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R Module 3 & 4
Recognize a Potential Market
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 Learning Outcomes
At the end of this lesson, the learners will be able to:
 identify the market problem to be solved or the market need to be met;
 propose solution/s in terms of product/s and service/s that will meet the need
using techniques on seeking, screening, and seizing opportunities:
 break down the market needs;
 detect the possible product/s or service/s that will meet the need of your
locality.
 screen the proposed solution/s based on viability, profitability, and customer
need in developing a Business Plan.
 choose the best product or service that will meet the market needs.

As the saying goes, the most difficult part of every task is where and how you start, the
same as true with entrepreneurship. You may have all the resources needed to operate a new
venture, but it will never easy to start one. This lesson will discuss the proper and efficient ways
of starting a business. You will be introduced to the entrepreneurial process, which starts with
identifying and evaluating the opportunity. The heart of this lesson is the scanning of the
marketing environment where you can formulate a product or service solution applying the
techniques of seeking, scanning, and seizing opportunities. As a result, you will deal with
analyzing the need of the market.

Spotting - refers to the recognition of the latest market trends.

Intrinsic - belonging naturally; essential.
Extrinsic - not part of the essential nature of someone or something.

Let us see how much you have remembered about the previous topic entrepreneurship vs.
employment by answering the pre-test.

Directions: Identify which among the following descriptions refer to entrepreneurs and which
refer to employees. On the blank, write EN for entrepreneur and EM for employee.
_______1. Income is earned whether the business is successful or unsuccessful.
_______2. He or she is usually comfortable with routines and minimal risks.
_______3. He or she is fully responsible for serving customers, making the business
profitable/sustainable, and providing employee satisfaction.
_______4. He or she prepares policies, procedures, and memoranda for the business.
_______5. He or she is fully dependent on the employer’s performance. If the company does
not perform well, he or she is at risk of becoming jobless.

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 Read the information very well then find out how much you can remember and how much you
learned by doing the exercises.

Recognize a Potential Market

The Entrepreneurial Process

The entrepreneurial process is a step-by-step procedure in establishing any kind of business
that an entrepreneur has to undergo. It is composed of four aspects.
1. Opportunity spotting and assessment.
This is the beginning of the process and is considered the most difficult. Entrepreneurs at this
point take note of interesting trends in their environment.
2. Developing a business plan
Entrepreneurs should formulate a business plan when they have already spotted and assessed the
opportunities for a market. A business plan is a comprehensive paper that details the marketing,
operational, human resource, financial, strategic direction, and tactics of the business. The
business plan will be the core guide and direction of the entrepreneur in calculating the resource
needed, assessing how to obtain these resources efficiently, and running the business sustainably.
3. Determining the Capital Needed
A big idea can be translated into reality if the entrepreneur’s resources are limited. Therefore, it
is mandatory in the entrepreneurial process to calculate the resources needed to establish the
business and compare this complete set of resources needed and include only those items that are
considered as well because there will be times that the resources will be inadequate or unsuitable.
4. Running the Business
This is the part where the entrepreneur should use resources allocated for the new venture. The
business plan prepared in step 2 should already have been implemented. All aspects of the
business plan should be critically observed from operations, marketing and sales, human
resources, finance, and strategy implementation. The entrepreneur should have a control and
monitoring system to serve as a check and balance of the formulated plans.
Scanning the Marketing Environment
Scanning the marketing environment is the starting point of any new venture that
involves understanding and knowing the intricacies of the macroenvironment,
microenvironment, and internal environment an entrepreneur can recognize various
opportunities and at the same time understand thoroughly the arena where the future business
will operate.
The process of seeking, screening, and seizing is adapted to create the most suited product
or service for an opportunity. The general rule is to find the opportunity first before coming up
with a new product or service, not the other way around, this is one of the mistakes that budding
entrepreneurs commit in starting a new venture.
Seeking, Screening and Seizing
The 3S of opportunity spotting and assessment is the framework that most of the promising
entrepreneurs use to finally come up with the ultimate product or service suited for a specific
opportunity. An opportunity is an entrepreneur’s business idea that can potentially become a
commercial product or service in the future.

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 S1: Seeking the Opportunity
Opportunity seeking is the first step and is the most difficult process of all due to the number of
options that the entrepreneur will have to choose from. It involves the development of new ideas
from various sources as follows:
1. Macroenvironmental Sources
a. STEEPLED - This is a mnemonic for sociocultural, technological, economic
environmental, political, legal, ethical, and demographic factors. This represents the
general environment where the entrepreneur can identify business opportunities from
and where the future business is about to operate.
b. Industry - This is the source of the current trend on what is happening in the industry
where the future business will belong to. For example, the entrepreneur should be fully
acclimated to what is happening with the rice industry if he or she wants to establish a
rice retailing business.
c. New discovery or knowledge. These are new trends that can be the core business model
of a new venture. For example, the influx of mobile applications necessitates businesses
to have these platforms as one of their transaction channels.
d. Futuristic opportunities. These are projected new opportunities that can affect the new
business while it is running. For example, sari-sari stores in the future will be able to
incorporate financial transactions such as accepting bills payment and process
remittances.
2. Micro market
a. Consumer preferences, interest, and Perception. These are the current needs and wants
of potential customers that should be discovered right away by a budding entrepreneur.
This way, he or she will be able to take a chance opportunity. A need is recognized
when a customer believes that there is a difference between his or her current situation
versus his or her desired condition. A want, on the other hand, is recognized when a
customer believes that there is a specific product or service that can perfectly suit the
need.
b. Competitors. Recognizing and understanding potential competitors will aid the
entrepreneur to develop a product or service that is unique and will surely stand out from
the competition. The 4Ps of marketing (product, place, price, and promotion) will be
competitively positioned if the entrepreneurs are familiar with his or her competitors.
c. Unexpected opportunities from customers. Oftentimes, the most brilliant ventures come
from the most unexpected opportunity. It may happen unlikely situations, unlikely
places, and with unlikely people. Existing problems and bottlenecks often give rise to
unexpected opportunities. What entrepreneurs usually do is be on top of the situation
and change the market perception of a product or service or build a new market.
d. Talents, hobbies, skills, and expertise. Business opportunities do not just come from
outside forces, but also from within the entrepreneur. The entrepreneur’s talents,
hobbies, skills, and expertise can be a source of business opportunity. For example, if
the entrepreneur is an artist, why not sell his or her paintings? If he or she is a musician,
why not put a bar and perform there? If he or she is an expert in home interior design,
why not make it a business?
e. Irritants in the market place such as deterrents, problems, complaints, and delays.
Generally, entrepreneurs see opportunities in situations where there is no more hope in
solving the problem, that is when the opportunistic entrepreneur should come in and
make a difference.
f. Location. Often, entrepreneurs just have to look at their ecosystem and they will be able
to spot a business opportunity right away. For example, if the entrepreneur’s location
has many schools, then a restaurant, an eatery, or probably a computer shop might be a
good business to establish. If the entrepreneur is on an island with an awesome
beachfront, why not put up a hotel?

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 S2 - Opportunity Screening
Opportunity screening is the process of cautiously selecting the best opportunity. The
selection will depend on the entrepreneur’s internal intent. The main objective that the business
will accomplish in the entrepreneur’s life, and the external intent, which will address the
compelling needs of the target market. The entrepreneur should apply due diligence and
independent judgement in selecting the opportunities that have a potential and eliminate those
that are not within the scope of the entrepreneur’s risk appetite. Risk appetite refers to the
entrepreneur’s tolerance of business risk.
Time must be considered by the entrepreneur in screening the opportunities at hand, as it is
considered one of the most critical resources of an entrepreneur. The crafting of a business plan
starts only when entrepreneurs already said no to many opportunities and said yes to one
forceful opportunity, to which they will devote their time and resources.
Detailed here are the most important elements that are always present in the compelling
opportunity. The entrepreneur should say no to an opportunity if it does not contain any of these

business opportunity elements:

1. Has superior value to customers
2. Solves a compelling problem, issue, a need or a want
3. Is a potential cash cow
4. Matches the entrepreneur’s skills, resources, and risk appetite
A cash cow is a business unit, product line, or investment that has a return on assets (ROA)
greater than the market growth rate. The idiom refers to the idea that it produces "milk" (profit)
long after the cost of the investment has been recouped.

The Opportunity Attractiveness Test (OAT)

The Opportunity Attractiveness Test (OAT) (Youngleson, 2009) aim to assist entrepreneurs in
ensuring that the opportunity that they will venture into is an attractive and feasible prospect.
This is not the “be all” in the road to entrepreneurial success but a framework to measure how
compelling an opportunity is. This test is designed to detail each entrepreneurial aspect into
small chunks to come up with a sound entrepreneurial decision.
In summary, with the four business opportunity elements and this OAT, the entrepreneur can’t
go wrong in his or her new venture. The key is effective diligence.
1. The “concept” and the “strategy”. The entrepreneur should think of the reason for the
business existence. He or she can do this through crafting a brief vision statement. A
vision statement is simply defined as what the business should do in the future. The
entrepreneur should also device a value creation preposition , the value that the product
or service will offer to the target customers or the satisfaction of the needs or wants of the
target customers. This preposition should be compelling enough to influence the behavior
of the target customer. Influencing the behavior means enticing the target customers to
pay an above average or a premium price or the product of services.
2. Opportunity metrics these are considered as the opportunity’s critical success factors.
These factors will approximately determine the attractiveness of the new venture
depending on the total scores that will generate and the risk appetite of the entrepreneur.

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 S3 Seizing the Opportunity
Opportunity seizing is the last step in opportunity spotting and assessment. This is the
“pushing through “with the chosen opportunity. Entrepreneurs should make the best out of this
opportunity, and they should exert effort and full dedication for the success of the
new venture. The entrepreneur’s idea can be any type of innovations listed here:
Innovation is the process of positively improving an existing product or service. It is a key
driver for economic growth. Innovation is inevitable as the world constantly changes. Therefore
products and services must also adapt to these changes. There are three types of innovation
according to the degree of distinctiveness.
1. Breakthrough Innovation .
These innovations, which may also include inventions, occur infrequently as these
establish the flatform on which future innovations in an area are developed. Breakthrough
innovations must be protected by a patent, a trade secrets, or a copyright.
2. Technological Innovation
These innovations occur more frequently than breakthrough innovations. These
innovations
are technological advancements of an existing product or service. These innovations need to be
protected, too. In relation to the examples given, technological innovations include the wireless
fidelity or wi-fi, the laptop, and the jet airplane.

3. Ordinary Innovation
These innovations occur ordinary as the name implies. They are commonly originating
from market analysis and technology pull instead of a technology push. This means that the
market has a strong influence in the implementation of an innovation. Relating again to the given
examples, examples of ordinary innovations are unlimited internet plans of telecommunications
companies, a wireless mouse, and an airbus for economical travelers.
Product or Service Planning and Development Process
In the seeking process, one opportunity stood out from a number of sources. This opportunity
was tested according to its attractiveness and feasibility in the screening process. The last
process, called the seizing process, involves refining and developing this opportunity. The
refining process is called product or service planning and development process. It has four key
stages

1. Idea stage . In this stage, the entrepreneur determines what are the feasible products
and/or services that will perfectly suit the opportunity
2. Concept stage. Once the acceptable product or service has already been identified, it will
go through the concept stage. In the concept stage, the developed idea will undergo a
consumer acceptance test. This test includes getting the initial reactions of the primary
target market and distribution channel.
3. Product development stage. In this stage, the entrepreneur leverages on the information
generated from the prospective customers via the concept stage.
4. Test marketing stage. This stage validates the work done from the first three stages to
measure success in the commercialization of the product or service. Actual sales results

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 will be the foundation of the consumers’ acceptance level and will be the basis in
commercializing the product or service.

Methods of Generating Ideas

Recognizing and understanding the vast sources of
opportunities is one difficult activity to do. Also, the
methods of generating ideas may be overwhelming
to undergo. Either one or a combination of the
methods given can be employed by the entrepreneur
in generating new ideas:
Focus Groups
A focus group is defined as a group of individuals providing information in a structured format.
A moderator handles through an open, in-depth discussion with a group of people who can
provide insightful ideas about a new product or service that will fill a market need.
Brainstorming
The brainstorming method allows a group of individuals to be stimulated to greater creativity by
interacting with each other and participating in organized group experience.
Brainwriting or Internet Brainstorming
This is the same as brainstorming except that the channel used is not face-to-face but in writing
or online. The results of brainwriting or Internet brainstorming usually take longer, as the
answers depend on the availability of the participants in answering the questionnaires online.
Problem Inventory Analysis
Problem inventory analysis is a method for obtaining new ideas and solutions by focusing on
existing problems. In this approach, the customers or consumers are provided with a list of
problems in a general product category.
STEEPLED Analysis
The result of the STEEPLED scan will aid the entrepreneur in deciding what product or service
to set up and whether this new venture will succeed or not. The focus of this scan is only on the
macroenvironment.

1. Social Factors or Socio-cultural Factors

These factors represent a general view of a locality’s traditions, customs, beliefs, norms
, and perceptions. These factors affect how a person of the locality behaves and reacts to
marketing and selling activities.

2. Technological Factors
These are composed of innovations of existing technology or an invention of a new one
mostly on applied science and engineering research areas. Entrepreneurs should always
be up-to-date with the technological changes, as these are the catalyst in improving a
product or service or replacing them entirely.

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 3. Economic Factors
These factors play a vital role in the scanning of the marketing environment because
economic factors directly affect any business venture. These factors include income,
expenses, and resources that can influence the cost of doing business and generating
income.

4. Environment or Ecological Factors

These factors should be given much importance in conducting business especially when
the world has already suffered severely from human-induced calamities.
5. Political Factors
These factors are mostly induced by government policies and administrations, which can
have a strong effect on the entrepreneur’s business.

6. Legal Factors
Related with political factors, legal factors are government laws and regulations that can
restrict or allow business activities.
7. Ethical Factors
These are factors that will serve as an entrepreneur’s guide on how to be ethical in
running the business.

8. Demographic Factors
The characteristics of the people in the target market.

Activity 1
WORD HUNT Think of words or terms related to the topic and find the words in the grid
horizontally, vertically, or diagonally. Write the words or terms on the space provided below.

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1. _________________________________ 6. ________________________________
2. _________________________________ 7. ________________________________
3. _________________________________ 8. ________________________________
4. _________________________________ 9. ________________________________
5. _________________________________ 10. _______________________________

Activity 2
COMPLETE ME Complete the table below by supplying it with products that you consider
similar. Write the product and not the brand in their respective columns. Then describe and
differentiate its characteristics and uses.

Conduct an online research of any successful entrepreneur on your locality or any part of the
country :
Answer the following questions.
 What is the nature of the business?
 Who are their customers?
 What industry are they operating?
 How much was their starting capital?
 How many years in operation?
 How many manpower involved from the start of operation until now?

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Resources :
 Batisan, R. (2016). Diwa Learning System Inc. Legaspi Village, Makati City,
Philippines

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