Opportunity analysis

Opportunity analysis
See also
SWOT analysis Strategic management Promotional plan Organizational innovation Macro environment analysis Business process reengineering Innovation process Strategic position TOWS analysis

Opportunity analysis is one of the most important strategic management tasks. It involves scanning of market information to spot various signals which could lead to development of new products, markets or profit sources. Examples of opportunities include: new customers, bankruptcy of competitor, technological innovation, new sources of materials or labour. Opportunity analysis is strongly connected to SWOT analysis and TOWS analysis, it requires also inputs from STEEPLE analysis.

Sources of opportunity

Seven sources of opportunity:

a) existing within a company:

• process needs
• unexpected events
• variances in demand and supply
• market changes

b) existing in society and environment:

• demographic changes
• new knowledge
• changes in a culture

Those sources can create new information, enables to use the exploitation of market inefficiencies and react on the changes in costs and benefits coming from deploying alternative resources or raw materials.

Identification of opportunities

The entrepreneurial opportunities that refer to situations which generate a potential for increasing economic value are usually split into five forms:

• introduction of new products to the market
• implementation of new production method
• opening a new market
• bringing into existence a new type of company
• decreasing of raw material costs

The opportunities are also defined as a gap in the market which create a demand for a new product. The key steps to identify the opportunity:

• entrepreneurial alertness – being prepared to change conditions
• active search – seeking out the relevant information and potential sources
• knowledge of the opportunity domain – having the specific knowledge about innovation and valuable solutions

Gathering a detailed knowledge about market opportunity requires conducting of five separate analysis that are defined as components of this study:

• demand analysis – exploration of the size of demand (incipient, latent, current) and potential market through classificatory models and measurement
• industry analysis – assessment of industrial trends and study of common practices as a bargaining power and treats coming from new entrants
• competitor analysis – gaining the knowledge about goals and next steps of competitors that enables the company to apply new way of using their resources
• segmentation analysis – selection of segments to serve by using attractiveness criteria as market growth potential, entry barriers and the percentage of market dominated by large competitors
• channel analysis – choosing the right channel partners which dispose appropriate skills and knowledge that can improve company performance

Approaches in opportunity analysis

Realism

Realist perspective is the approach grounded in economics. The opportunities are the result of market imperfections and due to that they always exist even if nobody takes the chance. The role of the company owner is to find them and identify the way of generate economic value.

Constructionism

The approach contains different assumptions about the opportunity's nature that is important in identification process. The ambiguous information leads to misunderstanding in interpreting by entrepreneur and causes not objective opportunities. This perspective assumes that the opportunities may not exist until somebody creates them – they are the result of people actions.

References

• Cavusgil, S. T., Kiyak, T., & Yeniyurt, S. (2004). Complementary approaches to preliminary foreign market opportunity assessment: Country clustering and country ranking. Industrial Marketing Management, 33(7), 607-617.

• Gruber, M., MacMillan, I. C., & Thompson, J. D. (2008). Look before you leap: Market opportunity identification in emerging technology firms. Management Science, 54(9), 1652-1665.

• Karlesky M. J., (2015), Identifying Entrepreneurial Opportunities: Cognition and Categorization in Nascent Entrepreneurs, University of Michigan, 6-7, 9-14.

• Kuada J., (2016), A Framework of Market Opportunity Analysis, Adonis&Abbey Publishers Ltd London, 70-83.

• Urwyler M., (2006), Opportunity Identification and Exploitation: A Case Study of Three Swiss-Based Software Companies, The University of St. Gallen, no. 3183, 18-19.

Footnotes

Author: Justyna Kurnik