What Are the Ways in Which Entrepreneurs Typically Identify, Evaluate and Exploit Opportunities?

What are the ways in which entrepreneurs typically identify, evaluate and exploit opportunities?

“An opportunity is defined as a future situation that the decision makers deem personally desirable and feasible” (Keh, Foo and Lim, 2003, p.125). In a business environment, opportunities come in many forms and arrangements. The definition of an opportunity can vary greatly, from identifying a niche in the market providing the prospect for a new product, to simply adding a new aspect to a service, making the experience more enjoyable overall for the customer, for example, offering a beverage to a waiting client in a hair salon.  In short, “an opportunity is, by definition, something beyond the current activities of a firm.” (Davidson, Delmar and Wiklund, 2006, p.26) The most important aspect of entrepreneurship is spotting these opportunities and responding in such a way that will add to the value of a product, service or overall business. No one can be a true entrepreneur without having identified, evaluated and pursued at least one opportunity; there are many ways in which one may do this.

One of the best ways in which an organisation can both identify and evaluate a business idea is to listen to their customers. This is essential for them to realise what the customer wants; where they want it and how they want it to be supplied. Market and customer research is vitally important as, “in addition to gleaning statistics of trends and current customer buying patterns, you need to know who your customers are, where they are located and what kind of competition exists in your area.” (Ray, 2015).

Identifying an opportunity could be as simple as spotting an inefficiency in a market place and using available resources and capabilities to rectify it (Wharton University, 2009). This could be anything from a poorly advertised product, to a product being placed in the entirely wrong market segment. Often, however, an opportunity is an idea brought to an organisation by employees who work there and it is up to the management of the organisation to evaluate said ideas and distinguish between the strong and weak and identify the best opportunity for the firm to exploit. Many small businesses fail due to a failure on behalf of managers to evaluate the firm’s over all talents, aims and goals. They must look closely at the company’s ability to take risks, and what those risks could cost them if certain ventures did not go to plan. Financial capabilities must be reviewed as well as both marketing and personnel skills. Also, if starting up an entirely new small business, relationships with family and friends will be strained and put under pressure. This must be carefully deliberated and all options must be equally conserved (Ray, 2015).

One key task of any entrepreneur, therefore, should be to try and find an opportunity that works for them, whether it be an addition to their existing business or product, or forming an entirely new business altogether. The entrepreneur must ask themselves if the new concept should focus on needs not yet met by an existing product or service, or whether they should take an existing product and offer it in a market where it may not yet be available (Wharton University, 2009). In the case study of Stephen Waring, we can see Waring did exactly this with a lawn treatment company he came across in America. He saw the success of the company and decided to bring a similar service to the United Kingdom. Although there was a lot of work and research involved, requiring Waring to spend, “6 months trying to recreate the green lawns he had seen in the United States… mixing together fertiliser ingredients such as nitrogen phosphate and potash in a bucket to experiment on his parents’ lawn.”  The case study shows that opportunities are rarely presented on a plate; they require a lot of trial and error and a high level of investigation into finding the best possible outcome. Stephen Waring put in the effort and came out with an incredibly successful multi £million organisation, “Green Thumb”.

Recognising the success of a possibly well-known business in one area would also be an instance where franchises should come into consideration. Franchises can be an excellent first venture and an excellent exploitation of an opportunity, as they allow an entrepreneur to show innovation as well as true commercial and business skills, but still allow for an aspect of security in the form of a ready-made business with existing loyal customers and a trusted brand name. Franchising is also an extremely effective growth strategy, and in this way, a great opportunity for current businesses to use in order to expand and increase profits and market share.  Although there may be a loss of control, putting the franchisee in charge of one’s own brand name, and in so doing risking the reputation of the entire brand, it reduces the amount of finance needed by the franchisor in order to expand geographically.

With such a wide range of businesses starting up each year, however, it is important for entrepreneurs to come up with a unique selling point to make yours stand out. The case study concerning Thea Green, the founder of the popular beauty brand, “Nails Inc”, highlights the importance and extreme benefits that come from having a strong USP. Similarly to Stephen Waring, Green visited America for work reasons and, realising the success of a particular category of business, brought the concept of specialist nail bars home with her to the UK. Again, like Waring, it was necessary for Green to carry out a considerable amount of research when evaluating her opportunity, not only to come up with a business most suitable for her home market, but to make sure hers was an original idea, not already being carried out by larger, successful firms with whom she could not possibly complete. Like any entrepreneur, Thea Green wanted her services to stand out from all others in the same or similar markets. When exploiting her well researched opportunity therefor, Green made a clear distinction between not only the price of her services in comparison with her competitors, but also the time taken to carry out her services was much shorter in comparison with other nail and beauty salons. This is solid evidence of the fact that the time take to evaluate and carefully research how best to exploit a business opportunity is reflected in the success of said opportunity. The case study also highlights the importance of running a business which fits in with your own interests and involves something for which you have a great passion.

Another instance where this is clearly visible is in the study of Oliver Brendon who, after having work experience in Thomas Cook travel agents at the age of fourteen, realised his passion and drive to make it in the travel industry. It is clear that it was his keen interest in this felid which motivated him to carry out his research and development and come up with the most effective and efficient business model for his venture, ATD Travel Services. His business dealt with the distribution of theme park tickets for families in advance of arriving in their holiday destination. It was an, “instant success, with Brendon selling £3 million worth of tickets in the first year despite handling all the sales himself”.