A Trilogy On Entrepreneurship: Preparing for Entrepreneurship. Eduardo A. Morato Jr.

economies, like China and India, have had a major impact on the prices of fuel, strategic metals, industrial products and consumer goods.

      Industries all over the world have been severely affected by these two economies. Meanwhile, countries and stock markets tremble at downturns in the biggest economic superpower of all, the United States. The US is a major consumer of world goods and services, creating and uncreating opportunities. Within the economic walls of any one country, the income levels and purchasing power of its people, the competitiveness or uncompetitiveness of its enterprises and the business cycles of its industries are sources of opportunities as well as threats. The entrepreneur must apply critical thinking to determine how each economic event impacts on his or her business.

      The ecological environment includes all natural resources and the ecosystem that defines the habitat of man, animals, plants and minerals. There is a growing ecological consciousness in the world today that will make this factor more and more important for countries, industries and businesses. Threats of ecological degradation have spawned countless opportunities. Oil-starved Japan is leading the way in producing electric cars and solar power. Opportunities shine in recycled materials, water-saving toilets, clean emissions, renewable forests, air purifiers and bio-degradable products. Smoke and spill detectors, filters and screens, pollution counters and energy-saving devices are the opportunity translations of an ecologically-worried world. New strains of viruses propel developers of anti-viruses. Along the way, fear grips the population into buying tons of vitamins and boxes of face masks. Opportunities abound for greener, cleaner, healthier and organically-grown products. Saving the planet and prolonging lives have become opportunity battlecries.

      The technological environment makes or breaks competing participants in any industry. New scientific and technological discoveries often lead to the commercialization of new products, rendering old ones obsolete because of superior attributes. The entrepreneur’s nightmare is to wake up one day to find his or her enterprise wiped out by better, cheaper, bigger, smaller, cleaner, friendlier, easier and lovelier products from frontier-pushing competitors. The entrepreneur’s choice is simple: either keep abreast of technological trends or die. The technology can come in the form of new machinery and equipment, new systems, new processes or new products. It can also be all of the above when technology paradigms are changed.

      Industry and Market Sources

      A thorough analysis of industry structure and dynamics yields opportunities for the astute entrepreneur. Situating the enterprise inside an industry realm, the entrepreneur can examine the entire supply to market chain of that industry. The entrepreneur may discover weak links in the chain that need strengthening or gaps in the whole chain that need filling. Sometimes the opportunity lies not in finding gaps and weaknesses but in assailing the strongest links where there may be a concentration of bargaining power. Each link in the supply to market chain represents an enterprise or a set of enterprises playing an economic role in transforming raw materials into finished goods and distributing those goods to market traders, wholesalers and retailers. The entrepreneur should determine which players produce the most volume of goods, which ones control the flow of those goods, which ones make the most profits, and which ones push the most volume through the market channels and to the final consumers. This rigorous profiling of the industry supply to market chain may reveal strategic opportunities for industry intervention.

      While industry structure lays out opportunities along the industry supply to market chain, industry dynamics present opportunities that arise from how the different industry participants interact, bargain and transact business with one another. There is a complex web of collaborators and competitors who are looking for strategic allies, outsourcing partners, better marketers, superior solutions, revolutionary technologies, excellent service providers or quality suppliers. Industry jousters will always be on the lookout for opportunities to gain greater competitive advantage or to decrease the bargaining power of other industry combatants. The entrepreneur should always be alert in detecting windows of opportunities emanating from shifts in the industry power equation or changes in the industry rules of the game.

      Market sources of opportunities can be gleaned from increased or decreased demand as well as higher or lower supply. For example, the newly-discovered medicinal properties of mangosteen increased the demand and the price of the fruit while the very high levels of cholesterol, plus the threat of mad-cow disease, decreased the demand and the price of beef. The former brings opportunities for mangosteen growers while the latter provides opportunities for chicken raisers. Similarly, a low harvest of mangoes for the majority of growers gives high profit opportunities to those who are able to produce a decent harvest. However, when there is a glut in mango supply, the producers of mango puree, mango juice and dehydrated mangoes will be the ones to benefit. They make money only when the harvest is plenty and the prices of mango fruits are low.

      Markets exhibiting very high growth rates, such as those for high tech electronic products, will find tremendous business opportunities. However, markets that have collapsed may still yield opportunities for the persevering supplier. Take the case of a World War II jeep restorer. Since the entrepreneur is the only one left supplying the product for avid vintage jeep collectors, he makes tremendous profits out of his “dying business.” Market trends should be monitored closely by the opportunity-seeking entrepreneur. If there are available market statistics, well and good for the entrepreneur. Otherwise, the entrepreneur must watch competitors’ products very keenly. Which ones are selling and which are not? For that matter, the entrepreneur should conduct frequent sales data mining of his or her own enterprise. There may be products surging ahead of the others. This presents opportunities for carrying larger inventories and selling more of those products. A retailer of men’s apparel discovered from her sales data mining exercise that her biggest sales and profits came from men’s briefs. She expanded the shelf space and the number of posters for the product. This increased her sales quite significantly. To bolster the search for promising opportunities, the entrepreneur is well advised to watch out for unforeseen successes and failures within one’s own business experiences or those coming from competitors. These unforeseen outcomes may not be flukes but serendipitous revelations of customer needs and wants.

      Consumer Preferences, Piques and Perceptions

      Customer preferences change over time. Because of scientific researches, education programs and information campaigns, customers today are more health conscious compared to twenty years ago. Planes, buildings, restaurants and public gatherings have become smoke-free zones and the once ubiquitous nicotine inhalers have been exiled to the pariah of isolated smoking rooms. The benefits of red wine have catapulted its sales to unprecedented heights, to the chagrin and lamentation of hard liquor producers. Unmarried adults have ceased frequenting singles bars. They have turned to more wholesome fitness gyms and health spas.

      People’s tastes in clothes, music, shoes, entertainment, dance, sports, hobbies, and even careers have evolved over the years. Sometimes the change is insidious, like the slow cooking of beef stew in a crackpot. Sometimes, it is fast and furious like a meteor shower. The slower the burn, the longer the trend. The faster the change, the quicker the fad. The entrepreneur must be very keen in discerning which opportunities will be worth investing in for the long term and which ones require rapid entries and exits. In general, customer preferences for items with high emotional valence take a longer time to change. This is true for food cooked “the way grandma used to make it,” music composed “during the good old days” and lifestyles that “we grew up with.” Items that customers purchase because “everybody else is buying it” have a shorter lifespan like pearl shakes, puka shells and potpourri.

      What piques customers is a great source of opportunities. Take the example of an upscale hotel like Westin Hotels and Resorts (Frances X. Frei, Chekitan S. Dev and Laure Mougeot Stroock, “Westin Hotels and Resorts: Operations of a Lifestyle Experience,” Harvard Business School. May 7, 2007). It wanted to go to the upper end of its market segment and beat competitors like Marriot and Hyatt. Westin commissioned a research group to conduct a survey of 600 executives. The survey revealed that 63% of the executive travelers complained that their quality of sleep was much less on the road than at home. They were piqued that their performance suffered because they had a terrible night’s sleep in a hotel