Introduction/definition of concepts
Opportunityrefers to the extent to which possibilities for new ventures exist and theextent to which entrepreneurs have the leeway to influence their odds for successthrough their own actions. Simply put,opportunity is a perceived means of generatingincomes that previously have notbeen exploited and are not currently being exploitedby others. Opportunityidentification can, in turn, be defined as the cognitive process orprocessesthrough which individuals conclude that they have identified an opportunity.Itis important to note that opportunity identification is only the initial stepin a continuingprocess, and is distinct both from detailed evaluation of the feasibility and potentialeconomic value of identified opportunities and from active steps to develop themthrough new ventures. It is essentially asituation in which new goods, raw materials,markets and organizationalstrategies can be introduced through the formation of newmeans, ends ormeans-ends relationships.
Thefocus these days is on innovative opportunities which are the ones that trulybreaknew grounds rather than merely expand or repeat existing business models.Opening anew Hausa or Igbo cafeteria in a neighbourhood dominated by a populacefrom theseextractions thatcurrently do not have one is an example. Not everyone can identifyopportunities. Someindividuals are more likely to identify and exploit opportunities thanareothers. Opportunity is a major process of self-evaluation of one’sability to start,operate and run a business venture withthe popular analysis often referred to as SWOT(Strength, Weaknesses, Opportunity and Threat). It helps to check the chances ofsucceeding in a particular choice of venture open to an individual through his experiences. Theseexperiences include family,religious or professional linkages,membership of any network group.
Searchingfor a business opportunity that is right for them is the major challengewould-be entrepreneurs face. New startups always focus on introducing a new product orservice based on an unmet need, select anexisting product or service from one marketand offer it in another where theyare not available; and sometimes the firm relies on atried and tested formulathat has worked elsewhere in a franchise setup.
Business OpportunityIdentification Process
It is pertinent to know how entrepreneurs identify and decide a new businessopportunity with the best chance tosucceed. The most important part of all businessattempts common to mostsuccessful start-ups is answering an unmet need in the market. Customers arealways interested in products that add value. They buyproducts needed only tosatisfy some problems. In actual fact, there is no substitutefor indulging theunmet needs of customers.Most entrepreneurs searching for new business ideasfundamentally consider threecentral issues. The main one is the potentialeconomic value. He first considers if theventure has the capacity to generateprofit. The second is the newness of such aventure. He/She will preferproducts, services or technology that does not previouslyexist in thatenvironment. The third is the perceived desirability whether their producthasthe moral or legal acceptability in that environment. He then considers if:
• his final business decision ideacorrects a deficiency in the market.
• the resources and capability to carryout this business idea are availableto him/her.
• the market for it are readilyavailable and at profit sales.
• the new business idea can compete favourably with existing relatedcompetitors and their market.
• this business market is growing ornot and how one should prepare to jointhat business.
.
ii. The Stages of Opportunity Identificationprocess
Opportunity identification is the collection of three main factors, which are theentrepreneur’s background, the business influence and the general business environment. Opportunity identification has five stages that lead to ‘recognition’. The five stages are discussed in relationship with the process of opportunity identification. These stages are:
- Preparation
- Incubation
- Insight
- Evaluation
- Elaboration
Preparation
Preparation stage is that knowledge and experience exercised just before theopportunity discovery process. These knowledge andexperience are not oftendeliberatelyacquired. However, preparation itself is usually a deliberate attempt towidencapability in an area and become sensitive to concerns in a field ofinterest.In an organized situation, the background of the business, theproducts or servicesor the technological knowledge must have majorly informedthe main ideas of the successful venture. One cannot however, rule out the role of new ideas andexpertise originatingfrom individuals in the organization that will eventually result ina newbusiness.
Incubation
Incubationstage is the part of the opportunity identification process thatinvolvesthe consideration of a concept or a specific problem ordinarily not subjected toconscious or formal analysis by a businessman or his team. It is usuallynotconsciously done and therefore more often than not, an instinctive andunempiricalapproach for the consideration of several potential alternatives.
Insight
Insight stage occurs at the moment a fundamental solution suddenly becomesrecognized unexpectedly. It is aparticular moment that keeps occurring persistentlyright through the process ofopportunity identification. Insights have been found tobe extensive channels tothe discovery of startup businesses and sometimes revealadditional knowledge for the development of a current process of discovery. Inrespect of a business venture, insight predictably encompasses the abruptrecognition of anopportunity in business, the answer to an adequately ponderedcrisis and thepossession of a concept from social networks and associates.
Evaluation
Evaluationstage is about investigating if the recognized and developed ideas arefeasible,if the businessman has the required abilities to realize the ideas and iftheidea is sufficiently innovative for prospects. It sometime involves full feasibilityanalysisof the ideas through all forms of research instruments and criticismsfromrelevant business acquaintances. It is fundamental to also investigate theprospectand viability of the new insight ideas as the spirit of entrepreneurship is to makesatisfactory andsensible profits.
Elaboration
Elaboration is that stage that exposes the opportunity/ideas to external analysiswith the tedious and time–consuming options selection, choice decision andorganization of resources. It is customarily in search of alllegalities that could buildconfidence and guarantee the practicability of the business. Elaborationalsoreduces uncertainties by providing the detailed planning activities after theevaluation viability confirmation. This will eventually reveal theconcept areas thatstill need further analysis and attention
Types of Opportunity
Themain purpose of any type of opportunity is to strategize to achieveappropriatesearch. In other words, appropriate searching strategies are afunction of the type ofopportunity. Business search opportunities could beclassified into three types, theseare the:
- recognized type
- discovered type
- created/enacted type
Eachof these types of opportunity is associated with a certain level ofuncertainty.These are low uncertainty for recognition opportunity, moderate uncertainty fordiscovery opportunity and ultimate uncertainty for created/enactedopportunity.
Recognition Type:
For opportunities that are recognized, deductive reasoning is used to either actively or passively filter for venture worthy ideas.Entrepreneurial alertness attitude enables recognition because the entrepreneurwill be very sensitive and alert to information available in his/her environment.Personal insights and intuition are equally important for identifying opportunitiesas a purposeful search. Recognition type consists of accidental recognition of anopportunity for a business solution to a challenge and realization of idea or ideasfrom others like colleagues and associates.Accidental recognition occurs in the passive search style and is more likely whenthe entrepreneur possesses a very sensitive entrepreneurial alertness. It couldalso be noticed that businesses established through accidental recognition breakeven earlier than any other formal one. Recognition type is characterized by
severalother factors such as the background of the entrepreneur, the influenceof thebusiness and its general environment. This type of opportunity has to dowiththe exploitation of the existing markets where both sources of supply anddemandthat exist are recognized and brought together. Opportunity recognitionoccursunder condition of near certainty. This low uncertainty or nearcertaintyopportunity in recognition type is referred to as analysis inducing.
Discovered Type:
In this type of opportunity,when only the demand exists, but supply does not, and vice versa, then the non-existent side has to be discovered. This type of opportunity has to do with the exploration of existing and latent markets. For the discovered type opportunities to occur, a purposeful search is necessary. The entrepreneurs of the discovery type narrowed theirsearch to areas where they had specific prior knowledge and they basically donot rely on alertness. An example is demand exists for ‘Published texts inentrepreneur education in Nigeria’ while the supply has to be discovered.Another example is the existence of supply for ‘application of computers inNigerian rural schools,’ demand has to be discovered. As earlier mentioned, withopportunity discovery the uncertainty level is moderate. With this moderateuncertainty task, the discovery opportunity is known as quasi-rationality inducing.
Creation/Enactment Type: This type of opportunity is based on theprinciple of enactment where the entrepreneur creates new means and newends by using effectual reasoning. Thisreasoning includes three types of means. The entrepreneur themselves, priorknowledge and experience, whom they know especially in the social, religiousandprofessional sector. In thistypeofopportunity, the supply and demand will not apparently exist; one or bothof them have to be created. This demands that severaleconomic inventionslikemarketing, financing and others have to be created for the opportunity toexist.
This opportunity exploits principally the creation of new markets. Theentrepreneurs imagine,rather than recognize or actively search for opportunities that represent theexecution of a selection of possible futures. Creation orenactment opportunity is associated with true or ultimateuncertainty. This highuncertainty task in opportunity creation can berecognized as intuition-inducing.Factors that Influence Business OpportunityIdentificationThere are five factors that influence identification ofopportunities. These are:
a.Entrepreneurial Alertness
b.Prior Knowledge
c.Discovery versus Purposeful Search
d.Networking versus Solo Entrepreneur
e.Creativity
f.Entrepreneurial Alertness Factor
Thisis a predisposition to observe and be responsive to information aboutobjects,incidents, and patterns of behaviour in the environment, with special sensitivity tomaker and user problems, unmet needs andinterests, and novel combinations ofresources. This is usually preceded by a position of enthusiastic awareness ofinformation.Entrepreneurs constantly search about for opportunities that havebeenoverlooked before then but unfortunately not all that have entrepreneurialalertness become successful entrepreneurs. Opportunity identification is onlyan indispensablestage of a process in initiating a new successful business.
Thereare two types of alertness. These are the potentially worthwhile goals thathaveremained unnoticed and the unnoticed but potentially valuable resources.Thealert entrepreneur is said to be alert to the receipt of information ratherthan alreadybeing inpossession ofit. Entrepreneurial alertness is of major importance inopportunity identification. Alertness for a venture is built upon the three ideas ofpersonality traits, social networks and prior knowledge.
People’s self-perception of creativity, high intelligence and a supportive familyenvironment that encourages creative thinking contributes highly to execution ofentrepreneurial plans. The optimism acquired from these builds up aself confidenceattitude and eventually success in recognizing entrepreneurialopportunities when itcomes. It is the belief by many people that they are verygood experts in decisionmaking, thereby detect opportunities and take risks.
Prior Knowledge Factor
People tend to discover opportunities from the information that is related to theinformation they already know. Prior knowledge and experience are the primarysource of searching for opportunities.Entrepreneurs narrowed their search to areaswhere they had specific priorknowledge. Prior knowledge triggers identification ofthe value of newinformation. There are two main areas of prior knowledge relevant to theidentification process. The first one is the knowledge that is of specialfascinating interest to the entrepreneur. The second area is the knowledgeaccumulated overthe years and eventually got familiar with customer problems andissuesinvolved. The fascinating interest compels the entrepreneur to intensify hisorher competences that eventually result in an insightful knowledge of the subjectmatter.
Discovery versusPurposeful Search Factor
Some entrepreneurs absolutely believe that opportunity identification has to bethrough a purposeful searchfor opportunities while others believe that opportunity issomething that had been readily available and overlooked but now discoveredaccidentally. Businessesestablished on accidentally discovered venture ideas andwhich had not beensubjected to prescribed screening achieved break-even salesfaster than thosebusinesses that had undergone purposeful searches.
Networking versus SoloEntrepreneurship Factor
Entrepreneurs’network is vital in opportunity identification. The main contribution ofnetwork toidentifying potential ventureopportunities is from information gatheredfrom social exchange of ideas. Thecommon sources for such opportunity are from friends, relatives,businessmen, lawyers, bankers,participation in professionalseminars, workshops and conferences, newspapers, books, periodicals andmanuals. It is the belief that anindividual’s strong-tie network within the family andfriends set up are fragile information sources compared with weak ties that are casual acquaintances. People with widespreadnetworks discover more pungentopportunities than those businessmen who do not have socialnetworks. There are three categories of opportunity recognition attitudes fromsocial networks.These are the solo, the network and the informal categories.
Thesolo entrepreneur category has a very creative, opportunistic and distinctivealertness attitude. Theydevelop business ideas on their own with the beliefthat new opportunities which isclaimed to be theirs alone, come naturally.Network entrepreneurs obtain their ideasfrom their social networks. With them,enduring opportunities are not related to eachother while entrepreneurialideas emanate only fromaccidentalroutes.Entrepreneurs with informal attitudes get their ideas whenrelaxed.
Creativity Factor
Thereis a link between creativity and entrepreneurship and are sometimes refer tobesame. The nature of creativity is about innovation leading to the creation ofnewventures while entrepreneurship itself is a form of creativity or can evenbe referredto as business creativity and in most cases new businesses arecreatively originaland functional. Most successful entrepreneurs identifyopportunities that others donot see due to the special creativity attributethey possess. These creative attributeshas a lot to do in business decision making and therefore very significant inopportunity- identification process. To entrepreneurs, the moreinnovative the ideathe better the idea This makes creativity a fundamental component in theentrepreneurial process. Hence creative entrepreneurship is described as theaccomplishment of original useful ideas to start a new business to product and
servicedelivery level.
Opportunities from SWOTAnalysis
Someopportunities are sometimes identified while the entrepreneur is having his orherself assessment in terms of strength, weakness, opportunities and threatsuniversallyreferred to as SWOT. SWOT Analysis is a useful self-appraisal system for yourstrengths and weaknesses that helps establish your business ordevelop your businessby exploiting your abilities, talents and opportunities. Itis frequently used to understand,underline and identify the opportunities opento you and the threats you are likely toencounter. SWOT Analysis could also be that initialself appraisal of the ability of thebusiness opportunity to start and survive.
SWOTanalysis was originated in the 1960s by Albert S Humphrey and hasremaineduseful till date as a simple start for strategy articulation or as avital strategy instrument.SWOT also allows achievable goals or objectives to beset for the business while futureprocedure for the accomplishment of theplanning and development of the objectivescould easily be derived from itsSWOT. With your understanding of the weaknesses ofyour business, unexpectedthreats can be eradicated or controlled well ahead, therebycompetefavorably in the market environment. In essence, there is Business SWOTAnalysis(BSA), and there is Personal SWOT Analysis (PSA). It all depends on whatyouwant to evaluate but both are good sources of opportunity identification andwithlittle efforts, it can facilitate identification of exploitable opportunities. To use SWOTAnalysis, one should understandthat Strengths and weaknesses are internal to yourorganization whileopportunities and threats generally relate to external factors. HenceSWOTanalysis is often described as internal/external analysis.
Strengths:
Your strengths should be perceived from both an internal position, and from thejudgment of the customersand others in the market. You should also be realistic and alist of your company’s characteristics of thebusiness or project team that give it anadvantage over others should help. In the study of your strengths, consider themwithyour competitors in mind. The situation where your competitors manufacture goodproducts, but of less quality packaging to yours; your own strength will be qualitypackaging. However, quality product remains a necessityand therefore a weaknessand a threat to your own product. Such strengths couldbe economical, availability ofadequate funding, abundant raw materials, etc.
Weaknesses:
Yourweaknesses are your limitations that characteristically place you or the teamat adisadvantage when compared with others. You are aware of your ownweaknesses thanany other. It is a time to be truthful to yourself by asking yourself some unpleasantquestions and answers about yourweaknesses. Like your strength, this should also beconsidered from an internal and external pedestal. Such weaknesses in Business SWOT Analysis(BSA) are poor funding, unconducivelocation, inadequateinfrastructure, outdated and poor equipment, poor staffing, while poor comportment,restlessness, drunkenness, low education, irresponsible attitudes, unwarrantedsocializing, reckless financial management, lack of skill and general ineptitude aremostly the weaknesses in Personal SWOT Analysis (PSA). Constant survey ofthemarket and your competitors’ progress should be done to inform you of yourweakness.
Opportunities
Opportunitiesare external chances for accomplishing the goals andobjectives of the venture. Theseobjectives may be to improve productions and achievebetter profits in themarket or to start up a new business from emergence to survival. Inconsideringopportunities, it is best to search your strengths for possible businessordevelopment opportunities. Another tactic is to search your weaknesses for possiblereduction of your weaknesses to identify and explore opportunities from them. Suchopportunities may open up from associations, connections and affiliations in onesreligious, political group, familyespecially inheritance and an acquired experience bythe entrepreneur.
Threats:
Thisrefers to external factors usually outside the control of person or persons inthemarket environment that could impede the business or the entrepreneur fromachievingthe expected goals and objectives. These external factors include unpleasantenvironment, new government regulations, technologicalupgrades in the industry, Government support for local production of cassava –a major drug component andthe ban on imported drugs, Chief Omotosho is deciding to establish a newpharmaceutical venture of international standard in Aawe, Nigeria, tocommemoratehis 60th birthday. He is thinking of handing over the business tohis children in threeyears time and would need a SWOT analysis for the newventure. This has beenprepared for him.
