Entrepreneur's Handbook
ANALYSIS OF MARKET OPPORTUNITIES
Identifying market opportunities has a special importance in entrepreneurship. Especially for new entrepreneurs, the basis of the business idea is the opportunities that are revealed through observation or research in the market. Therefore, one of the main tasks of a successful entrepreneur is to constantly examine changes in the market and analyze what opportunities these changes can bring for the business. The market opportunity includes;
- New desires and needs that may arise in consumers as a result of current and possible future changes,
- Products and services to meet demands and needs,
- New methods and marketing tools to present these products and services to consumers.
The basis of entrepreneurship is to identify new needs, products, and opportunities that include marketing tools arising from changes in market factors and to obtain commercial benefits from these opportunities. For this reason, good entrepreneurs constantly observe environmental changes and systematically analyze the opportunities created by these changes, not only during the establishment phase.
It is generally recommended to conduct a systematic situation analysis to identify market opportunities. Although there are many methods for situation analysis, the simplest and most used method is SWOT analysis as mentioned above. In this analysis, the entrepreneur aims to clearly reveal the situation of the business in many aspects.
The first two letters of SWOT analysis, Strengths and Weaknesses, are revealed as a result of comparing the resources of the business with its competitors. In the Opportunities and Threats section, it is aimed to determine the situation that arises due to changes in environmental factors. In this way, the business systematically followed the emerging opportunities and benefited from them on the basis of its resources, and will be able to put forward strategies to be protected from threats. Details of the SWOT analysis that should be done within the scope of the situation analysis are explained below.
4.1. Analysis of Opportunities and Threats
An entrepreneur who embraces change and innovation must constantly monitor the developments happening around him and calculate how he will be affected by them. Because these environmental developments can contain many opportunities and dangers. For example, the development of e-commerce and its intensive use by consumers may pose significant threats to physical stores such as Migros. For this reason, such large stores have started to observe these developments on time and transfer their activities to the electronic environment. Similarly, many entrepreneurs who do not have sufficient financial savings to open a physical store have started to market their products on the Internet. As can be seen in the example, the development of the Internet can be an opportunity for some businesses and a threat for others. Threats can turn into opportunities if a good entrepreneur properly evaluates the changes that appear to be threats. It is necessary to regularly examine many macro-environmental factors such as this, to catch opportunities on time and to take necessary precautions against threats. For this, it is necessary to act in accordance with the rate of change of the market.
Market opportunity is the activity of a potential buyer group to find a profitable solution to their problem. So the value of this solution will vary depending on how many customers it has created and how important it is to solve a problem. There are three main sources of market opportunity for the entrepreneur. These are;
- To offer a profitable solution in the short term,
- To improve the qualities of the product,
- To launch a brand new product.
Opportunities to offer a profitable solution in the short term are often easily spotted by most people and therefore do not have significant growth potential. Extra marketing skills are also not required to spot short-term opportunities. Examples of such opportunities include opening a new café and selling umbrellas in rainy weather due to the increasing demand for cafes and the profitability of existing cafes. As long as the demand in the market tends to grow, this method will provide gain for the entrepreneur but will not be sufficient for long-term success.
Making an existing product or service superior is more meaningful than the first method. This requires making differences or innovations in the product itself, the benefit it creates, the target audience, the distribution channel, pricing, and communication method. It contains more attractive opportunities than the first method. The main focus here is to create a product, feature or market segment that is not yet discovered by competitors. For example, with the popularity of social media, Snapchat company attracted attention and gained success by offering its users instant sharing features such as Facebook and Twitter, which are not found in its competitors. In summary, it is emphasized that the product offered in this method has a superior aspect compared to its competitors, rather than having brand new features. However, in order to create these opportunities, the entrepreneur should focus on this issue and work on alternatives systematically. The last way to reveal market opportunities is to create a brand new product / service. This method, which includes very attractive opportunities, emerges based on long and costly R&D studies. For this reason, it is mostly preferred by techno-entrepreneurs who prioritize R&D activities.
Entrepreneurs can also benefit from some idea development techniques they will use while identifying opportunities for these three different sources. Among these, applications such as brainstorming, problem / benefit analysis of buyers, consumption chain method can be useful for identifying market opportunities. Other suggestions that may be useful in identifying opportunities for entrepreneurs regarding this approach and practices are as follows (Kotler and Keller, 2012):
- To observe the trends and technological developments in the market and to produce hybrid solutions that are new for the market: For example, with the cheapness of GPS software, entrepreneurs who saw the opportunity gained success by developing systems that adapt the GPS system to minibuses.
- Making the purchasing process more efficient / comfortable: Previously, consumers who had to go to the address of the company to buy plane or bus tickets can now easily do these transactions over the Internet.
- Meeting the consumers' need for information / advice: For example, meeting the information needs of consumers such as sikayetvar.com about existing products and brands can create a lucrative opportunity area for the entrepreneur.
- Customizing the product: This method always results in a positive response from the consumer. However, the customized product must also be profitable. Many companies use this method by developing the appropriate technological infrastructure in order for personalization to be profitable. For example, even large companies such as "Timberland" can produce shoes with customer initials. This method can bring very attractive opportunities for small companies.
- Adding new capabilities / features to products: Businesses must constantly renew their products in order to maintain their competitive edge in the market. Therefore, it constitutes one of the most used methods. In this method, a feature that will be attractive to users is added to the product.
- For example, mobile phone companies release a new version almost every six months and introduce many features in this new version.
- Accelerating the distribution or differentiating the distribution channel: E-commerce companies using new storage technologies to shorten the delivery times or the online monitoring of orders by users are attractive applications for consumers. Similarly, retail companies marketing their products with automatic machines can also accommodate similar opportunities.
- Offering lower prices: The most used example of this method is that brands with a certain reputation in the market offer lower quality alternative products with the same features. For example, the Vestel brand sells its products with similar features at a lower price with the Regal brand. However, it is common for entrepreneurs who cannot find any other alternative competition method to compete by lowering their prices. It should not be forgotten that such practices reduce the profitability of the enterprise and other methods should be evaluated first.
- Apart from the methods mentioned above, the entrepreneur should constantly analyze internal and external environmental factors.
The analysis of four important environmental factors shown in the figure is called PEST Analysis in accordance with the initials of these words. In this analysis, the entrepreneur should evaluate the potential effects of the changes occurring in each of the environmental factors on the business and reveal the risks and opportunities. Because all of the opportunities and threats that arise with the business model that the entrepreneur has built are related to the change in these environmental elements.
Among the political factors, the rules set by the state and the reflections of the changes related to them on the business are taken into account. Here, regulations such as environmental regulations imposed by public authorities, regulations for commercial life, incentives and grants given and their terms of use, bilateral or multiple agreements with other states are closely related to the enterprise.
- Economic factors include macroeconomic indicators such as exchange rates, interest, credit, inflation rates, growth data, as well as raw materials, labor wages, industry growth rates, foreign trade, etc. For example, while the increase in exchange rates has an effect to increase the income of an exporter company, it poses a significant threat to the importing company. It will be beneficial for the entrepreneur to constantly monitor economic factors and to take the necessary precautions on time.
- Social factors cover the general life and consumption trends of the population in a particular geography. Although it changes more slowly than economic factors, social factors are very important for the entrepreneur as they determine the value structures and consumption patterns of people. In this group, subjects such as changes in people's lifestyles, population structure of the country or region, general consumption trends, ethical approaches, etc. are examined. For example, as the educated urban population increased with industrialization, the solo family model increased. Significant changes have occurred in consumption patterns as people started living alone. This situation can create opportunities for many entrepreneurs.
- Technological factors can significantly affect all systems of the enterprise, especially supply, production and distribution. New technological products released by competitors, new inventions developed and introduced in universities, new machine and process technologies can profoundly affect the way the business does business and even its presence in the market. For this reason, the enterprise must follow the technological developments closely and adapt to new technologies quickly.
- The entrepreneur should clearly reveal the potential impacts of changes in all these factors, the opportunities and threats they may create. After these are determined, evaluations can be made with the opportunity determination methods given above and it can be decided how the business can determine a strategy or what kind of innovations it should work on.
- 2. Evaluation of Opportunities
- Once the opportunities, and therefore threats, arising from changes in environmental factors have been identified, their potential effects should be assessed or graded. Because business resources are never enough to take advantage of all opportunities. It is also not necessary to take advantage of all opportunities. These opportunities need to be planned within a specific resource and strategy.
- The main focus in evaluating the opportunities is to analyze the potential effects of the planned activities on the business. In this context, it would be beneficial for the entrepreneur to allocate the existing resources to projects where he can find the best opportunity. For example, how to decide between a new product to be developed or a new market to be entered is an important issue, according to what the entrepreneur will decide.
- In this regard, it would be appropriate for the entrepreneur to examine the following issues and determine how to make a decision about the opportunity. (Kotler and Keller, 2012).
- The attractiveness of the identified opportunity for the current or potential customers of the business,
- The opportunity to deliver the benefit to the target audience at an affordable cost,
- Existence or accessibility of human, money, equipment and other resources required to seize the opportunity,
- The degree of competitive advantage provided by the opportunity,
- Existence of ability to do better than competitors,
- The adequacy of the earnings from the investment that needs to be made.
- These criteria will be the pole star in decision making for the entrepreneur. If there is more than one option, it is possible to make a selection by considering these criteria. It is clear that if an identified opportunity does not meet these six criteria, it will not be meaningful for the entrepreneur. For example, it may not make much sense to invest in a product that is not attractive to the firm's existing customers.
- Once the opportunity and the threats that will arise in parallel with it are determined, it is necessary to determine the first two parts of the SWOT analysis, in other words, the strengths and weaknesses of the business. Here, it would be useful to prepare a list of what kind of superior features and disadvantages the business has in comparison with its competitors. For example, although the financial resources of the enterprise are not sufficient, technical knowledge about the product and the sector may be at a superior level. In this way, determining the strengths and weaknesses is necessary for the business to reveal which features to compete in the market.