Chapter 2: Opportunity Seeking,

Screening, and Seizing

INDUSTRY, MARKET,
MICROMARKET & OTHER
SOURCES OF OPPORTUNITIES
 SOURCES OF
OPPORTUNITIES
Industry Micromarket

Market
Other
INDUSTRY SOURCES OF OPPORTUNITIES
• One of the most difficult aspects about industry
analysis is defining what constitutes an industry
in the first place.
• The proper classification of what industry the
enterprise is competing in is important if the
entrepreneur's intention is to define who are
relevant customers, who are the direct and
indirect competitors, and what are the critical
characteristics of the market as the quality of
products or services to be delivered.
Participants in an Industry include:

1. Rivals or competitors in a particular

type of business (e.g., Jollibee vs.
McDonald's, Coca-Cola vs. Pepsi,
Samsung Galaxy vs. Apple's iPhone,
etc.). True rivals or competitors are
those competing for the same or
similar markets.
Participants in an Industry include:

2. Suppliers of input (e.g., fuel,

electricity, raw materials) to rivals
as well as suppliers of machinery
and equipment, suppliers of
manpower and expertise, and
supplies of merchandise.
Participants in an Industry include:

3. Consumer market segments being

served by rivals or competitors.
4. Substitute products or services,
which customers shift or turn to.
5. All other support and enabling
industries.
• After identifying the participants, it
would help the entrepreneur to
determine the logic of the industry.
• A thorough analysis of industry structure
and dynamics yield opportunities for the
clever entrepreneur. Situating his or her
enterprise within the realm of an
industry provides many profitable
opportunities for the entrepreneur.
Several Ways of
Defining an
Industry
• The most common way of defining an
industry is according to product types or
according to functions of the product or
service.
• Classic examples of these industries
include the computer industry (Microsoft
vs. Apple), beer industry (San Miguel
Beer vs. Beer na Beer), fast food industry
(Mcdo vs. Jollibee), and cola industry
(Coca-Cola vs Pepsi Cola).
• Another way of defining an industry is by
tracing the industry from its most basic
raw material down to its various
consumer applications, otherwise known
as product or value-added chain.
• The difference between the product and
value-added chain is the focus of the
analysis. Product chain focuses on the
volume produced or converted at each
link of the chain. Value-added chain
focuses on the economic.
TRACING OF A PRODUCT CHAIN EXAMPLE

• Coconut Industry. The coconut tree,

regarded as the 'tree of life', is useful for
different purposes. Its trunk, shell, meat,
husk, and leaves find their way to all types
of products such as oils, soap, handicraft,
oleo-chemicals, furniture, wallboard, coir,
etc. Looking at this value chain alone
presents many potential opportunities for
the entrepreneur.
• Defining an industry with a narrower
scope represents a threat because of its
limiting effect.
• Example, to simply classify all those
using coconuts in their production
process as being in the coconut industry
per sec might not be too useful. The
reason is that most of the coconuts
harvested are processed into coconut oil,
which is just one of the many substitutes
in the fats and vegetable oils industry
traded worldwide.
• Value-added chain follows the product
chain but concentrates on the 'value'
added from one stage of the product to
the other - a value that is given by the
market price differential between stages
of production.
• The differential would include the
additional costs of processing the product
from one stage to the next and the profit
margins added on each stage by the
processor (or distributor).
VALUE-ADDED CHAIN EXAMPLE

• Cup of designer coffee. At farm gate prices, one

would get a few pesos out of a bag of freshly picked
coffee beans. The coffee beans will then get processed
and packaged by the coffee manufacturer. Cost and
profit margins are added before selling the product to
distributors.
• Once it gets in the hands of the distributors, the latter
will have to market and sell the finished product to
coffee shops for a few more pesos added to concoct
their own versions of designer coffees. The fancier the
coffee gets, the more expensive a cup of designer
coffee becomes.
Relationship between
Product & Value-added Chain
Product Chain Value-added Chain
Raw Material Raw Materials' Prices
and Additional Cost
Semi- and Profits
Processing
Semi-Processed Goods
Semi-
Prices and Additional
Processing
Costs and Profits

Fully Processed Prices of Processed

Product/Services Goods
• Entrepreneur may discover weak links in
the chain that need strengthening gaps in
the whole chain that need filling.
• Opportunity lies not in finding and
weaknesses but in assailing the strongest
links where there may be concentrated in
bargaining power.
• Entrepreneur should be alert in detecting
windows of opportunity emanating from
shifts in the industry power equation or
changes in the industry rule the game.
MARKET SOURCES OF OPPORTUNITIES

• Entrepreneur must be able to measure

the actual demand and supply as well as
the potential demand and supply of the
industry that the enterprise belongs to.
• Monitoring of the prevalence of product
substitutes and their market impact on
the existing players in the industry
• Market trend analysis is also
conducted in determining the critical
variables, which would most likely
affect the future directions in the
industry.
• Market traits, characteristics, and
behavior are identified in order
match these customer traits with the
product offerings of the enterprise.
• Market sources of opportunities can be
discovered from increased or decreased
of demand as well as higher or lower
supply.
• Example, battle of the value in combo
meals, otherwise known as “more-for-
less” strategy in the fast food restaurant
industry. The demand for more
affordable but filling meal is
continuously growing particularly for
the working population.
• This, in turn, creates an increased
demand in the items that come with
the value/combo meal such as rice,
chicken, pasta, sidings (e.g., mashed
potato, etc.) and beverage drink.
• Although smaller in portions, the
volume served is more, particularly in
peaked hours.It also opens up up the
opportunity of offering breakfast items
and strengthening this time-of-the-day
segment.
 MICROMARKET

It refers to the specific target

market segment of a particular
enterprise.
• These are the target customers that
represent the immediate customers
of an enterprise, meaning those
who are currently buying goods or
services offered by the enterprise
and its direct competitors.
• It likewise pertains to a clearly
defined location or specific
customer group that an enterprise
wishes to serve.
• The need for segmentation would
be crucial in micromarket analysis
because the definition of value for
money differs from group to group.
• If they do not differ, then the
entrepreneur is better off by
aggrupating rather than
segmenting.
• Example, the Makati office crowd has several
choices where to eat. Observing the behavior
of customers during lunch would indicate
what groups of customers prefer fast food
establishments, what group brings their own
pack lunches, and what group goes for casual
dining. Several opportunities can be spotted
by the entrepreneur, such as opening up a
new food outlet or offering food delivery
services to a particular office crowd.
• Consumer preferences refer to the tastes
of particular groups of people.
• Example, the clothes that people wear,
the food they eat, the music they listen
to, and the movies they watch. The
consumers' age, culture, and status affect
their preferences.
• Consumer dislikes refer to the things that
irritate customers. Either way, the
entrepreneur can explore opportunities
brought by consumer preferences or
dislikes.
• Example, if consumer trends show a rising
preference for “fast casual” dining, then
this would be an opportunity worth
exploring. If customers show great
annoyance at standing in long queues in
fast food outlets, then sit-down “fast
casual” dining could be a great opportunity.
• There are times when the product is
not changed by the enterprise but
what changes is the way consumers
perceive the product.

• Classic example, Listerine

mouthwash. It was first offered as a
surgical antiseptic and,later, a cure
for athlete's foot during the war.
Choices that Customers have to Struggle

1. Awareness of the new product or service

must be generated.
2. Arousing the customers' interest to buy, going
to the evaluation of the product, and finally,
the decision to purchase the product.
• After customer purchased the product, there
is a need to build brand loyalty and retain the
customer for a long time to get a bigger share
of his/her wallet, not just his/her mind.
 Other Sources of Opportunities
New knowledge as well as new
technology can be the source of
highly innovative opportunities
Unexpected successes (or failures) can lead
to good opportunities. Another potential
source of opportunity is the entrepreneur's
own skills or expertise, or hobby.
Other Sources of Opportunities
1. Customer preferences change over
time.
2. People's tastes in clothes, music, shoes,
entertainment, dance, sports, hobbies,
and even careers have evolved over the
years.
3. What piques customers is a great
source of opportunities
4. Before the customer is won over, there
is first a battle for the mind. Next,
there is a battle for the heart. Finally,
there is a battle for the wallet.
5. The longer the customer wants to use
the product, the greater the chances
of creating lasting loyalty.
6. Opportunities abound in shaping
consumer perceptions or occupying
spaces in their minds or places in their
hearts that have not yet been filled.
7. New inventions, new systems and work
processes, new insights about the
human psyche, new applications for old
knowledge, new revelations about how
the physical world works, new
interpretations, new combinations
based on the convergence of previous
technologies, new outlooks about how
life should be led, and a host of other
new things are tremendous sources of
opportunities.
8. Determining personal preferences
and competencies lay the
foundation for a new business
venture.
9. Unexpected occurrences in both the
external and internal environment of
the enterprise indicate that
significant changes are happening
and opportunities are sprouting.
Industry, Market,
Micromarket and
Other Sources of
Opportunities
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