BBA-1Entrepreneur Mind-setUnit-2

Opportunity analysis

Be it individuals or corporate, opportunities are always available. As an individual,

you have the opportunity to become a sports professional or a management
professional. The type of profession you choose, and the variables that you weigh
for making your decision, is the process known as opportunity analysis.

An example of opportunity analysis is the “Stay healthy” frenzy which has gripped
many nations. More and more people are realizing that by staying healthy they can
have a more enjoyable life as compared to being obese or having the wrong habits.
This resulted in the rise of organic farming. Fast food chains like Subway and
others came up just to give the customers “Healthy food” like they
wanted. Nike and Adidas focused exclusively on fitness. Fitness equipment shops
opened up and business of Gymnasiums, Yoga, Zumba etc boomed.

Because of a simple opportunity in the business of “Staying healthy”, so

many products from so many different sectors were formed. Just so that businesses
could profit from this opportunity. This is how opportunity analysis works.

Advantages of opportunity analysis

 Growth of company – As more and more opportunities are explored and

established, the company will grow.
 Better margins – As the company starts growing because of capitalizing on
new opportunities, it will start having better margins because it has entered
new segments.

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 Brand building – With better margins and a faster growth, company can
easily invest in brand building activities and get a better brand reputation then
ever.
 Economies of scale – As the business is growing all round, it achieves
economies of scale with the fixed costs remaining the same and only the
variable cost growing. Thus, the reputation and margins keep on increasing.

However, although there are advantages, there are several disadvantages of

opportunity analysis as well.

 Taking the wrong decisions – As an individual, many a times we take wrong

decisions in the stock markets when we invest in a poor stock just because we
are greedy or we dreamt of too much growth. A similar thing can happen in
case of opportunity analysis, wherein a company invests heavily in
a product which probably will not work in the market.
 Loss of reputation – A successful opportunity can lead to building
reputation. On the other hand, an opportunity which failed, can affect the
company’s reputation in a negative manner also.
 Dead investments – If opportunity analysis is not done properly, and you
invest in a product which does not grow, then the investment is also a dead
investment and does not do much in terms of ROI.

Although there are several disadvantages of opportunity analysis, the same

can be ignored because no company can survive without moving forward, and
for moving forward, it has to keep analysing more and more opportunities.

The best way to analyse and opportunity and find out whether it will be
profitable in the long term or not, is a 360 degree feedback. Take feedback
from your employees, distributors, channel partners, customers as well as the
management team so that the right decision can be taken for any opportunity
which has cropped up.

For the success of opportunity analysis, the following factors need to be

considered.

 Competitive analysis – What if the opportunity you are thinking has

profitable, already has many unorganized players and hence wont be
profitable in the long run? You need to find out the complete competitive
landscape to conduct opportunity analysis properly and for its success in the
near future.

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 Demand forecasting – An opportunity analysis will not be complete unless

and until you forecast the probable demand for the product. You can’t invest
in a product for which you don’t know the ROI.
 Targeted marketing – Once the opportunity has been analysed, then you
need to develop a targeted marketing plan. This is because each customer is
different and hence the segment which you are going to target will be
different too.
 Market research – Market research is an intrinsic part of opportunity
analysis as it gives insight in the customers mind and whether or not the
customer will adopt this product. It can also give further ideas and features /
attributes which can be added to the end product.

External Environmental Analysis: Meaning, Features, Need & Importance

Meaning of External Environmental Analysis, The word “External Environment

Analysis” has been made up of two words ‘External Environment’ and ‘Analysis’.
The first word ‘External Environment’ Means elements or factors outside the
institution of the entrepreneur, like – economic, social, cultural, political, physical,
educational, technical, religious, ethical and international, etc. which affect his
business.

The other word, ‘Analysis’ means reactions towards those factors or elements or
issues, neglect thereof or taking of decisions by predicting the opportunities.

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Hence, in composite form, external environment analysis means such process

through which decision is taken, by assessing economic, socio-cultural, political,
physical, educational, technical, religious, ethical and international environment or
factors or element, or issues. and also opportunities.

External environmental analysis or evaluation is a process through which strategic

planner (entrepreneur) evaluates economic, social, official, supply, technological
and market conditions to determine the opportunities and challenges for their
enterprise and according to which he adjusts his strategy and objectives

Thus, external environment analysis is that process through which the entrepreneur
determines opportunities, threats, reactions, neglects and challenges by evaluation
of those factors and in consonance whereof, adjusts his strategies and objectives.

Features of External Environmental Analysis

Following Characteristics of external environment analysis may be observed by

studying and analyzing its meaning.

1. Continuous Process

External environment analysis is a continuing process because till an entrepreneur

will not keep the continuous watch on the changes happening in the environment,
he will not be able to have knowledge about the threats and challenges.

2. Determination of Opportunities and Challenges

By external environment analysis, the entrepreneur evaluates all factors and parties
to determine the opportunities and challenges for his enterprise, so that he may
face the challenges of some factors and their tendencies.

3. Adjustment of Strategies and Objectives

In the external environmental analysis, the entrepreneur evaluates those factors to

determine opportunities, threats, reactions and challenges for his enterprise.
Thereafter, he adjusts his strategies and objectives in accordance with those
factors.

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4. Inner Knowledge Process

External environmental analysis is a process through which environmental

conditions are known on the one side, knowledge is also gained about future
possibilities and hidden opportunities.

5. Opportunities and Threats

External environmental analysis is the opportunity and threat analysis, ‘meaning

thereby that the external environmental analysis provides the opportunity to the
entrepreneur that presently the circumstances are favorable and hence decision
may be taken quickly and may be implemented also, so that profit may be earned.

6. Goal Orientations

Through external environmental analysis, the entrepreneur makes efforts to know

the future possibilities and their real effects or makes efforts to achieve his goal by
searching business opportunity with the help of external environmental analysis.

Opportunity Analysis Required Following Analysis in Entrepreneur

1. External Environment Analysis

2. Social Analysis

3. Technological Analysis

4. Economic Analysis

External Environment Analysis

External environmental analysis is the opportunity and threat analysis, ‘meaning

thereby that the external environmental analysis provides the opportunity to the
entrepreneur that presently the circumstances are favorable and hence decision
may be taken quickly and may be implemented also, so that profit may be earned.

External environmental analysis is the opportunity and threat analysis, ‘meaning

thereby that the external environmental analysis provides the opportunity to the

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entrepreneur that presently the circumstances are favorable and hence decision
may be taken quickly and may be implemented also, so that profit may be earned.

Techniques/Tools of External Environment Analysis

The main techniques used to analyze the external environment are mentioned
below.

 PESTLEG Analysis
 Scenario Planning
 Industry and Competitive Analysis

PESTLEG Analysis
PESTLEG is the acronym for political, economic, sociocultural, technological,
legal, environmental, and global factors. PESTLEG analysis involves the analysis
of general environment factors that we mentioned above.

These factors are uncontrollable to the firm. They are analyzed to identify the
environmental trends and assess possible opportunities or threats.

The following components are analyzed in PESTLEG analysis.

Political Factors – Political factors are those actions imposed by the government
that affects businesses. Such as understanding whether the country follows a
democratic political ideology or totalitarian.
Economic Factors – Economic factor consists of GDP, employment rate, income
level, and so on by which you have to decide whether the people have the payment
capacity to buy your products.
Socio-Cultural Factors – Factors like beliefs, traditions, views, values, attitudes,
habits, preferences, and so forth greatly affect people’s choices of purchase and
their living style.
Technological Factors – Today, the pace of technological advancement is very
high. To be competitive you should use advanced technology and understand how
it affects the organization’s performance.
Legal Factors – It includes a nation’s laws, business laws, constitution, law
administration, etc.
Environmental Factors – Management must be aware of changing physical
climates and restrict the activities hurting the physical environment.

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Global Environment – Global environment is the collection of global phenomena

such as global market, global competition, global culture, global opportunities, and
global threats.

Scenario Planning
In the event that conventional forecasting methods are unable to foresee the change
in the environment, scenario planning is utilized for environmental analysis. It is a
methodical technique for businesses to consider the future. It is created by
researching potential environmental effects on a specific business.

Industry and Competitive Analysis

An industry is a group of firms producing products that are close substitutes. The
industry environment is considered to be made up of Porter’s five forces – threats
of new entrants & product substitutes, bargaining power of suppliers & buyers, and
competitive rivalry.

Social Environment Analysis

A business must utilize and adapt to its external social environment, or it will not
survive. A business must be keenly aware of the society's social preferences
regarding its needs and wants. These preferences and needs and wants will be
influenced by a population's values, beliefs, and practices.
Let's look at some examples. A change in beliefs and values towards energy
conservation and global climate change may create a change in consumer
preference away from gas guzzling SUVs to hybrid sedans. Some cultures treat the
meal as a long social event, and fast food just won't cut it. Social preferences
relating to fashion are constantly changing as well.
If a business refuses to adapt to changing social preferences, its sales will drop, and
it will fail. Of course, sometimes the change in social preferences may be so large
that a business simply can't adapt. For example, a social movement led to the
outlawing of alcohol in the early 20th century, which was known as Prohibition.
During Prohibition, it was illegal to sell alcohol. Distilleries were put out of
business until Prohibition was repealed.
While there are risks with social change, there are also opportunities. Businesses
often try to influence social values through the use of marketing, advertising and
targeted public relations strategies. Marketing campaigns are used in an attempt to
create trends. The fashion industry is a prime example. Public relation campaigns

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are often used to build up or repair a business' image. For example, BP launched a
massive public relations campaign to improve its image after a major oil leak in the
Gulf of Mexico caused by offshore drilling. Fast food restaurants may include
healthier choices on their menus and sponsor health-related activities.
A key component of the external environment today is social media. As too many
companies have realized, actions or stances taken by a company can be praised or
condemned on social media, and the speed and depth of the response far exceeds
that of any traditional communications mode. Sadly, once even an untruthful item
has been seen by enough people, it can take on a life of its own and become
embedded in the external environment.

Technological Environment Analysis

Before we get into an elaborate discussion of business and marketing and how
technology can be benefiting them, Let us first understand the main factors that
determine the technological environment around the globe.

1. New Innovations

The first effect on this world caused by constant technological advancement is a

new innovation. The more technological inclined our society gets, the more we
will be motivated to bring about new innovations that will be easing our work in
the digital space.

When it comes to other technological decisions, businesses have to comply with

them at some point in terms of their marketing schemes. We wouldn’t want to have
a definite break in the structure of a business. However, these technological factors
affecting business are important to be chimed in, in the module.

2. Research And Development Sectors Will Increase

When it comes to the technological environment and its innovations, no new

technology can be brought about in the market without the credible aid of
experimentation. The experimentation will require the establishment of good
research and development sectors.

This will not only increase the scientific and technological value of the country but
will definitely help in giving jobs to new minds. New innovations will make a

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difference in the technological environment in marketing. This, in turn, will assist

heavily with the trading profit of the market.

3. Economy

The economy is one of the biggest determinants when it comes to technological

innovations. When it comes to innovations, how much capital investment a country
can afford is directly proportional to its modernization.

Today technology can be factored into any sector, whether it is agriculture,

industry, medical, etc. This is the reason why some third-world countries are
falling behind, and others are expanding heavily in the technological factors
affecting business.

4. Education

It is not just the entry-level education that should include the variants of
technology environment, the higher studies, and special courses should also cater
to the need of teaching people about the new innovations.

If there is one thing that the technological environment definition missed is how
sustainable it is. Especially during the pandemic, when the world was under
complete lockdown, it was only the technological environment in marketing that
brought about all the new strategies in digital marketing.

Negative Effects Of Technological Environment

As far as the positive effects technological environment definition stands,

technology does win. However, there are some negative impacts that technological
innovations might have on society and most importantly the business and
marketing.

When it comes to technological factors affecting business, there is only one thing
that might come to our understanding. When it comes to the negative impact, the
huge capital investment which sometimes will require risk spending is very high.

The hiring also becomes very dimensional, now that you only have to recruit
skilled workers with the ability to maneuver such technology.

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This can also be a problem when it comes to the technology environment in

marketing. Additionally, businesses have to be up to date with all the innovations
since digital marketing is ever-changing.

Economic Environment

The economic environment of the business is one of the external factors that can
influence strategy and decision-making in the business context. Economic factors
are important because they are directly related to goods, services, and
consumers. They also have a huge impact on how the business is able to operate in
its country of origin and partner with other businesses in different countries. Let's
examine this topic in more detail.

Types of Economic Environment

In this section, we will go over all the different factors of the economic
environment:
 Gross Domestic Product (GDP)
Gross Domestic Product is the total value of all products and services
produced in a country. Therefore, the growth of GDP signifies that the
economy of a country is stable and improving. It also means that people
have more disposable income that, in turn, leads to increased demand for
products and services.

It evaluates the financial worth of final goods and services—those that are
purchased by the end user—produced in a country over a specific time
period (say a year). It includes all of the output generated within the country.
GDP also includes non-market production, for example, education services
which are provided by the government itself.The GDP growth rate measures
the economic reports and amount of a country ’s economic growth (or
contraction). Faster growth in the gross domestic product (GDP) expands the
overall size of the economy and strengthens fiscal conditions.
 Unemployment
A high level of unemployment in a country means that such an economy is
not using its resources to its full potential. At the same time, it would

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negatively impact individual disposable income that will result in lower

demand. It affects the commercial aspect of an economy significantly. This
phenomenon is markedly noticed in the existing economic environment in
India.

The individuals not only lose income but also face other hurdles financially
as well as mentally. Government expenses extend further than the provision
of benefits to the loss of worker output, which eventually reduces the gross
domestic product (GDP) which in turn leads to economic issues and then
poverty. It will lead to lower GDP growth and fall in tax revenue for the
government.
 Inflation
When the overall prices of goods and services increase in a given period, it
is known as inflation. It happens when even though the prices of goods and
services are rising the general income level of consumers stays the same.
Therefore, individuals have less money at their disposal. Small businesses
and cottage industries are also affected as prices of raw goods and labour
increase, resulting in smaller profit margins.

The propensity for the price level to rise over time is referred to as inflation.
Inflation boosts prices and has the potential to reduce the purchasing power
of consumers. People buy more than they need to avoid paying higher costs
tomorrow, which drives up demand for products and services. Suppliers are
unable to keep up. Worse still, neither can salaries. As a result, most
individuals are unable to afford common products and services. Inflation
reduces the value of pensions and savings.
 Government Policy
Government policies also play a huge role in influencing the economy of a
country. Government policy can have a major influence on the economic
environment. This can include fiscal or monetary policy. An example of
monetary policy is a reduction in interest rates on bank loans which
encourages consumers’ demand for loans. An example of fiscal policy
would be when the government decides to reduce income tax. Both of these
policies attempt to gradually increase individual disposable income and
encourage consumers to spend more, thus boosting commercial activities.
It can influence interest rate, taxation and a rise, which tends to increase the
borrowing cost. Consumers will spend less if the interest is higher but if the
interest rate is lower it might attract investments. In general, a government’s
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active role in responding to the economic circumstances of a country is for

the purpose of preserving important stakeholders' economic interests.

 Reforms in the Banking Sector

The banks are considered to be one of the most crucial aspects of the Indian
economy. As a consequence, any reforms in this sector will have a huge
impact on the economy.

The banking sector plays a vital role in the betterment of the economy. By
boosting the quality of financial services and increasing money accessible,
banking sector openness may directly improve growth.
 Role of the Public and Private Sector
India has a mixed economy where both the private and public sector plays a
significant role. While the public sector plays a valuable role in carrying out
plans and reforms, developing infrastructure and building a strong industrial
base, the private sector is responsible for generating employment
opportunities. About 80% of the population is working in either organised or
unorganised private sectors.

The public sector promotes economic development at a rapid pace by filling

gaps in the industrial structure. It reduces the disparities in the distribution of
income and wealth by bridging the gap between the rich and the poor.
Agriculture and other activities like dairying, poultry come under the private
sector. It plays an important role in managing the entire agricultural sector.
 Balance of Trade and Balance of Payment
Briefly, Balance of Trade (BOT) is the difference between the money value
of a country's imports and exports of material goods only whereas Balance
of Payment (BOP) is the difference between a country’s receipts and
payments in foreign exchange. When the exports are greater than the
imports, it leads to a favourable trade balance. It means there is a high
demand for its goods offshores, and that increases the demand for its
currency. On another hand, when the outflow is greater than the inflow,
there is a current account deficit.

BOT records only merchandise and doesn’t record transactions of a capital

nature. BOP records transactions relating to both goods and services. BOP is
a true indicator of the economic performance of an economy.

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 Consumer Confidence
The consumer is confident about his purchasing habits or decisions when
they know they have income stability, and income is stable when the overall
economy of a country is. It also affects the markets. For instance, if
manufacturers and retail stores detect weak consumer confidence, they have
to manage their inventory and cut back on production. Therefore, the
economy will experience a slow down and ultimately, recession. A stable
and growing economy usually boosts a consumer’s confidence.

The confidence of consumers impacts their economic decision and hence is a

key indicator for the overall shape of an economy.

Business Plan

Business planning skills describe your ability to create a roadmap for the success
of a business. This ability encompasses documenting the specific details of the
business such as the goals and aims that a firm sets, the planned steps towards the
achievement of those goals, and the criteria that measures and monitors the firm’s
success.
Whether an already established company or a new start-up, business planning is
needed everywhere. Any document created in the process that organizes all the
data, manages your plans, and communicates them to stakeholders is known as a
‘business plan

Why is business planning important

Business planning can be arduous as well as time-consuming but its importance is
not debatable in any case. Whether planning an expansion of operations or launch
of a new and exciting product, business planning is the necessity of all large and
small companies.
Utilizing your skills to come up with a sound business plan requires a lot of
research, hence, keeping you well-informed about the true position of your
business in the market, relative to competitors. Gathering information for business
planning purposes can help you identify any weaknesses and foresee potential
threats so that strategies can be developed to deal with problems even before they
occur.

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The business plan that a company comes up with also serves as a reference point. It
helps you determine whether or not you have drifted from your original vision and
in case you have, it helps you get back on track. Therefore, starting a business
without carefully planning it is like setting off on a journey without a roadmap. It
can also serve as a great motivational tool when you review the plan to see how far
you have already come.

How to improve business planning skills

Take the following measures to improve your business planning skills:

 Adopt a conservative approach. In all your financial projections and estimates,

you must be conservative so that you don’t overpromise the returns to any
particular business. For instance, if you are certain that the business will capture
30% of the market share I the first year, you may state is only as an opinion and
give reasons for why you believe so. However, in making financial projections,
taking only 10% market share into consideration will give much more credible
results.

 Emphasize on people as much as ideas and concepts. As good as the business

idea may be, it can never be successful enough until you make the acquisition of a
strong management team a part of your planning. Venture capitalists as well as
individual financiers are much more likely to invest in businesses that not only
have a good concept but also a team with good credentials and expertise.
 Support every claim with evidence. Business planning requires making several
claims but all those claims must be backed up by proof. Otherwise, you will have
no credibility. If you say, for instance, that your staff qualified enough to make the
business success, their resumes must reflect it too.

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