Chapter 2: Opportunity Seeking, Screening, and Seizing PDF

## Chapter 2: Opportunity Seeking, Screening, and Seizing ### 2.1 Opportunity Seeking Entrepreneurs are innovative opportunity seekers. They have endless curiosity to discover new or different ideas and see whether these ideas will work in the marketplace. This is what separates entrepreneurs from...

## Chapter 2: Opportunity Seeking, Screening, and Seizing ### 2.1 Opportunity Seeking Entrepreneurs are innovative opportunity seekers. They have endless curiosity to discover new or different ideas and see whether these ideas will work in the marketplace. This is what separates entrepreneurs from the ordinary businessman whose main objective is simply to earn profits from producing, buying, and selling goods. Entrepreneurs create value by introducing new products or services or finding better ways of making them. These may include innovation in terms of product design or addition of new product features to existing ones. They may also tinker on improving their operational capability by employing new technologies that will bring them greater efficiency, better economies, and even enable them to reach unparalleled superiority. They may also consider expanding their reach by creating new markets or maximizing existing market reach. At the highest level, entrepreneurs may totally change the prevailing business paradigm by rendering it obsolete through the introduction of *disruptive technologies*, processes, and systems. ### Entrepreneurial Mind Frame, Heart Flame, and Gut Game Essential to an entrepreneur's opportunity seeking are the entrepreneurial mind frame, heart flame, and gut game. - The entrepreneurial mind frame allows the entrepreneur to see things in a very positive and optimistic light in the midst of crisis or difficult situations. Instead of being discouraged, the entrepreneur is able to use these problematic situations as inspiration in creating something innovative. In fact, in Chinese writing, the word crisis is composed of two characters. The first character means danger while the second character means opportunity. - If there is one commonality between an inventor and an entrepreneur, it is their surging passion or the entrepreneurial heart flame. Driven by passion, they are drawn to find fulfillment in the act and process of discovery. - Passion is that great desire to attain a vision or fulfill a mission. It is about wanting something so much that a person would be willing to totally devote one's self to the quest. Despite several setbacks or disappointments, the entrepreneur is not easily disheartened, but is rather driven to persevere even more. - The **heart flame** is also about emotional intelligence or EQ, which is often manifested in the entrepreneur's efforts to nurture relationships with customers, employees, and suppliers. The entrepreneur also looks after the interests of his or her people by motivating and encouraging them to be the best they can become. This creates a caring culture within the organization that brings about synergy among the people working toward a common vision. - The final ingredient is the entrepreneurial **gut game**. This refers to the ability of the entrepreneur to sense without using the five senses. This is also known as intuition. ## Financial Forecasts: Expected Returns, Risks, and Contingencies The eighth section of the business plan is the financial forecast including the financial returns, the financial risks, and the financial contingencies. The business plan must translate everything that we have discussed so far into financial forecasts and outcomes. From the financial forecasts, the business plan should then calculate the expected returns from the business. The important return calculations are the following: 1. expected return on sales 2. expected return on assets or investments 3. expected return on stockholders' equity The business plan should also calculate the long-term returns, using the time value of money. This means estimating the internal rate of return and the expected net present value. - The business plan should then evaluate both the business risks and the financial risks involved. ## Environmental and Regulatory Compliance The ninth part of the business plan is composed of the environmental and regulatory compliance. - The business plan must articulate the laws, rules, and regulations governing the business, and the industry that the enterprise is in. It should ascertain that all the necessary permits, licenses, and authority to use proprietary intellectual capital had either been secured or would definitely be secured. - The business plan should also assure the reader that all the necessary local government ordinances and barangay ethics would be followed by the enterprise. ## Capital Structure and Financial Offering: Returns and Benefits to Investors, Financiers, and Partners The tenth section of the business plan contains the capital structure and financial offerings of the enterprise including some discussions on who are the investors, the financiers, and the partners of the enterprise. - Finally, the business plan must appeal to its target audience. It must highlight for them the main features of the business plan that they are looking for. ## Table 1.1. Enterprise Delivery System | Input | Throughput | Output | Desired Outcomes | |---|---|---|---| | • Harnessing of human, money, and physical resources | • Conversion of input into output and the transformation process within the factory or service shop | • Goods produced or services delivered | • Customer satisfied | | • Resources mobilized | • Marketing | • Positioning: Packaging, Place, People, Promotion, Price | • Sales volume attained | | • Money | • Operations: Product, Production, | • Profits generated | • People performance | | • Men | | | | | • Machines | | | | | • Materials | | | | | • Methods | | | | | • Management | | | | - The EDS involves the harnessing of human, money, and physical resources from well-selected sources. - These resources become the input (money, men, machines, materials, methods, and management) which the Operations unit within the EDS (i.e., the manufacturing or service delivery personnel) will convert or transform into output. - The output will then be delivered to the customers through the Marketing unit of the EDS. The products/services of the enterprise are positioned to meet the requirements of the selected market segment by choosing the right packaging, pricing, promotions, people for selling and distribution, and places or locations where the targeted customers can best be found. - The Operations and Marketing units are supported by the Finance, Administration, and Human Resource Management units, which oversee the flow of money, the procurement and maintenance of machinery and materials, and ensure the proper deployment and development of people. - The EDS serves as the enabler of the Enterprise Strategy. The business plan must demonstrate how the EDS and the ES tandem lead to the attainment of the desired enterprise outcomes. - These business outcomes should reasonably include: - high customer satisfaction levels - high sales volume, market share, and market reach - high financial returns - high people performance, productivity, and morale levels. ## Industry Sources of Opportunities After the macro environment, the next biggest sources of opportunities are the industry and the market. One of the most difficult aspects about industry analysis is defining what constitutes an industry in the first place. The proper classification of what industry the enterprise is competing in is important if the entrepreneur's intention is to define who are the relevant customers, who are the direct and indirect competitors, and what are the critical characteristics of the market as to the quality of products or services to be delivered. 1. Participants in an industry include: - Rivals or competitors in a particular type of business (e.g., Jollibee vs. McDonald's, Coca-Cola vs. Pepsi, Samsung Galaxy vs. Apple's iPhone, etc.). True rivals or competitors are those competing for the same or similar markets. 2. Suppliers of input (e.g., fuel, electricity, raw materials) to rivals as well as suppliers of machinery and equipment, suppliers of manpower and expertise, and supplies of merchandise. 3. Consumer market segments being served by rivals or competitors. 4. Substitute products or services, which customers shift or turn to. 5. All other support and enabling industries. - After identifying the participants, it would help the entrepreneur to determine the logic of the industry. How do these participants in the industry make or lose money? What critical factors drive the industry's success? What critical factors lead to failures? - A thorough analysis of industry structure and dynamics yields opportunities for the clever entrepreneur. Situating his or her enterprise within the realm of an industry provides many profitable opportunities for the entrepreneur. ## Industry Threats 1. **Social** - **Opportunity for the enterprise:** Increasing double income earners in the family (i.e., mother and father are both working) creates increased customer base for the fast food chain. - **Threat to the enterprise:** Trend toward healthier food choices means more healthy product offerings are demanded by customers. 2. **Political** - **Opportunity for the enterprise:** Tax exemption for 13th month pay and other bonuses up to P70,000.00 passed by Congress creates increased purchasing power of the consumers, leading to higher retail sales. - **Threat to the enterprise:** Smaller suppliers' difficulty coping with greater competition posed by foreign rivals; might lose small but reliable suppliers. 3. **Economic** - **Opportunity for the enterprise:** ASEAN Integration in 2015 (countries that belong to ASEAN trading at zero tariff) means opportunity to expand to other ASEAN markets. - **Threat to the enterprise:** Additional costs incurred by new packaging may decrease profitability. 4. **Ecological** - **Opportunity for the enterprise:** Increased usage of eco bags and environment-friendly containers means opportunity to start an advocacy toward a 'greener' operation (not limited to usage of eco-friendly containers/packaging). - **Threat to the enterprise:** Greater usage of apps to place delivery orders via smartphones, which may help increase market reach means potential for online customer disappointments and netizen bashing due to poor product/service delivery brought about by intermittent technical glitches. 5. **Technological** - **Opportunity for the enterprise:** Increased usage of smartphones to disseminate important information (e.g., news, weather, traffic updates) means opportunity to start an advocacy toward a 'greener' operation (not limited to usage of eco-friendly containers/packaging). - **Threat to the enterprise:** Greater usage of apps to place delivery orders via smartphones, which may help increase market reach means potential for online customer disappointments and netizen bashing due to poor product/service delivery brought about by intermittent technical glitches. ## Table 2.1. Examples of Relevant Opportunities and Threats to a Fast Food Chain | Factors | Opportunities to the Enterprise | Threats to the Enterprise | |---|---|---| | **Social** | - Increased customer base | - More healthy product offerings are demanded by customers | | | - Increasing double income earners in the family (i.e., mother and father are both working) | | | | - Trend toward healthier food choices | | | **Political** | - Increased purchasing power of the consumers leading to higher retail sales | - Smaller suppliers' difficulty coping with greater competition posed by foreign rivals; might lose small but reliable suppliers. | | | - Tax exemption for 13th month pay and other bonuses up to P70,000.00 passed by Congress | | | **Economic** | - Opportunity to expand to other ASEAN markets. | - Additional costs incurred by new packaging may decrease profitability. | | | - ASEAN Integration in 2015 (countries that belong to ASEAN trading at zero tariff) | | | **Ecological** | - Opportunity to start an advocacy toward a 'greener' operation (not limited to usage of eco-friendly containers/packaging). | - Greater usage of apps to place delivery orders via smartphones, which may help increase market reach means potential for online customer disappointments and netizen bashing due to poor product/service delivery brought about by intermittent technical glitches. | | | - Increased usage of eco bags and environment-friendly containers | | | **Technological** | - Opportunity to start an advocacy toward a 'greener' operation (not limited to usage of eco-friendly containers/packaging). | - Greater usage of apps to place delivery orders via smartphones, which may help increase market reach means potential for online customer disappointments and netizen bashing due to poor product/service delivery brought about by intermittent technical glitches. | | | - Increased usage of smartphones to disseminate important information (e.g., news, weather, traffic updates) | | ## Fluctuate with the Movement of the Market Forces The income levels and the purchasing power of its people as well as the competitiveness (or uncompetitiveness) of its industries and enterprises are sources of opportunities. However, in any opportunity, there is always a threat that lurks behind it. In this case, the entrepreneur must be able to think critically through each and every single economic event that impacts his or her enterprise. For example, a very fast-growing demand for housing may lead to the overbuilding of houses. This threat is what house financing institutions are afraid of. ## Ecological Environment The ecological environment includes all natural resources and the ecosystem, habitat of men, animals, plants, and minerals. There is a growing awareness in the world today that will make this factor more and more important for countries, industries, and businesses. - The threats of ecological degradation have generated countless opportunities such as smoke and spill detectors, filters and screens, pollution counters, and energy-saving devices. Opportunities abound for greener, cleaner, and healthier products, whose objectives are to save the planet and prolong lives. ## Technological Environment New scientific and technological discoveries, which often lead to the launch and commercialization of new products with superior attributes or to rendering the old ones obsolete, are the entrepreneur's nightmares. In such cases, the entrepreneur is left with no choice but to invest in new technologies in order to keep up with competition. Technology does not only come in the form of advanced machinery or equipment, but it can also be in the form of new systems, new processes, or new products.