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Recognizing Opportunities & Generating New Ideas

Chapter 2

2008 Prentice Hall

Chapter Objectives
(1 of 2)

1. Explain why its important to start a new firm when

its window of opportunity is open.
2. Explain the difference between an opportunity and
an idea.
3. Describe the three general approaches entrepreneurs
use to identify opportunities.
4. Identify the four environmental trends that are most
instrumental in creating business opportunities.

2008 Prentice Hall

What is An Opportunity?
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Business Opportunity

An opportunity is a
favorable set of
circumstances that
creates the need for a
new product, service, or business idea.

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Opening Case: Entrepreneur Got Success

Tony Hsieh
Coming out of Harvard
Launched his first internet
company LinkExchange.
Sold it to Yahoo in $265 mill.
Started zappos.com
Sold it to Amazon in 2009 for
$1.2 Bill.

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Window of Opportunity
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.
At some point, the market matures, and the window of
opportunity (for new entrants) closes.

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What is an Opportunity?
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An opportunity has four essential qualities

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Three Ways to Identify An Opportunity

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First Approach: Observing Trends

(2 of 2)
Environmental Trends Suggesting Business or
Product Opportunity Gaps

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Trend 1: Economic Forces

Economic Forces
Economic forces affect consumers level of disposable
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

Trend 2: Social Forces

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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
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

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
The increase in the number of cell phone users.
New forms of entertainment.
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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
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
2008 Prentice Hall

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 2002. The act
requires certain companies to keep all their records, including
e-mail messages and electronic documents, for at least five years.

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Second Approach: Solving a Problem

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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
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.

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Second Approach: Solving a Problem

(2 of 2)
Businesses Created to Solve a Problem

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Third Approach: Finding Gaps in the

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
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Full View of the Opportunity

Recognition Process
Depicts the connection between an awareness of emerging trends and
the personal characteristics of the entrepreneur

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Techniques For Generating Ideas


Focus Groups


Other Techniques

2008 Prentice Hall

(1 of 2)

Is a technique used to generate a large number of ideas and
solutions to problems quickly.
A brainstorming session typically involves a group of
people, and should be targeted to a specific topic.
Rules for a brainstorming session:

No criticism.
Freewheeling is encouraged.
The session should move quickly.
Leap-frogging is encouraged.

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Focus Groups
Focus Group
A focus group is a gathering of five to ten people, who
have been selected based on their common characteristics
relative to the issues being discussed.
These groups are led by a trained moderator, who uses the
internal dynamics of the group environment to gain insight
into why people feel they way they do about a particular
Although focus groups are used for a variety of purposes,
they can be used to help generate new business ideas.

2008 Prentice Hall

(1 of 2)

A survey is a method of gathering information from a
sample of individuals. The sample is usually just a fraction
of the population being surveyed.
The most effective surveys sample a random portion of the
population, meaning that the sample is not selected haphazardly or
only from people who volunteer to participate.
The quality of survey data is determined largely by the purpose of
the survey and how it is conducted.

Surveys generate new product, service, and business ideas

because they ask specific questions and get specific
2008 Prentice Hall