Chapter 4

9/2/2021 Understanding Market Opportunities 1

 Source: John Mullins, The New Business Road Test: What Entrepreneurs and Executives Should Do Before Writing a Business Plan (London: FT/Prentice
Hall, 2010).

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• Market - Group of individuals or organizations
having the willingness and ability to:
• Buy goods or services to satisfy a particular class of
wants or needs
• Industry - Group of organizations offering
goods or services that are:
• Similar and close substitutes for one another

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• Components of macroenvironment
• Demographic
• Sociocultural
• Economic
• Regulatory
• Technological
• Natural

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• Rivalry is greater under the conditions
• There is high investment intensity
• There are many small firms in an industry or no
dominant firms exist
• There is little product differentiation
• It is easy for customers to switch from one seller’s
products to those of others

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• Entry is more difficult when:
• Strong economies of scale and learning effects
are present
• Industry has high capital requirements
• Strong product differentiation exists among
current players
• Gaining distribution is particularly difficult

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• Their power is increased under the conditions
• If the cost of switching suppliers is high
• If prices of substitutes are high
• If suppliers can realistically threaten forward
integration
• When the supplier’s product is a large part of the
buyer’s value added

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• The extent to which buyers succeed in their
bargaining efforts depends on:
• The extent of buyer concentration
• Switching costs that reduce the buyer’s
bargaining power
• Threat of backward integration
• Product’s importance to the performance of the
buyer’s product
• Buyer profitability
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• Substitutes - Alternative product types
produced by other industries that perform
essentially the same functions
• Put a ceiling on the profitability of an industry by
limiting the price that can be charged

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• Popular and business press
• The Internet
• Supplier and customer contacts
• Trade associations
• Trade magazines

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• Opportunities are attractive when:
• There is an identified source of customer pain that
can be resolved by the product offered
• Target customers are clearly identified
• The offering provides customer benefits that
other solutions do not

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 • The target segment is likely to grow
• There are other segments for which the currently
targeted segment may provide a springboard for
subsequent entry

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• Opportunities are attractive when the
company:
• Possesses something proprietary that other
companies cannot easily duplicate or imitate
• Can develop superior organizational processes,
capabilities, or resources that:
• Others would find it difficult to imitate or duplicate
• Business model is economically viable

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• Opportunities are only as good as the people
who will pursue them
• Mission, aspirations, and risk propensity
• Ability to execute on the industry’s critical success
factors
• Connectedness - It’s who you know, not what you
know

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• Management needs systems to help identify,
evaluate, and respond to:
• Environmental events that may affect the firm’s
longer term profitability and position

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