Recognizing Opportunities and Generating Ideas Part I Chapter

Recognizing Opportunities and Generating Ideas Part I Chapter 2 Diane M. Sullivan, Ph. D. 2011 Some sections modified from: Barringer & Ireland (2008) 1

What is an Entrepreneurial Opportunity? l A favorable set of circumstances that creates the need for a new product, service or business l An opportunity has five essential qualities: 1. Attractive i. 2. Durable i. 3. What environmental, market, or industry trends suggest now is the time for the opportunity? Anchored in a product, service, or business that adds value to buyer/end user i. 5. How is the opportunity competitively sustainable (e. g. , not easily imitated, unique in some why that allows for a competitive advantage)? Timely (window of opportunity is open) i. 4. What makes this venture good for an ENT to start? What value does the ENT/investor extract from the opportunity? What value do customers extract from this business? Does it solve a problem or fulfill a need? Does it save them time/money? Adds value to necessary network partners (e. g. , those providing resources necessary for venture success) i. How does the opportunity add value to others that you need to help make you firm work—your 2 resource providers?

Identifying Opportunities via Observing Trends l Observing Trends in External Environment l Economic l Social and Demographic l Technological l Political/Legal 3

Trend 1: Economic Forces l l l State of the economy Consumers’ level of disposable income Spending patterns (e. g. , who has money to spend and who’s cutting costs) l l An increase in the number of women in the workforce and their related increase in disposable income Many large firms are trying to cut costs l l Entrepreneurs have taken advantage of this trend by starting firms that help other firms control costs Increasing gas prices 4

Economic Trend: Teen Affluence l 2002: teen shoppers spent over $170 billion l 2007: teen shoppers spent $163 billion l Analysts project teen spending upswing by 2013 Source: Mintel Oxygen, 2011 What are three biggest industries where teens spend their money? 1) Clothing 2) Music 3) Movies 5

Economic Trend: Fuel Prices “The national average retail price for regular gasoline could exceed $4. 00 in 2011 (U. S. Energy Information Administration, 2011). Electric Bikes Provide Greener Commute “The surging cost of gasoline and a desire for a greener commute are turning more people to electric bikes as an unconventional form of transportation. … they’re flying off the shelves…” Source: Cnn. com, 2008 Chrysler, EPA develop new hybrid technology “Chrysler has teamed up with the Environmental Protection Agency to commercialize a unique hybrid vehicle technology. ” Source: Wall Street Journal, 2011 6

Trend 2: Social and Demographic Forces l Changes in social trends and characteristics of the population provide openings for new businesses l The proliferation of fast-food isn’t because people love fast food l It’s because people are busy, and have disposable income l The aging of the population creates new needs in multiple industries 7

Trend 2: Examples • Family/work patterns • Childcare • Scheduling • Aging of the population • Healthcare • Financial management • Increasing diversity in the workplace • Training • Globalization of industry • Transportation • Taxation • Regulatory compliance • Online shopping • Focus on health care and fitness • Weight management • Trainers • Computers and the Internet • Hardware/software/training • Shopping alternatives • Number of cell phone users • New technology/complimentary products • New forms of entertainment • Video games • DVR • Laser tag • Fantasy sports teams • Online entertainment 8

Social Trend: Health Conscious Consumers Recession Fuels Confectionary Purchases However… Consumers are more likely to purchase candy that is low fat, low sugar, low calorie and that are made with real fruit and organic ingredients Source: Mintel Oxygen (2010) 9

Social Trend: `Tween Market Kiddie calls are on the horizon for the growing 'tween market “’Tweens [ages 8 -12] constitute a lucrative retail market … 23 million members … Retail studies say this demographic is on the leading edge of the most-consumer-oriented generation in history. They increasingly have disposable income, and their voice now factors heavily into family purchases. ” “ … when they shop for themselves, ‘tweens ignore toys … preferring clothes, video games and electronics. ” “ The world's No. 2 toymaker [Hasbro, Inc. ] is going after the … 'tween market with a walkie-talkie-like device that resembles a mobile phone. ” Source: St. Louis Tribune, February 12, 2005 10

Social Trend: `Tween Market LG Migo Firefly Mobile 11

Demographic Trend: Aging Population l France: Analysts project the aging French population will result in reduced consumer mobility, leading to an increased demand for convenience shopping. l l Carrefour, Intermarché and Leclerc moving to local, neighborhood format stores Spain: Analysts project that the aging population will impact the food market—consumers will prefer value prices and food specialists versus larger supermarkets Source: Mintel Oxygen, 2010 12

Demographic Trend: Aging Population l Technology Needs of Seniors http: //www. cbsnews. com/video/watch/? id=7171169 n&tag=mncol; lst; 2 13

Trend 3: Technological Advances l Entrepreneurs must keep on top of how new technologies affect current and future business opportunities l Industries have emerged due to technological advances l l Computer industry, Internet, biotechnology, digital photography Once developed, new firms form to take technology to higher level l Real. Networks was started to add video capability to the Internet l Massively Multiplayer Online Role Playing Games (MMORPG) l l l Ever. Quest World of Warcraft Second Life 14

Technological Trend: Computers Virtual Gaming and the Economics of MMORPGs “…supply-and-demand market exists for virtual items … that it crosses over with the real world. [This includes: ] … (Castronova, E. , 2005) • The purchase of in-game items for real-world currency • $1. 6 billion in sales in 2010 (The New York Times, 2010). • Exchanges of real-world currencies for virtual currencies Virtual Crimes on the Rise Dutch teenager was arrested for stealing virtual furniture (BBC News, 2007) “Virtual killer faces real jail after murder by mouse” (Mc. Neill, 2008) 15

Technological Trend: Email Text message essay baffles British teacher Monday, March 3, 2003 Posted: 10: 17 AM EST (1517 GMT) The girl's essay began: "My smmr hols wr CWOT. B 4, we used 2 go 2 NY 2 C my bro, his GF & thr 3 : - kids FTF. ILNY, it's a gr 8 plc. " Source: CNN. com 16

Trend 4: Political Action and Regulatory Changes l Political action and regulatory changes provide the basis for new business opportunities l EPA laws create opportunities to start firms that help other firms comply with environmental laws and regulations l Non-smoking legislation in Ohio and other states l Periods of war/conflict 17

Legal/Political Trend: Increased Security High Condition (Orange). A High Condition is declared when there is a high risk of terrorist attacks. Source: US Department of Homeland Security “The controversy over airport body scanners has created a crop of entrepreneurs … that promise to keep parts of your body from showing up on the images … agents see. ” Source: Cnn. com, 2011 18

Legal/Political Trend: FCC Indecency Regulations Breached Legal Trend FCC to investigate incident at end of halftime show Social Trend Howard Stern Show Taken Off Clear Channel Stations Whoops! Source: CNN. com Tuesday, February 3, 2004 Posted: 7: 58 AM Source: Clear Channel Communications, Inc. Press Release Wednesday February 25, 2004 19

Suggestions for the Coming Week: • Think about a domain you are familiar with like: • College students • University environment • Your favorite hobbies • Your favorite sports • Your favorite technologies • Etc. • Research trends that might impact these areas in the coming years • Do any of these trends suggest that new needs/problems might emerge that need to be fulfilled/solved? • Can you come up with a way to meet those needs or solve those 20 problems?