Opportunity

Recognition
Module No. 11
by BSN II A - GROUP 6
 MEMBERS

Ms. Katherine K. Belarmino Ms. Jessia Olivia G. Noel

Ms. Erin Faith M. Pateña Ms. Zoie Joplin L. Tradio Ms. Jolly Anne A. Turbiso
 COURSE LEARNING OUTLINE

At
At the
the end
end of
of this
this module,
module, students
students will
will be
be able
able to:
to:

Define
Define Opportunity
Opportunity Recognition
Recognition
Explain
Explain the
the 77 Opportunity
Opportunity Factors
Factors
Discuss
Discuss the
the Opportunity
Opportunity Recognition
Recognition Process
Process by
by Long
Long && McMullan
McMullan (1984)
(1984)
Discuss
Discuss thethe Opportunity
Opportunity Recognition
Recognition Sequence
Sequence by by Bhave
Bhave (1994)
(1994)
Differentiate
Differentiate New
New Venture
Venture Idea
Idea from
from Entrepreneurial
Entrepreneurial Opportunity
Opportunity
 CONTENTS

01 Definitionof
Definition ofOpportunity
OpportunityRecognition
toEntrepreneurship
to
Recognitionaccording
EntrepreneurshipTheorists
Theoristsand
according
andPractitioners
Practitioners 02 The77Opportunity
The OpportunityFactors
Factors

By Ms. Noel By Ms. Pateña

03 Opportunity
Opportunity Recognition
Recognition Process
Process 04 HowDifferent
How DifferentEntrepreneurs
EntrepreneursDiffer
Differin
DiscoveringOpportunities
Discovering Opportunities
in

By Ms. Belarmino By Ms. Turbiso

 CONTENTS

05 NewVenture
New VentureIdea
Ideavs
vsEntrepreneurial
Entrepreneurial
Opportunity
Opportunity 06 References
References

By Ms. Tradio

07 08
GENERAL DEFINITION
Perceiving a possibility for new profit
potential through (a) the founding and
formation of a new venture or (b) the
significant improvement of an existing
venture. (Christensen, Madsen, & Peterson,
1989)
 QUOTES ON THE CONCEPT

Entrepreneurs not only see the

The significant problems
system as it is, but as it might You have to recognize
we face cannot be solved
be. They have a knack for when the right place and
at the same level of
looking at the usual and seeing the right time fuse and
thinking we were at when
the unusual, at the ordinary and take advantage of the
we created them.
seeing the extraordinary. –
opportunity.
– Albert Einstein
Mitton (1989, p. 12)
– Ellen Metcalf
 Subtopic no. 1

Definition of Opportunity Recognition

according to Entrepreneurship
Theorists and Practitioners

By Ms. Noel
 Opportunity recognition is the active, cognitive process (or
BARON processes) through which individuals conclude that they
have identified the potential to create something new that
has the potential to generate economic value and that is not
currently being exploited or developed, and is viewed as
desirable in the society in which it occurs (i.e. its

A
development is consistent with existing legal and moral
conditions). (Baron, 2004b, p. 52)
 BARON

Because
Because opportunity
opportunity recognition
recognition is is aa cognitive
cognitive
process,
process, according
according to
to Baron
Baron (2004b),
(2004b), people
people can
can
learn
learn to
to be
be more
more effective
effective at
at recognizing
recognizing
opportunities
opportunities by
by changing
changing the
the way
way they
they think
think
about
about opportunities
opportunities and
and how
how toto recognize
recognize them.
them.
 DRUCKER

B
Systematic innovation involves “monitoring seven sources
for innovative opportunity” (Drucker, 1985, p. 35). The
first four are internally focused within the business or
industry, in that they may be visible to those involved in
that organization or sector. The last three involve changes
outside the business or industry.
DRUCKER Internally vs Externally Focused

Internally Focused Externally Focused

The unexpected (unexpected success,
Demographics (population changes)
failure, or outside events)
Changes in perception, mood, and
The incongruity between reality as it
meaning
actually is and reality as it is assumed to
New knowledge, both scientific and
be or as it ought to be
nonscientific
Innovation based on process need
Changes in industry structure or market
structure that catch everyone unawares
 MITCHELL

One of the components of Mitchell’s (2000) New Venture TemplateTM asks

whether the venture being examined represents a new combination. To determine
this, he suggests considering two categories of entrepreneurial discovery: scientific
discovery and circumstance.

Scientific Discovery
Physical/technological insight
New and valuable way
Circumstantial Discovery
Specific
When
knowledge
and
of time,
what
place, or
you
C
circumstance
know
The second set of variables to consider are the market imperfections
that can create profit opportunities: excess demand and excess
supply. This gives rise to the following four types of
entrepreneurial discovery.
MITCHELL
b.) Observation
c.) Invention II
a.) Invention I -Circumstances reveal -Uses science to exploit excess supply
(a market imperfection)
opportunity to exploit excess
-Example: Second most abundant
-Uses science to exploit excess demand (a market element on earth after oxygen = silicon
demand (a market imperfection) imperfection) microchips
-Becomes an opportunity to -Not necessarily science-
discover and apply the laws of oriented d.) Coordination
nature to satisfy excess demand -Example: airline industry = -Circumstances reveals opportunity to
-Inventions in one industry have exploit excess supply (a market
need for food service for
ripple effects in others imperfection)
-Example: invention of airplane
passengers -Example: Producer’s capacities to
lower prices = Wal-Mart
 SCHUMPETER
D
Schumpeter’s (1934) five kinds of new combinations (see page 13) can occur within each of the four kinds of
entrepreneurial discovery (Mitchell, 2000):

New or improved good/service

Distinction between true advances and promotional differences
New method of production
Example: assembly line method to automobile production, robotics, agricultural processing
Opening of a new market
Global context: Culture, laws, local buyer preferences, business practices, customs, communication, transportation all set
up new distribution channels
Example: Honda created a new market for smaller modestly powered motorbikes
Conquest of a new source of supply of raw materials
Enhance availability of products by providing at lower cost
Enhance availability by making more available without compromising quality
Reorganization of an industry
 MURPHY
Murphy (2011) claimed that there was a single-dimensional logic that
oversimplified the approach taken to understand entrepreneurial discovery.

E
He was bothered by the notion that entrepreneurs either deliberately
searched for entrepreneurial opportunities or they serendipitously
discovered them. Murphy’s (2011) multidimensional model of
entrepreneurial discovery suggests that opportunities may be identified:

Through a purposeful search

Because others provide the opportunity to the entrepreneur
Through prior knowledge, entrepreneurial alertness, and means other than
a purposeful search
Through a combination of lucky happenstance and deliberate searching for
opportunities.
Vesper (1996) identified several ways in
which entrepreneurs found ideas: VESPER
(1) Prior job, (2) Recreation, (3) Chance event, (4) Answering discovery
questions
According to experimentation research, entrepreneurial creativity is not correlated with IQ. Research has also shown that
those who practice idea generation techniques can become more creative. The best ideas sometimes come later in the
idea-generation process—often in the days and weeks following the application of the idea-generating processes (Vesper,
1996).

E
Although would-be entrepreneurs usually don’t discover ideas by
a deliberate searching strategy (except when pursuing acquisitions
of ongoing firms), it is nevertheless possible to impute to their
discoveries some implicit searching patterns. (Vesper, 1996, p. 60)
 Subtopic no. 2

The 7 Opportunity Factors

By Ms. Pateña
 In today’s fast-paced business environment, entrepreneurial success is
directly related to one’s ability to identify opportunities resulting from rapid
change and new trends. To Succeed, entrepreneurs must continually
recognize, monitor, and stay abreast of what is going on in the economy,
government, society and technology.
Opportunities emerge when there are changes in:

1. Technology
2. Consumer Economics
3. Social Values
4. Political Action and Regulatory Standards
5. Demographics
6. Natural Disasters
7. Resource Discoveries
 TECHNOLOGY

● Technology contributes to higher levels of economic

output and can deliver new goods and services that
change human lives and capabilities.
● Google made search better. Amazon simplified online
buying and selling. Netflix solved on-demand
streaming media. GrabCar or GrabTaxi is trying to
make on-demand car service better.
 CONSUMER ECONOMICS

● Consumers are the ones who demand

goods/services and the ones who buy them.
● Being alert and aware of the changes in
consumer economics will enable us to
discover emergent patterns that we might not
have seen or encountered.
SOCIAL VALUES

● Social values can be the driving force behind starting

a business venture.
● They become a factor of opportunity when the
business idea is in line with the society.
● Hospitality is one of the Philippines’ greatest social
values. A lot of our businesses are community-
centered and a lot of establishments are created with
the thought of pleasing and satisfying consumers and
tourists.
 POLITICAL ACTION AND
REGULATORY STANDARDS

● An entrepreneur can identify business

opportunities by referring to the existing law and
government regulations.
● Example: Laws to protect the environment have
created opportunities for entrepreneurs to start
firms that help other firms comply with
environmental laws and regulations.
 DEMOGRAPHICS

● Demographics are the personal characteristics

of people in a population.
● If an entrepreneur studies the demographics
of his/her consumers, then he/she will be in a
better position to predict the product or
service that they will buy.
 NATURAL DISASTERS

● Changes in environmental conditions are often the catalyst

that spurs people to action. But environments that suppress
innovation can have a chilling effect on opportunity
recognition.
● Disasters can provide entrepreneurs new business
opportunities in areas such as energy efficiency, renewable
energy, cleaner production, carbon finance and sustainable
supply chains.
RESOURCE DISCOVERIES

● Financial resources, human resources, educational

resources, emotional resources, and physical resources are
examples of resources that help a business function
effectively.
● Most businesses start off on a small budget. That’s why,
often, a small business owner’s best strategy is to make
the most of what they got.
 Subtopic no. 3

Opportunity Recognition Process

Long and McMullan (1984)

By Ms. Belarmino
Studying the process of entrepreneurship is
one of the most important directions for
future entrepreneurship research
Uncontrolled Factors
Cultural Forces
Social Forces
Economic Forces
Job Forces
Personality Forces
Controlled Factors
Venture, Alertness, Cultivation
Study of Venture Subjects
Job Selection
Moonlight Venturing
Entrepreneurial Lifestyle
Identifying the Field of Opportunity
Elaborating the Opportunity
The Decision to Proceed
 Subtopic no. 4

How Different Entrepreneurs Differ in

Discovering Opportunities

By Ms. Turbiso
The impact of, Social Networking,
Learning with a Mentor, Cognition
and Experience on opportunity
recognition (OR) process.
Theoretical Lenses
Social Networking

According to Ma et al.(2011), the gate pass that access and provides

information related to opportunities in different culture societies is the social
networking. Where individuals stays aware of important changes and new
trends that might exist in markets, technology and government policies. Two
main aspects characterized the social networking are strong ties (The
relationship with friends and families) and weak ties (The relationship with
non-close persons or the public).
 Strong ties are working well in weak regimes were
information transparency and trustworthy is low. In
collectivist and individualist societies, offers a wide
range of information and shows a common interaction
between individuals and social networking.
Weak ties in contrary work well in strong regimes
were information transparency and trust worthy is
high, it experiences a deficiency and chances of
missing information exist.
Theoretical Lenses
Social Networking

Ma et al. (2011) are interested in studying the benefits of social networking and
how they are related to OR. Authors like, Ozgen and Baron (2007) state that the
use of social networks by individuals would be through information,
understanding the technological development, changes and trends of the market
and government policies. (Ma et al. 2011)
 Bridging and social ties, acts positively in the
individualist cultures societies, because, a form of
link will solve the deficiency and lack of information
that might exist in such cultures toward opportunities.
And acts negatively in collectivist cultures societies,
were they are already sharing and exchanging
information exist.
Behavioral Theory
Learning with A mentor (Observing)

St-Jean & Tremblay (2011) who studied the OR among novice entrepreneurs
based on the influence of mentors. They state that various studies (such as,
Ozgen & Baron, 2007; Barrett, 2006; Hezlett, 2005; Wanberg, Welsh, &
Hezlett, 2003; Egan, 2005; Godshalk & Sosik, 2003) provide evidence that
mentors do play and significant positive role on their mentee (entrepreneurs)
towards recognizing opportunity.
St-Jean & Tremblay (2011) points out that, authors like
Davidsson & Honig (2003) and Orwa (2003) have
studied the influence of knowledge on OR by
entrepreneurs, by classifying knowledge into tacit and
explicit knowledge. And their findings show that,
entrepreneurs with tacit knowledge in business have
higher ability of identifying and recognizing
opportunities than those with explicit knowledge.
 Novice entrepreneurs should take experienced
entrepreneurs as their mentors and their experience and
knowledge of the mentors will provide the novice
entrepreneurs with greater opportunity towards
recognizing business opportunities
Cognition Theory
Alertness

Baron & Ensley also focuses on the role of alertness in OR as a unique

preparedness to recognize opportunities when they exist ( Kaish and Gilad1991,
p. 48) ” ( Baron & Ensley : 2006).. In their study, they focused on factors (e.g.
Prior Knowledge, Specific Search Strategies, Social Networks and other
recognition) that determine the alertness level of each person. The different
individuals tend to connect the dots to link the opportunities to existed
prototypes that exist in their minds which make their alertness ability differs.
 "the process through which individuals identify
meaningful patterns in complex arrays of events or
trends"
 Some people recognize the opportunities by linking
ideas to gather them. Which will help them to find a
purposeful pattern and framework that lead to mental
“prototypes”.

Entrepreneurial minds works by comparing new

opportunities that are related to products and services to
existing prototypes.
 Subtopic no. 5

NEW VENTURE IDEAS VS

ENTREPRENEURIAL
OPPORTUNITIES

By Ms.Tradio
“Venture ideas take inspiration. Venture
opportunities need perspiration.”
 WHAT
WHAT IS A BUSINESS IDEA?

A business idea is a concept that has the potential to make money.

It is tied around a product or service but has no commercial value
yet because the concept has not been proven.
● A prospective market
● Solve the customer’s problem
● Be unique in the market
● Be innovative
● Prospective revenue sources
● High prospects for profitability in
the long run.
 WHAT IS A BUSINESS OPPORTUNITY?

A business opportunity is a concept that has been proven severally

in the marketplace with the presence of several or many successful
businesses doing the same or similar things.
● It must be a proven concept with several
successful businesses using the same
model.
● The gross margins of the business must
be high.
● The business must have the potential to
reach a break-even point within 12
months – 36 months.
● The capital or investment required to start
up must be realistic and within what you
can raise.
● You have the skills or people needed to
make the business successful.
● It must have the potential to keep on
improving with time.
● The risk level must be many times lower
than an unproven idea.
● Ideas are not the same as opportunities
Many budding entrepreneurs believe that an idea alone will
guarantee them success and wealth
Opportunities arise from CHANGES—whether it be the
development of new knowledge by individuals and
organizations, or the changes in the behavior of relevant
actors in the economy (e.g., competitors, consumers,
suppliers, institutions, etc.), or wide-ranging changes in
the macroenvironment (e.g., market saturation,
deregulation, business cycles, etc.).
PHASES OF ENTREPRENEURIAL ACTION

FIRST PHASE
FIRST PHASE SECOND PHASE
The evaluation of the opportunity for
The formation of subjective beliefs that
oneself (or for one’s organization), that
an opportunity exists for those with the
is, whether one has the means and
relevant abilities and means to exploit it
motivations to act on the opportunity
 A venture idea can only turn into a venture opportunity, if
there is a favorable combination of circumstances that make
it both desirable and feasible for the entrepreneur to exploit
a venture concept and to introduce a potentially value-
adding offering into the marketplace
 REFERENCES

Course Hero. (n.d.). Opportunity Recognition. Retrieved from

https://www.coursehero.com/file/61517382/opportunity-recognitionppt/

Edom, S. (2018, April 29). The Difference Between A Business Idea And A Business Opportunity.
StartupTipsDaily.
https://startuptipsdaily.com/difference-between-a-business-idea-and-a-business-opportunity/.

Mohammad BarrakFollowBusiness Development Manager at Line

CompanyLike23Comment5ShareLinkedInFacebookTwitter0, Follow, & Mohammad BarrakBusiness Development
Manager at Line CompanyFollow. (n.d.). Opportunity recognition - how different entrepreneurs differ in
discovering opportunities. Retrieved April 20, 2021, from https://www.linkedin.com/pulse/20140724072944-
147339648-opportunity-recognition-how-different-entrepreneurs-differ-in-discovering-opportunities

Shoikat, J. (2019). Entrepreneurship development & recognizing opportunities. Retrieved from

https://www.slideshare.net/JubayerAlamShoikat/entrepreneurship-development-amp-recognizing-opport
unities
 REFERENCES

Snow, C. (n.d.). (Opportunity Recognition). Retrieved from

https://slideplayer.com/slide/4881020/?fbclid=IwAR1zcFANwAJVDzTTGUdpaR42TrFQjbTCYsy895fbG3y
5zOyCvlCaNg-S9p4

Sortoviro, S. (2019). 6 Factors That Impact Opportunity Recognition. Retrieved from

https://serendipitism.com/6-factors-that-impact-opportunity-recognition/

Swanson, L. (2017, August 31). Chapter 2 – opportunity recognition and design thinking. Retrieved April
19, 2021, from https://openpress.usask.ca/entrepreneurshipandinnovationtoolkit/chapter/chapter-2-opportunity-
recognition-and-design-thinking/

Vogel, P. (2018, August 14). Business ideas are not the same as business opportunities: Here is why. IMD
business school.
https://www.imd.org/research-knowledge/articles/ideas-are-the-seeds-of-new-business-opportunity/.
THANK YOU FOR
LISTENING!
Module No. 11 - Opportunity Recognition
by BSN II A - GROUP 6