Assessment of entrepreneurial opportunities:

Contents
Critical Factors in opportunity assessment:....................................................................................2
Focusing on the pre-startup and start-up phases, consider:.....................................................2
When is an idea not an opportunity:.............................................................................................2
The evaluating process:.....................................................................................................................2
Analysing opportunity landscape..................................................................................................2
Assessing industry environment:..................................................................................................2
Uncertainty analysis:......................................................................................................................3
Value chain analysis:......................................................................................................................3
Porter’s 5 forces model:.................................................................................................................3
Competitors:..................................................................................................................................3
Suppliers........................................................................................................................................3
Buyer power..................................................................................................................................3
Barriers to entry:...........................................................................................................................3
Threat of substitutes......................................................................................................................4
Competitor Analysis:.......................................................................................................................4
Feasibility Criteria Analysis:...........................................................................................................5
Fundamental Feasibility Criterion..................................................................................................5
Technical Feasibility.......................................................................................................................6
Marketability Analysis:..................................................................................................................7
Kevin Hindle’s positioning analysis (pp. 311):................................................................................7
Have a checklist that provides key questions to be answered to forewarn of problems
to illuminate alternatives:

Critical Factors in opportunity assessment:

Focusing on the pre-startup and start-up phases, consider :
1. Relative uniqueness of the venture.
2. Size of investment needed to get established and survive the pre-sales start-
up phase.
3. Expected growth of sales and/or profits that can generate cash flow as the
venture moves through the start-up phase.
4. Extent to which products are ready and available for sale during the pre-
startup and start-up phases
5. Availability of customers during pre-startup and start-up phases.

The evaluating process:

Critical task is to evaluate solid analysis and feasibility before getting started.
Put the idea through analysis to reveal flaws.
Analysing opportunity landscape:
Consider the external landscape – government, political, economic, social and
technological forces.
Conduct a PESTLE analysis to help the entrepreneur to:
1. Locate source of the opportunity and changing conditions that present the
opportunity.
2. Identify size and likely market needs that may arise from these changing
conditions.
3. Identify likely duration of the need – and how conditions will influence timing of
the opportunity.
4. Locate trends which create new needs – show how need will increase or
decrease over time.
5. Indicate emerging issues, values or lifestyles which uncover emerging needs.
These should set out the major proposition as to why the business proposal exists.
Assessing industry environment:
Two questions are relevant (based on Michael Porters work):
1. What is the structure of the industry and how is it likely to evolve over time?
2. What is the company’s relative position in the industry?

Uncertainty analysis:
These factors increase uncertainty and can only be resolved through careful and
mindful participation in the industry.
Technological uncertainty:
  Uncertainty regarding technology in emerging industries.
 Which product configuration will ultimately be the best?
 Which production technology will prove to be the best?
Strategic uncertainty:
 Because no one strategy exist participants formulate different strategies.
Value chain analysis:
First step is to look at the industry value chain.
 Look at the network of suppliers and buyers.
 Each link carries the cost imposed by upstream buyers – and contributes to
the cost of downstream purchasers.
 Each link has to be able to sell its goods at a margin that enables the whole
chain to produce, distribute and deliver the g/s to the end user at a price the
end user is willing to pay.
Simplified Industry value chain:

Industry value chain has within it all the entities that bring components and
ingredients into the company and move completed goods out of the company to the
final end user.
Porter’s 5 forces model:
Competitors:
 Define competitors market profile (Size, products, customer base, market
reach etc.)
 Characterize the competitive advantage of competitors
Suppliers:
 Consider the suppliers to the venture.
 Is it easy to suppliers or are some critical to business’ success.
 To what extent can suppliers control major portion of cost ?
 Supplier power.
Buyer power – can buyers force unfavourable trade terms?
Barriers to entry:
 Which barriers make it more difficult for new entrants?
Threat of substitutes
Competitor Analysis:
Components of competitor analysis:

Feasibility Criteria Analysis:

Fundamental Feasibility Criterion:
Is it proprietary?
- Doesn’t have to be patented but must permit long-term head-start against
competitors.
Are the initial product costs realistic?
- No large unexpected expenses
Potential for very high margins?
Is the time required to get into the market and reach break-even point realistic?
Is the potential market large?
- Look 3-5 years ahead
Is the product the first of growing family?
- If you can’t realize large return on first product, might realize on second or
third.
Do initial customers exist?
Are the development costs and calendar times reliable?
 Is this a growing industry?
Can the product and need for it be understood by the financial community?
- Financiers must grasp the idea and its value.
- Investment proposal?

Fig. 9.7. Fundamentals of assessing Feasibility of new venture:

Suggested two most important questions:

Technical Feasibility:
- Technical requirements of producing the product/service that will satisfy
customers.
- Functional design and attractiveness of appearance.
- Durability of materials.
 - Ease and low cost of maintenance
- Ease of processing or manufacture
- Ease in handling and use.
Marketability Analysis:
Three major areas:
1. Investigating full market potential and identifying customers for the g/s.
2. Analyzing extent to which customers might exploit the market.
3. Using market analysis to determine opportunities and risks associated with
the venture.
More attention is given in the actual chapter on marketability.
Kevin Hindle’s positioning analysis (pp. 311):

- X – axis is ability to generate revenue and profit.

- Y – axis is ability to sustain itself over time.
- Size of circle is managements ability to exploit opportunity.