Identification and Analyzing

Opportunities
Chapter 5
Identification and Analyzing Opportunities
• Concept: opportunity Recognition and Opportunity Assessment plan
• Information Sources
• Sources of Information for startup entrepreneurs in Nepal
• Nature and significance of International Entrepreneurship
– Domestic versus International Entrepreneurship
– Technological Environment
– Culture
– Available Distribution System Motivation to Global
– Strategic effects of global
– Foreign Market Selection
– Entrepreneurial Entry Strategies
• Entrepreneurial Partnering
• Barriers to International Trade
• Implications for global Entrepreneurship
• One of the difference between a successful
entrepreneur and other people is their ability to
recognize an opportunity and act on it.
• Where many people see as problems in the world,
 entrepreneur sees opportunity to become
successful at solving them
• They see new angles, new possibilities, and new
ways to do things
• Opportunity recognizers truly think outside the box,
stretch the limits.
Opportunity Recognition
• Successful entrepreneurs are opportunity
recognizer that can see ahead of everyone else and
act on those opportunity first.
• Opportunity recognizer tend to think outside the
box and stretch the limit of their imagination to
come up with a new or improve ways of doing thing
that allow them to turn their idea into reality.
• They can look at the same situation as everyone
else, but see the bigger picture, and
envision/imagine something else.
• While opportunity recognition is crucial in the
beginning, it is when forming a company that when
they must be able to constantly recognize
opportunity in order to grow, compete, and evolve
with the changing trend of the market.
• This step is essential and will always be part of any
entrepreneur, whether they just starting out or an
experienced entrepreneur.
 Opportunity Assessment Plan

• Once an opportunity has been identified, it should be

evaluated through an opportunity assessment plan.
• Opportunity Assessment plan is one of the best methods used
to ascertain the marketability of an innovation.
• It is done instead of a lengthier more time consuming business
plan to see if the idea/opportunity is worth pursuing.
• Compared to business plan, it is
a) shorter
b) focus on the opportunity and market not the venture
c) is the basis for making the decision to either act on an
opportunity or wait until another, better opportunity comes
along
• The opportunity assessment plan addresses four
areas:
• a description of the idea, the industry and the
competition;
• the market — its size, trends and growth rate;
• an entrepreneurial self and team assessment; and
• the steps needed to translate the opportunity into a
viable venture.
Section 1: Description of idea, industry and competition

• A description of the product or service.

• The (market) need for the product or service.
• The specific aspects/features of the product or
service.
• The competitive products available filling this need
and their features.
• The companies in this product market space.
• The unique selling proposition/approach of this
product/service.
Section 2: Description of the market
• The market need filled.
• Any market research data available to describe this
market need.
• The size, trends and characteristics of the domestic
and/or international market.
• The growth rate of the market.
Section 3: Team and self-assessment

• Why does this opportunity excite you? (what do u

think is special about this opportunity)
• How does the product/service idea fit into your
background and experience?
• What business skills do you have?
• What business skills are needed?
• Do you know someone who has these skills?
Section 4: Steps to create a viable venture
• Identifying each step.
• Determining the sequence of activities and putting
these critical steps into some sequential order.
• Identifying what will be accomplished in each step.
• Determining the time and money required at each
step.
• Determining the total amount of time and money
needed.
• Identifying the source of this needed money.
 Information Sources
 General Information
Government agencies
Department of industry
Department of cottage and small industries
Office of the registrar of companies
Nepal tourism board
 Other valuable Web sites include: biruwa.net etc.
Special agencies of government

• Industrial promotion Board

• Nepal industrial development finance
• National productivity and economic
development centre
• Microenterprise, cottage, and small
industries promotion board
 Information Sources (cont.)
• Industry and Market Information
– Plunkett - Industry data, market research, trends,
statistics on markets, and forecasts.
– Frost and Sullivan - Industry specific information.
– Euromonitor – Information on consumer market sizes,
marketing parameters, companies, and brands.
– Gartner - Information on technology markets.
– Gale Directory Library - Industry statistics and
information on nonprofit organizations and associations.
 Information Sources (cont.)
• Competitive Company and Product Information
• Business Source Complete (BSC provides full-text
business journals and hundreds of scholarly, peer-
reviewed journals covering all aspects of business)
– Provides company and industry.
– Hoovers - Provides information on both large and small
companies with links to competitors in the same NAICS
(North American Industrial Classification System)
category.
 Information Sources (cont.)
• Search Engines

• There are many key terms for searching the needed

industry, market, and competitive information.
• Trade Associations
• Are also a good source for industry data about a
particular country.
• Some trade associations do market surveys of their
members’ domestic and international activities and are
strategically involved in various issues of the industry.
• Trade Publications

• There are numerous domestic and international

publications specific to a particular industry that are also
good sources of information.
• The editorial content of these journals can provide
interesting information and insights on trends, companies,
and trade shows by giving a more local perspective on the
particular market and market conditions.
• Sometimes trade journals are the best source of
information on competition and growth rates in a
particular industry.
 The Nature of International Entrepreneurship

• International entrepreneurship is the process of an

entrepreneur conducting business activities across
national boundaries.
• A new venture is set up by an individual or a group of
individuals to take advantage of an international
business opportunity from inception or soon
afterwards,
• Any existing venture crosses national borders to take
advantage of opportunities to create future goods and
services.
• The activities necessary for ascertaining/determining
and satisfying the needs and wants of target consumers
take place in more than one country.
 The Importance of International Business to the
Firm
• International business has become increasingly
important to firms of all sizes.
• Importance to Exporting Firm:
I. Insufficiency of domestic demand
II. Legal Restrictions
III. Relative Profitability
IV. Less Business Risk
V. Technological Improvements
VI. Product Obsolescence
Importance from Other Points of View

I. International Collaboration
II. Brings Various Countries Closer
III. Helps in Maintaining Good Political Relations

A successful entrepreneur must be able to:

• Fully understand the difference between
domestic and international business.
• Respond accordingly thereby successfully “going
global.”
• Domestic VS International Entrepreneurship

• Economics
• In a domestic business strategy, entire country is
almost always organized under a single economic
system and has the same currency.
• Creating a business strategy for a multi country
area means dealing with differences in: levels of
economic development; currency valuations;
government regulations; and banking, venture
capital, marketing, and distribution systems.
• These differences shows themselves in each aspect
of the entrepreneur's international business plan
and methods of doing business.
• One of the biggest problems entrepreneurs have is
raising capital. The amount of private equity capital
investments varies greatly by the area of the world
and is significantly less than that available in the
United States.
• Stage of Economic Development
• Every country has regional variances of relative
income.
• While needing to adjust the business plan according
to regional differences, an entrepreneur doing
business only in one country does not have to
worry about a significant lack of such fundamental
infrastructures as roads, electricity, communication
systems, banking facilities and systems, adequate
educational systems, a well-developed legal system,
and established business ethics and norms.
• These factors vary greatly in other countries, from
those industrialized to those in the process of
developing, and they significantly impact the ability
to successfully engage in international business.

• The balance of payments/ current account

• With the present system of flexible exchange rates,
a country's balance of payments affects the
valuation of its currency.
• The valuation of one country's currency affects
business transactions between countries.
• Political and Legal Environment

• Government Stability and Risk

• Political risk analysis - An assessment of a country’s political

policies and its stability prior to entry.
• Use political analysis to understand the likelihood of
how long a government will be in power and the
political risk associated with that stability.
• While there is some political risk in every country,
the range varies from country to country significantly,
and even in a country with a history of stability and
consistency, these conditions could change.
• There are three major types of political risks that
might be present: operating risk (risk of
interference with the operations of the venture),
transfer risk (risk in attempting to shift assets or
other funds out of the country), and—the biggest
risk of all—expropriation risk (risk where the
country takes over the venture’s property and
employees).
• Wars and Conflicts
• Conflicts may target a company’s employees as well
as creating a delay or total block in the free flow of
a company’s goods and services.
• While most entrepreneurs prefer to do business in
stable and freely governed countries, good business
opportunities often occur in different conditions.
• For example, oil companies such as ExxonMobil
have been active in countries such as Nigeria since
1955. Yet, Nigeria and other developing world oil
exporting nations are often perceived as difficult
places to conduct business.
International versus Domestic Entrepreneurship (cont.)

Cultural Environment
• Entrepreneurs must make sure that each element
in the business plan has some degree of
congruence with the local culture.
• Language
• Sometimes, one of the biggest problems is finding
a translator.
• To avoid errors, entrepreneurs should hire a
translator whose native tongue is the target
language.
• Technological Environment
• Technology, like culture, varies significantly across
countries.
• The variations and availability of technology are
often surprising, particularly to an entrepreneur
from a developed country like the United States.
• While U.S. firms produce mostly standardized,
relatively uniform products that can be sorted to
meet industry standards, this is not the case in
many countries, making it more difficult to achieve
a consistent level of quality.
• AVAILABLE DISTRIBUTION SYSTEMS
• The entrepreneur needs to be less concerned about
worldwide logistics today, due to state-of- the-art
transportation methods and the
ensuing/consequent cost reductions, as well as the
online purchasing that occurs.
• One challenge is the distribution channels in the
target country. Distribution channels vary
significantly from one country to another, and the
channel of distribution in any country is very
important and critical to the success of the global
company.
Factors affects the choice of the distribution system
 the overall sales potential,
 the amount and type of competition,
 the geographical size and density of the country,
 the product factor,-perishable and expensive
through shorter distribution channel and non
perishable goods through
 Industry factors,- relates to competition, normally in
high competition the choice is same as competitor.
 the overall marketing plan.
 Motivations to Go Global
• Profits.
• Competitive pressures.
• Unique product(s) or service(s).
• Excess production capacity.
• Declining home country sales.
• Unique market opportunity.
• Economies of scale.
• Technological advantage.
• Tax benefits.
 Strategic Effects of Going Global
• Physical and psychological closeness to the
international market affects the way business
occurs.
• Geographical closeness does not mean you are
always closer to your customers.
• Cultural variables, language, and legal factors can
make a foreign market that is geographically close
seem psychologically distant.
 Strategic Effects of Going Global (cont.)
• Issues involved in psychological distance:
– The distance envisioned by the entrepreneur may be
based more on perception than reality. Ex:
Entrepreneurs from USA may feel they are closer to
Canada, Australia losing out on vast difference that exists
between them.
– Closer psychological proximity makes it easier for an
entrepreneurial firm to enter a market than who are
psychologically distant.
– There are more similarities than differences between
individual entrepreneurs regardless of the country.
 Foreign Market Selection
• One good market selection model employs a
five-step approach:
– Develop appropriate indicators.
– Collect data and convert into comparable
indicators.
– Establish an appropriate weight for each indicator.
– Analyze the data.
– Select the appropriate market from the market
rankings.
• In Step 1, appropriate indicators are developed based on past sales,
competitive research, experience, and discussions with other
entrepreneurs doing global business.

• Specific indicators developed in three general areas:

• overall market size indicators- (1) population, (2) per capita income, (3)
the market for the specific product (for consumer products), and (4) the
types of companies and their sales and profits of particular products (for
industrial products).
• In terms of market growth indicator the overall country growth (GDP)
should be determined as well as the growth rate for the particular
market of the venture.
• Finally, appropriate product indicators-- such as the size of the export of
the specific product category to the market, the number of sales
leads(perspective customers), and the level of interest should be
established.
• Step 2 involves collecting data for each of these
indicators and making the data comparable.
• Both primary data (original information collected
for the particular requirement) and secondary data
(published data already existing) need to be
collected.
• Secondary data are collected first to establish what
information (if any) still needs to be collected
through primary research.
• The third step is to establish appropriate weights for
the indicators to reflect its importance in predicting
foreign market potential.
• This procedure results in each indicator receiving a
weight that reflects its relative importance.
• The assignment of points and weights and the
selection of indicators vary greatly from one
entrepreneur to another and indeed are somewhat
arbitrary.
• Step 4 involves analyzing the results. When looking
at the data, the entrepreneur should carefully
evaluate the results.
• He/she should also look for errors, as mistakes can
be easily made.
• Also, a what-if analysis should be conducted by
changing some of the weights and seeing how the
results vary.
• The final step—Step 5—involves selecting a market
to enter as well as follow-up markets so that an
appropriate entry strategy can be determined and a
market plan developed.
• ENTREPRENEURIAL ENTRY STRATEGIES
• There are various ways an entrepreneur can market
products internationally.
• The method of entry into a market and the mode of
operating overseas are dependent on the goals of
the entrepreneur and the company’s strengths and
weaknesses.
• The modes of entering or engaging in international
business can be divided into three general
categories: exporting, non-equity arrangements,
and direct foreign investment.
 Generic Strategic
• Basic approaches to strategic planning that can be
adopted by any firm in any market or industry to
improve its competitive performance.
• The theory, developed by Michael Porter, that a
business can get an advantage over other similar
businesses in three ways, by cost leadership (= being
a low-cost producer), by differentiation (= offering
products that are different and that have added
value in relation to quality), or by focus (= selling to a
part of a market with particular needs).
 Generic strategies:
Porter’s Generic Strategies

Cross-Section
of Buyers
Overall
A Broad

Broad
Low Cost
Differentiation
Competitive Scope

provider
Strategy
Strategy
Best cost
provider
A Narrow Buyer

Market Niche)
Segment (or

strategy
Focus
Focused Low-
Differentiation
cost Strategy
Strategy

Low Cost Higher Cost

Competitive Advantage
 Low cost provider strategy
• Aiming to become lowest cost producer
• The firm can compete on the price with other organization
• Cost reduction provides the focus of the organizations
strategy
• Target a broad market
• Competitive advantage is achieved by driving down costs
• A successful cost leadership strategy requires that the
firms is the cost leader and is unchallenged in this position
• Especially beneficial: where customers are price sensitive
 Differentiation strategy
• A differentiation strategy calls for the development
of a product or service that offers unique attributes
that are valued by customers.
• Customers perceive the product to be different and
better than that of rivals.
• The value added by the uniqueness of the product
may allow the firm to charge a premium price for it.
• Differentiation can be based on product image or
durability, after sales, quality, additional features.
• It requires research capability and strong marketing.
 Focused strategy
• The focus strategy concentrates on a narrow segment and within
that segment attempt to achieve either a cost advantage or
differentiation.
• The premise is that the needs of the group can be better serviced
by focusing entirely on it.
• A firm using a focus strategy often enjoys a high degree of
customer loyalty and this entrenched loyalty discourage other
firms from competing directly.
• Because of their narrow market focus firms pursuing a focus
strategy have lower volumes and therefore less bargaining power
with their suppliers.
• However, firms pursuing a differentiation-focused strategy may be
able to pass higher cost on to customers since close substitute
products do not exist.
 Best cost provider strategy
• Combine a strategic emphasis on low-cost with a
strategic emphasis on differentiation
• Make an upscale product at a lower cost
• Give customers more value for money
• Strategic Target
– Value-conscious customers
• Competitive advantage
– Ability to give customers more value for money
• Product line
– Items with appealing attributes, assorted upscale features
 Types of Grand Strategies

1. Concentrated 8. Concentric
diversification
2. Market development
9. Conglomerate
3. Growth & Expansion diversification
4. Product development 10.Retrenchment/
5. Innovation Turnaround
6. Horizontal integration 11.Divestiture
7. Vertical integration 12.Liquidation
8. Joint ventures 13.Bankruptcy
14.Strategic Alliance
47
 1.Concentrated Growth
• Concentrated growth is the strategy of the
firm that directs its resources to the profitable
growth of dominant product, in a dominant
market, with a dominant technology
• The main rationale for this approach,
sometimes called a market penetration
strategy, thoroughly developing and exploiting
its expertise
• It comprises vertical & horizontal growth.
 2.Market development
• Market development involves introducing present products
or services into new geographic areas.
• It consists of marketing present products, often with only
cosmetic modifications, to customers in related market
areas by adding channels of distribution or by changing the
content of advertising or promotion
• The business environment for international market
development is becoming more favorable. In many
industries, such as airlines
• Frequently, changes in media selection, promotional
appeals, and distribution are used to initiate this approach
 3.Growth Strategy
• Strategy aimed at winning larger market share, even at the
expense of short-term earnings. Four broad growth
strategies are diversification, product development, market
penetration, and market development.
• Most small companies have plans to grow their business and
increase sales and profits. However, there are certain methods
companies must use for implementing a growth strategy. The
method a company uses to expand its business is largely
contingent upon its financial situation, the competition and even
government regulation. Some common growth strategies in
business include market penetration, market expansion, product
expansion, diversification and acquisition.
 4 Product development
• Product development is a strategy that seeks
increased sales by improving or modifying
present products or services.
• Product development usually entails large
research and development expenditures.
• It can be marketed to current customers
through established channels as well.
 5.Innovation
• The transformation of creative ideas into useful
applications by combining resources in new or
usual ways for new or improved products,
technology or services.
• The underlying rationale of the grand strategy of
innovation is to create a new product life cycle and
thereby make similar existing products obsolete
• (Invention - The creation of new products, processes, and
technologies not previously known to exist.)
 6.Horizontal integration
• It is a strategy of seeking ownership or increased control
over competitors
• When a firm’s long-term strategy is based on growth
through the acquisition of one or more similar firms
operating at the same stage of the production-marketing
chain, its grand strategy is called horizontal integration
• Such acquisitions eliminate competitors and provide the
acquiring firm with access to new markets
• It allows for increased economies of scale and enhanced
transfer of resources and competencies.
 7.Vertical Integration
• Forward integration and backward integration
are collectively referred to as vertical
integration strategies.
• Forward integration involves gaining
ownership or increased control over
distributors or retailers.
• Backward integration involves gaining
ownership or increased control over suppliers.
 8. Joint venture
• It means that two or more companies
combine to form a new company by equity
participation and sharing of resources like
finance, managerial talents, technology etc, so
as to create new entity distinct form its
parents .
 9.Concentric (Related) Diversification

• Adding new, but related, products or services is widely called

concentric diversification
• It involves the acquisition of businesses that are related to
the acquiring firm in terms of technology, markets, or
products
• With this grand strategy, the selected new business possess a
high degree of compatibility with the firm’s current business
• The ideal concentric diversification occurs when the
combined company profits increase the strengths and
opportunities and decrease the weaknesses and exposure to
risk
• Telephone & cable company can offer internet services
10.Conglomerate (unrelated) Diversification

• A conglomerate is a combination of two or more

corporations engaged in entirely different
business that fall under one corporate group.
• Usually it involves a parent company and many
subsidiaries.
• Often conglomerate is a multi-industry company.
• Often it is large and multinational company as
well.
Guidelines for Conglomerate Diversification

• Conglomerate diversification may be an effective

strategy when:
• Declining annual sales and profits
• Capital and managerial talent to compete
successfully in a new industry
• Strong financial synergy between the acquired
and acquiring firms
• Existing markets for present products are
saturated
 11. Retrenchment /Turnaround
 It is the strategy that aims to reduce the size or diversity of an
organization.
 Its focus on reduction in expenditure to become financially
stable.
 Retirement is one of the retrenchment strategy.
 Sometimes it is called a turnaround or reorganization strategy
 During retrenchment, strategists work with limited resources
and face pressure from shareholders, employees, and the
media.
 Among the reasons are economic recessions, production
inefficiencies, and innovative breakthroughs by competitors
 12. Divestiture
• It is a strategy of selling a division or part of an
organization is called divestiture.
• It is often used to raise capital for further strategic
acquisitions or investments.
• When retrenchment fails to accomplish the desired
turnaround, or when a non-integrated business
activity achieves an unusually high market value,
strategic managers often decide to sell the firm
• Reasons for divestiture vary
 13. Liquidation
• Selling all of a company's assets, in parts, for
their tangible worth is called liquidation.
• Liquidation is recognition of defeat and,
consequently, can be an emotionally difficult
strategy.
• However, it may be better to cease operating
than to continue losing large sums of money
 Entrepreneurial Partnering
• If your business will be owned and operated by several
individuals, you'll want to take a look at structuring your
business as a partnership. Partnerships come in two varieties:
general partnerships and limited partnerships. In a general
partnership, the partners manage the company and assume
responsibility for the partnership's debts and other obligations.
A limited partnership has both general and limited partners.
The general partners own and operate the business and
assume liability for the partnership, while the limited partners
serve as investors only; they have no control over the company
and are not subject to the same liabilities as the general
partners.
• ENTREPRENEURIAL PARTNERING
– Good way to enter an international market is to partner
with an entrepreneur in that country.
– Know the country and culture and can facilitate business
transactions.
– Good partners share the entrepreneur’s vision and will
not try to exploit the partnership for their own benefit.
How does the entrepreneur go about selecting a good partner?
• Collect as much information as possible on the industry
and potential partners in the country.
• Information can be obtained from embassy officials,
members of the country’s chamber of commerce, firms
doing business in that country, and customers of the
potential partner.
• The entrepreneur needs to attend any appropriate
trade shows.
• References for each potential partner should be
checked.
• Entrepreneur meet several times with a potential
partner to get to know the individual and the company
before any commitment is made.
 IMPLICATIONS FOR THE GLOBAL ENTREPRENEUR
• The cultural, political, economic, and distribution
systems of a country clearly influence its
attractiveness as a potential market and potential
investment opportunity.
• Costs and political risks are lower in those market-
oriented countries that are more advanced
economically and politically.
• Future growth and expansion is more in less
developed and less stable countries.
• The entrepreneur needs to carefully analyze the
countries to determine the best one(s) (if any) to
enter and then develop an appropriate entry strategy.