuition, serendipity, or chance • Problem: People have less time for lawn maintenance • Solution: Robomow, automatic lawn mower, by Friendly Robotics • Problem: Computers are susceptible to viruses • Solution: Symantec Corp. created Norton antivirus software to guard computers against viruses • Problem: People have less leisure time for watching TV on a schedule • Solution: Tivo, DVR

  18. How Are Opportunities Identified?#3 Finding Gaps in the Marketplace • Look for a need that customers have that is not being satisfied • Are there customer segments that are not being served? • Neglected Need: Specialized, unique, apparel • Solution: Small clothing boutiques • Neglected Segment: Overweight 30+ women • Solution: Curves International, affordable fitness club for women • Neglected Segment/Need: Non-tech savvy (usually older) customers that need cell phones • Solution: Jitterbug

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