Lesson 3

• If a firm increases advertising then their demand curve shifts right, increasing the equilibrium price and quantity
• Five Stages of Opportunity Recognition

  • Precondition: Entrepreneur's knowledge of the market
  • Conception: Educational Background, Formal Training, Personal Experiences, Previous Employment
  • Visioning: Visions on what you want to do
  • Assessment: Evaluation of resources and skills
  • Realization: Testing stage
• If you add up marginal utility for each unit you get total utility
• Elements in Opportunity Assessment


  • Product or Service
• Opportunity


  An exploitable set of circumstances with uncertain outcome requiring a commitment of resources and involving exposure to risk
• Factors in Opportunity Recognition

  • Creativity and Business Idea
  • Market Awareness
  • Entrepreneurial Readiness
  • Connections
• Opportunity Recognition as a Creative Process

  1. Precondition: A pre-test to assess the skills of the entrepreneur

  2. Conception: The stage where an idea is generated driven by personal intentions and creativity

  3. Visioning: The stage when visions on what you want to do starts to form

  4. Assessment: To see whether the idea is rational, evaluation of resources and skills

  5. Realization: The creation of a prototype
• Opportunity


  A situation or occasion that makes it possible to do something that you want to do
• Marginal utility


  The additional utility (satisfaction) gained from the consumption of an additional product
• Opportunity Assessment

  1. Identifying unique factors of a product or service

  2. Reasons why customers will purchase it

  3. Needs or wants it fulfills

  4. Advantages over existing products or services in the market
• Profitability Assessment


  An important motivation for business
• Costing and Pricing

  1. Considering the affordability of valuable products

  2. Quantity vs Quality

  3. Factors to consider: Cost of Raw Materials, Means of Production

  4. Value-based vs Cost-based pricing

  5. Impact on customer groups
• Risk Assessment

  1. Evaluating potential risks that can impact profitability or lead to loss or failure in a business venture

  2. Types of Risks: Internal Risks, External Risks
• Resource Requirements Assessment


  1. Identifying input and production needs

  2. Types of Inputs: Intermediate Inputs, Factor Inputs
• Market Opportunity Assessment

  1. Evaluating market characteristics

  2. Assessing competitiveness of the environment
• Key Elements in Opportunity Assessment

  • Profitability
  • Entrepreneurial commitment
  • Resource Requirements
  • Risks
  • Opportunity Pathways
• Intuitive Approach

  1. Starts with the recognition of an opportunity and proceeds to grabbing it after sensing it can be done

  2. Relies on intuition, determined by prior knowledge, previous work, and life experiences

  3. Recommendations for no big investments, micro-entrepreneurs, and flexibility in redirecting the business if needed
• Stages in Product Planning and Development Process

  • Idea Stage
  • Concept Stage
  • Product Development Stage
  • Test Marketing Stage
• Determinants of an Entrepreneur’s Commitment

  • Motivations of the individual
  • Skills
  • Experience
  • Resources
  • Amount of time he/she can devote
• Rational Approach


  1. Uses systematic procedures in proceeding with the implementation of a business opportunity

  2. Follows steps like generation of entrepreneurial intent, visualization of an idea, recognition of an opportunity, assessment of opportunity, seizing the opportunity

  3. Recommendations for big enterprises, big investments, and a sense of security
• Product Life Cycle Hypothesis


  Any product has life, with stages like Introduction, Growth, Maturity, Decline
• Entrepreneurial Commitment


  The commitment of an entrepreneur to pursue the realization of its business idea
• Product Planning and Development Process


  Includes stages like Creativity and Business Idea, Precommercialization Stage, Commercialization Stage
• Two Approaches of Opportunity Assessment

  1. Rational Approach

  2. Intuitive Approach