©2006 Prentice Hall 2-1 Chapter 2 Entrepreneurship: Successfully Launching New Ventures, 1/e Bruce R. Barringer R. Duane Ireland

Slide 1Bruce R. Barringer
R. Duane Ireland
©2006 Prentice Hall
Most entrepreneurial firms are started in one of two ways:
Internally stimulated: entrepreneur decides to start a firm, searches for and recognizes an opportunity, then starts a business.
Externally stimulated: entrepreneur recognizes a problem or an opportunity gap and creates a business to fill it.
Opportunity Defined
An opportunity is a favorable set of circumstances that creates the need for a new product, service or business idea.
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Attractive
Durable
Timely
Anchored in a product, service, or business that adds value for its buyer or end user
Should also add value for necessary network partners (e.g., those providing resources necessary for venture success)
An opportunity has five essential qualities.
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Idea
An idea is a thought, impression, or notion. It may or may not meet the criteria of an opportunity.
Difference Between an Idea and an Opportunity
Many businesses fail, not because the entrepreneurs that started the businesses didn’t work hard—they fail because there was no real opportunity to begin with.
Before getting excited about a business idea, it is crucial to understand whether the idea fills a need and meets the criteria for an opportunity.
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Opportunity Recognition
Opportunity recognition is the process of perceiving the possibility of a profitable new business or a new product or service
Thus, opportunity recognition involves perceiving the possibility of potential opportunity that is
Attractive
Durable
Timely
Anchored in a product, service, etc. that offers value to the customer or end user
Adds value to required network partners
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Window of Opportunity
Window of Opportunity
The term “window of opportunity” is a metaphor describing the time period in which a firm can realistically enter a new market.
Once the market for a new product is established, its window of opportunity opens, and new entrants flow in.
At some point, the market matures, and the window of opportunity (for new entrants) closes.
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Observing Trends
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Economic forces affect consumers’ level of disposable income.
Who has money to spend and who is trying to cut costs.
An increase in the number of women in the workforce and their related increase in disposable income was one of the factors that led the founders of buyandhold.com to target women.
Many large firms are trying to cut costs. Entrepreneurs have taken advantage of this trend by starting firms that help other firms control costs.
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Economic Trend: Teen Affluence
Last year teenage shoppers spent over $170 billion — double the amount just 10 years earlier (ABC news, 2003).
Over the past five years, teen purchases … have grown [more] than the teen population, rising from $122 billion annually in 1997 to $170 billion last year (The Sun Herald, 2003).
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Economic Trend: Fuel and Steel Prices
Higher Gas Prices: The Next Motorcycle Sales Boom Is In Sight
“…it’s evident we’ll see motorcycle sales continue to increase in the coming months.”
Source: Mehren, 2004
Auto Suppliers Applaud Congressional Resolution on Steel Hearings
“ …Motor & Equipment Manufacturers Association (MEMA) … commended … a resolution calling on the International Trade Commission (ITC) to consider – and report on – the impact of U.S. antidumping or countervailing duties on steel-consuming manufacturers.”
“… ITC hearings will be held in March and April to review duties on … steel … found to be unfairly priced or “dumped” into the U.S. market…”
Source: MEMA, February 10, 2005
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Social Forces
Changes in social trends provide openings for new businesses on an ongoing basis.
The continual proliferation of fast-food isn’t happening because people love fast food. It is happening because people are busy, and have disposable income.
The Sony Walkman developed not because consumers wanted smaller radios but because people wanted to listen to music while on the go.
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Examples of Social Forces That Allow For New Business Opportunities
Family and work patterns
The increasing diversity in the workplace
The globalization of industry
The proliferation of computers and the Internet
The increase in the number of cell phone users
New forms of entertainment
Social Trend: Health Conscious Consumers
Inside Story: 10 Candy Trends
“Fueled by popularity of the Atkins diet and a health-conscious uprising in America, products that are low in fat, carbs, sugar and calories are hitting retail shelves at lightening speed.”
“ACNielsen reports that in 2002, diet candies grew the fastest, claiming 23 percent of the $24 billion candy market.”
Source: Carneal (2004), American Wholesale Marketers Association
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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
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Technological Advances
Given the pace of technological change, entrepreneurs need to keep on top of how new technologies affect current and future business opportunities.
Entire industries have emerged due to technological advances.
Examples: computer industry, Internet, biotechnology, and digital photography.
Once a technology is created, new firms form to take the technology to a higher level.
For example, RealNetworks was started to add video capability to the Internet.
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Avis takes a bite of Bluetooth
“… Avis Europe is improv[ing] customer service by using Bluetooth-enabled … mobile devices and wireless check-in infrastructure … to cut down on the time taken for its staff to check-in a car being returned to the depot by the customer.”
Source: Europe Intelligence Wire, February 10, 2005
USB drives go beyond storage
“... a new company called U3 … said it would promote the next generation in flash drive technology.”
“Keychain drives are going beyond … storage … They're going to … [run] applications … [like] PowerPoint [,] … and ScanDisk.”
“A few companies have already endorsed the idea: McAfee … antivirus software vendor [and] ... Zone Labs … the firewall maker …”
Source: Hesseldahl (2005), Forbes
Monday, March 3, 2003 Posted: 10:17 AM EST (1517 GMT)
The girl's essay began:
"My smmr hols wr CWOT. B4, we used 2go2 NY 2C my bro, his GF & thr 3 :- kids FTF. ILNY, it's a gr8 plc."
Source: CNN.com
Political Action and Regulatory Changes
Political action and regulatory changes provide the basis for new business opportunities.
For example, laws that protect the environment have created opportunities for entrepreneurs to start firms that help other firms comply with environmental laws and regulations.
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Legal/Political Trend: Legal Unrest
Visitors wait in line to be fingerprinted and photographed at the U.S. Customs check point at San Francisco International Airport in San Francisco.
Source: CBSnews.com
High Condition (Orange). A High Condition is declared when there is a high risk of terrorist attacks.
Source: US Department of Homeland Security
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FCC to investigate incident at end of halftime show
Source: CNN.com
Wednesday February 25, 2004
Globalization
Today, over 97% of all U.S. exporters are small businesses with fewer than 500 employees.