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Entrepreneurship:
Successfully Launching
New Ventures, 1/e
Bruce R. Barringer
R. Duane Ireland
Chapter 2
©2006 Prentice Hall
2-1
What is an Opportunity?
(1 of 2)
• Most entrepreneurial firms are started in one of two
ways:
– Internally stimulated: entrepreneur decides to start a
firm, searches for and recognizes an opportunity, then starts
a business.
– Externally stimulated: entrepreneur recognizes a problem
or an opportunity gap and creates a business to fill it.
• Opportunity Defined
– An opportunity is a favorable set of circumstances that
creates the need for a new product, service or business idea.
©2006 Prentice Hall
2-2
What is an Opportunity?
(2 of 2)
An opportunity has five essential qualities.
1. Attractive
2. Durable
3. Timely
4. Anchored in a product, service, or business that adds
value for its buyer or end user
5. Should also add value for necessary network
partners (e.g., those providing resources necessary
for venture success)
©2006 Prentice Hall
2-3
Difference Between an Idea and an
Opportunity
• Idea
– An idea is a thought, impression, or notion. It may or may
not meet the criteria of an opportunity.
• Difference Between an Idea and an Opportunity
– Many businesses fail, not because the entrepreneurs that
started the businesses didn’t work hard—they fail because
there was no real opportunity to begin with.
– Before getting excited about a business idea, it is crucial to
understand whether the idea fills a need and meets the
criteria for an opportunity.
©2006 Prentice Hall
2-4
Opportunity Recognition
• Opportunity recognition is the process of perceiving the
possibility of a profitable new business or a new product
or service
– Thus, opportunity recognition involves perceiving the
possibility of potential opportunity that is
•
•
•
•
Attractive
Durable
Timely
Anchored in a product, service, etc. that offers value to the
customer or end user
– Adds value to required network partners
©2006 Prentice Hall
2-5
Window of Opportunity
• Window of Opportunity
– The term “window of opportunity” is a metaphor
describing the time period in which a firm can
realistically enter a new market.
• Once the market for a new product is established, its
window of opportunity opens, and new entrants flow in.
• At some point, the market matures, and the window of
opportunity (for new entrants) closes.
©2006 Prentice Hall
2-6
Two ways to Identify an Opportunity
• Observing Trends
– Economic
– Social
– Technological
– Political/Legal
– Globalization*
• Solving a Problem
©2006 Prentice Hall
2-7
How Are Opportunities Identified?
First Approach: Observing Trends
Figure 2.1
Environmental Trends Suggesting Business, Product and Service Opportunity Gaps
©2006 Prentice Hall
2-8
Trend 1: Economic Forces
• Economic Forces
– Economic forces affect consumers’ level of disposable
income.
– Who has money to spend and who is trying to cut costs.
• An increase in the number of women in the workforce and their
related increase in disposable income was one of the factors that led
the founders of buyandhold.com to target women.
• Many large firms are trying to cut costs. Entrepreneurs have taken
advantage of this trend by starting firms that help other firms
control costs.
©2006 Prentice Hall
2-9
Economic Trend: Teen Affluence
• Last year teenage shoppers spent over $170
billion — double the amount just 10 years
earlier (ABC news, 2003).
• Over the past five years, teen purchases …
have grown [more] than the teen population,
rising from $122 billion annually in 1997 to
$170 billion last year (The Sun Herald, 2003).
©2006 Prentice Hall
2-10
Economic Trend: Fuel and Steel Prices
Higher Gas Prices:
The Next Motorcycle
Sales Boom Is In Sight
“…it’s evident we’ll see
motorcycle sales
continue to increase in
the coming months.”
Source: Mehren, 2004
Auto Suppliers Applaud Congressional
Resolution on Steel Hearings
“ …Motor & Equipment Manufacturers
Association (MEMA) … commended … a
resolution calling on the International Trade
Commission (ITC) to consider – and report on –
the impact of U.S. antidumping or countervailing
duties on steel-consuming manufacturers.”
“… ITC hearings will be held in March and April
to review duties on … steel … found to be
unfairly priced or “dumped” into the U.S.
market…”
Source: MEMA, February 10, 2005
©2006 Prentice Hall
2-11
Trend 2: Social Forces
• Social Forces
– Changes in social trends provide openings for new
businesses on an ongoing basis.
– The continual proliferation of fast-food isn’t
happening because people love fast food. It is
happening because people are busy, and have
disposable income.
– The Sony Walkman developed not because
consumers wanted smaller radios but because
people wanted to listen to music while on the go.
©2006 Prentice Hall
2-12
Trend 2: Social Forces
Examples of Social Forces That Allow For New
Business Opportunities
• Family and work patterns
• The aging of the population
• The increasing diversity in the workplace
• The globalization of industry
• The increasing focus on health care and fitness
• The proliferation of computers and the Internet
• The increase in the number of cell phone users
• New forms of entertainment
©2006 Prentice Hall
2-13
Social Trend: Health Conscious Consumers
Inside Story: 10 Candy Trends
“Fueled by popularity of the Atkins diet and a health-conscious
uprising in America, products that are low in fat, carbs, sugar and
calories are hitting retail shelves at lightening speed.”
“ACNielsen reports that in 2002, diet candies grew the fastest,
claiming 23 percent of the $24 billion candy market.”
Source: Carneal (2004), American Wholesale Marketers Association
©2006 Prentice Hall
2-14
Social Trend: `Tween Market
Kiddie calls are on the horizon for the growing 'tween market
“’Tweens [ages 8-12] constitute a lucrative retail market … 23 million members
… Retail studies say this demographic is on the leading edge of the mostconsumer-oriented generation in history. They increasingly have disposable
income, and their voice now factors heavily into family purchases.”
“ … when they shop for themselves, ‘tweens ignore toys … preferring clothes,
video games and electronics.”
“ The world's No. 2 toymaker [Hasbro, Inc.] is going after the … 'tween market
with a walkie-talkie-like device that resembles a mobile phone.”
Source: St. Louis Tribune, February 12, 2005
©2006 Prentice Hall
2-15
Trend 3: Technological Advances
• Technological Advances
– Given the pace of technological change, entrepreneurs need
to keep on top of how new technologies affect current and
future business opportunities.
– Entire industries have emerged due to technological
advances.
• Examples: computer industry, Internet, biotechnology, and digital
photography.
– Once a technology is created, new firms form to take the
technology to a higher level.
• For example, RealNetworks was started to add video capability to
the Internet.
©2006 Prentice Hall
2-16
Technological Trend:
Avis takes a bite of Bluetooth
“… Avis Europe is improv[ing]
customer service by using
Bluetooth-enabled … mobile
devices and wireless check-in
infrastructure … to cut down on
the time taken for its staff to
check-in a car being returned to
the depot by the customer.”
Source: Europe Intelligence Wire,
February 10, 2005
©2006 Prentice Hall
USB drives go beyond storage
“... a new company called U3 … said it would
promote the next generation in flash drive
technology.”
“Keychain drives are going beyond … storage …
They're going to … [run] applications … [like]
PowerPoint [,] … and ScanDisk.”
“A few companies have already endorsed the idea:
McAfee … antivirus software vendor [and] ...
Zone Labs … the firewall maker …”
Source: Hesseldahl (2005), Forbes
2-17
Technological Trend:
Text message essay baffles
British teacher
Monday, March 3, 2003 Posted: 10:17 AM EST (1517 GMT)
The girl's essay began:
"My smmr hols wr CWOT. B4, we used 2go2 NY
2C my bro, his GF & thr 3 :- kids FTF. ILNY, it's a
gr8 plc."
Source: CNN.com
©2006 Prentice Hall
2-18
Trend 4: Political Action and Regulatory Changes
• Political Action and Regulatory Changes
– Political action and regulatory changes 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.
©2006 Prentice Hall
2-19
Legal/Political Trend: Legal Unrest
Source: CBSnews.com
High Condition
(Orange). A High
Condition is declared
when there is a high risk
of terrorist attacks.
Visitors wait in line to be fingerprinted
and photographed at the U.S. Customs
check point at San Francisco
International Airport in San Francisco.
©2006 Prentice Hall
Source: US Department of
Homeland Security
2-20
Legal/Political Trend:
FCC Indecency Regulations Breached
Legal Trend
FCC to investigate incident at end of halftime show
Social Trend
Howard Stern Show Taken
Off Clear Channel Stations
Whoops!
Source: CNN.com
Tuesday, February 3, 2004 Posted: 7:58 AM
Source: Clear Channel
Communications, Inc. Press Release
Wednesday February 25, 2004
©2006 Prentice Hall
2-21
Trend 5: Globalization
• Recall from Chapter 1:
– Globalization
• Today, over 97% of all U.S. exporters are small
businesses with fewer than 500 employees.
• Export markets are vital to the U.S. economy and
provide outlets for the sale of U.S. produced products
and services
©2006 Prentice Hall
2-22
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