ENTREPRENEUSHIP 12

CHAPTER 2: OPPORTUNITY SEEKING, SCREENING, AND SEIZING

I. OPPORTUNITY SEEKING – entrepreneurs are innovative opportunity seekers. They have endless curiosity to
discover new or different ideas and see whether these ideas will work in the marketplace.
Entrepreneurial mind frame – allows the entrepreneur to see things in a very positive and optimistic light in the midst of
crisis or difficult situations.
Entrepreneurial heart flame – is one commonality between an inventor and an entrepreneur, it is their surging passion.
Entrepreneurial gut game – this refers to the ability of the entrepreneur to sense without using the five senses. This is
known as the intuition. The gut game also connotes courage or in the local dialect, “lakas ng loob”
THE MANY SOURCES OF OPPORTUNITIES
1. Macro Environmental Sources of Opportunities
Macro Environment – refers to the ”big or macro forces” that affect the area, the industry, and the market, which
the enterprise belongs to.
5 CATEGORIES OF MACRO ENVIRONMENT
a. Socio-Cultural Environment – includes the demographics and cultural dimensions that govern the relevant
entrepreneurial endeavor.
b. Political Environment – defines the governance system of the country or the local area of business.
c. Economic Environment – supply and demand forces mainly drive the macro economic environment
d. Ecological Environment – includes all natural resources and the ecosystem, habitat of men, animals, plants,
and minerals.
e. Technological Environment – new scientific and technological discoveries, which often lead to the launch
and commercialization of new products with superior attributes or to rendering the old ones obsolete, are
the entrepreneur’s nightmares.
2. Industry Sources of Opportunities – next biggest sources of opportunities. One of the most difficult about
industry analysis is defining what constitutes an industry in the first place.
Participant in an industry include:
a. Rivals or competitors in a particular type of business (e.g. Jollibee vs. McDonald’s, Coca-cola vs.
Pepsi, Samsung Galaxy vs. Apple’s iPhone, etc.)
b. Suppliers of input (e.g. fuel, electricity, raw materials) to rivals as well as suppliers of machinery and
equipment, suppliers of manpower and expertise, and supplies of merchandise.
c. Consumer Market Segments being served by rivals or competitors
d. All other support and enabling industries.
Ways of Defining an Industry
a. Product types or functions
b. Product or value added-chain- tracing the industry from its most basic raw material down its various
consumer applications

Product Chain Value-Added Chain

Raw Material Raw Materials’ Price and

Additional Cost and Profits

Semi-Processing
Semi-Processing Semi-Processing
Additional Cost and Profits

Prices of Processed Goods

Fully Processed Products/Services

3. Market Sources of Opportunities

-The entrepreneur must also be able to measure the actual demand and supply as well as the potential demand
and supply of the industry that the enterprise belongs to
-can be discovered from increased or decreased demand as well as higher or lower supply.
4. Micromarket – refers to the specific target market segment of a particular enterprise.
 These are the target customers that represent the immediate customers of an enterprise.
5. Consumer Preferences, Piques, and Perceptions
Consumer preferences – refer to the tastes of particular group of people.
6. Other Sources of Opportunities
a. Customer preferences change over time
 b. People’s taste is clothes, music, shoes, entertainment, dance, sports, hobbies, and even careers have evolved
over 10 years.
c. What piques customers is a great source of opportunities
d. Before the customer is won over, there is first a battle for the mind. Next there is a battle for the heart.
Finally, there is a battle for the wallet.
e. The longer the customer wants to use the product, the greater the chances of creating lasting loyalty.
f. Opportunities abound in shaping consumer perceptions or occupying spaces in their minds or places in their
hearts that have not been filled.
g. New inventions, new system and work processes, new insights, new applications, new revelations about how
physical world works, new interpretations, new combinations, new outlooks
h. Determining personal preferences and competencies lay the foundation for a new business venture.
i. Unexpected occurrences in both the external and internal environment of the enterprise indicate that
significant changes are happening and opportunities are sprouting.
II. OPPORTUNITY SCREENING
1. Personal Screen – the entrepreneur first has to consider his or her preferences and capabilities by asking
three basic questions:
a. Do I have the drive to pursue this business opportunity to the end?
b. Will I spend all my time, effort, and money to make the business opportunity work?
c. Will I sacrifice my existing lifestyle, endure emotional hardship, and forego my usual comforts to
succeed in this business opportunity?
2. The 12 Rs of Opportunity Screening
a. Relevance to vision, mission,and ojectives of the entrepreneur.
b. Resonance to values
c. Reinforcement of Entrepreneurial Interests.
d. Revenues. In any entrepreneurial endeavor, it is important to determine the sales potential of the
product or services you want to offer.
e. Responsiveness to consumer needs and wants.
f. Reach. Opportunities that have good chances of expanding through branches, distributors, dealerships,
or franchise outlets in order to attain rapid growth are better opportunities.
g. Range. The opportunity can potentially lead to a wide range of possible product or service offerings.
h. Revolutionary Impact. “Next big thing” or game changer that will revolutionize the industry.
i. Returns. Products with low costs of production and operations but are sold at higher prices will
definitely yield higher returns on investment.
j. Relative Ease of Implementation
k. Resources Required. Opportunities requiring fewer resources from the entrepreneur may be more
favored than those requiring more resources.
l. Risks. High technological, market, financial and people risks.
3. The Pre-Feasibility Study
Factors that are Contained in a pre-feasibility Study
1. Market potential and prospects- is based on the estimated number of possible customers who might avail of the
product or service.
 Segmenting the market – using a set of demographics (e.g., gender, age, place of residence, income
class, etc.) will the most basic approach in determining the Trget segment.
 Assessing Competition – market potential is also affected by the number of establishments
supplying and serving your customers. The more suppliers and competitors there are within a
confined area, the greater the level of competition.
 Estimating Market Share and Sales – the entrepreneur can go for a small market share unless the
entrepreneur has a very superior product or service that can immediately command a large market
share.
2. Technology Assessment and Operations Viability/ Availability and appropriateness of technology –by going
through this process, the entrepreneur would be able to determine whether the product or service offering will
meet customer demand or not.
Four Target Customer Expectations
1. Quantities demanded
2. Quality specifications demanded
3. Delivery Expectations
4. Price Expectations

3. Investment Requirements and Production/Servicing Costs or Project investment and detailed cost estimates
Three investments that needed to be funded
1. Pre-Operating Costs- cost related to the preparation for the launch of the business. This
include the pre-feasibility study, in-depth feasibility study, market research, product
development, organizational development, and initial promotional costs.
 2. Production/Service Facilities Investment – refers to the long-term investment for the actual
business establishment, including investment in land, buildings, machinery, equipment,
computers, software, furniture, vehicles, etc.
4. Working Capital Investment - includes the investment needed to operationalize the business. The entrepreneur
must see to it that he or she has enough cash to cover the inventories to be purchased (or manufactured), the
accounts receivable to accommodate customers, and the operating expenses to be incurred.
Operating Expenses
1. Employee salaries, wages, and benefits
2. Rent and lease expenses
3. Utilities
4. Transportation
5. Fees and licenses
6. Commissions
7. Office supplies, etc.
In this effect, this part of pre-feasibility study asks two questions:
 Do I have enough resources to cover the necessary investment?
 Would my sales estimates be significantly higher than my monthly production/service costs in order to produce
profits?
5. Financial forecast and determination of financial feasibility – refer to the monetary transactions that the business
is expected to engage in. Financial forecasting calls for the creation of four critical financial statements:
Four Critical Financial Statements
 Income Statement – is the financial statement that measures an enterprise’s performance in terms of revenue
and expenses over a certain period.
Simply put, the formula is:
REVENUES – EXPENSES = INCOME OR PROFIT(LOSS)
 Balance Sheet – creating the balance sheet is a bit more complicated because one has to look at three different
things: assets, liabilities, and equities.
Assets – represent all the investments in the enterprise including the initial investments that you considered in
the pre-feasibility study (investment requirements). This include cash (on hand and in bank), accounts
receivable, inventory of goods, equipment and machinery, facilities, vehicles, etc.
Liabilities – represent the enterprise’s debts to suppliers, to banks, to government, to employees, and other
financiers.
Stockholders’ equity – represents the investors’ investments in the stock(or shares) of the business.
The balance sheet equation is:
ASSESTS = LIABILITIES + EQUITY
 Financial Ratios and Measurements
Payback Period – is how long will it take for the entrepreneur to get back what he or she has invested in the
enterprise.
The income payback period is computed as follows:
PAYBACK PERIOD = TOTAL INVESTMENT______
ANNUAL NET INCOME AFTER TAXES
 The faster you are able to earn back the money invested, the better it is for the entrepreneur and the more
attractive the business opportunity becomes.
Return on sales(ROS) – ratio where the entrepreneur calculates how much profit the enterprise is earning for
each peso sold.
The formula is as follows:
RETURN ON SALES = NET PROFIT AFTER TAXES
SALES
Return on Assets(ROA) or Return on Investment (ROI) shown by the formula:

RETURN ON ASSETS OR RETURN ON INVESTMENTS = NET PROFIT AFTER TAXES

TOTAL ASSETS/INVESTMENTS
4.The Feasibility Study - is prepared to convince bankers and investors to put money into business opportunity. It is
more comprehensive and detailed compared to pre-feasibility study.
The entrepreneur should take into consideration the following in writing a feasibility study:
a. A more in-deoth study of market potential to ensure that the business proposal will reach the
forecasted sales figure;
b. Proof that the product or service being offered has he right design, attributes, specifications, and
preferred features;
c. Proof that the entrepreneur and his or her team have the necessary experience, skills, and
capabilities to maximize the venture’s chances of success;
d. Legal visibility;
e. More detailed costing on the different assets and more justification for the production and
operating expenses; and
 f. More thorough analysis of the technology and its sustainability
III. OPPORTUNITY SEIZING – final stage where the entrepreneur has an idea as to where he or she will locate
the business and how he or she will market the product or service.
The question for the entrepreneur in Opportunity Seizing is “ Will I able to manage, to my advantage, the
critical success factors and avoid the critical failure factors?”
1. Crafting a Positioning Statement – the entrepreneur is advised to look at other competitors(or substitutes) in the
marketplace.
o Details such as their major buyers, attributes or features that make the competitors’ products
attractive should give the entrepreneur an idea.
o Customer profiling will come into the picture- their characteristics and traits, behavior and usage
pattern, preferences and dislikes.
Main Value Proposition (MVP)- going through the process of questioning, the entrepreneur will be able
to come up with each of the competing products and from there, work on his own positioning.
The following key points ca help out the entrepreneur on how to go about this questioning.
a. What are the main customer segments?
b. What are the different product attributes and features of each of the competitors?
c. What are the existing marketing practices of the various competitors?
d. What are the market preferences of consumers when it comes to the products being offered?
2.Conceptualizing the product or Service Offering-
Concept – is an idealized abstraction of the product or service to be offered to the preferred market of the
entrepreneur.
To come up with the product or service concept, the following options or directions may be considered.
 The first to create a concept similar to the winning products in the marketplace and ride with the obvious
market trends.
 The second is to find a market niche(place) that has not been filled by the competitors.
Market niche – means small segments(parts) of the market where discriminating customers are searching
for special product/service features and attributes.
 The third is to conceptualize a product in a positioning category where participants are rather weak.
 The fourth is to conceptualize a product that would change the way customers think, behave, and buy, thus
making existing products” obsolete” and “old-fashioned.”
3.Designing, Prototyping, and Testing the Product – Designing means that the entrepreneur must render the concept
and translate it into its very physical and very real dimensions (measurement).
- this entails building a prototype(sample) of the product that will be ready for actual testing by the
entrepreneur, later on, subject to testing by potential customers through focus group discussions(FGD), surveys,
product demonstration sessions, and the like.
4. Implementing, Organizing, and Financing - good planning and good programming are essential to have good
implementation.
A good planner and programmer must make several important choices to achieve the desired end results.
1. Choose the correct technology, the one that would produce the output that would meet the quality specifications of
the customers.
2. Choose the right people who can perform the technical and the managerial functions necessary to realize desired
end results.
3. To design the operating workflow that would assure the effective, economical, and efficient production of the
output.
4. To specify the systems and procedures that would govern the enterprise, motivate and discipline the work force, and
satisfy the customers.
5. To design the organizational architecture that would allow the people to function at their best.