MODULE2 - Recognizing the

Potential Market
 This module…
• Will discuss the proper and efficient ways of
starting a business
• Will introduce you to the entrepreneurial
process, which starts with identifying and
evaluating the opportunity.
• Will deal you with analyzing the need of the
market, thinking of the potential set of
products or services that will meet the need,
assess the feasibility of the solution, and select
the best product or service that will address
the need.
 The Entrepreneurial Process
1. Opportunity Spotting and Assessment
 It is the beginning of the process and is considered the
most difficult.
 Entrepreneurs take note of interesting trends in their
environment.
 They carefully assess the opportunity through estimation
of opportunity length, capitalization required, threats,
profitability, and calculation of real and perceived value.
 The opportunity is aligned with their personal goals and
attributes.
 They should also think in advance how they will position
the product or service in the market and showcase its
unique selling proposition
 …the entrepreneurial process

2. Developing a Business Plan

 A business plan is a comprehensive paper and details
the marketing, operational, human resource,
financial, strategic direction, and tactics of the
business.
 This will be the core guide and direction of the
entrepreneur in calculating the resources needed,
assessing how to obtain these resources efficiently,
and running the business sustainably.
 …the entrepreneurial process
3. Determining the Capital Needed
 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.
 …the entrepreneurial process
4. Running the Business
 The entrepreneur should use the resources
allocated for the new venture.
 The business plan should already have
implemented.
 Operations, marketing and sales, human resources,
finance, and strategy implementation should be
critically observed.
 The entrepreneur should have control and
monitoring system to serve as a check and balance
of the formulated plan.
 Opportunity Developing a Determining the Running the
Spotting and Business Plan Capital Needed Business
Assessment

• Evaluated the • Come up with a • Calculate the • Practice

opportunity business intrinsic ad leadership as a
description and extrinsic capital way of life.
analysis needed.

• Conceptualize • Perform industry • Calculate the Recognize critical

and measure the analysis existing capital success factors
opportunity

• Identify the • Come up with the • Calculate the • Identify existing

perceived value marketing plan difference and foreseeable
of the between the problems and
opportunity to needed capital issues
the company and and existing
customers capital. Choose
the most cost-
efficient suppliers
or service
providers
 Opportunity Developing a Determining the Running the
Spotting and Business Plan Capital Needed Business
Assessment
• Do cost-benefit • Prepare the • Develop contact • employ, risk-
analysis of the operations plan and relationship mitigating
opportunity including the with suppliers controls and
including risk organizational and service monitoring
analysis plan providers systems
• Match the • Come up with • Device an
opportunity with the financial plan expansion/sustai
the nability strategy
entrepreneur’s
skills and
objectives
• Scan the • Identify
strengths and strategies and
weaknesses of tactics
competitors
• Perform
monitoring and
control
 SCANNING THE MARKETING
ENVIRONMENT
(Seeking, Screening, and Seizing)
 …scanning the marketing
environment
It is the starting point of any new venture
that involves understanding and knowing
the intricacies of the microenvironment,
microenvironment, and internal
environment.
The process of seeking, screening, and
seizing is adapted to create the most suited
product or service for an opportunity.
GENERAL RULE:
To find the opportunity first before coming up with a new
product or service, not the other way around.
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.
S1: Seeking the Opportunity

 OPPORTUNITY SEEKING is the first step and is the

most difficult process 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:
MACROENVIRONMENTAL SOURCES and
MIRCROMARKET.
1. Macroenvironmental Sources
a. STEEPLED. This represents the general environment
where the entrepreneur can identify business
opportunities from and where the future business is
about to operate.
S – sociocultural
T – technological
E – economic
E – environmental
P – Political
L – legal
E – ethical
D – demographic factors
 …macroenvironmental sources
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 possible affect the
new business while it is running.
 2. Micromarket
a. Consumer preferences, interests, and perception
These are the current needs and wants of
potential customers that should be discovered right
away by a budding entrepreneur.

Need – is recognized when a customer believes that

there is difference between his or her current
situation versus his or her desired condition.
Want – is recognized when a customer believes that
there is a specific product or service that can
perfectly suit the need.
 …micromarket
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. What

entrepreneurs usually do is be on top of the situation and
change the market’s perception of product or service or build a
new market.

d. Talents, hobbies, skills, and expertise. Business opportunities

do not just come from outside forces, but also from within the
entrepreneur.
 …micromarket
c. Irritants in the marketplace such as deterrents,
problems, complaints, and delays. When customers
are already sick and tired of the same old issue or
problem, that is when the opportunistic
entrepreneur should come in and make a difference.

d. Location. 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)
 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.
…methods of generating ideas
2. Brainstorming
 Is an activity that allows the
participants to share creative
ideas using the following
rules:
a. No destructive criticism or
judgment allowed
b. Wilder ideas are accepted
c. More ideas are preferred
d. Improvement of other’s
ideas is allowed.
 …methods of generating ideas
3. Brainwriting or Internet
brainstorming
 Exactly the same as
brainstorming except that the
channel used is face-to-face, but
in writing or online.
 The results usually take longer,
as the answers depend on the
availability of the participants in
answering the questionnaires
online.
…methods of generating ideas
4. Problem Inventory
Analysis
 It 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 problem(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.
 …STEEPLED analysis
1. Socio-cultural Factors. These factors represent a general view of
a locality’s traditions, customs, beliefs, norms, perceptions.
 Health consciousness
 Education level
 Attitudes toward imported goods and services
 Attitudes toward product quality and customer service
 Attitudes toward saving and investing
 Emphasis on safety
 Buying habits
 Religion and beliefs
 …STEEPLED analysis
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.
 Basic infrastructure level
 Rate of technological change
 Spending on research and development
 Technology incentives
 Legislation regarding technology
 Communication infrastructure
 Access to newest technology
 Internet infrastructure and penetration
 …STEEPLED analysis
3. Economic Factors.These factors include income,
expenses, and resources that can influence the
cost of doing business and generating income.
 Growth rates disposable income
 Inflation rates  Monetary policies
 Interest rates  Fiscal policies
 Exchange rates  Price fluctuations
 Unemployment trends  Stock market trends
 Labor costs
 Stages of business
cycle
 Trade flows and
patterns
 Level of consumers’
 …STEEPLED analysis
4. Environmental or Ecological Factors.The scan of
these factors will help the entrepreneur determine
if the business he/she is entering into will comply
with the environmental standards or will just be a
hazard to people, animals, and nature.
 Weather
 Climate change
 Laws regulating environment pollution
 Air and water pollution
 Recycling
 Waste management
 Attitudes toward “green” or ecological products
 Endangered species
 Attitudes toward and support for renewable energy
 …STEEPLED analysis
5. Political Factors. These factors are mostly likely
induced by the government policies and
administrations, which can have a strong effect
in the entrepreneur’s business.
 Government stability and likely changes
 Bureaucracy
 Corruption level
 Tax policy (rates and incentives)
 Freedom of press
 Rule of law
 Government effectiveness
 Political rights
 …STEEPLED analysis
4. Legal Factors. Related with political factors, legal factors
are government laws and regulations that can restrict or
allow business activities.
 Anti-trust law
 Discrimination law
 Copyright, patents/intellectual property rights
 Consumer protection
 Employment law
 Health and safety law
 Data protection law
 …STEEPLED analysis
4. Ethical Factors. These are the factors that will
serve as an entrepreneur’s guide on how to be
ethical in running the business.
 Ethical advertising and sales practice
 Accepted accounting, management, and marketing
standards
 Attitude toward counterfeiting and breaking patents
 Attitude toward development and well-being of
employees
 …STEEPLED analysis
4. Demographic Factors.These are
characteristics of the people in the target
market.
 Population growth rate
 Age distribution and life expectancy rate
 Gender distribution
 Social classes
 Family size and structure
 Minorities
S2 – Screening the Opportunity
OPPORTUNITY SCREENING is the process
of cautiously selecting the best opportunity. The
selection will depend on the entrepreneur’s:
a. Internal intent – i.e., the main objective that
the business will accomplish in the
entrepreneur’s life
b. External intent – which will address the
compelling needs of the market.
…opportunity screening
The entrepreneur should apply due diligence and
independent judgment in selecting the opportunities that
have a potential and eliminate those that are not within the
scope of the entrepreneur’s risk appetite. 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.
…opportunity screening
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 (AOT)
 Aims to assist entrepreneurs in ensuring that the opportunity that
they will venture into is an attractive and feasible project.
(Youngleson, 2009)
 This is not the be “be all” in the road to entrepreneurial success
but a framework to measure how compelling an opportunity is.
 The answers in this test will be the guiding principle of the
entrepreneur in writing the business plan.
 At the end of this test, the entrepreneur should be able to at least
decipher the relative attractiveness of the business opportunity.
…AOT
With the four business opportunity elements and this AOT,
the entrepreneur can’t go wrong in his or her new venture.
The key is effective diligence.
1. The “concept” and the “strategy.”
 The entrepreneur should think of the reason for the business
existence by crafting a vision statement (what the business
should do in the future).
 The entrepreneur should also devise a value creation
proposition, i.e., the value that the product/service will offer
to the target customer or the satisfaction of the needs or
wants of the target customers.
…the “concept” and the “strategy.”
 The entrepreneur should also understand the
importance of the timing of the business. He/She should
ask:
“Is it really necessary to establish the
business now?”
 Last, the entrepreneur needs to devise a differentiator
or a positioning strategy – what difference will the new
business inculcate to the target customers as compared
with the rest? Is this compelling enough to influence the
behavior of potential customers?
…AOT
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.
 The entrepreneur can extend the scoring
system depending on the complexity of
the industry and the venture itself.
S3 – Seizing the Opportunity
OPPORTUNITY SEIZING is the last step in
opportunity spotting and assessment. This the
“pushing through” with the chosen
opportunity.

Innovation is the process of positively

improving an existing product/service. It is a key
driver for economic growth.
 Three 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.
Example: Internet,
computer, or the airplane
…three types of innovations

2. Technological
Innovation
These innovations
occur more frequently than
breakthrough innovations.
These are technological
advancements of an
existing product or service.
Examples: WiFi, laptop,
and jet airplane.
 …three types of innovations

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.
Examples: unlimited
Internet plans, wireless
mouse, airbus for
economical travelers
Product or Service Planning and
Development 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.
 Key Stages of Product or Service
Planning and Development Process
1. Idea Stage
 In this stage, the entrepreneur determines what
are the feasible products and/or services that
will perfectly suit the opportunity
 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 consumer
metrics
 Products and services that are unappealing to
the market should be eliminated at this stage.
 …key stages of product or service
planning and development process
2. Concept Stage
 Once the acceptable product or service has
already been identified, it will go through the
concept stage.
 The developed idea will undergo a consumer
acceptance test. This test includes getting the
initial reactions of the primary target market
and the distribution channel.
 Conversational interviews are conducted to
understand consumer preference on physical
characteristics of a service.
 …key stages of product or service
planning and development process
2. 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.
 The participant’s task is to critique the actual product
or service and record the good qualities and inferior
attributes.
 Consumer preference will largely be based on methods
such as multiple brand comparisons, risk analysis, level
of repeat purchases, or intensity of preference analysis
(Hisrich, 2010)
 …key stages of product or service
planning and development process
2. 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.
 Actual sales results will be the foundation of
the consumers’ acceptance level and will be
the basis in commercializing the product or
service.