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.