CHAPTER TWO

BUSINESS OPPORTUNITIES AND IDEAS

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1. Business Idea: some one’s opinion regarding what may or may not be a
good business.
Kinds of Start-up Ideas
i. Type A
ideas centered around providing customers with an improved product

ii. Type B
ideas centered around providing customers with an existing product
not available in their market.

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iii. Type C
New ideas involving new technology, and centered around providing
customers with a new product.
2. Business Opportunity: positive external trends or changes that provide
unique and distinct possibilities for innovating and creating value.
 represent the gap in the market, which presents the possibility of new
value creation.
 is the chance of doing things both differently from and better.

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 Opportunity No opportunity

Idea A venture with A venture without

potential is potential is
conceived conceived

No idea Missed opportunity Correct rejection of

an idea

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3. Innovation: invention (act of creating something) plus commercialization
(putting the new creativity in to the market place).
 a means of exploiting a business opportunity.
 related to implementation
Creativity and Innovation
i. Creativity: is the thinking of novel and appropriate ideas
the ability to bring something new into existence.
 related to imagination.
 the generation of ideas that result in the improved efficiency or
effectiveness
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ii. Innovation: includes conception of a new idea, the invention of a new
device, and practical application of ideas or inventions.
Innovation = theoretical conception + technical invention+ commercial
exploitation.
iii. Invention: discovering something for the first time.
 converting intellectual thoughts into a tangible new artifact (a product
or process).

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 Analytical
Organizing of
planning Implementation
resources

Commercial
application
Innovation process

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1. Invention: creation of a new product, service, or process, often one that
is novel or untried.
2. Extension: the expansion of the product, service or process already in
existence.
3. Duplication: the replication of an already existing product, service, or
process.
4. Synthesis: the combination of existing concepts and factors into a new
formulation. This involves taking a number of ideas or items already
invented and finding a way so that together they form a new application.

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1. Existing companies: monitoring and evaluating the products and
services of existing or new companies offer.
 Analysis ways to improve offerings that may result in a new product or
service.
2. Distribution channel: excellent sources of new ideas because of their
familiarity with the needs of the market.
3. Consumers
 Informally monitor potential ideas and needs.
Formally arrange for consumers to express their opinions.

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4. Government: the file of patent office contains numerous new product
possibilities.
 new product idea can come in response to government regulations.
5. Research and Development: the largest source for new ideas.

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Techniques for generating ideas
1. Focus group: consists of a moderator leading a group of people through
an open-in depth discussion.
 Involves a group of 8 to 14 participants
2. Brainstorming: consists of participants & moderator.
Allows people to be stimulated to greater creativity.
Good ideas emerge when the brainstorming effort focuses on a
specific product or market area.
 Participants should be in similar experience & profession.

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Rules of brainstorming:
 No criticism.
 Freewheeling is encouraged.
 Quantity of ideas is desired.
 Combinations and improvements of ideas are encouraged.

3. Problem Inventory Analysis

Consumers are provided with a list of problems in a product category
and they are asked to identify and discuss the problem of the products.

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1. Observing trends
 Important trends are:
 Economic trends
 Social trends
 Technological advances
Political action and regulatory changes
E.g. Smart phones wouldn’t be as successful if mobile population has not
increased(social trend), technological trend (a much smaller size), and their
ability to help users better manage their money via online banking and
comparison shopping.
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Environmental trends suggesting business or Product opportunity gaps
Economic Forces
State of the economy
Level of disposable income
Consumer spending patterns
Business, Product,
Social Forces or Service
Social and cultural trends Opportunity Gap New Business,
Demographic changes Difference between Product, and
What people think is "in“ what’s available and Service Ideas
what is possible.
Technological Advances
New technologies
Emerging technologies
New uses of old technologies

Political and
Regulatory Changes
New changes in political arena
New laws and regulations

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i. Economic Forces
State of the economy

Level of disposable income

Consumer spending patterns

When the economy is strong, people have more money to spend and are
willing to buy products.
e.g. An increase in the number of women in the workforce and increase in
disposable income is an opportunity to launch business targeting
professional women.
 weak economy may also provide business opportunities for start-ups

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ii. Social Forces
 An increase in fast-food restaurants is because people are busy and
don’t have time to cook their own meals.
 Face book, Twitter, and Instagram are popular because they allow
people to connect and communicate with each other, which is a natural
human tendency.
E.g.
 Aging of the population

 An increasing focus on health and wellness

 Growth in the use of mobile devices

 Continual migration of people from small towns and rural areas to cities

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iii. Technological Advances
 OpenTable. com is a website that allows users to make restaurant
reservations online.
 The creation of iPod, iPhone, iPad led to the production compatible
devices (headphones, portable USB device chargers and Bluetooth
speakers).
iv. Political Action and regulatory Changes
Political and regulatory changes also provide the basis for business ideas.

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2. Solving a problem
to recognize problems and find ways to solve them
 observing the challenges that people encounter in their daily lives
“Every problem is a brilliantly disguised opportunity” (John Gardner)
E.g.1. Jay Sorensen dropped a cup of coffee in his lap because the paper
cup was too hot. This experience led Sorensen to invent an insulating cup
sleeve and to start a company to sell it.

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E.g.2. After watching countless women walk home barefoot after a long
night in heels, New York University students Katie Shea and Susie Levitt
created a pair of flats that fold up to fit into a pocket-size zip pouch,
which easily fits into most women’s purses.
3. Finds Gaps in the Market place
 Products that consumers need or want that aren’t available in a
particular location or aren’t available at all.
E.g.
If no guitars on the market made specifically for women.

If no furniture for children

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 Gaps in the marketplace are recognized when they can’t find a product
or service that they need.
 Another technique to generate business opportunities is to take an
existing product or service and create a new category by targeting a
completely different target market.

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1. Starting a Business from Scratch: risky way of starting a business
 Requires the entrepreneur to identify:
 Genuine business opportunity
 Secure the necessary financial resource to create the venture
 Acquire labor, material and capital resources,
 create an organizational structure
Advantages
 Greater way in deciding the product, market, location and and
individuals you hire.
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 No preexisting equipments and inventory
 Customer contacts and relationships are new
 The entrepreneur can create a business that reflects his personality
There is no previous ill will to contend with
 Gives opportunity to provide a unique product or service to the
market
 Credit connections are new
 Suppliers are not predetermined

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Disadvantages
 Obtaining credit or getting investors may be more difficult
 Starting and organizing a new business will take more time and energy
 It is uncertainty in terms of operational and marketwise feasibility
 Estimating costs and making other forecasts become very difficult

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 buying an existing business to start a new business.
Advantages of acquisition
 reduces the time and cost of establishing a new business
 A successful business may continue to be successful.
The business may already have the best location
 Employees and suppliers are already established
Equipment is installed and its productive capacity known.
 The buyer can use the expertise of the pervious owner
 The business may be a bargain.
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 A chance to eliminate one competitor
Disadvantages of acquisition
 bad will may exist
 incompetent employees
 the business may be overpriced
 outdated inventory and obsolete equipments
 undesirable legal commitments with suppliers, trade unions,
customers.
 the personality of the business reflects its previous owner

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Step 1. Analyze your skill, abilities, and interest to determine what kinds of
business you should consider.
Step 2: Develop a list of criteria
Step 3: Prepare a list potential of candidates
Step 4: Investigate the potential acquisition targets and select the most
acceptable candidate(s)
Step 5: Negotiating the Deal
Step 6: Ensure a smooth transition

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 an arrangement in which the owner licensed to use trade mark, trade
name or copy right in selling goods/service similar to a franchisor.
 Involves the franchisor (who offer the franchise) and the franchisee (the
party who purchases the franchise).
Franchise is the legal arrangement between these two parties.
 The franchisor permits the franchisee to use the franchisor’s trademark,
name and advertising.

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Types of Franchising
1. Trade name Franchising: involves being associated with a brand name.
 facilitates purchasing the right to become identified with the
franchisor’s trade name.
2. Product distribution Franchising: involves licensing the franchisee to
sell specific products under the manufacturer’s brand name and
trademark.
3. Pure Franchising/business format franchising: the franchisee purchases
the right to use all the elements of a fully integrated business operation.

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Advantages to the franchisee
 Training and guidance
Brand appeal
Proven record of accomplishment
Financial assistance
Centralizing buying power
Territorial protection
Proven products and business formats

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 Less Operating Capital
 Opportunities for Growth
Advantages to the franchisor
 Expansion
 Cost advantages
 Franchise revenues
 Motivation
 Shared Advertising

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Disadvantages to the franchisee
 Franchise fees and profit sharing
Unsatisfactory training programs
Restriction on purchasing
Limited product line
Strict adherence to standardized operations

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Feasibility Analysis: the process of determining whether an
idea is viable for creating a successful business or not.
 designed to critique the merits of a proposed business
 requires both primary and secondary research
 allows for ideas to be revised, altered, and changed.
 help shape and mold the idea.

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Feasibility analysis includes:
1. Industry and market feasibility
2. Product /service feasibility
3. Financial feasibility analysis
1. Industry and Market Feasibility Analysis
 determine the attractiveness of an industry
 identity possible market(niches) a small business can occupy

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a. Industry attractiveness: macro level picture of an industry
 Size of the industry
Growth rate of industry
Profitability industry
Essentiality of products /services to customers
Industry threats
Level of competition

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An Industry’s attractiveness can be analyzed using Michael porter Five
forces model
i. Rivalry among existing companies: the higher the competition the less
attractive is the industry.
ii. Bargaining power of suppliers: greater bargaining power of suppliers
reduces the attractiveness of an industry.
iii. Bargaining power of buyers: the higher the buyers’ influence on a
company the less attractive the industry is.

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iv. Threat of new entrants: the larger the pool of potential new entrants
, the grater is the threat to existing companies

v. Threat of substitute products: the availability of substitutes product

reduces the attractiveness of an industry.

b. Market/niche attractiveness- includes analyzing:

Market to occupy (specific niche)
Size and growth rate of the niche /market
Product differentiation
 competitive advantage – the advantage over the competitors
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2. Product /service Feasibility Analysis
determines the degree to which a product /service idea appeals to
potential customers.
It analyzes:
- willingness of customers to buy our goods/services
- whether the product /service can be sold to customers at a profit
- identifies the required resource to produce the product

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3. Financial feasibility Analysis
 This analysis includes:
Capital requirements: estimate of the amount of start –up capital.
Estimated earnings: forecast the earning potential of the business.
Return on investments: the rate of return the venture is expected to
produce.

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The systematic design, collection, analysis, and reporting of data and
findings.
 involves the gathering of information about a particular market.
Process of marketing research
1. Define the problem and research objectives
describe the problem thoroughly
guides the entire research process

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2. Develop the research plan
determine the information needed (secondary or primary)
develop a plan for gathering (how and where to gather).
3. Collecting the Information – executing the plan to gather data
4. Analyzing the Information - extracting important information and
findings from the data.
tabulate the results and compute averages and other statistical
measures.

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5. Present the Findings - interpret the findings, draw conclusions, and
report them to management.
6. Make the Decision - decide as what action should be taken
 make the data directly available to marketing managers

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