Entrepreneurial Opportunity Identification and Exploitation - Example

Entrepreneurial opportunity identification and exploitation Name Course Name and Code Instructor’s Name Date Table of Contents Table of Contents 2 Introduction 3 Theoretical Background 4 The role of opportunities in entrepreneurial research 6 Opportunity Identification and Exploitation 7 Ethics and Social Responsibility in Entrepreneurship 9 Conclusion 10 Personal Reflection 11 References 13 Introduction An entrepreneurial opportunity is a situation in which a person can exploit a new business idea that has the potential to generate a profit (Baron and Shane, 2008). The entrepreneurial opportunity has qualities including attractiveness, durable, and timely. An entrepreneurial opportunity can either be a product or a service which creates or can add value for the buyer or user (Madura, 2006). Entrepreneurial opportunity identification and exploitation is one of the tremendously growing research fields. In essence, the main intriguing fact about this is how to examine and identify entrepreneurial opportunities. Entrepreneurship is particularly concerned with the discovery and exploitation of profitable opportunities (Madura, 2006). Many research activities into this topic specifically focus on studying how, by whom together with what effects opportunities are identified, evaluated, and exploited. With regard to these studies, various conceptual and theoretical findings have been documented with regard to the role of entrepreneurial opportunities in entrepreneurship research. Some of the theoretical elements put forward as core factors that extensively affect the identification and exploitation of entrepreneurial opportunities include: idiosyncratic knowledge, cognitive properties, information processing and social networks, personal traits, entrepreneurial alertness, signal detection, entrepreneurial intuition, and mindset. The studies which investigate the role of having prior knowledge, entrepreneurial, learning, pioneering behaviour, network alliances, risk handling as well as growth aspirations in the identification and exploitation of entrepreneurial opportunities. This report provides an academic analysis of Entrepreneurial opportunity identification and exploitation. Specifically, the report highlights the importance of the entrepreneurial opportunity identification and exploitation for new venture start-up and success. Accordingly, the report will also give an extended personal reflection as to why this research topic “Entrepreneurial opportunity identification and exploitation” was chosen and what I have learnt with regard to entrepreneurship. Theoretical Background There are three vital elements when studying the entrepreneurial opportunities phenomenon: first, it is argued that knowledge and information are unevenly dispersed among people. In this regard, it is wholly alluded that no two people hold or share the same kind of information and knowledge about the economy (Blume & Covin, 2011). The information and knowledge held by these individuals influence how they identify and exploit entrepreneurial opportunities. Secondly, other researchers in this field also concluded that entrepreneur’s prior knowledge is an essential tool for entrepreneurial opportunity identification and exploitation. This notion dictates that, entrepreneurs will only be able to discover and exploit entrepreneurial opportunities that are related to their already existing knowledge (Fauchart and Gruber, 2011). Lastly, it has also been established that the nexus between the individual and the opportunity itself is another vital phenomenon to be studied in order to comprehend why entrepreneurs identify and exploit certain opportunities (Madura, 2006). For this matter, such studies should examine the attributes of both the entrepreneur and the opportunity and the association between the two instead of looking at either attributes of the opportunity or attributes of the entrepreneur. Similarly, it is argued that the focus for identifying and exploiting the entrepreneurial opportunity primarily lie on the individual-opportunity nexus. Entrepreneurship phenomenon and entrepreneur as a person can be traced back into the 18th century (Gedajlovic and Shulman, 2009). Initially, according to Turgor’s theoretical concepts, the entrepreneur’s role was to coordinate; for instance, connecting producers and consumers through making judgment in uncertainty environments. An entrepreneur was also regarded because of capitalist investment decision. For instance, he/she was tasked with either leading the money (representing a pure capitalist agenda) or he/she was a producer. With regard to Turgor’s thoughts, an entrepreneur is a vital entity in the economic life, as he/she understands the technological means of production together with transferring this knowledge into valuable products and services. In the same line of thinking, due to the emergence of neoclassical economics where the equilibrium model is the analytical core, the entrepreneur almost disappeared from the economic theory, as he/she seemed to distort the equilibrium conditions (Ramoglou, 2013). However, some scholars challenged this perfect model and introduced the concept of risk and uncertainty in early 1920s. Similarly, they strongly objected the static concept of neoclassical model. For this reason, an entrepreneur was found to disturb the economic equilibrium. The founders of the Austrian School of Economics also agreed that equilibrium is not a given condition of the economy. With regard to these expert points of view, the entrepreneur is a key player and is responsible for this process happening (Sørensen and Nanda, 2010). For example, it was noted that the market process is influenced and driven by people who acquire excellent mutual knowledge and information with regard to plans made by fellow market participants. Significantly important, the market place is shaped by the imaginative, daring, and speculative actions of entrepreneurs who discover pure opportunities for profits in the current uncertain market conditions (Minniti and Moren, 2010). The concepts of entrepreneurial alertness and entrepreneurial discovery are essential in ensuring that the entrepreneur is alert to the existing opportunities in the market and identify them by coincidence and exploit them accordingly (João and Rui, 2009). The economist who founded the Austrian School of Economics in the mid 19th century also studied the effects of the entrepreneur together with the productive opportunity on the growth of an organization. Nonetheless, it should be noted that entrepreneurship as an independent and individual field of study, came into existence in the 1970s and has evolved academically as well as in business practice for various reasons. For example, some research activities into this topic regard entrepreneurship as the engine of economic growth. In the same line of discussion, entrepreneurship is responsible for the creation of new jobs together with increased organizational growth. Additionally, besides from employment creation and organizational growth, entrepreneurship has five more benefits including wealth creation, creation of change, enterprise development, innovation, and value creation. The role of opportunities in entrepreneurial research The ideas of opportunities can be traced back to the Austrian School of Economics; for this matter, entrepreneurs can either create opportunities by using innovative means or discover opportunities through exploiting existing market disequilibrium through idiosyncratic knowledge, profit motives, and/or alertness (Erik, 2011). Different experts have come up with different definitions of entrepreneurial opportunity definitions; however, the sources of their entrepreneurial opportunity definitions tend to have a particular interest. There are seven sources of opportunities where four exist with the company or industry including unexpected occurrences, incongruities in demand and supply, process needs, industry and market changes. The other three sources of opportunities exist outside the company in its social and intellectual contexts and these are change in demographics, change in perceptions, and the acquisition of new knowledge. These seven sources can be summarized into three main categories, which are: Creation of new information as it occurs with the advancement in technology The exploitation of market efficiencies that result from information asymmetry, as it happens across time and geography, and The reactions to the shifts in the relative costs together with benefits of alternative uses of resources as it happen with the political regulatory or demographic changes. Some authors with regard to this topic argue that opportunities can either, be created, recognized or discovered depending on the maturity of the markets and the level of information completeness. Opportunity Identification and Exploitation Like in the above discussion, opportunity identification and exploitation wholly depends on the Austrian School of Economics. Individuals discover entrepreneurial opportunities due to idiosyncratic knowledge together with specific cognitive properties. There are two basic determinants with regard to how entrepreneurial opportunities are evaluated: the nature of the opportunity itself; the entrepreneur will only exploit those opportunities that he/she expects to profit from. Secondly, the individual can evaluate the entrepreneurial opportunities based on the individual differences in experience, personality, perception and optimism. In accordance with this, they address the question of when the opportunity should be exploited by the institutional arrangements of the organization or when it should be exploited through the market. Basing on the entrepreneurship theory, extend of the entrepreneurial opportunity can be elaborated (Thomas, Robert and Michael, 2009). Rather than examining the stability of personal traits of entrepreneurs, the studies should focus on entrepreneurial activities that emerge from episodic information. Accordingly, they should evaluate the usefulness of theories of equilibrium in entrepreneurship studies. Furthermore, the descriptions of various topologies of opportunities, like opportunities that occur through changes in the value chain. For example, the entrepreneurial theory proposed by Velamuri and others (2004) state that dispersed knowledge lead to uncertainty: heterogeneous expectations, together with entrepreneurial opportunities. In this theory, it is argued that the different levels of dispersed knowledge, uncertainty as well as expectations will automatically explain whether the opportunities are exploited by established or new companies. The concept of entrepreneurial alertness together with aspects of dispersed and prior knowledge, a comprehensive opportunity model was developed where personal traits, prior knowledge together with social networks are potential recipes that lead to entrepreneurial alertness which then culminate into entrepreneurial opportunities. On the other hand, some experts in this field, strongly stress the importance of the development process of entrepreneurial opportunities, here, some concepts are created and nurtured in a continuous and proactive process until a business enterprise is formed. The development of entrepreneurial opportunities can also be based on asymmetric information as well as knowledge combined with information processing and network theory. West (2003) illustrates how entrepreneurs can continuously transfer asymmetric information into asymmetric knowledge through calculated information acquisition by iterative and reciprocal communication exchanges. The developed network is thereby used as a platform to increase the information transfer and to improve the chances of identifying entrepreneurial opportunities and their exploitation. Ethics and Social Responsibility in Entrepreneurship Like any other organizations, ethical decision-making is equally important to entrepreneurs; following the persistence of ethical situations in big corporations including Enron and WorldCom, entrepreneurs must act ethically and responsibly. The value system learnt by business executives as well as entrepreneurs has shaped them to be ethical and responsible in their exploits (Paul, 2010). Ethical learning processes that business executives experience in their daily undertakings to be ethical. Understanding ethics and its application in decision-making process is influenced by social variables including social norms and cultural systems. The responsibilities, accountabilities, as well as liabilities towards ones action is the manifestation of one’s strong convictions of transparency and integrity together with responsibility (Shane, 2013). Following the above understanding, it is extremely important for entrepreneurs to come up with an ethically acceptable culture that will ensure that they are socially responsible in all actions that they undertake. Similarly, consumers of the current times want to do businesses with organizations they can trust; in this regard, the way the new start-up organization respond to the needs of their stakeholders including consumers will reveal their moral conduct. Connecting ethics with the core business of the enterprise as well as in decision-making process from across the leadership fraternity is ideal in ensuring that the business organization conducts its businesses ethically and responsibly. The business environment within which the new business operate should have models that will aid in identifying, examining and resolving ethical issues; this will help entrepreneurs to coherently asses the value of ethical behaviour (Scott, 2003). Business ethics studies wholly constitutes human conducts that regarded as either wrong or right in the business context as well as the moral standards that are concerned with the behaviour that can vastly affect the well being of the human race. In this perspective, the start-up organization should develop a professional code of ethics that will be responsible for governing the conduct of its members. In the same line of discussion, social responsibility is another core aspect of an organization that is essential in ensuring that business organization is perceived or regarded as caring as well as being responsible to the society within which it operates. In a similar manner, entrepreneurs should have well and elaborate plans for social responsibility in order for the new start-up to win the customers from within and without (Kickul and Bacq, 2012). This will also help the new organization to create a name for itself, be an acceptable brand, and thus generate a competitive advantage at the marketplace. Conclusion Identifying and exploiting entrepreneurial opportunities is the most significant thing that will ensure the success of any business start-up. In this regard, entrepreneurs are required to have excellent skills and abilities for identifying business opportunities in uncertain business environment or come up with new products and services through innovation. Conducting a feasibility study is key in ensuring the prioritization of activities and allocation of resources. According to the above discussion, there are different ways and means through which entrepreneurs identify opportunities and eventually exploit them. Different theories have been put forward with regard to how they can accomplish this daring and dangerous adventure. The Austria School of Economics was on the forefront in studying and developing the different theories as to how entrepreneurs manage to successfully pursue their mission. For instance, they established that individuals discover entrepreneurial opportunities due to idiosyncratic knowledge together with specific cognitive properties. It is also important to understand that the ethical code observation by entrepreneurs is significantly important. For instance, by adhering to the societal norms and morals in their business operations allow their new businesses to be perceived as socially responsible and thus acceptable. A socially responsible company is positioned to thrive even in the most turbulent business environment. Personal Reflection Reflecting on my classroom experiences, I highly value the immeasurable effects that lecturers make on the lives of all those who attend their lectures. I fully acknowledge that the knowledge and skills I acquired in the classroom will be helpful and useful to me throughout my life. Therefore, as an entrepreneurship student I would like to develop my entrepreneurial skills, become an influential entrepreneur by being among the first individuals to identify and exploit entrepreneurial opportunities. I believe that the extensive knowledge and skills I have acquired in this course will help me to have an entrepreneurial mind thus increasing my capacity to make a positive impact in the entrepreneurial field. Furthermore, I wholly believe that the vast knowledge I have acquired whilst pursuing my MSc in entrepreneurship has not only enabled me realize that entrepreneurship is a research field, and engine for economic growth but also as a way of life. The course dealt with all aspects of entrepreneurship examining how individuals can discover and exploit entrepreneurial opportunities. Similarly, the entrepreneurial opportunity sources, the types and forms of opportunity, the industries which favour the development of new business enterprises and above all the entire entrepreneurial process is extensively described. The level of my current understanding with regard to this subject matter is outstanding and I believe that with such outstanding understanding of entrepreneurship subject gives me a solid foundation of becoming an excellent entrepreneur with abilities to identify and exploit entrepreneurial opportunities. In addition to the above, the study of this course has empowered me to have an entrepreneurial personality, mindset and above all differentiate the different types of entrepreneurs. In the same line of thinking, through my learning, I discovered how entrepreneurs are different from other people; for instance, they are daring, like risk taking, and are able to identify opportunities in the most uncertain situations. Vitally important, the course taught me how entrepreneurs assemble their resources including human and social capital like forming the entrepreneurial team and how to create entrepreneurial networks. The financial capital on the other hand defines the types of capital available for new venture creation, the sources of finance and how to finance the on-going ventures. With regard to this, I came to understand why it is difficult for entrepreneurs to raise start-up capital and identify the sources of capital for the new ventures. Another significant aspect of assembling resources is the information; for instance have comprehensive knowledge as to why conducting feasibility analysis, opportunity evaluation, market information government policies and the interpretation of this information is a key aspect of entrepreneurship. This helped me understand what the entrepreneurs need to know before starting up a new business. Similarly, the manner and ways through which entrepreneurs obtain relevant and appropriate information together with its interpretation is well and extensively elaborated through this course. My experience through this course has instilled and empowered me with relevant and extensive knowledge and skills with regard to entrepreneurship. For this matter, I am able to identify and exploit entrepreneurial opportunities. Accordingly, I can identify and assemble entrepreneurial resources. With regard to this, I can identify and exploit entrepreneurial opportunities. References Blume, B., & Covin, J. 2011. Attributions to intuition in the venture founding process. Do entrepreneurs actually use intuition or just say that they do? Journal of Business Venturing, vol. 26, pp. 137-151 Baron, R. And Shane, S. (2008) Entrepreneurship. A process perspective, 2nd ed. Mason (OH): Thomson/South-Western. Erik, N. 2011. Entrepreneur Training Manual, 3rd Ed. London: Guanzi Institute Press Fauchart, E., and Gruber, M. 2011. Darwinians, Communitarians, and Missionaries: The Role of Founder Identify in Entrepreneurship. Academy of Management Journal, vol. 54, no. 5, pp. 935–957. Gedajlovic, N., and Shulman, K. 2009. A typology of social entrepreneurs: Motives, search processes and ethical challenges. Journal of Business Venturing, vol. 24, no. 5, pp. 519-532. João, L., and Rui, B. 2009. Public Policies for Fostering Entrepreneurship. New York: Springer. Kariv, D. 2011. Entrepreneurship: An International Introduction. London: Taylor & Francis Kickul, J., and Bacq, S. 2012. Patterns in Social Entrepreneurship Research. London: Edward Elgar Publishing Madura, J. 2006. Introduction to Business. London: Cengage Learning Minniti, M., and Moren, L. 2010. Entrepreneurial types and economic growth. Journal of Business Venturing, vol. 25, no. 3, pp. 305-314. Paul, D. 2010. Entrepreneurship in the United States: The Future Is Now. New York: Springer. Ramoglou, S. 2013. Who is a 'non-entrepreneur'? Taking the 'others' of entrepreneurship seriously. International Small Business Journal, vol. 31, no. 4, pp. 432–453. Scott, A. 2003. A General Theory of Entrepreneurship: the Individual-Opportunity Nexus. London: Edward Elgar Publishing. Shane, S. 2013. The genetics of entrepreneurial performance. International Small Business Journal, vol. 31, no. 5, pp. 473–495. Sørensen, J., and Nanda, R. 2010. Workplace Peers and Entrepreneurship. Management Science, vol. 56 Thomas N., Robert D., and Michael, A. 2009. Technology Entrepreneurship: Value Creation, Protection, and Capture. London: Academic Press Read More