2. LEARNING OUTCOMES
• LO 1: Differentiate between an idea and an opportunity.
• LO 2: Identify and apply the criteria used to evaluate whether an idea is an
opportunity.
• LO 3: Identify the facets of idea generation.
• LO 4: Explain the integrated approach to opportunity evaluation.
• LO 5: Discuss the issues pertaining to the pursuit of an entrepreneurial
opportunity.
• LO 6: Explain why large businesses leave gaps in the market.
• LO 7: Define and understand the concept of the window of opportunity.
• LO 8: Identify and differentiate between the five stages of the window of
opportunity.
• LO 9: Illustrate with examples what a competitive advantage is.
• LO 10: Discuss the influence of the Fourth Industrial Revolution (4IR) on
opportunity evaluation and utilisation.
3. 4.1 INTRODUCTION
• For new businesses to be created, entrepreneurs need to identify new business
and entrepreneurial opportunities, new products and new ways to meet
customer needs (Nieman & Bennett 2014).
• Read: Business strategy: making the most of a window of opportunity
4. 4.2 THE ROLE OF IDEAS
• An idea must create value and add value.
• It does not automatically translate into an opportunity.
• It is the first step of converting creativity into opportunity.
• Traditionally enjoys too much emphasis from entrepreneurs.
• This translates into entrepreneurial myopia (a constricted viewpoint).
5. 4.3 THE OPPORTUNITY
• A gap left in the market by those who serve it
• Qualities – attractive, durable and timely
• Results from changes in the marketplace
• Could be more than just a product or service
• Changes derived from technology, demography or regulations
• These changes lead to a disequilibrium
• This leads to market imperfections which have the potential to create economic
returns
6. 4.3 THE OPPORTUNITY (continued)
• Normally identified by an individual who
– has prior knowledge
– possesses social capital
– exhibits cognition
– understands environmental conditions
– demonstrates entrepreneurial alertness
– practices systematic search.
7. 4.4 WHEN IS AN IDEA AN OPPORTUNITY?
Attractive
Durable
Timely
Anchored in
product/service
Opportunity
Idea
9. 4.6 OPPORTUNITY EVALUATION
• According to Mmako, Sambo and Shambare (2021), when the entrepreneur starts
with the process of evaluating an opportunity, five basic questions should be
asked:
– What are the risks and rewards of this opportunity?
– Is this an attractive and sufficient market opportunity?
– Is the proposed solution feasible in terms of a technological and market
perspective?
– Will there be a sustainable competitive advantage?
– Will this opportunity be lucrative?
10. 4.6 OPPORTUNITY EVALUATION (continued)
• The criteria used to screen opportunities include:
– Industry and market issues
– Economics
– Harvest issues
– Management team issues
– Fatal flaw issues
– Personal criteria
– Strategic differentiation
11. 4.6 OPPORTUNITY EVALUATION (continued)
4.6.1 Industry and market issues
The attractiveness of a market is determined by the following factors:
• Market structure. Market conditions that make it possible for higher-potential
businesses to thrive are ones where unfulfilled market niches are involved.
• Market size. A large and growing market is the type of market a high-potential business
seeks to engage in and, more often than not, thrives in
• Market capacity. A market at full capacity in a growth situation – where demand
outweighs possible current supply – is a very attractive one to enter.
• Market share. The potential and ability of a business to become a market leader and
capture a substantial portion of the overall market are significant contributing factors to
the business becoming a high-growth business.
• Cost structure. A business that can provide low-cost goods and services while providing
value for money is attractive.
12. 4.6 OPPORTUNITY EVALUATION (continued)
4.6.2 Economics
• High gross margins = high, durable profits
• Positive cash flow within three years
• Low start-up capital ideal
• Initial costs must be recoverable within a reasonable time
13. 4.6 OPPORTUNITY EVALUATION (continued)
4.6.3 Harvest issues
• Refers to the selling of the business
• If the business or market is unattractive, no one will buy it
4.6.4 Management team issues
• It is important and beneficial for a business to have an entrepreneurial team that
possesses proven experience within the chosen industry
• Managerial team should possess compatible and complementary skills
14. 4.6 OPPORTUNITY EVALUATION (continued)
4.6.5 Fatal flaw issues
• Makes an opportunity unattractive
• Mainly caused by
– markets that are too small
– markets with overwhelming competition
– markets where the cost of entry is too high
– markets where entrants are unable to produce a sustainable competitive
advantage.
15. 4.6 OPPORTUNITY EVALUATION (continued)
4.6.6 Personal criteria
• Successful entrepreneurs have a good fit between what they wish to derive from
the business and what the business requires of them
• Successful entrepreneurs take calculated risks and have a high stress-tolerance
level
• Opportunity obsessed and committed to excellent
16. 4.6 OPPORTUNITY EVALUATION (continued)
4.6.7 Strategic differentiation
• Offering a service/product different from the competition
• Creating ‘unique’ value and asking a premium price
• Emphasises high-quality, extraordinary service, innovative designs, technological
capability or an unusually positive brand image
17. 4.7 THE PURSUIT OF ENTREPRENEURIAL
OPPORTUNITIES
Disadvantages of established businesses:
• Organisational inertia occurs when a business refuses to adapt in a responsive
manner to changes in the marketplace.
• Organisational complacency occurs when a business refuses to adapt in a
responsive manner to changes in the marketplace.
• Bureaucracy occurs due to increased hierarchy levels and increased financial,
operational and human resources. Opportunity-seeking mechanisms become
rigid and inadequate.
18. 4.8 WHY BIGGER BUSINESSES LEAVE GAPS IN THE
MARKET
The most common reasons for bigger or more established businesses
leaving gaps in the market include:
• Failure to see new opportunities
• Underestimation of new opportunities
• Technological inertia
• Cultural inertia
• Politics and internal fighting
• Government intervention to support new and (smaller) entrants
19. 4.9 THE WINDOW OF OPPORTUNITY
Nieman and Bennett (2014) state that the window of opportunity refers to the time
period available for creating new businesses. As a market grows, more and more
opportunities are revealed, in other words, the window opens. However, as the
market matures, the window begins to close and the available opportunities in the
market begin to dwindle and eventually peter out.
20. 4.9 THE WINDOW OF OPPORTUNITY (continued)
The ‘open window’
• Must be open long enough for the entrepreneur to take advantage of the
opportunity
• Entrepreneur needs the right
– characteristics
– management team
– personal skills
– resources.
21. 4.9 THE WINDOW OF OPPORTUNITY (continued)
Figure 4.2 The window of opportunity
Source: Spinelli and Adams (2016). New venture creation: entrepreneurship for the 21st century, 10th ed. McGraw-Hill. The
material is reproduced with permission of The McGraw-Hill Irwin Companies.
22. 4.10 THE STAGES OF THE WINDOW OF
OPPORTUNITY
Figure 4.3 A holistic view of the
window of opportunity
23. 4.10 THE STAGES OF THE WINDOW OF OPPORTUNITY (continued)
4.10.1 Seeing the window
• Search for gaps left by competitors.
• Proactively and productively take advantage of the gap to benefit the
entrepreneur while also adding value for the consumer.
• Identify and outline ways to provide a better product/service.
24. 4.10 THE STAGES OF THE WINDOW OF OPPORTUNITY (continued)
4.10.2 Locating the window
• Understand positioning of product/service in the market.
• ‘Positioning’ is relative to existing product/service.
25. 4.10 THE STAGES OF THE WINDOW OF OPPORTUNITY (continued)
4.10.3 Measuring the window
• Ensure the opportunity is viable and feasible.
• A feasibility study is a general examination of the opportunity's potential, and
includes matching the entrepreneur's ability and skill with the business needs.
• A viability study critically examines the market trends and expected market
responses.
26. 4.10 THE STAGES OF THE WINDOW OF OPPORTUNITY (continued)
4.10.4 Opening the window
• It represents entry to the market and the start of business activity.
• Obtain commitment from and commence coordination of stakeholders
(financiers, employees, suppliers, customers).
• Relationships with stakeholders are imperative to the longevity of the business.
27. 4.10 THE STAGES OF THE WINDOW OF OPPORTUNITY (continued)
4.10.5 Closing the window
• To prevent competitors from utilising late-mover advantages.
• Failure to close leads to diminished market share or an obsolete business.
• Close window by creating a sustainable competitive advantage.
29. 4.11 CONTINUOUS OPPORTUNITY
EVALUATION/UTILISATION
• Once entrepreneurs have successfully moved through the different stages and
motions of opportunity evaluation, it is not good for them to rest on their laurels,
thinking that they will maintain their position forever.
• With the rapid rate of technological growth happening daily in the market, the
Fourth Industrial Revolution (4IR) is seen as a fusion of technology that is
blurring the lines between technology and people.
• In order to have a durable and sustainable business, it is critical for the
entrepreneur to be constantly on the lookout for other opportunities that they
can successfully take advantage of.
