CHAPTER 4 Flashcards
(13 cards)
What are the role of ideas
• An idea must create value and add value.
• It does not automatically translate into an opportunity.
• It is the first step of converting creativity into opportunity.
• Traditionally enjoys too much emphasis from entrepreneurs.
• This translates into entrepreneurial myopia (a constricted viewpoint)
When is an idea an opportunity?
- attractive
- durable
- timely
- anchored in product services
The screen opportunities include what :
– Industry and market issues
– Economics
– Harvest issues
– Management team issues
– Fatal flaw issues
– Personal criteria
– Strategic differentiation
The attractiveness of a market determined by what factors
• Market structure. Market conditions that make it possible for higher-potential
businesses to thrive are ones where unfulfilled market niches are involved.
• Market size. A large and growing market is the type of market a high-potential
business seeks to engage in and, more often than not, thrives in
• Market capacity. A market at full capacity in a growth situation – where demand
outweighs possible current supply – is a very attractive one to enter.
• Market share. The potential and ability of a business to become a market leader and
capture a substantial portion of the overall market are significant contributing
factors to the business becoming a high-growth business.
• Cost structure. A business that can provide low-cost goods and services while
providing value for money is attractive
What must the economy have for opportunity evaluation
• High gross margins = high, durable profits
• Positive cash flow within three years
• Low start-up capital ideal
• Initial costs must be recoverable within a reasonable time
Harvest issues refer to what?
• Refers to the selling of the business
• If the business or market is unattractive, no one will buy it
Name the management team issues
• It is important and beneficial for a business to have an entrepreneurial team
that possesses proven experience within the chosen industry
• Managerial team should possess compatible and complementary skill
What are the fatal flaws in an opportunity ?
• Makes an opportunity unattractive
• Mainly caused by
– markets that are too small
– markets with overwhelming competition
– markets where the cost of entry is too high
– markets where entrants are unable to produce a sustainable competitive
advantage
What is the personal criteas needed in opportunity evaluation
Successful entrepreneurs have a good fit between what they wish to derive
from the business and what the business requires of them
• Successful entrepreneurs take calculated risks and have a high stress-
tolerance level
• Opportunity obsessed and committed to excellent
What are the disadvantage in established businesses
• Organisational inertia occurs when a business refuses to adapt in a
responsive manner to changes in the marketplace.
• Organisational complacency occurs when a business refuses to adapt in a
responsive manner to changes in the marketplace.
• Bureaucracy occurs due to increased hierarchy levels and increased
financial, operational and human resources. Opportunity-seeking
mechanisms become rigid and inadequate
The most common for bigger business to leave a gap in a market
• Failure to see new opportunities
• Underestimation of new opportunities
• Technological inertia
• Cultural inertia
• Politics and internal fighting
• Government intervention to support new and (smaller) entrants
Define and explain the “open window”
Must be open long enough for the entrepreneur to take advantage of the
opportunity
• Entrepreneur needs the right
– characteristics
– management team
– personal skills
– resources
Name and explain the stages of opening a window
Seeing the window
• Search for gaps left by competitors.
• Proactively and productively take advantage of the gap to benefit the
entrepreneur while also adding value for the consumer.
• Identify and outline ways to provide a better product/service
Locating the window
• Understand positioning of product/service in the market.
• ‘Positioning’ is relative to existing product/service
Measuring the window
• Ensure the opportunity is viable and feasible.
• A feasibility study is a general examination of the opportunity’s potential,
and includes matching the entrepreneur’s ability and skill with the business
needs.
• A viability study critically examines the market trends and expected market
responses
Opening the window
• It represents entry to the market and the start of business activity.
• Obtain commitment from and commence coordination of stakeholders
(financiers, employees, suppliers, customers).
• Relationships with stakeholders are imperative to the longevity of the
business
