Programme: BA (Hons) in International Business with Foundation Year
Module: Understanding the Entrepreneurial Spirit
Module level : Level 4
Resources
Essential Resources
Rae, D. (2015). Opportunity-Centred Entrepreneurship. (2nd ed.). London: Macmillan International Higher Education.
Recommended Resources
Bygrave, W.D. and Zacharakis, A. (2019). Entrepreneurship. (5th ed.). Hoboken, New Jersey: John Wiley & Son.
Burns, P. (2018). New venture creation: a framework for entrepreneurial start-ups. (2nd ed). Basingstoke, Hampshire: Palgrave Macmillan.
Bessant, J. and Tidd, J. (2015). Innovation & Entrepreneurship. (3rd ed.). London: Wiley
Stokes, D., Wilson, N. and Mador, M. (2010). Entrepreneurship. London: Cengage Learning.
Pervaiz, A. and Shepherd, C. D. (2010). Innovation Management: Context, Strategies, Systems and Processes. New York: Prentice Hall.
Trott, P. (2021). Innovation management and new product development. 7th ed. Harlow: Prentice Hall.
Wickham, P. (2006). Entrepreneurship. London: Prentice Hall.
Week 4 – Lecture
Assessing opportunities
Topics for today’s session
•
Evaluating the opportunity
•
Assessing the environment for your opportunity
•
Opportunity assessment and decision making
•
Locating clusters, networks and resources for opportunity development
•
Corporate entrepreneurship: connecting opportunities with organisational strategy
•
Assignment guideline
Introduction to the module
AIMS
Through the completion of this module, you will:
1. Gain an understanding of the theoretical and practical frameworks that underline
entrepreneurship and intrapreneurship development.
2. Obtain knowledge and understanding of key aspects of business planning, financing, evaluating
risk and how innovation creates competitive advantage
3. Develop marketing knowledge and skills, including the role of marketing and marketing
processes
4. Understand how entrepreneurial marketing contributes to business startup and growth.
5. Develop entrepreneurial skills that foster engagement with various stakeholders for business
development.
LEARNING OUTCOMES
1. Recognise and assess the scope and characteristics of entrepreneurship and intrapreneurship
2. Demonstrate a critical understanding of entrepreneurship and entrepreneurs.
3. Present the differences between business activity and entrepreneurial activity, including notions of risk
assessment
4. Demonstrate knowledge of the significance of marketing to entrepreneurial activities.
5. Develop personal entrepreneurial skills and behaviour to individually be able to establish a business,
interact with and convince various stakeholders.
6. Evaluate how different national cultures will influence the effectiveness of different entrepreneurial
policies.
Assessment
▪ Assignment Deadlines and weight:
Deadline
Component
number
Form of
assessment
Learning
Assessment Weighting
outcomes
size
(%)
assessed
Late
Subn Core or
noncore
26/03/2023
1
2
Essay
Portfolio
1,500 words
1,500 words
50%
50%
1, 2, 3
4, 5, 6
19/03/2023
Yes
Core
Yes
Core
Assessment
▪ Component One: Refer to Assignment Brief posted on Brightspace
▪ Component Two: Refer to Assignment Brief posted on Brightspace
Evaluating the opportunity
➢ The purpose of opportunity evaluation is to assemble
the known information about the opportunity, and
Think SMART:
use it to investigate essential, strategic questions.
➢ The answers will inform your decision making on
whether to go ahead with a venture to act on the
opportunity, and on planning how to do so.
➢ Opportunity evaluation aims to reduce the risk of
project failure by researching thoroughly all the
relevant information on the factors which affect the
project
✓ Specific (who needs what and why?)
✓ Measurable demand (scale and value)
✓ Achievable (what has to be done?)
✓ Realistic (resources? feasibility?)
✓ Timescale (now-future?)
General Electric Portfolio Approach
➢ Harvest/Divest: If activity is weak in strength and the industry is
not attractive then it’s likely one you should consider exiting or
closing down.
High
➢ Hold: Activities that land within this section are less appealing
for investment than the Grow activities, but not necessarily at
the point of exiting.
Hold
Selective
Investment
Grow
Invest
Hold
Selective
Investment
Harvest
Divest
Hold
Selective
Investment
Harvest
Divest
Harvest
Divest
Low
➢ Grow/Invest: Activities placed in this area should be invested as
you have a high strength in a highly attractive industry.
Grow
Invest
Industry /Market attractiveness
The matrix helps you decide the appropriate investment
strategies between the following options:
Grow
Invest
Medium
The GE Matrix is a portfolio analysis tool based on long-term
industry attractiveness and business competitive strength.
Low
Medium
High
Competitive Strength of the Business Unit
GE – Portfolio matrix (Adapted from McKinsey, 2008)
Analysing the industry
➢ It's now time to look at how attractive your industry is on a macro
level.
➢ Mullins suggests using Porter's Five Forces to assess which factors
affect the profitability of your industry.
➢ To do this, first define the industry that you will be competing in, and
then ask yourself how easy it is to enter this industry. If it is easy to
get into, you can quickly be flooded with competitors if you are seen
to make a success of your business.
➢ Let’s have a look into the next slide for a more detailed overview.
Adapted from Porter’s 5 Forces, cit. Evans,
2016:70; See also, Mullins, 2018:261.
Activity
The price of prescription medicine is high, partly because when someone is sick there is no
real alternative to buying medicine. Which of Porter's Five Forces explains how this aspect
of the prescription medicine industry helps keep its profitability high?
a)
b)
c)
d)
Rivalry among existing firms
Threat of new entrants
Threat of substitutes
Bargaining power of buyers
Assessing the environment for your
opportunity
➢ To assess the market attractiveness and the industry attractiveness, we also need to look into the
macro levels.
➢ The developed world is an opportunity-rich environment. In economically less developed countries,
there are also many opportunities but access to the resources, technology and other means of
exploiting them can be much more limited and challenging. It is necessary to assess the
relationships between economic, environmental, political, social, technological forces and
entrepreneurial activity.
➢ These factors may in themselves create opportunities and will either positively or adversely affect
the ability to exploit the opportunity.
Economic factors
➢ These include the economic stability of the country or market, the conditions of economic growth or
recession, predictability or volatility in demand, pricing, level of inflation, exchange rates of the
currency to be used, and availability and cost of investment or loan finance.
➢ These factors can differ significantly between neighbouring countries, such as South Africa, which
has a stable and growing economy, and Zimbabwe which has experienced volatile economic factors
and has a virtually untradeable currency, which makes business management very challenging.
➢ Economic forces can affect consumers’ level of disposable income. When studying how economic
forces affect opportunities, it is important to evaluate who has money to spend and who is trying to
cut costs.
➢ Many large firms are trying to cut costs. Entrepreneurs have taken advantage of this trend by
starting firms that help other firms control costs.
Political factors
➢ Political factors include the level of political stability, and the extent of support for enterprise
development at the local, regional, national and supranational levels.
➢ The level of legislation and regulation and the ways in which this is administered, the transparency
of government processes and the presence or absence of corruption in government are all
relevant and have a major bearing on the ease and attractiveness of operating a business venture.
➢ Political factors and regulatory changes can also provide the basis for new business opportunities.
➢ For example, laws that protect the environment have created opportunities for entrepreneurs to
start firms that help other firms comply with environmental laws and regulations.
Why is compliance with regulations and legislation important?
Environmental factors
➢ The natural and physical environment includes factors such as climate change (increasing
unpredictability of weather patterns), lack of rain and water shortage or excessive rainfall, and
availability of natural and physical resources.
➢ Geographical factors, including the concentration of population in urban areas or transport and
communications such as road networks, airports, fast rail links, telephone and data networks, and
levels of congestion may all be significant factors.
➢ The cost of transport, either through delays caused by congestion or charges such as tolls for road
use, is increasingly important but may present new opportunities for alternative logistics,
communication and distribution businesses.
Social Factors
➢ The cultural acceptability of entrepreneurship is changing markedly in many societies, but
this is only one factor. Others include demographics; many developed societies have ageing
populations, in contrast to the ‘youth’ of many developing countries.
➢ Changes in social trends provide openings for new businesses on an ongoing basis.
• The continual proliferation of fast-food, for example, isn’t happening because people
love fast food. It is happening because people are busy and have disposable income.
Examples of Social Forces That Allow For New Business Opp.
• Family and work patterns
• The age of the population
• The increasing diversity in the workplace
• The globalization of industry
• The increasing focus on healthcare and fitness
Technological factors
➢ These factors include the level of technological development in the market.
➢ They include access to communication media such as Internet, broadband and mobile
phones; the support for technological development and innovation such as research
institutes and universities with relevant expertise; enablers and constraints to the
implementation of technology.
➢ Given the rapid pace of technological change, it is vital that entrepreneurs keep on top of
how new technologies affect current and future business opportunities.
➢ Entire industries have emerged as the result of technological advances.
➢ Examples include the computer industry, the Internet, biotechnology, and digital
photography.
➢ Once a technology is created, new firms form to take the technology to a higher level.
Activity
Which of the following factors does the macro-environment
not include?
a) political and regulatory factors.
b) customer needs in a given market.
c) social and demographic factors.
d) technological changes.
Opportunity assessment and decision making
➢ Some opportunities are ‘better’ than others, and it is necessary to have methods for comparing,
assessing and evaluating opportunities to enable the most attractive ones to be selected.
➢ This means that we can screen and select opportunities to identify those with higher or lower
potential and use this information to decide which to invest effort and resources.
The pentagon model: five key dimensions of opportunity potential
1.
Investment of resource → from none to high
2.
Risk and uncertainty → from certainty to unpredictability
3.
Return and value created → from none to high
4.
Impact of innovation and change → from none to great
5.
Timescale → from now into the future
The pentagon model of opportunity assessment (Rae, 2007)
Investment
Resources must be invested to realise any type of opportunity.
The nature of the investment is likely to be a combination of the
following:
➢ Financial: capital belonging to the entrepreneur; venture capital
from an investor; equity or loan finance.
➢ Non-financial resources such as productive capacity, staff time,
and capability. These represent an ‘opportunity cost’ since the
resources could be used alternatively for a different reward.
➢ Intangible resources such as knowledge, information, expertise,
intellectual property rights.
➢ Reputation, such as branding, partnering, social capital and
credibility.
Example of Resources and Capabilities
Lets refer to the Entrepreneurs Finance Framework below to identify which quadrant your venture lies.
➢ Bottom left: Small business (i.e. low-risk, tested business), bank
loans and personal credit will be sufficient. Example: café
➢ Top left: If you are a using proven technologies to create
something (i.e. less risky, almost guaranteed return), utilising
commercial banks, project finance and strategic investors are
usually your options. Example: creating a new smartphone.
➢ Bottom right: If you are using new technologies i.e. a startup, it
often means that the only ways to get investment is through
angel investment and venture capital. Example: Airbnb.
➢ Top right: If you are using new technologies and the product is
extremely capital intensive, it is really difficult to get funding
except through government support, due to the risky nature of
it all. Example: new drug for curing a certain disease.
Entrepreneurs Finance Framework
Risk and uncertainty
➢ It is essential to evaluate the degree of risk involved in exploiting an opportunity. Risk arises from
uncertainty:
• If complete certainty should exist → there is no risk;
• If complete unpredictability exit →produces very high risk.
➢ The aim is to identify what factors lead to uncertainty, and how far these can be reduced. The variable
factors which cause risk need to be identified. They may include:
Knowledge
lack of information about market factors and likely demand.
The economy
Technology
fluctuations in macro-economic factors (market stability, currency
exchange and interest rates)
will the technology work as planned?
Financial factors
are the financial costings and plans realistic and achievable?
Competition
how will competitors respond?
Customers
will they buy and pay as expected?
Supply chain
will suppliers and distributors deliver as expected?
Human elements
does the venture team have the expertise to manage the venture?
Return and value created
The return on the investment may vary from nothing – a total loss of the
investment – to high, which may be a return of several hundred per cent. An
assessment of the acceptability of the return should take into account the
following factors:
➢ The amount invested; it may be acceptable to lose a
small investment completely.
➢ Return in relation to risk: the higher the risk, the
higher the return which will normally be expected.
➢ The timescale over which the return will come. Risk
tends to increase further ahead in time.
➢ The form of the return, e.g. as capital growth of the
investment or as a flow of income.
➢ The exit strategy from the opportunity, e.g. as
liquidation of assets, sale as a going concern,
flotation, value anticipated and timescale for exit.
Measuring Risk & Opportunity
Impact of innovation and change
➢ Innovating and introducing a completely
new concept or product can introduce
fundamental changes into the market.
➢ Strategic and disruptive innovation can
reduce competitors’ power and create
new markets.
➢ A process innovation which enables a new
business to offer lower prices than
existing suppliers will attract existing and
probably new customers, thus changing
customer expectations and behaviour;
e.g. the introduction of low-cost air carriers
has expanded the air travel market, polarising
customer expectations between low-cost, nofrills service and high-cost standard service.
Innovation Landscape Map (HBR, 2015)
Timescale
The timescale for the venture needs to be assessed.
Achieving the right timing is often a critical factor in
entrepreneurial decision making, and points to consider
here include:
➢ Is the timing of entry leading ‘the rest’ of the market,
which may give an advantage but also require greater
investment? Is it entering the market at the same time
as competitors, or is it trailing others into a mature or
declining market?
➢ What is the duration of the opportunity – from short to
long term?
➢ What is the lead time needed to enter the market?
➢ When will the investment achieve a return?
Locating clusters, networks and resources
for opportunity development
The hexagon model shown consists of six
decision-making clusters, each of which
includes a number of specific factors which
can be used to assess an opportunity,
enabling you to judge whether it is high
value or lower value.
Let's now have a look at each factor
The business opportunity hexagon model (Rae, 2007)
Factors in the opportunity recognition hexagon
Market potential
1. Market growth – ability to access markets of growing size
and value
2. Customer base – extent of known, identifiable customers in
defined markets
3. Customer reliance – degree of customer reliance on the
product
4. Customer interaction – quality and compatibility of
customer relationships
The business opportunity hexagon model (Rae, 2007)
5. Partnering – strength of supplier and technology networks
6. Competition – advantages in relation to competitors
Factors in the opportunity recognition hexagon
Innovation
1. Innovation leadership – use of prior experience to lead the
market
2. Innovation providing a solution to a customer-defined
problem
3.
Use of differentiated technology providing performance
and cost benefits
4. Strength of intellectual property protection – vulnerability
to copying
5. Speed and likelihood of being first to market
6. Feasibility of implementation – extent of challenges to be
overcome
The business opportunity hexagon model (Rae, 2007)
Factors in the opportunity recognition hexagon
Strategy
1. Business growth – purpose, scope and strategy to
create and grow a business
2. Strategic options – single or multiple options for
strategy and exit
3. Value creation – profit margin and cash generation
4. Innovative business model – superiority to existing
models
People
The business opportunity hexagon model (Rae, 2007)
1. Chief executive officer (CEO) – ability to show leadership and innovation
2. Management team effectiveness – skills, compatibility and motivation
3. Contextual experience – ability to use prior experience and knowledge of
industry
4. Staff capability – ability to recruit experienced people from the industry
Factors in the opportunity recognition hexagon
Investment
1. Investment-reward: financial return and profitability in
relation to investment
2. Investor attraction: based on projected increase in equity
value
3. Risk: acceptability of loss in worst case scenario
4. Commercial viability, break-even and predictability of cash
flow
5. Timescale: short/long-term income stream and exit strategy
Learning
The business opportunity hexagon model (Rae, 2007)
These factors feature the entrepreneur’s individual learning and vary between individuals
1. Independent control of business direction
2. Personal vision and confidence in business potential
3. Incremental learning – being able to find ‘what works’
4. Intuition – knowing what is the ‘right thing to do’
5. Ethics – ability to practice ethical framework and values
Locating clusters, networks and resources
for opportunity development
➢ The entrepreneurial economy operates in a
highly social, networked way.
➢ Entrepreneurs and firms participate
intensely in different kinds of social activity,
including buying and selling, collaborating,
competing, and copying.
➢ Industry clusters are based on groups of
companies in a single industry being closely
co-located and operating interdependently,
by competing, co-existing and collaborating
As an example, lets look at the map of the
creative industry networks in one city in the UK
Opportunity map of creative enterprise networks
Corporate entrepreneurship: connecting
opportunities with organisational strategy
➢ Corporate Entrepreneurship is a cost-effective approach to promote and maintain a Competitive
Advantage.
➢ There are 4 Models of Corporate Entrepreneurship. The model an organization adopts is dependent on
how it’s positioned along 2 dimensions–organizational ownership and resource authority.
For your opportunity, consider:
● How would you identify
potential corporate partners?
● What benefits does your
opportunity offer to them?
● How would you initiate a
potential partnership?
● What risks or constraints would
you need to be aware of and to
manage in the relationship?
ASSIGNMENT BRIEFS
• Component 1
• Component 2
Assignment guideline
• Component One and Component 2
• General and basic guideline:
• All assignment questions contained in each of the
assignment briefs are to be addressed.
• Tick each question whenever it is completely
addressed.
• Read and understand each of the questions carefully
before conducting the respective research.
• One of the purposes of doing an assignment is to show
to your lecturer what you have learnt from the
lectures. How to do it? Always refer to the core
textbook and the lecture notes before answering the
questions. Cite all the relevant materials and apply
them to your assignment whenever required.
• Always refer to and follow the CRAAP Test. See table.
Assignment guideline
• Component One and Component 2
• General and Assignment-specific guideline:
• Refer to the Marking Guidance table stipulated on p. 4 of the assignment brief.
• Address each sub-topic logically and whenever appropriate.
• Quantitative measurement (word count) is one of the requirements but qualitative
work is equally required for each part of the assignment.
• In general, if you have addressed those points in the table, you’ll be fine. Yet, high
quality of work is always what we are looking for.
• Respective topics in the table should be sufficiently covered in the lecture notes.
• Your lecturer will walk you through with it during various lectures, before the
submission date or whenever appropriate.
SUMMARY
•
Evaluating the opportunity
•
Assessing the environment for your opportunity
•
Opportunity assessment and decision making
•
Locating clusters, networks and resources for opportunity development
•
Corporate entrepreneurship: connecting opportunities with organisational strategy
•
Assignment guideline
Any questions?
Thank You
References
Baron, R. (1998). ‘Cognitive Mechanisms in Entrepreneurship: Why and When Entrepreneurs Think Differently Than Other
People’. Journal of Business Venturing, 13(4): 275-294
Burns, P. (2018). New venture creation: a framework for entrepreneurial start-ups. 2nd ed. Basingstoke, Hampshire: Palgrave
Macmillan.
Bygrave, W.D. and Zacharakis, A. (2019). Entrepreneurship. (5th ed.). Hoboken, New Jersey: John Wiley & Sons.
Cohen, S.L., Bingham, C.B. and Hallen, B.L. (2019). The role of accelerator designs in mitigating bounded rationality in new
ventures. Administrative Science Quarterly, 64(4), pp.810-854.
Evans, V. (2016) Writing a Business Plan, How to win backing to start up or grow your business. 2nd Ed. Pearson Education: Harlow.
HBR (2015) You Need An Innovation Strategy. Available at: https://hbr.org/2015/06/you-need-an-innovation-strategy (Accessed: 1
January 2023).
Meoli, A., Fini, R., Sobrero, M. and Wiklund, J. (2020). How entrepreneurial intentions influence entrepreneurial career choices: The
moderating influence of social context. Journal of Business Venturing, 35(3), p.105-982.
Mullins, J. (2018). The New Business Road Test. 5th Ed. Harlow: Pearson Education.
Open University (2020) Entrepreneurship Accelerator. Available at:
https://www.open.edu/openlearncreate/mod/oucontent/view.php?id=144663&section=4.2 (Accessed: 28 December 2022).
Steininger, D.M., 2019. Linking information systems and entrepreneurship: A review and agenda for IT‐associated and digital
entrepreneurship research. Information Systems Journal, 29(2), pp.363-407.