EXPLORING BUSINESS OPPORTUNITIES
Entrepreneurs use a number of criteria in selecting good business opportunities:- There should be a demonstrated need for the product or service by buyers being willing to pay a price higher than the cost of producing the product.
- The number of the willing buyers should be large enough to ensure that the quantities of the product to be bought will create a large enough turnover to make the business profitable.
- The business to be started should be able to access factor inputs required for its operations. These include capital, labour/human resources, raw materials, energy, transport and communication facilities.
- There should be appropriate technology and skilled manpower to start and operate the business.
- The business to be started should be legal and compatible with the social norms of the community where it is located. For example, if the community is predominantly Muslim, a business opportunity of selling pork or alcohol would not be appropriate.
- The business should be acceptable in the community. For example, though a disco and video business may be a profitable business within a school’s neighbourhood, it may not be acceptable by the community.
Activity One
A school canteen as a business opportunity
Procedure
In groups of 5 to 8, ask learners to
In groups of 5 to 8, ask learners to
- Find out what fellow learners and staff might need from the canteen and show how they can intervene to take care of those needs.
- Carry out a market survey to establish a market philosophy and consumer profile and, most importantly, consumer demand.
- Establish whether there is a viable or potential market and formulate a strategy on how to maximise opportunity and monitor competition.
- Draw a plan showing how the business will be developed and how the unexpected events will be counteracted.
- Determine the product mix that will satisfy the consumer demand after analysing the market.
- Show how financial records will be kept or maintained.
- Assess the opportunity cost of the venture.
Note:
- Let each group have a team leader and a secretary.
- Give time to each group to present their findings to the class.
- Interpose where necessary to rectify possible mistakes and/ or make more elaborate explanation.
Activity Two
Identifying business opportunity
Discuss with the learners the nature of business opportunity in Uganda and its relevance to the country’s economy. Develop a list of local opportunities that could develop into a business venture.
Sources of business Ideas
Business ideas are a starting point in the journey to starting a business. Entrepreneurs can develop or generate business ideas in a variety of ways:- The technical skills and experience they possess. These give them opportunities to exploit what they know and can do.
- Personal contacts which give them access to advice, capital and markets.
- Observing new developments and changes taking place around them and identifying emerging trends of the demand for goods and services.
- Studying the press - newspapers and magazines, radio, television, internet etc., where most developments, policies and priorities are communicated and publicised.
- Conducting surveys to find out what is happening, the latest thinking and preferences of customers.
- Discussions and/or interviews with other entrepreneurs on business issues, to seek their views and suggestions.
- Going into the market to observe the products that are being sold, gaps in what is available and products that can be improved.
- Trends of changes taking place e.g. population growth, people’s income, upcoming major players in different areas, topical/key issues in the community or the country.
Activity Three
Present the following scenario to the learners and ask them to provide answers to the questions that follow:
Students are coming back to school from their holidays. They are expected to arrive between 11.00 a.m. and 6.00 pm and the school is about 800 metres from the stage where taxis drop them. Tired as they are, they wonder how to carry their luggage to the dormitories. They have suitcases, mattresses, bags, etc. Most of them have travelled long distances and are already hungry or very thirsty yet the school does not start serving meals until 7.30 p.m.. |
- Suggest business opportunities that can be generated out of the above school situation.
- Rank your business ideas.
- Describe what you would need to get your preferred business idea running.
- What are the likely challenges you may face in your business?
Creativity
Creativity is the power or ability which enables entrepreneurs to come up with exciting business ideas even in situations that may look hopeless, for example, setting up a lucrative business in a refugee camp or turning people’s problems into business opportunities. In any situation, entrepreneurs are able to dream up business ideas, which they can develop into opportunities and eventually turn them into profitable businesses.
Areas that provide business opportunities
An entrepreneur can generate business ideas for different types of businesses, for example, agribusinesses, manufacturing, trading or service businesses. He/she can do this by:
- Observing the available raw materials and finding what products can be made from them.
- Knowing the available human resources and, especially, where people with the necessary specialised skills can be found.
- Finding out peoples’ needs and examining how best they could be met by a new business.
- Checking on those things other people/institutions consider useless and finding out what business could come out of them. Such may include farm wastes (which can be used to make biogas), manure which can be turned into mulch and compost.
- Examining existing businesses to find out those which do not satisfy peoples’ needs, then figure out how to satisfy those needs. This could be done through increasing the quantity, improving the quality of the products, better customer service, packaging, branding, etc..
The Market 
An entrepreneur begins the journey into business formation by generating as many ideas as possible from different situations. S/he subjects them to a ranking process and selects the best idea which becomes his/her business opportunity. The best business opportunity is the one where there are many buyers willing to buy the products or services in sufficient quantities at prices that are higher than the costs of production.
The existence of buyers, the quantities of the business products they are willing to buy and the prices at which they are willing to buy them are therefore crucial in the whole process of business selection. Put together, these constitute what is called market.
a) Meaning of a market
A market for any business means all the potential buyers (people, institutions, businesses, etc) within a specific geographical area, who need the business products and are willing and able to buy them. For example a market for products of a trading business consists of people or institutions that exhibit the following characteristics:
i) They need or want the products being sold by the trading business.
ii) They have sufficient money to buy the products.
iii) They are willing to buy the products.
ii) They have sufficient money to buy the products.
iii) They are willing to buy the products.
(b) Meaning of potential market
A potential market for a business is made up of people, businesses or institutions that need its products and are able but are not yet willing to buy. The potential market of a business is very important because it is from here that it can get new customers to expand its market and operations.
(c) Meaning of market assessment
Market assessment is the process of determining the market for the products of a business. Through market assessment, the entrepreneur is able to find out the ‘real’ and potential market of the product. After starting their businesses, entrepreneurs also need to carry out regular market assessment to ensure that they know the size of the market for their products and what they need to do to sustain or expand it.
Factors for assessing market potential of a business
As seen in section (b) above, the market potential for a business is the number of people or institutions which need its products and are able but not yet willing to buy them. It is therefore important that an entrepreneur knows the size of his/her potential market before and after starting his/her business because it is from it that the business will get new customers to sustain or expand its market.
The following factors are used in assessing market potential for a business:
i) Demand
This is the amount of the business products that the people are willing to buy at any given price. The higher the demand, the higher the potential market and therefore the better the prospects for the business.
ii) Competition´
Businesses selling similar products or services to the same customers share them. Customers will have more options to choose to buy from. Businesses will therefore be at pains to try to keep their customers as well as attract those of others. This is known as competition in business. A business which faces high competition has a low market potential market because the would-be customers have already been taken by other businesses.
iii) Prices
Although there may be many people and institutions who need or wish to buy the business products, their ability to buy them is affected by the prices at which they are being offered. For example, the potential market for new designer clothes in a rural area shall be very low because the people cannot afford them yet the potential market for cheap second hand clothes shall be very high because people are able to buy them.
iv) Substitutes
Substitutes are alternative products that buyers can go for to satisfy the same need. For example a bottle of soda and a glass of juice. A business which produces products with no close substitutes has a higher potential market than the one which has many substitutes. This is because customers will choose only its products to meet the same need.
v) Income levels
A potential market depends on the ability or capacity of the target people and institutions to purchase the business products at profitable prices. The higher the income level, the higher the potential market.
vi) The location of the business
A business which is strategically located in relation to its target customers will have a higher potential market than the one that is not.
vii) The number of people, businesses and institutions operating from the target area
A potential market of any business will depend on the number of people, businesses and institutions operating from the business’ target area. The higher the number, the higher the business’ potential market.
viii) Government policies
Government policies may affect operations of businesses. For example, the opening and closing hours for business, the licensed customers that the business can serve, taxation policies, etc
Activity Four
Students assess a market potential for a business opportunity of their choice
| The following exercise is a procedural process through which an entrepreneur can assess the potential market for a business. Carry out one. |
Name of the business _______________________________________________ Nature of business__________________________________________________ |
Location and why you chose this particular business?_____________________ Is it nearer to the customers? ________________________________________ |
Who are the customers? _____________________________________________ Are they new or those that have always bought the products?____________ How often do they come back? _______________________________________ |
Are there similar businesses in the same locality? ______________________ How does their presence affect your clientele? _________________________ What other competitive commodities are being sold in the area? |
Are there many people in the area? ___________________________________ Do they have families? ______________________________________________ Do they have many young children? ___________________________________ Is the population growing or decreasing? ______________________________ Is it a rich or poor population/neighbourhood? ________________________ Who comes to buy; the rich or the poor? _____________________________ How do the customers react to small price changes? ___________________ |
What government policies affect the business operations and how? ___________________________________________________________________ |
Conducting a market assessment
(a) Factors to be considered when conducting a market assessment
As seen in Section (c) above, market assessment is a process through which an entrepreneur finds out how much market his/her products will have once produced. To conduct a market assessment for business products, an entrepreneur would have to consider the following factors:
i) The target market for the products
This refers to people, businesses or institutions the business intends to serve. Since a business may have a geographical focus, this also provides a boundary within which the assessment is to be done. When looking at the target group, the entrepreneur may wish to look at the age, sex, income levels, education, etc.
ii) The nature of the products to be produced and what the market wants
Under this factor, the entrepreneur looks at the product variety, quality, design, features, brand name, and packaging, range of sizes, services, warranties and returns. All these are checked against what the customers would wish to have.
iii) The competition and substitute products the business products will face and how this affects their market
Most businesses have competitors making products (goods or services) that perform functions similar to what the entrepreneur would wish to produce. This means that the competitors’ products can be substituted for the ones the entrepreneur wishes to make.
This therefore, requires the entrepreneur to check on the competitors he/she will face in the market and establish the level of competition his/her products are going to face. If the competition is too high, implying that few of his/her products will be sold, then the entrepreneur would better not go into such business. In such a case the entrepreneur would go back to his/her list of business ideas and get an alternative opportunity that can be turned into business.
iv) The target market trends and their implications on the business market
Target market trend is an important factor to be considered when conducting a market assessment for a business. The entrepreneur would wish to know how the market he/she intends to join has been behaving in the recent past. This will affect the total number of products he/she will be able to sell now and in the future. The market trend issues that the entrepreneur would wish to know include the following:
- Is the market expanding or contracting?
- Is the market stable or volatile?
- How does the market treat new entrants?
- What are the major factors that are driving the market trend; is it the prices, seasons, population, income, government policies?
Activity Five
Group activity
- In groups of 5-8, conduct a market assessment for a business of your choice.
- Write a group report of not more than 1,000 words of your findings.
- Present to the class.
Information to look out
Are there:
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Using SWOT analysis in determining the competitive advantage of a business
SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is used as a tool to enable an entrepreneur to check the chances of success of his/her business in a market. Once the entrepreneur has caried this out he/she will be able to reach a decision as to whether to go ahead with their business plan. SWOT analysis enables the entrepreneur to check on his/her business strengths, weaknesses, opportunities and threats. This helps him/her to determine whether his/her business is in a position to compete.
Strengths
|
Weaknesses
|
Opportunities
|
Threats
| |
| Potential competitors | What are the competitors’ strengths in the market when compared to the entrepreneur? | What are the competitors’ weaknesses in the market when it comes to competing with the entrepreneur? | What are the competitors’ opportunities in the market when compared to the entrepreneur? | What are the competitors’ threats in the market when compared to the entrepreneur? |
| The entrepreneur | What are the entrepreneur’s strengths in the market? | What are the weaknesses of the entrepreneur’s business in the market? | What are the entrepreneur’s business opportunities in the market? | What threats does the entrepreneur’s business face in the market? |
The following are examples of the issues that the entrepreneur will have to consider when carrying out self-assessment using SWOT analysis with a view to determining his/her competitive advantage.
Strengths
These are the things, features and qualities that put the entrepreneur’s business products at an advantage when compared to the competitors. They include the following:
- High quality products
- Customer friendly but profitable prices
- Ability of the product to meet the customers’ tastes
- Efficiency and effectiveness at serving customers
- Ability to attract customers
- Good location of the business
- Good and trained marketing staff
- High and effective entrepreneurial spirit
Weaknesses
These are the limitations/constraints that the business products may face in the market.
- Being new in the market and having a weak market image
- Weak distribution image
- Marketing skills that are below average
- Higher overall unit costs relative to key competitors
- Inability to finance needed marketing changes
- Too narrow a product line
- Location not being close or easily accessible to customers
Opportunities
These are external possibilities or chances that may happen and benefit the business. The business has no control over such happenings and they may not happen. Such possibilities may include the following:
- Possibility of landing big orders say from the government arising out of policy changes
- Sudden shift in tastes and fashions of customers in favour of the entrepreneurs products
- Change in the market trend due to new developments, for example, a new school being opened up in the neighbourhood, a large business being established in the area, etc.
- Falling trade barriers in attractive foreign markets, for example, the Unites States of America’s Growth Opportunity Act (AGOA), which removed import duties on goods manufactured in Africa and enables African countries to export to America.
- Faster market growth
- Complacency among rival enterprises
Threats
These are undesirable happenings that may occur in the market to the disadvantage of the business.
- Entry of lower cost foreign companies
- Rising sales of substitute goods
- Adverse shifts in foreign exchange rates and trade policies
- Costly regulatory requirements
- Growing bargaining power of customers or suppliers
- Changing buyer needs and tastes
- Adverse demographic changes
- Sudden negative changes in the government policies
- Competitors reducing their prices
After checking his/her own position, the entrepreneur should make a similar check for his/her immediate competitors. S/he should compare his/her position in all the above areas against those of his/her close competitors. If the comparison is not favourable, i.e. if the competitors are in a better position, then s/he has a competitive disadvantage. This would imply that if put on the market, his/her products will not be able to compete with those of the competitors. The entrepreneur will therefore make losses and fall out of business.
On the other hand, if his/her position is stronger than that of his/her competitors, it means he/she has a competitive advantage. This means that if put on the market, his/her products would attract more buyers/customers than those of the competitors. The entrepreneur would sell more of his/her products at profitable prices, make more profits and his/her business will expand.
Further, the results of the analysis exercise will enable the entrepreneur find out whether his/her position can be improved or not. If it cannot be improved, then the entrepreneur should not start that business, rather, he/she should go back to the list of his/her business ideas and choose the second best and subject it to a similar analysis. This process should be continued until the one that promises him/her the best competitive position in the market is found.
Activity Six
SWOT analysis – Identifying the strong and weak points of a company
SWOT analysis – Identifying the strong and weak points of a company
1. Organise learners into four groups
Group 1: Soft Drinks Company
Group 2: Dairy Milk Company
Group 3: Mobile Telephone Company
Group 4: Bread Making Company
2. Explain to learners that a SWOT analysis is a common way in business to get a very quick ´snapshot´ of a company and its market.
Group 2: Dairy Milk Company
Group 3: Mobile Telephone Company
Group 4: Bread Making Company
2. Explain to learners that a SWOT analysis is a common way in business to get a very quick ´snapshot´ of a company and its market.
3. Ask learners to think of four items for each box in the Table below for their company.
Positive
|
Negative
| |
Company |
Strengths
|
Weaknesses
|
Market |
Opportunities
|
Threats
|
4. Ask learners to present their findings to the rest of the class.
5. Learners discuss and compare their ideas.
Variation
Learners can do a personal SWOT analysis for learning Entrepreneurship Education.
1. What are your strengths in Entrepreneurship Education?
2. What are your weaknesses in Entrepreneurship Education?
3. What are your opportunities for learning Entrepreneurship Education?
4. What stops you getting better?
2. What are your weaknesses in Entrepreneurship Education?
3. What are your opportunities for learning Entrepreneurship Education?
4. What stops you getting better?
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