Ep 04 (1) unit 2

OPPORTUNITY SCOUTING
AND IDEAGENERATION
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1
Introduction
Objectives
Entrepreneurship and New Venture Creation
Opportunity Scouting -Meaning
Opportunity Scanning
Environmental Analysis
International Environment
Macro Environment
Sectoral Analysis
SWOTAnalysis
Role of Creativity and Innovation in Idea Generation
2.5.1 The Creative Process
2.5.2 Components of the Creative Process
Opportunities in Contemporary Business Environment
2.6.1 Niche Marketing
2.6.2 Service Industry
2.6.3 Franchising
2.6.4 Tourism
2.6.5 Entertainment
2.6.6 Green Entrepreneurship
2.6.7 IT Enabled Services
Idea Generation
Summary Glossary
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S
e
lf-assessment questions
Further readings
2.0 INTRODUCTION
Once an individual decides to take up entrepreneurship as a career path, to be a job provider instead
of a job seeker, he has to establish an enterprise. It is extremely important to take
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utmost care in identifying the product or service to be launched by the entrepreneur otherwise
it might prove to be a very costly mistake. He must develop sensitivity to changes around him,
which can provide business opportunities and then carefully scan his environment to generate
ideas. After tentatively identifying four to five ideas he should go in for detailed assessment and
feasibility study. This will help him to crystallise one idea in an objective and systematic manner,
which will greatly enhance his chances of success.
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4.2 ENTREPRENEURSHIPAND NEW VENTURE
CREATION
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Even to a most casual observer it will appear that India is moving on a growth path.
The roads are choked with cars, scooters and buses and now in Delhi we have a brand new
Metro also. Most people are well dressed and carry cell phones. The sale of TVs, washing
machines and other white goods are booming. There is a spurt in travel both domestic and
international as well as in the number of people dining out. All these are signs of economic
development and it is the entrepreneur who is the driving force behind economic growth and
rejuvenation. This is true not only in India but also all across the globe.
We have already studied in Chapter I how development of entrepreneurship helps to accelerate
the pace of economic growth, solve problems of unemployment, check concentration of wealth in the
hands of a few individuals or business families. It also helps to achieve balanced growth of all
regions of the nation.
We have also learnt that the entrepreneur is at the center of this phenomenon of

entrepreneurship. He is the one who makes things happen by perceiving an opportunity and
organizing the resources needed to exploit this opportunity. He creates a new business in face of
risk and uncertainty for the purpose of achieving profit and growth.
Entrepreneurs look ahead to see what can be done in future rather than concentrating on the
past. Where others see problems and shortcomings they see opportunities for starting a business.
Check your progress
From the list given below select names of economies which have exhibited high growth rates
in the recent past.
Srilanka, China, Pakistan, Singapore, Malaysia, Korea, Bangladesh
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To set up an enterprise the entrepreneur has to undergo the entrepreneurial experience. Once having
done that, he has to concentrate on the management of his business. The entrepreneurial experience
begins with the idea for starting a new venture. The idea has to be sifted and refined so that he can
identify a new product or service to be produced or offered. Usually there is a triggering factor,
which makes the entrepreneur take the plunge to start his business. However one has to
systematically make a business plan and study the feasibility of the proposed venture before doing
so.
4.3 OPPORTUNITY SCOUTING
The entrepreneurial process begins with identifying an opportunity and evaluating it through an
initial screening process. If it appears reasonable a detailed business plan can be made. If not it
can be discarded. (Figure 4. 1)
SEARCH FOR BUSINESS IDEA
SENSING SCANNING THE
OPPORTUNITY ENVIORNMENT
SEARCH FOR
BUSINESS IDEA

INITIAL
SCREENING
DISCARD FEASIBILTY
ANALYSIS
Figure 4.1 Search For Business Ide
Clearly, except in very rare cases, opportunities just do not 'occur' to the individual. These have to
be actively searched/ scouted for. Hence, the start up process for a new venture creation begins
with scouting for opportunities. The process may start from an arm's length, that is, one may just
look around one's immediate context- family, community, and job and build up a case for business
from the bottom-up. Else, one may take a top-down approach,
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starting from the scanning of the international and macro economic environment and
conducting/using industrial/consumer surveys and identifying appropriate business ideas. An
entrepreneur can sense and intelligently seize opportunities, which exist in the environment.
Check your progress
2.4 OPPORTUNITY SCANNING
Once the entrepreneur perceives opportunities, it becomes important for him to scan the
environment. It is quite possible that many of the promising opportunities might not make
commercial sense. Scanning involves close examination of the environmental conditions and their
impact upon the business idea. It is not a cursory exercise but rather an attempt to look beyond the
immediate opportunities to the emerging trends. An attempt can be made to modify, adapt,
rearrange, substitute, combine, reverse etc.

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2.4.1 ENVIRONMENTALANALYSIS
entrepreneurship does not exist in a vacuum. It is affected by and affects the environment.
Entrepreneurship Environment
Relationship Between Entrepreneurship And Environmen
As the economies are getting internationally integrated, for an analysis of the environment of
entrepreneurship you would be required to develop an understanding of international, domestic
macro economic, and industry/sector specific factors.
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2.4.2 INTERNATIONAL ENVIRONMENT

As the economies increasingly get integrated, so does their susceptibility to external
happenings. A September 11, an outbreak of SARS or bird flu in any part of the globe will have
ramifications in the rest of the world. As a potential entrepreneur, you will have to keep all these
factors in mind as you pursue your entrepreneurial dreams.
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In fact, the world of business is being increasingly modified by three concurrent happenings-
internationalisation thanks to WTO, digitization, thanks to advances in IT & communication, and
outsourcing, thanks to the resultant interdependencies. These trends influence different businesses
differently. What we are concerned here is to examine these developments from the standpoint of
small business. We would be restricting ourselves to a brief discussion of the impact of WTO on the
small-scale sector.
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2.4.3 MACRO ENVIORNMENT
The macro environment of an entrepreneur consists of the political, technological, social, legal and
economic segments. All of these are not an immediate part of the entrepreneur's venture yet they
have an impact on his enterprise. Let us now examine the elements of the macro environment of the
entrepreneur one by one.
Political Environment
Entrepreneurship can flourish under a stable and conducive political climate. Government policies
which give priority to growth of trade and industry, provide infrastructural facilities, Institutional
support can give a fillip to entrepreneurship.
Considering the employment and export potential, the short gestation period and the fact that
small industries act as a seedbed for nurturing and developing entrepreneurship, the Government
is very supportive of the small-scale sector. It has created an extensive Institutional framework for
provision of finance, technology as well as help in marketing is made available by government
institutions like SIDO, SISI, NIESBUD, NSIC, and SFCs etc.

Simpler legal procedures can facilitate the process of new venture creation and its smooth
functioning including setting up of ancillaries, foreign tie-ups and joint ventures.
Economic Environment
India has today achieved a GDP of 8.5 % and aspiring for 10 % GDP in next financial year.
Liberalisation, Globalisation and opening of economy in India, has increased the space for
business operations. It has also opened channels for foreign investors, banks, insurance and
infrastructure companies to start operations. The resultant competition, rapid and complex changes
have generated uncertainties, which have to be handled by the entrepreneurs.
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2.4.4 SECTORAL ANALYSIS
The purpose of industry analysis is to determine what makes an industry attractive- this is
usually indicated by either above normal profits or high growth. For such analysis one should study
the history of the industry, the future trends, new products developed in the industry, forecasts made
by the government or the industry. It is also advisable to study the existing or potential competition,
threat of substitutes and entry barriers. Sometimes there might be bilateral agreements between
countries regarding some sectors or government policy that is sector specific or some event that
throw up challenges e.g. bird flu has dealt a severe blow to the Rs. 2600 crore poultry sector in India
recently.
There might be certain constraints regarding availability of technology, manpower or raw

materials, which are industry specific. Similarly there might be certain strengths of a particular
sector, which might outweigh some negative general trends. Currently the cement and steel sector
are on an upward swing with a favourable climate in the housing sector as well as government's
thrust on building roads and flyovers.
2.4.5 SWOT ANALYSIS
At this stage conducting a SWOT analysis will help the entrepreneur to clearly identify his own
strengths and weaknesses as well as the opportunities and threats in the environment. Threats in the
environment can arise from competition, technological breakthroughs, change in government
policies etc. He might posses certain unique skills or abilities, which along with his knowledge and
experience can provide him a cutting edge.
Strengths are positive internal factors that contribute to an individual's ability to accomplish
his/her mission, goals and objectives.
Weaknesses are negative internal factors that inhibit an individual's ability to accomplish
An entrepreneur should try to magnify his strengths and overcome or compensate for his/her
weaknesses.
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Opportunities are positive external options that an individual could exploit to accomplish
Threats are negative external forces that an individual could exploit to accomplish his/her
mission, goals and objectives. These could arise due to competition, change in government policy,
economic recession, technological advances etc.
An analysis of the above can give the entrepreneur a more realistic perspective of the business,
pointing out foundations on which they can build future strengths and the obstacles they must
remove for business progress
The hierarchical approach to development of business idea is given below.
Macro environment analysis
Sectoral analysis
Swot analysis
Product / service
Figure 4.3 Development of Business Idea

The entrepreneur has to use the opportunities provided by the environment, combine these with his
unique strengths in terms of knowledge, skills, experience etc. and then take a decision to launch a
particular product or service. The proposed product / service should be compatible

2.5 CREATIVITYAND INNOVATION
It is frequently commented that the only constant thing in business is change. It is a true statement
as the business environment is constantly changing for any number of reasons. There can be
technological break thoroughs like the IT revolution, demographic changes like nuclear families,
working parents, which have fueled a demand for day care centers, old people's homes, fast food
etc. Changes in tastes and preferences have resulted in mushrooming of restaurants and designer
clothes. A natural disaster can create a demand for tents, blankets, medicines, torches, food etc. An
entrepreneur with his vision, creativity and innovation can capitalize on these changes and create
customers. Recently 'terrorist insurance' has been started in war torn Iraq.
Creativity is the ability to bring something new into existence. Innovation is the translation of
an idea into application, which has a commercial value. Creativity is a prerequisite for innovation.
It can be developed by any individual who has a concern for excellence and is willing to work hard.
A creative person develops new alternatives and offers innovative solutions.
This can be done, for example, by:
• Adding product features - a job which is hard to do can be made easier for example
electric mixers and grinders have dramatically reduced the labour expended in Indian
kitchens. Another example is that of the Courier Service which has almost threatened
the functioning of the Indian Postal Service,
• Cutting cost - the entrepreneur can change the expensive product for example the
prices of computers and cell phones have come down drastically,
• Simplifying operations--- through creative distribution and financing for example

these days' loans for washing machines, televisions are given by the seller many a
times.
It is through their creative thinking that entrepreneurs find solutions to problems, handle
adversity and exercise control over business. Creativity helps not only in doing different things but
also in doing the things differently. Look what FM has done to a nearly forgotten means of
entertainment, 'radio' which has again reached such heights of popularity.
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4.5.1 THE CREATIVE PROCESS
Brilliant ideas do not simply materialize out1of the blue. They are the outcome of a creative
process consisting of the following six stages :
1
Ref. Taneja Satish , Gupta S.L..Entrepreneur Development, New Venture Creation
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Stage 1. Task Presentation: If one has a burning desire to discover or to do something then
the seed of curiosity germinates to form a focused idea.
Stage 2: Preparation: A conscious search for collecting information and seeking solutions has
to be made.
Stage 3: Incubation: This is the stage when the subconscious mind takes over and mulls over
the problem. This stage can be short or it can run into months or even years sometimes.
Stage 4: Idea Generation: A number of ideas and solutions are generated depending upon the
personal knowledge, experience, insight etc. of the potential entrepreneur.
Stage 5: Idea Validation: Each idea that is generated is verified to test it's usefulness, and
application.
Stage 6: Outcome Assessment: The creative process ends with either the crystallization of an
idea or the lack of it. If it is the latter then one goes back to stage 1 and starts the process all over
again. However if an idea is zeroed on then its feasibility has to be evaluated and a project Report has
to be prepared. We will learn more about these in the next two Chapters.
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2.5.2 COMPONENTS OF THE CREATIVE PROCESS:
The creative process has three distinct components:
1. Motivation :Initial motivation which provides stimulus for processing information and
exploring alternative solutions
2. Skills in the Task domain: The extent of the knowledge, talents and technical skills of the
entrepreneur will help in his search for solutions, pin pointing an idea and verifying the idea.
3. Skills in Creative thinking: These will help him to visualize different solutions,
generating a number of alternatives, see divergent uses of a single idea etc. to come up with a
workable idea or plan.

2.6.1 NICHE MARKETING
Niche marketing is a marketing strategy, which can be intelligently used by a small entrepreneur.
He can try and identify his own USP, which can be targeted towards some very specific market
segments called a niche. By providing personal service, convenience and value to the customers the
small entrepreneur can successfully compete with the bigger market

players. The standardised goods produced on large scale cannot cater to the special
requirements of different segments of the market. For example there is an emerging niche in the
food market of health conscious people who want to consume only organically grown foods.
With the increase in number of murders and other crimes taking place in big cities entrepreneurs
can tap the niche of households for installing security systems like alarms, CCTVs, cameras and
other safety gadgets etc.
4.6.3 FRANCHISING
Franchising takes a proven formula for success and expands it. Business franchising is a name
given to relationship in which the owner of a product, process or service allows a local operator to
set up a business under that name, for a specified period of time. Haldiram, McDonalds, VLCC
outlets, are some examples of how some entrepreneurs buy a venture which is a part of a chain of
similar business units. Franchising is an arrangement between the buyer who is called a franchiser
and the seller who is called the franchisee. The buyer gets the right to sell the trademark product or
service of the franchisee. He is relieved of most of the functions involved in setting up of an
enterprise and gets the benefit of visibility and recognition. Usually the franchisee also looks after
the advertising, training, and design and lay out etc. for the franchiser.
The franchisee is able to expand his market geographically without having to worry about day-
to-day operations. The licensing system gives the franchisee barriers to entry, standardization and
incentives for growth. However they have to be careful that their standards are adhered to. The
franchisers too have to be careful in reading the fine print otherwise they can get caught in legal

problems. Also if by chance the franchisee closes down for example Mothercare of UK, then all the
franchisers will run out of business overnight.
2.6.4 TOURISM
Tourism is amongst the fastest growing industries the world over, highest foreign exchange earning
sectors for India and offers tremendous opportunity for entrepreneurship and
employment. It includes any business connected with the activities of tourists: -
• Travel arrangement (rail, road, air or sea)
• Accommodation (hotels, motels, guest houses)
• Food
• Entertainment
Apart from the potential in providing these direct services, tourists use many indirect services
also for example they hire taxis for local site seeing, buy all kind of souvenirs, they need guides
and interpreters. There is an acute shortage of service providers in all these areas. The gap between
the demand and supply is likely to increase in the foreseeable future, especially with the
Commonwealth Games to be hosted by India in the year 2010.
Other growing segments of tourism include Adventure Tourism, Eco-Tourism, Rural-Tourism,
and Spiritual Tourism. Some people have even capitalized on the high cost of Medical Services
abroad and have promoted Medical Tourism. It is clear from the above that this sector has untapped
potential which can be exploited by potential entrepreneurs.

2.6.5 ENTERTAINMENT
Entertainment industry is another sector, which boasts of very high rates of growth. Hundreds of
films are made annually in India. There are innumerable TV Channels ranging from news, sports,
cartoons, family dramas, music, religious etc. Music industry is also flooded with music videos,
remixes, music and film nights, preparation and launch of CDs and DVDs etc.
Enterprises can be set up to provide services for pre and post production including script
writing, music, dubbing, animation, editing to name a few.
Like the tourism sector the entertainment sector too has a host of feeder activities attached to it
- supply of costumes, jewellery, sets, food, banners, posters which provide endless entrepreneurial
opportunities.
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The sources of idea generation are listed in the figure below.
Sources of idea generation
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Informal Formal
________________
Banks,
Personal
Family,
Friends,
Colleagues
Others
Newspapers,
Magazines,
Books,
Journals,
Catalogues,
Internet.
Govt.Agencies,
EDPs,
Business Consultants,
Trade Meets,
Exhibitions.

Once the idea or group of ideas is generated it has to screened or evaluated to determine it's
appropriativeness for further development. Ideas showing the most potential are subjected to a
feasibility analysis and a Project Appraisal is then made. You will learn about these stages of a
venture starter in the next two chapters.

Sources of idea generation
_______________________________________
Informal Formal
________________
Banks,
Personal
Family,
Friends,
Colleagues
Others
Newspapers,
Magazines,
Books,
Journals,
Catalogues,
Internet.
Govt.Agencies,
EDPs,
Business Consultants,
Trade Meets,
Exhibitions.

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Ep 04 (1) unit 2

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Ep 04 (1) unit 2