Questions and Answers
What is a viable business opportunity?
A perceived means of generating economic value that has not previously been explored and is not currently being exploited by others and meets a need or desire.
Which of the following are characteristics of a viable business opportunity? (Select all that apply)
Entrepreneurs have a lower perception of risk compared to non-entrepreneurs.
True
What are cognitive biases?
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What is the planning fallacy?
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What does the belief in the law of small numbers imply?
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Heuristics are commonly used by managers in large organizations.
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What role do cognitive skills play in opportunity recognition?
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Study Notes
Opportunity Recognition and Evaluation
- Opportunity evaluation is critical; it distinguishes between ideas and viable business opportunities.
- Entrepreneurs need market knowledge to assess opportunities effectively.
Foundations of Opportunity Recognition and Evaluation
- A viable business opportunity is one that generates economic value and meets an unmet need.
- Key Characteristics of viable business opportunities include:
- Potential economic value
- Newness
- Perceived desirability
- Entrepreneurs must leverage cognitive abilities to manage risks and develop objectivity during evaluations.
Cognitive Approach to Opportunity Recognition and Evaluation
- Cognitive skills involve gathering, processing, and evaluating information effectively.
- Opportunities arise from changes in technology, the external environment (economic, political, social, demographic), and personal circumstances of the entrepreneur.
Cognitive Biases and Heuristics in Opportunity Evaluation
- Entrepreneurs often exhibit cognitive biases, overestimating their chance of success.
- Cognitive biases serve as mental shortcuts that affect judgments about business opportunities.
- Heuristics simplify decision-making under uncertainty, making them more prevalent in entrepreneurs than in larger organizations.
- Key biases include:
- Overconfidence
- Planning fallacy
- Belief in the law of small numbers
- Illusion of control
Risk Perception
- Risk perception is subjective; the amount of perceived risk varies between entrepreneurs and non-entrepreneurs.
- The difference in risk perception can drive some individuals to pursue opportunities that others might overlook.
Overconfidence
- Overconfidence leads to the inability to recognize personal limitations in knowledge and skills, resulting in inflated certainty about outcomes.
Planning Fallacy
- Entrepreneurs often underestimate the time, resources, and workload for projects.
- Unique and uncertain situations exacerbate this tendency, potentially leading to overly optimistic predictions about project success.
Belief in the Law of Small Numbers
- Entrepreneurs sometimes generalize from small information samples, lacking predictive validity.
- This bias stems from the difficulty in obtaining large random samples in real-world scenarios.
Characteristics of Successful Products and Services
- Successful products and services typically have unique features that set them apart in the marketplace.
- Validating product and service ideas involves rigorous analysis to filter out non-feasible options.
Viability Assessment of Ideas
- A systematic approach is essential for evaluating the feasibility and marketability of new ideas.
- Screening guides can help determine which ideas to pursue based on market needs and potential economic benefits.
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Description
This quiz focuses on opportunity recognition and evaluation in entrepreneurship. It covers cognitive biases, venture capitalist criteria, and characteristics of successful products and services. Assess your understanding of how new ideas can be analyzed for market feasibility.
