Where Do Entrepreneurial Opportunities Come From

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Where do entrepreneurial opportunitiescome from?

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Murray Hunter

University Malaysia PerlisAn opportunity is a gap in the market

where there is the potential to dosomething different and create value(Wickham 2004). This represents apotential to serve customers better

than they are already being servedthrough a product or service thatoffers consumers more utility in

terms of satisfying human needsthan existing products or services.An opportunity must solve aproblem, fulfil a need or want, create

a fad or trend for any exploitation ofit to have a chance of succeeding.New opportunities continuallyemerge but dont necessarily presentthemselves openly. They must beseen, discovered and identified,which is the task of entrepreneurs

and managers of firms. Not everyidea is worthy enough to take actionupon. The potential return on theinvestment of time and effort must

be large enough to offset theopportunity cost of exploiting another

idea or doing something else (Kirzner 1973).

All opportunities have a basis or rationale of being. If the opportunity is to beconsidered entrepreneurial, it must originate from a source of innovation, as

entrepreneurial market activity is novel by definition (Kuratko & Hodgetts 2004).An innovation can be seen as the source that enables the successful exploitation

of ideas into new products, services, processes or business models. Innovation iscritical to enable a firm to grow and remain profitable. Innovation combines

knowledge and the needs and wants of consumers that are the base ofopportunities. Innovation is not just about the improvement of technology butcovers all aspects of a business and the way it organizes itself and operates.Innovation is an ingredient needed to construct most opportunities that seek to

exploit changes within the environment. Innovation combines knowledge,resources, capabilities and competencies with social networks to create newmeans of creating value.

Innovation can create new sources of competitive advantage for a firm when itenables incremental changes in the market. Revolutionary innovation can create

new industries with new breakthroughs in technology and methods oforganization. However there must be a reason for innovation, not just something
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done for the sake of doing it like what occurred with the launch ofNew Coke,replacing the well accepted Classic Coke during the 1980s. Likewise technologyalone does not automatically yield innovation, imagination, development andmarketing skills are needed. Innovation must provide the basis or source ofopportunity that is intended to exploit a gap within the marketplace.However not all sources of opportunity need be innovative and most venturesusually start with non-innovative ideas. In fact very few enterprises have neither,the time, resources, technology or expertise to research and develop newbusiness ideas and innovations (Johnson & Tilley 1999).

A business begins with an idea that has been deemed an opportunity through

some form of analysis and a person is motivated enough to act upon it. Themajority of ideas are derived from the following categories;1. An old type of business that can be given a new twist or professionalism, i.e.,

McDonalds or herbal products,2. A standard product or service that can be customised, i.e., recording birthdays

on customer records so that congratulatory messages can be individually sent tocustomers by a company,3. New technology that can be adapted to manufacture old products, i.e., desktop

publishing, compact disks, faxes and email, etc.

4. Imported products that can be replaced with domestic products, i.e., the basisof many domestic automobile industries,

5. The changing of business models, i.e., sourcing products from a third partyrather than manufacturing them,6. Developing the same business identity in another geographical location, i.e.,

The opening up of Coca Cola, KFC and Pizza Hut franchises in other states andcountries, and7. Replicating another business and competing against the original business, i.e.,

the opening up of a bakery, milk bar, convenience store near another one.

Although entrepreneurship has been associated with opportunity, there has been

very little written about the sources of opportunity. Attention has been focused

upon the sources of innovation, rather than the sources of opportunity, which canbe innovative or non-innovative.Business development is concerned about the art of seeing and exploitingopportunity for the creation of value, which may contribute to the firmsprofitability, growth and/or survival. This process goes through four basic phases;1. The discovery, identification or construction of ideas about opportunitiesthrough the creative process,2. The screening of these ideas to determine whether an opportunity exists that

has potential to be exploited,


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3. The crafting of a useful strategy that is able to exploit the identifiedopportunity, and4. The implementation of the strategy in a way that adds value to the firm.

There is an abundance of management theory about the identification andexploitation of opportunities from various points of view. Andrews (1965), Ansoff(1965) and Porter (1980, 1985, 1990) take the point of view that opportunityidentification and strategy development is rational and analytical through

convergent thinking process. Ohmae (1982), Mintzberg (1994) and Stacy (1993)see opportunity identification and strategy development as more intuitive and acreative process through divergent thinking. Others like Wilson (1994, 1998),

Raimond (1996), Liedtka (1998a, 1998b) and Heracleous (1998) see opportunityidentification and strategy development as a mixture of art and science. Whatseems to be important is a firms ability to recognise what information isimportant in opportunity recognition and subsequent innovative processes, its

prior and related knowledge and experience (Cohen & Levinthal 1990), and its

alertness, self efficacy, creativity, social networks and the type of opportunityitself (Ardichviliet. al. 2003). Previous entrepreneurial experience may assist indeveloping an opportunity intellectthat aids the identification of opportunities

and provides a framework that allows informed and experienced based decisionsabout how to exploit an identified opportunity (Kaish & Gilad 1991).

The process of opportunity identification would appear to be an emergent ratherthan a deductive process, requiring divergent rather than convergent thinking.Innovation is generated through social interaction where data cannot be analyzedin logical ways. For example quantitative market research may be very limited in

the information it can provide a person who foresees the possibility of opening asandwich bar next to a commuter train station or a courthouse. Understanding

consumer behaviour, their wants and needs will be more important in making anydecision to exploit the perceived opportunity. Therefore seeing opportunity ismore related to the ability to imagine and associated emotions. New ideas areconstructed, not analyzed. The future cannot be forecast, it can only be explored(Schumacher 1974, P. 200).In order to see the potential sources of opportunity one must be able to take astrategic view of the firm and the environment. A strategic view is one that canpick up subtle changes in the environment through a degree of sensitivity andalertness and be able to extrapolate any linkages and connections discovered intoidea scenarios that can be evaluated. An individual will tend to be more sensitiveand alert in domains that he or she already has knowledge and experience.

To see opportunity there must be motivation or intent. Hamel and Prahalad(1989) conceptualized the concept ofstrategic intentwhere there is an intuitivevision of the future direction of the firm. This helps to provide focus on thedomain and selective parts of the environment that are considered important tothe firms future. Therefore as well as being a motivator,strategic intentconcernsitself with the immediate domain and the firms perceived capabilities and prior

learning linked through prior knowledge.Strategic intentalso gives a sense ofdestiny and direction (Hamel & Prahalad 1994, pp. 129-130).

The discovery of useful sources of opportunity in the construct of opportunities istied to observation of environment changes over time. Changes in the

environment usually occur in an evolutionary manner which the average personwill not be aware and think about. Connectiveness of the past and present to the


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future must be incubated by the individuals who make up the firm over reflectionand time.

Alternatively sources of opportunity may be driven by new technologies, either asan incremental step or breakthrough. New technologies incorporated intoproducts, services or improve production processes can potentially add value to a

firm. With novel breakthrough technologies a firm may be able to create a newmarket segment, i.e., P&Gs development of Pert/Rejoice 2 in 1 shampoo, or evena new industry, i.e., the advent of cellular phones created a new industryseparate to existing landline phone networks.

The firm will operate according to a self hypothesiswhich is influenced by

learning and prior knowledge. A self hypothesisis a shared mental model of theenvironment and the firms place within it. The firms self hypothesisis wherethe firm perceives its own strengths and weaknesses, those of its competitors,the potential reactions of competitors to an aggressive stance taken by the firm,

weak spots and barriers within the field and areas where the firm should not

enter or is safe to enter. The self hypothesisis the firms view of the world,generating a perception of its own self efficacy. The self hypothesiscan be abarrier to seeing opportunities if one is not aware of the assumptions behind it.

Most influence of prior knowledge is manifested through the firms selfhypothesis. Prior knowledge contains learning about what can and cannot be

done within the market by the firm. One important role prior knowledge plays isin technical and tacit knowledge about products, business models, technology,consumers, and competitors, etc. Through incubation prior knowledge assists thecognitive system make linkages and connections which identify new sources of

opportunity for the firm. The huge majority of ideas already exist in one form oranother within the existing or another domain, another geographical location or in

another time. We remember different ideas from past experience or observationof the environment. Past knowledge may assist in creating unique insights intothe consequences of change occurring within the environment.

Alertness and sensitivity are qualities needed to see and pick up subtle changes inthe environment. Our focus also plays a role in assisting to narrow down ourattention to what is relevant to potential new opportunities. Finally it is importantto know what to look for in finding new opportunities. Our opportunity intellect isa specialised knowledge which guides us through the discovery, evaluation andscenario building process of a potential opportunity. It is a strong entrepreneurialintuitive ability. The components influencing the strategic view are shown inFigure 1.


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Figure 1. The components of the strategic view.Therefore new sources of opportunity can be pushed out by a firm as a new

product or service into the marketplace or be pulled by unsatisfied customerneeds. Some innovations go on to be successful as the product or service is whatcustomers are looking for, while others miss fulfilling any latent customer need

and fail. In the case of failure mistakes can be felt very quickly with a product,service, or even business failure, which may prove very expensive.

The sources of opportunityPeter Drucker (1985, P. 34) remarked that we cannot develop a full and completetheory of the sources of opportunity, yet we can understand where opportunitiesmay come from. The overwhelming majority of successful innovations exploitsocial, economic and regulatory change or new and improved technologies. Newto the world breakthrough inventions may provoke change as did the aeroplaneto commercial aviation, the telephone to communication and the television to

entertainment, etc. New technologies often make great changes to the way we

live our lives as we are beginning to see through new advances in biotechnologyand genomics.


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Innovation requires a systematic and disciplined way of work based upon what

the innovator sees and learns from the environment, particularly in his or her owndomain. All sources of opportunity must be based on purchasing power which isthe ultimate driver of innovation. For example, very few people in Malaysia couldafford to purchase a new Proton Saga car when it was launched in Malaysia

during 1984, if it was not for the innovative leasing packages attached topurchases of the vehicles. Finance packages made the Proton Saga car availableto many new potential car buyers through its easy access to lower middle incomegroups. This was the innovative part of the proton business model that enabledthe company to gain over a 70% market share in Malaysia during the late 1980sand throughout the 1990s. Finance changed the Malaysian car market from asupply driven to a demand driven market. These forms of social innovation often

have much more impact than technical innovation.

The author has divided the sources of opportunity into six main categories,

market void, technology infusion, structural changes, resource monopoly,

regulation and non-innovative. Each main category has a number of sub-categories (see Figure 2). Further, each source of opportunity will have a differentimpact upon the environment. It may;

- Increase efficiency with small intensely focused productivity improvementsby improving what already exists through minimal investment. These types of

sources of opportunity can be seen in many quality programs that manufacturingand service industries engage upon.

- Make evolutionary changes incremental to the market place focused onimproving existing products and services like bank ATMs, Dell Computers masscustomization of home computers as per customer preferences and Toyotas

development of specialized distribution channels for the Scion brand targeted atGen Y, etc., and

- Make revolutionary changes through radical new additions to the market

place that change the way people think about and do things, which may lead tochanges in existing structure of the industry and/or marketplace, like theinvention of the motor vehicle at the beginning of the 20th century and HenryFords development of the mass production line around 1914 which brought the

product from something only the elite could afford to something affordable to themiddle classes of the United States (Dent 1994).


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Figure 2. The potential sources of opportunity (Opportunity anchors) for a firm.

The result of utilizing a source of opportunity will be;1. The development of new products which may exploit established technology,simply an improvement of what is already available or may offer a new radicalway of doing something.2. New services,3. New production technologies,4. New operating practices,5. New ways of delivering the product to the customer,

6. New means of informing the customer about the product, or7. New ways of managing relationships between entities.

Sources of opportunities are also viewed from different perspectives dependingupon who is looking at the environment. Individuals with limited ideas, capital,experience, expertise and networks may look for an opportunity that returns

them a wage rather than a profit. An entrepreneur with good domain knowledgeand experience within an industry may have his or her own theory of how things


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can be done betterbelieving they have a personal theory of success and be veryfocused upon specific types of opportunities. A corporation will take a strategicview and analyse potential opportunity space looking at how to minimize oreliminate risks and uncertainty before moving into any form of action. Thereforeeach individual will look at different levels of return and profitability and approachthe environment with different levels of capital, resources, skills and capabilities

and networks.

A brief description of each source of opportunity is described below.

Market VoidMarket void opportunities are those potential opportunities that may exist due toan unnoticed gap or un-serviced portion of the market. They includeincongruities, demographic, and perceptual changes.Incongruities: Peter Drucker in his book Innovation &Entrepreneurship identifies incongruities as a source of innovation. He defines anincongruity as a discrepancy, a dissonance, between what is and what ought tobe(Drucker 1985, P. 57). An incongruity is a symptom of an opportunity to

innovate. Consumers are aware of them, but not in an overtly conscious way thatleads to the expression of their unmet needs. It may be a latent need, a yearningfor some improvement or a want that there was something that could solve their

problem. However these incongruities may only be visible to people withexperience of the industry, being very difficult to detect by those outside theindustry. Alternatively they may be visible to people who have that need. Ifincongruities are detected and exploited, they can be very powerful sources of

opportunities that can lead to substantial growth for a firm.

Demographic Changes: Demographics represent differences in population

distribution, age structure, ethnic and racial composition, employment levels,education status, and income distribution, etc. The proportion and number ofwomen in the population, ratio of blue to white collar workers, unemployed to selfemployed, births, deaths, and immigration influences both the types andmagnitude of opportunities available in a society. What people want, need, andpurchase in aggregate can be correlated to specific demographic groups.

Perceptual Changes: Opportunities are created when a sizable proportion of apopulation change perception. A change in perception does not alter the facts,

but the understanding and identity of a population alters to the point wheremeanings change. Changing perception is about changing attitudes, which lead tochanging habits.

Technology Infusion: Technology infusion is an extremely important source of

opportunity. The infusion of new technology into a field brings change and thatchange usually exposes further sets of opportunities. This can be clearly seenwith the introduction of the internet in the 1990s, where over the last decade anda half the way people interact with each other and the rest of the community has

drastically changed. Email has replaced letter writing, chat groups and othersocial media link individuals to the general community and special interestgroups. People now seek news and information from conventional and alternative

news sites and various sites that contain product information. People purchaseproducts, airline tickets, make concert bookings and use commercial services


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Structural ChangesStructural changes are important sources of opportunities and can occur throughchanging external factors or through the firm constructing them through strategy.These are discussed in the next three sections.

Changes in Industry Structure: Industry structure will usually change when shiftsin costs, relationships alter, potential profits and emerging customer needs fromeconomic, sociological, regulatory, or technological forces as detected andexploited. This presents itself in the conceptual elevation of a new product orservice that may emerge to the level of being a potential and viable opportunity(Porter 1980, P. 215). This is often very difficult to see from within the industryas existing firms accept the tacit rules of the industry, have developed theircapabilities and competencies according to the existing structure of the industryand become complacent. This was seen in the U.S. automobile and retail industry

in the 1960s and the airline industry in the 1970s, where many incumbent firmsdid not detect industry changes (or ignored them) and made no changes to theirstrategy. New entrants came into these industries without much resistance fromthe incumbents and eventually took over market leadership.New Processes: Another source of opportunity that alters structure are newprocesses. A new process within a business/or industry improves efficiency,

enhances a service or product delivery and provides extra features and benefitsto users and consumers, thus giving the innovative firm some form of competitiveadvantage over its rivals. New processes take advantage of incongruities,changing demographics, new target consumer groups, or regulatory changes, etc.

New processes create business that didnt exist before, either through creatingnew customers or winning over customers from rivals. A process change usuallyoccurs through either the development of new technology or curiosity thatcreates the following types of questions:

- How can this be done better?

- How can this process be changed to solve our existing problems?- How can the process change to meet the needs of consumers better?- How can this process be simplified?- How can this process create extra benefits to consumers?

A process change strengthens something that is operating less than optimal.Adaptation, Combination and Integration:A firms success and also itssurvival are dependent upon the ability to adapt to the changing environment.

Failure to do so will leave the market open to other competitors that have morerelevant strategies and capabilities to exploit standing opportunities. The optimalposition of the firm in relation to presenting opportunities is when its strategies,resources, capabilities, skills and networks are aligned to the target opportunity.

However this alignment is not a permanent position as opportunity is continuallyshifting. Therefore a firm must be able to adapt its strategy structure,


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deployment of resources and relevant capabilities to the shifting opportunity.Alignment must match opportunity and the firm must adapt to its continuallyshift to maintain alignment.

Resource MonopolyVery few industries actually operate according to perfect competition. Firmsdevelop and exercise some form of insulation from other firms by means of realor fancied product differences from their rivals (Stigler 1968, P. 308). There arenumerous products in the market but demand for them is far from being a

random action. This applies to housing, automobiles, electrical appliances, traveland holidays, utilities (electricity, water and gas), food, and toothpaste. Productsin each category do not necessarily compete directly, yet there is rivalry (Stigler

1968, P. 310). Every firm has some degree of latitude in setting prices beforecustomers will start looking for substitutes. In this way firms have some degreeof monopoly.

A resource monopoly is a general term referring to a situation where a firmcontrols all the resources necessary to produce a product, perform a service, orgenerally undertake business in a defined area. It is an economic term but also

describes a source of opportunity when a firm has a monopoly advantage over aspecific resource. In general the less competition from other goods and servicesand availability of substitutes, the stronger will be the monopoly position.Monopolies occur for different reasons, physical location, access to a particularraw material, control over a capability, a legal concession and restriction on otherfirms to compete, or a form of monopoly through powerful branding. These formsof monopoly will be examined in more detail in this section.Physical Resource: A unique barrier to entry to other firms in a market is theprocession of some form of unique physical resource. The mining industry is agood example of firms that can exercise market power over the exclusive access

to a particular precious material or mineral. MMC Norilsk Nickel of Russia controlsover 90% of the worlds nickel and the worlds leading producer of palladium. TheDe Beers group of companies controlled almost all diamond mining and trading in

Southern Africa and Canada until the late 1990s through various methods ofrestricting the market (Kretschmer 1998). Companies that hold strategic claimsfor minerals that have, or are likely to have strong demand in the future will be ina position to make massive profits. For example, a mineral like lithium may have

a large future as a material needed in batteries for hybrid cars. Mining companiesthat hold these resources will be in a good position to grow exponentially in the

near future, if battery technologies require the use of lithium.

Capacity Resource: A capacity resource is an exclusive capability of anindividual or firm to carry out a particular activity. This can usually be achieved inthree ways; the need of specified qualifications or licensing to carry out afunction, through specific skills and capabilities a person or firms have at theirdisposal, or through shear dominance and strength. Professional occupations likedoctors, lawyers, architects, engineers, pilots, veterinarians and psychologists,

etc., require a formal degree recognisable by a governing association of theprofession and license to practice.

Legal Resource: Governments usually grant a restricted number of operatinglicenses to firms in the banking, finance, petrol distribution, communications andbroadcasting industries. This creates an oligopoly situation where firms have


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some degree of pricing power, especially if they can combine another source ofmonopoly like branding and product differentiation. Governments may also limitthe granting of licenses to gambling concessions and casinos forming legalmonopolies where revenue above costs are shared between the government andconcessionaire as taxes and profits respectively. Non-government organizationslike sports federations also restrict membership of sports clubs like football which

have some of the characteristics of a monopoly.

Brand Resource: Products and services produced by companies differ in terms ofquality, reputation, location convenience, and so on. These factors influence thedesirability of a product to various buyers. Each product or service has some formof uniqueness (monopoly power), and yet has many rivals. Porter (1980) definedtwo forms of competitive strategy that can build some degree of product

uniqueness through product differentiation and focus upon specific niche markets.Porter postulated that through differentiation and focus a firm can develop someform of competitive advantage over its rivals. De Bono (1993) outlined the

criteria through which a firm can develop a value monopoly, listing physicaluniqueness, technological uniqueness, name recognition, dominance, cost of

entry, brand image, and segmentation, as factors that contribute to creating abrand name that is desired by consumers over other brands. Chan Kim andMauborgne (2005) took the concept of differentiation and creating productuniqueness further in their book Blue Ocean Strategy.

Scarcity Power: Certain types of businesses like retail providers located within atourist, historical or sports precinct, entertainment, food and beverage inshopping malls and food vending in restricted places like airports, train stations,and the aircraft and trains themselves, etc, can exercise some degree ofscarcity

power. Scarcity poweris a term used by Time Hardford (2006) in his book TheUndercover Economistto describe a situation where a business can charge a priceabove the standard or going price in a particular location because of the unique

location of the business away from other potential competitors at a crowddrawing location. This is why a cup of coffee is relatively expensive in manytourist locations, airports, and historical sites around the world.

Changes in the Cost or Value of Resources: Changing resource costs or valuescreate new opportunities by changing industry and product cost structures. Achange in the cost of a resource will make it either more or less attractive to

consumers of that resource. For example the rise in the cost of petroleum makesthe use of petroleum as an energy source less attractive. Due to short terminelastic demand, consumption will not necessarily decline, but will encourageserious consideration of alternative energy sources. From the demand

perspective, an increased interest in green technologieswill increase the valueof renewable resources, perhaps making them viable alternatives to conventionalenergy sources. This is the rationale behind the development of alternativeenergies and their relative economic feasibility to conventional fuels. As

petroleum prices increase the viability of alternative fuels increase.

RegulationRegulation determines who is able to enter a market/industry, how many, howfirms must behave, and what other legal requirements they must satisfy.Regulation in some form covers most aspects of our society and influences the

opportunities available to the population within it, be it the general population atlarge or a small select qualified group within it, with the barriers to entry it


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creates. Regulation determines what is legitimate and legal in society and what isillegitimate and illegal. Regulation determines what customers should expect, howprotected they are in the decisions they make, and institutionalizes theseexpectations and protections. Regulation can define the product cost and pricingstructures of an industry, determining its attractiveness to investors.

Effect on Process: Regulation concerning process determines which firms canenter a market through licensing, the rules of the game,how easy or difficult itis to start up a firm, environmental compliance, occupational health and safety,ethics, corporate governance and social responsibility, consumer protection andthe raising of capital.

Effect on Product: Regulation concerning product specifies standards, whatproducts are forbidden, and specific restrictions on the use of certain materials inthe manufacture of nominated products.

Non-InnovativeNon-innovative opportunities are those which are not based on breakthroughs,incremental improvements in technology, or in utilizing novel business models to

gain competitive advantage. Non-innovative opportunities include personalservices and consulting, duplication of other businesses, extension of otherbusiness concepts, or copy and imitation of other products. Non-innovative

businesses are risky, rely on hard and continuous work to succeed and survive.Personal Service & Consultancy: Personal services and consultancy includes awide range of activities including investment advising, personnel recruitment, real

estate sales, tax advising, legal services, house conveyance, managerialconsultancy, interior decorating, fortune telling, and any other personal service orconsultancy that requires the provision of personal advice or any other service to

clients. This type of business depends upon an individual having personalknowledge and experience in a discipline that people are willing to pay for, goodpersonal reputations, personal selling skills, and contacts and deal making skills(Bhide 1999). These businesses are totally orientated towards exploiting shortterm consulting opportunities and success depends upon the ability to design anddevelop a good product (service) and the ability to deliver it well to solve theclients problems. The industries that these businesses operate within are usually

fragmented and sometimes localized. Little innovation can be utilized indeveloping products in this industry as it will be duplicated almost immediately by

competitors. Flexibility is the key in being able to tailor solutions directly to theclients needs. Customer loyalty can only be created by solving clients direct

problems with an excellent level of personal service and that he or she is satisfiedin the value for money of the service. Developing a business plan to start upthese types of businesses is of not much use because it is hard to gauge whatbusiness will come from where and for how long it will last.Duplication: The concept of duplication is about a firm replicating its businessmodel within a different business location, whether locally, regionally, nationally,

or internationally. Duplication is a widely utilized source of opportunity (even bythe most innovative forms) by many types of businesses involved in retailing,distribution, manufacturing, and service industries as a basis of their growth

strategies. The aim of duplication is to replicate something successful in one placeinto another place. Where factors are similar, e.g. location variables, market size,demographics, consumer profiles, and the like, this process is relatively straight


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forward. Duplication is the central concept behind the opening of a new Wal-Mart,Costco or Carrefour store, a McDonalds or KFC outlet, the Body Shop, a 7-Eleven, a Starbucks or Gloria Jeans coffee shop, or a Kinokuniya bookstore. Theduplicated businesses are controlled and coordinated through various forms oforganization and control, including centralized management, centralizedaccounting and data capturing systems, decentralized management with highly

formal procedural systems, or franchise agreements, etc.Extension: Extension covers a number of sources of opportunity that resemblethree of Ansoffs strategy typologies, being pursuing growth through launchingexisting products into new markets or market development, launching newproducts into existing markets or product development, and in some caseslaunching new (modified) products into existing markets or diversification.

Through such a gamut, extension is one of the most commonly utilized sources ofopportunity exploited.

Launching existing products into new markets extends the boundaries of a firms

existing scope of business and is thus termed market development. This is wherea firm opens up a new market for its existing product or range of products. Inorder to succeed, the firm must extend its ability to market, promote, sell and

distribute its products in the new market. The firm may simply duplicate what it isalready doing in its existing markets into the new market scenario. Ifenvironmental or market variables are different then the firm may have to adapt

its strategies to the different environment.Copy/Imitation: The majority of businesses in the world are copies of otherbusinesses somewhere else. They are basically a copy of a business or the

proprietor has copied some of the elements of other businesses and incorporatedthem into his or her own. This is unavoidable as there is demand for products and

services almost everywhere. Therefore there is a need for convenience stores,supermarkets, newspaper vendors, shoe stores, shoe repair stalls, coffee loungesand kiosks, fast and take-away food vendors, sandwich bars, boutiques, discountstores, second-hand stores, electrical stores, computer stores, accountingservices, lawn mowing services, home repair services, mobile phone stores, etc.in more than one location, and consequently there is always an opportunity tocopy a successful business model and place it somewhere else.

Relating sources of opportunity to strategyAfter identifying and explaining each source of opportunity individually, it must besaid that a firm rarely utilizes only one source of opportunity within its working

business model. The lines between each source of opportunity are also blurredand entrepreneurial ventures may utilize two or even three different sources ofopportunity within their working business models.Opportunities can originate externally from the environment or internally throughinnovation within the organization. Common to both sources of opportunity is thatcreativity constructed the strategy to exploit the discovered opportunity.

Consequently there are various sources of opportunity available to exploit andmake a profit. This includes the creation of tangible products like automobiles,aircraft, soap and processed foods, intangible products like computer games and

software, the use of physical distribution channels like supermarkets and discountstores, or through the internet by creating or utilizing a high traffic website. Somenew products emerge through discovery or by using materials for different


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applications than what they were designed for. Other opportunities are createdthrough the development of new production processes, or the creation of newbusiness models.

Sources of opportunity are found through discovering new information thatcomplements what a person already knows. New information that brings new

perspectives changes a persons meaning. This process of discovery may occurthrough a change in social demographics or attitudes, economic changes,technology changes, or regulatory changes. This could be a gradual process or betriggered by something drastic like a disaster of some kind, or an unexpectedsuccess or failure (Drucker 1986, P. 37). For example the development of stronganti-trust legislation in the United States created many opportunities in trucking,railroads, banking, airlines, and natural gas (Winston 1998). As we have seen in

chapter two, opportunities occur according to a time, place, and stage ofeconomic development and as we will see in chapter nine, opportunities are alsothe result of a particular competitive situation. In some situations chance plays a

role in developing opportunities. Ventures may produce dis-continualties thatallow shifts in competitive positions that may nullify the advantages of existing

competitors and can result from the strategic decisions firms make. For examplethe apparel industry developed in Singapore during the 1980s as Europeancountries placed quotas on apparel imports from Japan (Porter 1990, P. 124).Some opportunities may require a prior domain research, while others may not(Klevorick et. al. 1995). The best conditions for opportunities to emerge are whena market grows faster than production capacity, thereby creating moreopportunities to add more production capacity. Growing markets will eventuallysegment (Christenesen & Bower 1996), allowing firms to specialize in particularniches (Geroski 2001).

Opportunity conditions tend to be more favourable for exploitation where theremay be barriers of entry to prevent others from exploiting the same opportunity.

For example in sources of opportunity based on technology infusion, theintellectual property framework provides for innovating firms to protect theirinventions or innovations through patents. Methods of protection of innovationswill vary from industry to industry, where company proprietary knowledge maybe

a better way to protect information than through the formal intellectual propertyprotection system (Levin et. al. 1987), particularly where technology changesrapidly or innovations are unable to be patented.Different sources of opportunities require different levels of creativity rangingfrom no originality to radical innovation. Peoples capacity for execution differs aswell. Revolutionary creativity will throw a stagnant market into turmoil and may

attract violent retaliation from competitors. On the other hand creative ways ofadding to markets can develop enterprises without the need of new technology orindependent innovation such as is seen in the computer and mobile phoneaccessories market. Where there is no innovation involved, it is very important t

understand the needs of customers to be successful. Innovation is an unnaturalprocess in firms as we build up roadblocks against it (Crawford & di Benedetto2002, P.15).All new businesses have many factors in common; however an entrepreneurialbusiness will have some form of intrinsic quality that will stand that business out

from others. People with entrepreneurial and creative skills that try to dosomething different that result in the change of an industry are a minority in thepopulation. Therefore most businesses start small and dont last long. A largeproportion of these businesses remain small without any significant growth

because they dont have the ideas or products necessary to differentiate


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themselves from their competitors. They fail to use strategy to develop someform of competitive advantage over their competitors.

Any strategy begins with identifying the sources of opportunity to exploit. Thesesources of opportunity should be relevant to the present scope of an existing firmor evoke a sense of purpose and passion from a person who is intending to

engage upon a start-up venture (Dundon 2002, P. 147). A source of opportunityshould be relevant to the firm and the market it will serve, the technology thatthe firm is accustomed to, and compatible with the people within the firm itinterrelates with. The idea should be simple, must be able to be supported by anoverall business strategy, must be distinctively new and better than what isalready available, must be proven, profitable, implementable within the ability ofthe firm, and finally must be meaningful to consumers.

It is impossible to accurately foretell whether an exploited opportunity will end upbeing large and successful. There are too many internal and external variables

that may get in the way of success. Whats necessary is that strategy be

implemented effectively and the strategy itself aims to create leadership overcompetitors. This requires hard work rather than the ability to discoveropportunities and strategic brilliance. Focus, determination, flexibility and

ingenuity are the important qualities in strategy implementation. For this tosuccessfully occur, the entrepreneurs ability must be aligned with the needs ofthe opportunity and strategy components to be effective. It is important to

understand the abilities and disabilities of the firm in relation to any opportunitiesand the change needed in strategy to pursue them, i.e., which type of strategiesis a firm able to cope with and which types of strategies is the firm unable to

perform?Therefore the set of core organizational competencies will need tochange as new opportunities are pursued. This also requires the firms values thatinfluence what type of competencies are valued to change as well over time.Certain values reflect the firms cost structures and control what an organization

may or may not do. For example if a firm requires a margin of 40% on products,then any decisions will reflect that. Such a company would not be capable ofgoing into low margin high volume businesses, even though that type of businessmay represent new channels and opportunities. Different companies exhibit

different values and thus make different decisions on the situations they face.

Whether a firm is successful in exploiting any opportunity partly depends upon

the firms strengths, competencies, networks, and resources. Strongcompetencies like good distribution networks lay down the infrastructure for afirm to launch successive products into a market. It is important that assets,competencies and capabilities the firm has at its disposal are suitable to support

the strategy direction. In entrepreneurial start-ups where resources andcompetencies may be lacking, these must be compensated for through findingcreative ways to cut corners or the use of charisma to assist in developingstrategic relationships with potential customers, suppliers, and other resource

providers.

Continually solving customers problems creates new opportunities for

differentiation and erects new barriers to entry, perpetuating competitiveadvantage (Calvin 2002). Differentiation can be created by developing excellencein sales, marketing, customer relationships, cost, pricing, niche marketing, and

operational procedures and efficiencies, etc. Proper differentiation creates aperceived competitive advantage in the minds of customers. However competitorscan easily copy an innovative product. What they will have trouble emulating isthe systems that incorporate many distinct and complementary capabilities that

build the product. A business with attractive product lines, integrated


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manufacturing systems and logistics, close relationships with customers andsuppliers, a culture of customer responsiveness, and the capabilities to continueproducing a stream of innovative products is hard to copy (Bhide 2000, P. 15).Strategy must try to build up barriers to competitors and be executed well so it isdifficult to copy.

Exploring new ideas in new and changing industries is much easier than makingwaves in mature industries. Product standards and the rules of competition havenot yet been defined. Products that are too revolutionary may be difficult toeducate consumers and not worth the investment. Companies in fast growthindustries usually require a revolutionary idea with a leader that has anevangelistic ability in the implementation stage, i.e., Bill Gates, Steve Jobs andRichard Branson, to lure investors, customers, financiers, employees, suppliers,

and build an organization. Founders who spend a long time in research, reflectionand planning are no more likely to survive in their first three years than peoplewho just seized the opportunity without any planning (Bhide 2000, P. 57).

Entrepreneurs recognise their mistakes when they implement strategy and adjustit as they go along. However perseverance and tenacity can be both a strength

and a weakness during the early days of a start-up firm.

Most firm strategy is about manipulating their current position rather thanseeking wide differentiation and outright competitive advantage. Much strategy isreactionary, out of fear, rather than vision and thus tends to be short term and

focused on risk minimization. Therefore most strategy follows primarily genericpatterns which can be commonly seen in many types of product and servicemarkets.

One of the most common strategies used by firms is to directly copy thecompetitors product or service just utilizing their own brand name or trademark.

Other competitors may modify the product superficially in terms of colour, packsize, fragrance, taste, etc, within their own quality and branding paradigms, i.e.,an economy version or a bonus size pack, etc. A third option is through creativeimitation where the competitor adopts some common product configurations asthe incumbent product (the imitation aspect), and develop their own twists orvariations upon the product (the creative aspect).

A successful product or service is usually expanded in a number of ways. Firstly,a product can be launched in a new geographic market. Secondly, a productsdistribution can be expanded through new distribution channels. Thirdly, aproduct or service can be franchised or licensed to other companies in othermarkets, e.g. McDonalds, KFC, Pizza Hut, or Coca Cola, or a different type of

product licensed with a well known brand name, e.g. Disney, Gucci. Finally, aspin-off firm can be developed utilizing the same brand and technology intoanother industry, e.g. consumer detergent and cleaning product manufacturers

enter the institutional, industrial and commercial cleaning markets.

Firms will have to decide whether they should become early pioneers in a newmarket or make a delayed entry. Early market pioneers tend to be technically

focused, proponents of radical change, visionary within the market context,project orientated, willing to take risks, willing to experiment, self-sufficient, andtend to communicate horizontally across disciplines (Geoghegan 1994). Although

earlier entry may give the firm incumbency advantage, later entrants have timeto look for product and strategy defects, pick up the incumbents blind spots, or

launch a product with a superior form of technology, thereby outflanking theincumbent.


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Opportunity models developed by strategy and marketing researchers may not

fully apply to start-up venture opportunities. On more than one occasion, stronglyembedded competitors like IBM have asked themselves how young upstarts havebeen so successful in pursuing opportunities that were not even on their radarscreens.The nature of opportunity pursued will define the strategies required and the typeand shape of organization needed to support those selected strategies. The

important question that needs to be answered is can the vision derived from thediscovered or constructed opportunity be developed into a workingstrategy?(Walters 2002). The organization must be configured with the correct

assets, structure, processes, values, leadership, resources, competencies, andnetworks to be able to creatively develop the capacity to execute strategiesdeveloped to exploit the identified opportunity, in order to be successful.Although this is very intangible, one must as Peters and Waterman (1981) put it

stick to the knittingto enable an exceptional capacity for execution in order to

tip the competitive balance into the firms favour. Many firms have struggled toexceptionally execute strategy in products closely aligned, but different from theircore business. For example, as previously mentioned S.C. Johnsons sold off their

personal care product arm to focus back on their core household productsbusiness and more recently Fosters the Australian Brewer sold off their winedivision to focus back on their core beer business (Fenner 2010).

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