Finding gaps in the marketplace

A gap n the market - is an opportunity to offer something that customers want but that businesses
aren't currently providing. The term "gap" refers to the difference between supply and demand for that
offering.
 For example, Netflix filled a market gap with its DVD mail-order rental business, competing with
Blockbuster Video. By 2010, Netflix streaming eventually bankrupted Blockbuster.
Examples of Market Gaps
Market gaps are opportunities disguised as voids. A gap in the market is a place or area that current
businesses aren’t serving.
Netflix
Netflix has filled multiple market gaps over the years. In 1997, the company began by renting out DVD
movies by mail for a monthly fee. In 1998, the company had a DVD rental website competing with
Blockbuster Video, which had brick-and-mortar stores.
The company was one of the first successful DVD rental companies online and surpassed one million
customers by 2003. The company introduced its streaming platform, and by 2009, had 10 million
customers, while in 2010, Blockbuster filed for bankruptcy. As of 2022, Netflix is in 190 countries with
200 million customers globally.12
Whole Foods
Whole Foods fills the market gap that occurred when health-conscious consumers wanted a central,
convenient place to shop for organic, healthy, and natural food products. In 1980, the first Whole Foods
Market opened in Texas, while the U.S. had only a few natural food supermarkets at that time.
By 1984, the company expanded throughout Texas and the southern U.S. By the 1990s, the company
was acquiring other natural food stores on the West Coast and the Northeast. As of 2022, Amazon.com
owns Whole Foods, which it acquired in 2017.34
How To Find Market Gaps
A gap in the marketplace is often created when a product or service is needed by a specific group of
people but doesn’t represent a large enough market to be of interest to mainstream retailers or
manufacturers.
Whether you are starting a small business or looking for growth opportunities in your current business,
market gaps can be amazing sources of inspiration for your next big idea.
Assess Your Strengths
It’s not just the right idea you are looking for—you must find the right idea for the right person. It doesn’t
do you any good to find a gap in the market that you can’t take advantage of. So before you start to look
for market gaps, it only makes sense for you to know exactly where your strengths lie.
Start by making a list of your perceived strengths. Use past experiences to guide you.
Think about what you’re most happy doing. Think about what you have the most success doing. Revisit
old critiques or performance reviews to pick out anything that might give you some insight. Reach out to
colleagues for honest feedback that can help you figure out what specific strengths you could bring to
the table. Consider taking a professional aptitude test, which could identify areas of strengths you can
explore in a small business environment.
- A gap in the marketplace is often created when a product or service is needed by a specific group of
people but doesn’t represent a large enough market to be of interest to mainstream retailers or
manufacturers.

FULL VIEW OF THE OPPORTUNITY RECOGNITION PROCESS

Opportunity recognition is a process through which entrepreneurs and businesses identify potential methods of
growing their ideas or beginning new ventures. It gives entrepreneurs the chance to brainstorm for new and
better ideas constantly. In addition, opportunity recognition makes the available products and services better
through continuous process improvement.

What is the meaning of opportunity?

An opportunity refers to a favorable situation that provides one with a chance to progress. It arises when a
person finds it possible to do something they have wanted to do. In the economy today, entrepreneurs have
managed to identify business opportunities and promote economic growth. Opportunities have been identified
through solving problems, changing trends, and technological advances.

For entrepreneurs to make profits and remain relevant, they must possess the skills to recognize possible
opportunities. Opportunity recognition is an essential skill for an entrepreneur to have. It encourages people and
businesses to develop new products and skills and improve those that already exist. Entrepreneurs with high
opportunity recognition skills can create new products that satisfy the existing market. It is an
essential entrepreneurial skill because it helps an individual identify a niche and solve a problem while gaining
profits. As a result, entrepreneurs with high opportunity recognition skills become successful and remain relevant
in an economy.
Opportunity Recognition Process

The opportunity recognition process is a step-by-step procedure of how an entrepreneur identifies an

opportunity and makes it a viable business idea. Entrepreneurs must learn the industry's background, recognize
opportunities when they present themselves, and actively look for new opportunities. The role of opportunity
recognition in innovation is highly significant to an innovative firm. There are five stages in the process of
opportunity recognition. The opportunity recognition process helps equip them with the skills they need in each
step. They include getting the idea, identifying the opportunity, developing the opportunity, evaluating the
opportunity, and finally evaluating the team.

1. Getting the idea: The first stage is for the entrepreneur to get the business idea. An individual can
generate a business idea from a niche in the market. A niche is a gap left unfulfilled by those currently
serving the market. It provides a chance for other people to add value that was unmet. It allows the
new entrepreneurs to perform differently and compete with already existing businesses.
2. Identifying the Opportunity: Opportunity identification is when an individual realizes a business idea
with good returns that has not been discovered. It requires keen scanning of the business environment,
being alert about the changing information, and the ability to use the information effectively.
3. Developing the Opportunity: Developing an opportunity requires the entrepreneur to modify the idea
to suit the current market needs. During this stage, research is conducted to identify whether the
business idea can be converted into an actual business. The entrepreneur begins the process of
acquiring resources for the opportunity.
4. Evaluating the Opportunity: Opportunity evaluation is the stage where the potential risks are assessed.
It is identified whether the risks will be worth the investments made. Profitability is also scrutinized to
find out how long the payback period is after an investment.
5. Evaluating the team: The final stage involves having a skilled team to bring the business idea to
realization. Employing capable people is crucial because they are the people who will work to make the
opportunity economically viable.

- Depicts the connection between an awareness of emerging trends and the personal characterictics
of the entrepreneur

Environmental Trends
Economic Factors - state of the economy, Level of disposable income, Consumer spending patterns
Example of Economic Trend Creating a Favorable Opportunity
A weak economy favors
startups that help consumers
save money.
An example is GasBuddy.com,
a company started to help
consumers save money on gas.
Economic trends help determine areas that are ripe for new startups and areas that startups should
avoid.

Social factors - Social and cultural trends, demographic changes, what people think is “in”
Social trends alter how people and businesses behave and set their priorities. These trends provide
opportunities for new businesses to accommodate the changes.
Retirement of baby boomers.
The increasing diversity of
the workplace.
Increasing interest in health, fitness, and wellness.
Emphasis on alternative forms of energy.
New forms of music and other types of entertainment.

Technological advances - New technologies, Emerging technologies, New uses of old technologies
An example is H20Audio,
a company started by four former San Diego State University students, that makes waterproof
housings for the Apple iPod.

Examples of Entire Industries that Have Been Created as the Results of Technological Advances
Computer industry
Internet
Biotechnology
Digital photography

Political and regulatory changes. - New changes in political arena. New laws and regulations
Gen Example: Laws to protect the environment have created opportunities for entrepreneurs to start
firms that help other firms comply with environmental laws and regulations.

Example: The No Child Left Behind Act of 2002 requires states to develop criterion-based assessments
in basic skills to be periodically given to students in certain grades. Kim and Jay Kleeman, two high
school teachers, started Shakespeare Squared, a company that helps high schools comply with the
act.
Business, Product or Service
Personal Characteristics Opportunity Gap Difference New Business,
between what’s available and
Of an Entrepreneur what’s possible
Product and
Prior experience -Prior Industry Experience Service Ideas
Several studies have shown that prior experience in an industry helps an entrepreneur recognize
business opportunities.
By working in an industry, an individual may spot a market niche that is underserved.
It is also possible that by working in an industry, an individual builds a network of social contacts who
provide insights that lead to recognizing new opportunities.
Cognitive factors - Cognitive Factors
Studies have shown that opportunity recognition may be an innate skill or cognitive process.
Some people believe that entrepreneurs have a “sixth sense” that allows them to see opportunities
that others miss.
This “sixth sense” is called entrepreneurial alertness, which is formally defined as the ability to notice
things without engaging in deliberate search.

Social networks - Nature of Strong-Tie Vs. Weak Tie Relationships

Strong-tie relationship are characterized by frequent interaction and form between coworkers,
friends, and spouses.
Weak-tie relationships are characterized by infrequent interaction and form between casual
acquaintances.
Result
It is more likely that an entrepreneur will get new business ideas through weak-tie rather than strong-
tie relationships. (See next slide.)

Creativity -
Creativity is the process of generating a novel or useful idea.
Opportunity recognition may be, at least in part, a creative process.
For an individual, the creative process can be broken down into five stages, as shown on the next
slide.