A strong Partner for Sustainable Development

Entrepreneurship
1st Quarter, 2nd semester AY: 2021-2022

College of Education
Agricultural Science High School
SENIOR HIGH SCHOOL
Recognizing, Assessing, and Exploring Opportunities

Learning Competencies:
 The Learning Competencies that you are to learn in this Chapter are the following:
 Explain the process of recognizing opportunities
 Explain the important factors in opportunity recognition
 Create an opportunity assessment plan
 Discuss the different pathways to seizing opportunities
 Explain the product planning and development process
Introduction
The previous two chapters gave us a glimpse of what entrepreneurship is all about. In Chapter
1, we defined the process of entrepreneurship, identified the qualities of an entrepreneur, discussed the
key elements of the entrepreneurial process, and examined how entrepreneurial intentions are formed. In
Chapter 2, we focused on the use of logic and creativity in generating business ideas and in solving
problems.
Beyond knowing how entrepreneurial intentions and ideas are made, there is a need to recognize and
assess these intentions and ideas as business opportunities. In this chapter, we will discuss the various
stages in recognizing and assessing opportunities and how these opportunities are translated into
entrepreneurial ventures. For these opportunities to be realized as business ventures, the individual needs
to commit resources and should have the capacity to absorb the uncertainties of any business undertaking.
OPPORTUNITY RECOGNITION PROCESS
Before we proceed with the process of recognizing opportunities for entrepreneurial ventures, we need to
define the concept of opportunity. According to Cambridge Dictionary, an opportunity is “a situation or
occasion that makes it possible to do something that you want to do.” There are three elements in this simple
definition. First, you want to do something. In this case you want to establish your own business enterprise.
Second, there are conditions for the realization of the objective. Third, you must make decisions or take
action on these conditions to realize your objective.
From a business perspective, an opportunity is “an exploitable set of circumstances with uncertain
outcome requiring a commitment of resources and involving exposure to risk”
(www.businessdictionary.com). This definition not only fulfills the three elements discussed above, but also
provides specific features of a business opportunity. It should be pointed out that an opportunity will not
automatically lead to a realization of your objective. An opportunity can only be considered as a possibility of
realizing your objective since there are elements of uncertainties in its realization. Thus, the entrepreneur
must take action to achieve his objectives. This decision will require resources including time from the
individual and his acceptance of the risks because of uncertainties.
 Opportunity recognition often entails phases that potential entrepreneurs take before introducing a
product or service to the market. The five stages of opportunity recognition, according to Hills, Shrader,
& Lumpkin (n.d.) are summarized as follows':
Precondition. This is a preparatory stage, during which the individuals assesses his knowledge of the
market. His prior knowledge of the market is extensively shaped by his educational background. Aside
from formal training, personal experiences including travel, and previous employment can also provide
the individual with valuable information on the market that he wants to enter.
Conception. This is the gestation phase, during which entrepreneurial intentions and ideas are generated,
using logic, creative thinking, or both. As discussed previously, creativity is the capacity of the mind to
reprocess and recreate new ideas by connecting ideas from existing products or services. For example,
connecting ideas on the various ways of preparing bread can lead to a creative idea.
Visioning. This third stage provides the individual a hunch that can serve as an opportunity for business.
This comes about as ideas become clearer and how the logic of connections leads the individual to a new
idea. In our previous example on connecting ideas, the preparation of bread can lead us to an idea of
toasted siopao, which takes off from the classic steamed siopao
Assessment. This stage involves the evaluation on whether the idea can be realized or not. Aside from the
resources needed and technology to be used, the paramount question to the individual is whether the idea
can really be actualized. In our stated example, the relevant question at this stage is whether we can really
toast siopao?
Realization. The last phase suggests the production of a prototype. This is the stage when the mental
construct or idea is now felt in its tangible or physical form. Thus, the idea of toasted siopao is produced
by baking the dough with fillings instead of steaming the traditional siopao.

FACTORS IN OPPORTUNITY RECOGNITION

A framework on recognizing opportunities crafted by Hisrich, Peters, and Shepherd (2010), provided
some of the key factors in opportunity recognition. According to them a successful recognition of business
opportunities is influenced by three major factors: (a) market awareness, (b) entrepreneurial readiness,
and (c)connections.
Market awareness (prior knowledge of the market) refers to personal exposure to the market and its
components including customers and suppliers. Information on the market, in turn, can be acquired from
formal training. Tools on market analysis are usually learned from business training programs and
business education. Environmental scanning, for example, can provide information about the market,
customer needs, and emerging product lines.
 Beyond formal training, experience can be a major source of understanding, the market. Your
dissatisfaction with a particular product can be part of your personal experience that can push you to
improve on the product. In the same manner, your work experience can also provide a wealth of knowledge
about the market and its prospects.
Entrepreneurial readiness (entrepreneurial alertness), on the other hand, refers to a variety of features
of an individual to start a business venture. It covers all types of resources that the individual possesses
including financial, physical and human resources. Aside from the resources that the individual can
potentially commit in the implementation of his potential enterprise, readiness also includes the ability of the
individual to take risks and manage uncertainties once the enterprise is operational. Entrepreneurial
readiness not only has a direct impact on opportunity recognition but it also has an indirect effect as it
interacts with previous knowledge on the market.
The last factor is connections(networks). Business opportunity recognition is heightened when the
individual has a diversity of networks. Families and friends as well as business associates can bring about
opportunities that we can pursue.
OPPORTUNITY ASSESSMENT
Once an idea has been generated and an opportunity has been recognized from it, there is need.to
assess whether this opportunity is feasible to implement. Opportunity assessment refers to the process of
evaluating the likelihood that the opportunity can be realized. Several studies found the following
elements in opportunity assessment: product, market,· cost, profitability, capital requirements, risks, and
commitment.
Product or Service. A business opportunity is primarily the potential of introducing a new product or
service to the market. This new product or service can be a result of various creative ways of
differentiating an existing product or service. Given these considerations, the following questions need
to be answered as part of the assessment process: What is the unique feature of the product or service?
Why will the consumers purchase this commodity? What need or want is the product or service trying to
fill? What is the competitive edge of this commodity compared with existing products or services?
Market Opportunity. This element in the assessment process refers to the appraisal of the
characteristics of the market. Included in the assessment process is the competitive environment in the
market. Is it easy to enter the market? If there are barriers to entry, can they be overcome? How strong is
the bargaining power of existing players in the market? How different is the product or service that you
want to introduce compared to the existing products and services in the market? What segment of the
market is your product or service targeting?
Costing and Pricing. A product which may be considered valuable by consumers may not be affordable.
Thus, the cost of production as well as the unit price of the commodity is very important in the
assessment phase. Although there is a market for expensive goods and services, the market however is
very limited. In such a case, the product should be highly differentiated like Louis Vuitton bags that it
can create a snob effect on a select group of consumers. On the other hand, consumer goods catering to
the general public must be priced appropriately because they have a lot of substitutes that serve as
competitors. The price of a product or service would depend on the cost of raw materials and other
factors of production. Cheap and reliable raw materials and the employment of inexpensive unskilled
laborers can make your product competitively priced.
Profitability. Part of the assessment process is the extent of profitability of a product or service. An
important motivation for venturing into business is to earn profit. Thus, a nonprofitable business
enterprise, however creative the business idea, is not worth pursuing. Profitability is based on how the
market will receive your product and the cost of producing it. There are business ventures that are very
profitable but will require huge capital and long gestation periods. A starting entrepreneur with limited
resources may not be able to pursue this option even if the rate of profit is very high. On the other hand,
there are projects with limited resource requirements and give earnings immediately but their returns are
not as attractive.
Resource Requirements. In any business ventures, you will need inputs in the production process. There
are two types of inputs used in production: intermediate inputs and factor inputs. Intermediate inputs are
also called raw materials that need further processing. Aside from cost, the concerns on raw materials
include their availability. accessibility, and reliability. Factor inputs, on the other hand, are called the
processing inputs which include labor, capital, and technology. Since factor inputs will remain with the
firm for some time, unlike raw materials that have to be acquired regularly, the main concerns on factor
inputs are on their productivity and costs.
Risks. Any business enterprise will face risks in the course of its operations. Risks are uncertain situations
that can increase the probability of loss or failure of a business venture. Risks can come from within
(internal risks) and from outside (external risks). Internal risks, which emanate from the management of
resources, can be prepared and controlled. While external risks, which arise from various environments
affecting business, can be managed. If the potential business venture will just face normal business risks,
the business venture can be pursued. However, very risky business ventures may not be suitable for
beginning entrepreneurs.
Entrepreneurial commitment. The last element in the process of entrepreneurial assessment relates to
the commitment of the individual to pursue the realization of its business idea. Commitment may include
the motivations of the individual, his skills, experience, resources, and the amount of time he can devote
in the operation of the business. The seriousness of the individual can define his commitment and can
proceed with the introduction of product or service.
OPPORTUNITY PATHWAYS
Once the opportunity has been identified, the individual can subject it to an assessment as described
above, proceed with its implementation, or put the business idea on hold. If the decision is to proceed, the
individual has two options to follow or pathways in transforming the opportunity into a business venture.
These two opportunity pathways are called the rational approach and the intuitive approach.
The rational approach is also called the traditional approach. It uses systematic procedures in proceeding
with the implementation of a business opportunity. Many Filipino entrepreneurs who use this approach may
start with questions on what is possible (Ano ang puwede?), then make an assessment to identify the best
alternative (Ano ang pinakamainam?) From the answers to these questions, he can conclude by trying it
(Masubukan nga). As a rational approach, the traditional pathway employs a routine in the entrepreneurial
process. It starts with the generation of entrepreneurial intent, visualization of an idea, recognition of an
opportunity, assessment of opportunity, and finally seizing the opportunity.
The traditional approach is usually applicable for business ideas that require substantial initial
investments or those that are undertaken by what we refer to as Schumpeterian entrepreneurs. There is a need
to utilize a systematic process (from the planning stage to the implementation phase) in these types of
commercial enterprise because a business failure can mean a waste of huge resources. Since this approach is
rational and systematic it implies that entrepreneurship can be learned. There are steps to be followed that
eventually will lead to the introduction of the product and service in the market.
PRODUCT PLANNING AND DEVELOPMENT PROCESS
This section summarizes the development process of a product from inception, introduction in the
market, and final decline. Hisrich, Peter, a Shephend (2010).identified the various stages that a product or
service undergoes in its product life. It takes two main phases: precommercialization phase and the
commercialization phase.
Idea stage. This refers to the formation of business ideas. It starts with an entrepreneurial intent and
proceeds with the development of a business idea using logic and creativity.
Concept stage. The refinement of ideas and visualization of an idea that can serve as business
opportunity is called the concept stage. The initial customer evaluation also happens during this stage. A
feasibility study or market study is undertaken to determine if there is a demand for the product or
service.
Product development stage. After the visualization of the idea the business idea is concretized with the
production of a prototype.
Test marketing stage. At this phase the product or service is introduced to the market after a series of
evaluation and feedback from potential customers.
 Once the precommercialization phase has ended, the commercialization phase follows. This phase is
also referred to as the product life cycle. According to the Vernon, product life cycle hypothesis, any
product has life and, similar to any living organism, it has its birth and its consequent death. Thus, a
product is introduced to the market as an innovative product and exits the market with the emergence of
other newer innovative products. The various stages of the product life cycle are summarized as follows:
Introduction. With a positive feedback after a series of market testing, the product is formally introduced
to the market. At this stage, the entrepreneur has to devote resources and time for the marketing of the
product. Hopefully, the innovativeness of the product, its uniqueness, and the human want it tries to
answer can stimulate demand.
Growth. With a successful marketing campaign the product is recognized by the market. This market
recognition is translated into a decision to purchase the product. There is growth if there are repeat
purchases or sustained demand from the initial and subsequent buyers. Aside from marketing cost, the
entrepreneur should make sure that the raw materials, as well as the factor inputs, are readily available to
produce the product and to ensure supply for the growing market.
Maturity. At this stage, the product is widely accepted with the emergence of brand loyalty and
patronage from its target market. The product is an established brand in a particular market with a
significant market share. To remain competitive, the entrepreneur must engage in innovative activities to
improve and further differentiate the product.
Decline. Once the market for the product has been saturated and innovation possibilities for it have been
fully explored, the product might start to lose its market power. The decline becomes real when
competitive products with newer innovations and creative differentiations are introduced and get accepted
by the market.