Recognizing The Potential Market.docx

Recognizing the Potential Market The Entrepreneurial Process The entrepreneurial process is a step-by-step procedure in establishing any kind of business that an entrepreneur has to undergo. It is composed of four aspects. 1. Opportunity spotting and assessment  This is the beginning of the process and is considered the most difficult. Entrepreneurs at this point take note of interesting trends in their environment. Consumers are reliable sources of opportunity information because market needs originate from them.  The entrepreneur’s toughest job is to carefully assess the opportunity through estimation of opportunity length, capitalization required, threats, profitability, and calculation of real and perceived value.  Entrepreneurs should also assess if the opportunity is aligned with their personal goals and attributes.  Entrepreneurs should already think in advance how they will position the product or service in the market and showcase its unique selling proposition. 2. Developing a business plan  Entrepreneurs should formulate a business plan when they have already spotted and assessed the opportunities for a market.  A business plan is a comprehensive paper that details the marketing, operational, human resource, financial, strategic direction, and tactics of the business. The business plan will be the core guide and direction of the entrepreneur in calculating the resources needed, assessing how to obtain these resources effectively, and running the business sustainably. 3. Determining the capital needed  A big idea can never be translated into reality if the entrepreneur’s resources are limited.  It is mandatory in the entrepreneurial process to calculate the resources needed to establish the business and compare this against the entrepreneur’s current resources.  Caution must be applied in computing the complete set of resources needed and include only those items that are considered as the real needs in venture creation.  Allowance must be considered as well because there will be times that resources will be inadequate or unsuitable. 4. Running the business  This is the part where the entrepreneur use the resources allocated for the new venture.  All aspects of the business plan should be critically observed from operations, marketing and sales, human resources, finance, and strategy implementation.  The entrepreneur should have a control and monitoring system to serve as a check and balance of the formulated plans. Scanning the Marketing Environment • The starting point of any new venture that involves understanding and knowing the intricacies of the macroenvironment, microenvironment, and internal environment. • An entrepreneur can recognize various opportunities and at the same time understand thoroughly the arena where the future business will operate. • The general rule is to find the opportunity first before coming up with a new product or service, not the other way around. This is one of the mistakes that budding entrepreneurs commit in starting a new venture. Seeking, Screening, and Seizing • The 3S of opportunity spotting and assessment is the framework that most of the promising entrepreneurs use to finally come up with the ultimate product or service suited for a specific opportunity. • An opportunity is an entrepreneur’s business idea that can potentially become a commercial product or service in the future. • The entrepreneur serves as the catalyst of creating a value for the customers through the new or innovated product or service. And, earns profits when the customers are satisfied and delighted. S1: Seeking the Opportunity • Opportunity seeking is the first step and is the most difficult process of all due to the number of options that the entrepreneur will have to choose from. • It involves the development of new ideas from various sources as follows: 1. Macroenvironmental Sources a. STEEPLED. This is a mnemonic for sociocultural, technological, economic, environmental, political, legal, ethical, and demographic factors. This represents the general environment where the entrepreneur can identify business opportunities from and where the future business is about to operate. b. Industry. This is the source of current trend on what is happening in the industry where the future business will belong to. c. New discovery or knowledge. These are new trends that can be the core business model of a new venture.

d. Futuristic opportunities. These are projected new opportunities that can possibly affect the new business while it is running. 2. Micromarket a. Consumer preferences, interests, and perception. These are the currents needs and wants of potential customers that should be discovered right away by a budding entrepreneur. A need is recognized when a customer believes that there is a difference between his or her current situation versus his or her desired condition. A want, on the other hand, is recognized when a customer believes that there is a specific product or service that can perfectly suit the need. b. Competitors. Recognizing and understanding potential competitors will aid the entrepreneur to develop a product or service that is unique and will surely stand out from the competition. c. Unexpected opportunities from customers. Oftentimes, the most brilliant venture come from the most unexpected opportunities. It may happen in unlikely situations, unlikely places, and with unlikely people. Existing problems and bottlenecks often give rise to an unexpected opportunity. d. Talents, hobbies, skills, and expertise. Business opportunities do not just come from outside forces, but also from within the entrepreneur. The entrepreneur’s talents, hobbies, skills, or expertise can be a source of business opportunity. e. Irritants in the marketplace such as deterrents, problems, complaints, and delays. Generally, entrepreneurs see opportunities in situations where there is a recurring problem or sometimes when there is no more hope in solving the problem. f. Location. Often, entrepreneurs just have to look at their ecosystem and they will be able to spot a business opportunity right away. Methods of Generating Ideas 1. Focused group discussion (FGD)  In this method, a moderator handles a very open, free-flowing, and in-depth discussion with a group of people who can provide insightful ideas about a new product or service that will fill a market need. 2. Brainstorming  Similar to the FGD, brainstorming is an activity that allows the participants to share creative ideas using the following rules: a. no destructive criticism or judgment is allowed b. wilder ideas are accepted c. more ideas are preferred d. improvement of other’s ideas is allowed  Brainstorming is a fun discussion with lenient rules. 3. Brainwriting or Internet brainstorming  This is exactly the same as brainstorming except that the channel used is not face-to-face, but in writing or online. The results of brainwriting or Internet brainstorming usually take longer, as the answers depend on the availability of the participants in answering the questionnaires online. 4. Problem inventory analysis  This method is similar to the FGD except that the participants are already given an inventory of product or service problems. The participants will just identify from the list given the compelling problems(s) of a potential product or service instead of generating the ideas from them. Macroenvironmental Sources: Examples of Findings STEEPLED Analysis • The result of the STEEPLED scan will aid the entrepreneur in deciding what product or service to set up and whether this new venture will succeed or not. • Not all factors can have an effect on the new venture. • The important thing is for the entrepreneur to fully scan these factors so he or she can decide if there is compelling business opportunity or an impending threat. 1. Socio-cultural factors. These factors represent a general view of a locality’s traditions, customs, beliefs, norms, and perceptions. These factors affect how a person of the locality behaves and reacts to marketing and selling activities. 2. Technological factors. These are composed of innovations of an existing technology or an invention of a new one mostly on applied science and engineering research areas. 3. Economic factors. These factors play a vital role in the scanning of marketing environment because economic factors directly affect any business venture. 4. Environmental or ecological factors. These factors should be given much importance in conducting a business especially when the world has already suffered severely from human-induced calamities. 5. Political factors. These factors are mostly induced by government policies and administrations, which can have strong effect in the entrepreneur’s business.

6. Legal factors. Related with political factors, legal factors are government laws and regulations that can restrict or allow business activities. 7. Ethical factors. These are the factors that will serve as an entrepreneur’s guide on how to be ethical in running the business. 8. Demographic factors. These are the characteristics of the people in the target market. S2: Screening the Opportunity • Opportunity screening is the process of cautiously selecting the best opportunity. The selection will depend on the entrepreneur’s internal intent, i.e, the main objective that the business will accomplish in the entrepreneur’s life, and the external intent, which will address the compelling needs of the target market. • Risk appetite refers to the entrepreneur’s tolerance of business risks. • Time must be considered by the entrepreneur in screening the opportunities at hand, as it is considered one of the most critical resources of an entrepreneur. • Time should only be devoted to worthwhile opportunities. • Entrepreneurs must always be sharp-eyed for real opportunities. • The entrepreneur should say no to an opportunity if it does not contain any of these business opportunity elements: 1. Has superior value to customers. 2. Solves a compelling problem, issue, a need, or a want. 3. Is a potential cash cow. 4. Matches with the entrepreneur’s skills, resources, and risk appetite. The Opportunity Attractiveness Test • The OAT aims to assist entrepreneurs in ensuring that the opportunity that they will venture into is an attractive and feasible prospect. • A framework to measure how compelling an opportunity is. • This test is designed to detail each entrepreneurial aspect into small chunks to come up with a sound entrepreneurial decision. • The answers in this test will be the guiding principles of the entrepreneur in writing the business plan. • The components of the OAT will be used to channel the entrepreneur’s direction in data gathering. 1. The “concept” and the “strategy”. The entrepreneur should think of the reason for the business’ existence. He or she can do this through crafting a brief vision statement. A vision statement is simply defined as what the business should do in the future. The entrepreneur should also devise a value creation proposition, i.e., the value that the product or service will offer to the target customers or the satisfaction of the needs or wants of the target customers. 2. Opportunity metrics. These are considered as the opportunity’s critical success factors. These factors will approximately determine the attractiveness of the new venture depending on the total scores that it will generate and the risk appetite of the entrepreneur. S3: Seizing the Opportunity • Opportunity seizing is the last step in opportunity spotting and assessment. This is the “pushing through” with the chosen opportunity. • Innovation is the process of positively improving an existing product or service. It is a key driver for economic growth. Innovation is inevitable as the world constantly changes. 3 Types of Innovations (according to the Degree of Distinctiveness) 1. Breakthrough innovation. These innovations, which may also include inventions, occur infrequently as these establish the platform on which future innovations in an area are developed. 2. Technological innovation. These innovations occur more frequently than breakthrough innovations. These innovations are technological advancements of an existing product or service. 3. Ordinary innovation. These innovations occur ordinarily as the name implies. They are commonly originating from market analysis and technology pull instead of a technology push. • Entrepreneurs often encounter a problem in defining a “new” product or service, or identifying its components or features. • The “newness” is also independent on the eyes of the market and the company. Product or Service Planning and Development Process • In the seeking process, one opportunity stood out from a number of sources. This opportunity was tested according to its attractiveness and feasibility in the screening process. The last process, called the seizing process, involves refining and developing this opportunity. The refining process is called product or service planning and development process. It has five stages. 1. Idea Stage. In this stage, the entrepreneur determines what are the feasible products and/or services that will perfectly suit the opportunity. Usually, a market evaluation is conducted by the entrepreneur to assess whether the new product or service ideas will be accepted by the market using values and benefits to consumers as metrics.

2. Concept stage. Once the acceptable product or service has already been identified. In the concept stage, the developed idea will undergo a consumer acceptance test. 3. Product development stage. In this stage, the entrepreneur leverages on the information generated from the prospective customers via the concept stage. Actual reactions from prospective customers are determined. 4. Test marketing stage. This stage validates the work done from the first three stages to measure success in the commercialization of the product or service