Opportunity, Strategy & Entrepreneurship: A meta-Theory Volume 2, New York, Nova Scientific Publishers

1. BUSINESS ISSUES, COMPETITION AND ENTREPRENEURSHIP
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OPPORTUNITY, STRATEGY
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AND ENTREPRENEURSHIP:
A META-THEORY
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VOLUME TWO:
THE SOURCES OF OPPORTUNITY, RESOURCES,
SKILLS, COMPETENCIES AND CAPABILITIES,
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NETWORK, THE COMPETITIVE ENVIRONMENT
AND THE OPPORTUNITY FRAMEWORK
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2. BUSINESS ISSUES, COMPETITION
AND ENTREPRENEURSHIP
Additional books in this series can be found on Nova’s website
under the Series tab.
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Additional E-books in this series can be found on Nova’s website
under the E-book tab.
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3. BUSINESS ISSUES, COMPETITION AND ENTREPRENEURSHIP
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OPPORTUNITY, STRATEGY
AND ENTREPRENEURSHIP:
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A META-THEORY
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VOLUME TWO:
THE SOURCES OF OPPORTUNITY, RESOURCES,
SKILLS, COMPETENCIES AND CAPABILITIES,
NETWORK, THE COMPETITIVE ENVIRONMENT
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AND THE OPPORTUNITY FRAMEWORK
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MURRAY HUNTER
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Nova Science Publishers, Inc.
New York

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Library of Congress Cataloging-in-Publication Data
ISSN: 2161-8186
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ISBN: 978-1-61470-824-7
Published by Nova Science Publishers, Inc. † New York

5. CONTENTS
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Preface vii
Chapter 1 The Sources of Opportunity 1
Chapter 2 Resources: The Bedrock of Opportunity Exploitation 89
Skills, Personal Competencies and Enterprise Capabilities 119
Chapter 3
Chapter 4
Chapter 5
Chapter 6
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Networks: Technical Know who Is what Makes a Business
The Competitive Environment:
A Framework for Observing Industry Evolution
Strategy: The Means of Opportunity Exploitation
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215
243
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Chapter 7 The Opportunity Framework 325
Summary 355
Index 357
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7. PREFACE
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The first volume of this book dealt with the nature of opportunity, time and space, the
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vision platform, and making connections. In the first volume, chapter one introduced the
concept of opportunity. Opportunity was described as both an environmental and individual
phenomenon where aspirations and imagination were just as important as changing social,
economic, technological, and regulatory structures and conditions. It was explained how four
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basic types of opportunities exist. Imitation based opportunities occur with little innovation
and value creation. Allocative opportunities occur because of mismatches in supply and
demand. Discovery based opportunities occur from shifting consumer preferences, regulation,
and economic conditions. Construction based opportunities don’t exist until someone
constructs and develops them through the process of effectuation. Opportunity was seen as a
dynamic and ever shifting, where successful firms are those that match their strategy with
opportunity. Opportunities begin through images which are connected with other images
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forming concepts which are developed, evaluated, and elaborated into ideas. The chapter
concluded with a discussion about emotional sensitivity and the role it plays in seeing
opportunities, the idea evaluation process, and chance and fate.
Chapter two examined opportunity from the socio-economic, economic history,
economic geography, political economy, and biographical perspectives. Chapter two argued
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that opportunity and our consequential actions occur within the realm of time and space. Due
to our evolutionary accumulation of knowledge, technology advancement, and social
evolution being time and spatially based, opportunity to a large degree is a product of time
and space. For ideas to become valid opportunities, all the elements that enable opportunity
gestation and its subsequent exploitation must be in place. The trajectories that
entrepreneur/inventors take are also a product of time and space as opportunity and strategy
are socially bounded. This chapter was divided into three parts. Part one examined the phases
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of national development through the stages of a traditional economy, under-developed
economy, developing economy, developed economy, and post industrial economy. Each
particular stage of national development lends itself to certain types and scope of
opportunities. The second part of the chapter looked at the biographies of a number of
inventor/entrepreneurs during the industrial revolution to the turn of the twentieth century.
Looking directly at biographical contexts allowed us to look at the flow of events in time and
space in terms of innovation, invention, promotion, and effect on society at the time and into
the future. This approach provided a window into how inventor/entrepreneurs gained insight
and were able to develop their inventions into commercial reality. One can also get some

8. viii Murray Hunter
feeling about the motives they had, challenges they faced and see how their development of
business models was crucial to the success of their ventures. Part three took us into the
twentieth century beginning in the post World War II era. A look was taken at some of the
important entrepreneurial events during each decade until today. Certain entrepreneurs and
their ventures were examined in the light of the social and economic conditions evident
through those times.
Chapter three examined the ways we look at the world through a number of different
paradigms and metaphors. The chapter was an attempt to explain how we perceive and what
influences our thinking. This chapter was also broken into three parts. The first part looked at
how we perceive through examining the sociological factors influencing us. These include
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demographic factors like family and peers, domicile outlook, the need to survive, work and
life experiences, education, skills and abilities, age, and gender. The section finished with a
look at generational differences and culture. Part two explained how our cognitive system
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works, emphasizing its limitations and how this is compensated for. Part three took us into the
psychological domain where a number of mechanisms influence how we perceive, think, and
make decisions. These include our emotions, emotional attachment, our ego, identity, and
self, the unconscious, defence mechanisms, group views of reality, transference, symbolic and
ritualistic delusion, groupthink, motivational bias, tiredness and complacency, cognitive traps,
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personality traits, entrepreneurial typologies, power and conflict, genetic inheritance, and mid
life crisis and transition. Imagination, passion, enjoyment, energy, personal discipline, and
what constitutes a motivational trigger are examined as processes that facilitate a person see
and react to opportunity. Finally the chapter hypothesized that opportunity is as much a
product of ourselves as it is of the environment around us.
Chapter four was concerned with creativity, a concept that is not totally agreed upon as
some people see creativity as a process, while others view creativity as a product. Creativity
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is totally interlaced with opportunity, strategy, and entrepreneurship where both its process
and product are fundamental to the whole phenomenon. Creativity is necessary in idea
creation, its evaluation, opportunity construction and effectuation, developing the sources of
opportunity, the gathering and combining of resources, networking, and the crafting of
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strategy to achieve a vision and solve problems along the way. Although we know most of the
cognitive processes related to creativity and can identify most of the characteristics associated
with it, we still need to explore creativity through metaphors, various styles, and applications.
The second half of the chapter looked at a few different approaches to applying creativity and
concluded with a discussion about the barriers to creativity and how they can be overcome.
In this volume, chapter one introduces the sources of opportunities. As opportunities can
be considered gaps in the market where there is potential to do something and create value,
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these gaps must have a causal source. There are six basic major sources of opportunity
consisting of market voids, technology infusion, structural changes, resource monopolies,
regulation and non-innovative sources. Any opportunity is likely to be based on one or more
of these sources, carrying multiple characteristics, but they are in fact very hard to really see
and understand. Once the correct sources of opportunity have been identified, resources,
capabilities, networks, can be configured to develop strategies to exploit them.
Chapter two considers the issue of resources in relation to opportunity exploitation.
Resources comprise of anything that is of use to an entrepreneur, either within a tangible or
intangible form. A business model can be considered a higher level resource, as it reflects
how an entrepreneur combines resources to create value from those at his or her disposal. The

9. Preface ix
chapter briefly discusses how needed resources for a new value chain can be identified and
allocated within the venture to build the resource base. The resources base is from where
enterprise capabilities and ultimately strategies are built upon. Difference types of resources
are needed during different stages of a firm’s evolution. Eventually the entrepreneur will be
able to build specialized resources that cannot easily be copied by competitors and can form
the basis of some form of competitive advantage. The chapter concludes with a brief
discussion about how resources can be utilized as barriers to entry and outlines the resource
cycle of a firm.
Chapter three considers skills, personal competencies, and enterprise capabilities. The
beginning of the chapter looks at personal talents and abilities and how they can be developed
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into skills. Various types of skills exist along a continuum spanning between those that are
domain specific and the broader cognitive and interpersonal skills. Sets of skills can be
developed into personal competencies which enable a person to become an expert in a
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particular field and within an entrepreneurial start-up, form the basis of enterprise capabilities.
Enterprise capabilities are distinctive enterprise competencies directly related to various
aspects of the business. They include management capabilities, entrepreneurial capabilities,
organizational culture, learning capabilities, innovative capabilities, and dynamic capabilities
which assist the firm change according to the trajectory of opportunities within the
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environment. Enterprise capabilities form the basis of strategy that the firm employs to
exploit opportunities.
Chapter four examines networks which are an entrepreneur’s connection both within his
or her organization and to the outside environment. Networks can be formal or informal and
enable the entrepreneur to acquire resources and finance, gather market intelligence, develop
new products, develop bridges where they lack capabilities, gain access to new markets, and
enable the sounding out of ideas and access to emotional support. There are many formal
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network mechanisms including licensing agreements, sub-contracting, strategic alliances,
agency and distribution agreements, and routine mechanisms like sales calls. Informal
mechanisms can include social connections, family and peers. Networks are an important
source of learning and have diverse influences upon decision making. The remainder of the
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chapter looks at network based strategies such as strategic alliances, relationship marketing,
and looks briefly at network based opportunities, and network building strategies.
Chapter five outlines the composition of the competitive environment, the actual field
where opportunities manifest and are exploited. The competitive environment incorporates
customer and supplier influences, substitute and complementary good influences, barriers to
entry, and the competitive field itself. This is continually influenced by the state of the
economy, social trends, technology, and government intervention. Consequently the
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competitive environment is dynamic and continually changing with its own lifecycle, which
influences the nature of competition. Firms are able to segment the competitive field or with
radical new technology, new processes, and/or business models, create new competitive
fields. The opportunity-strategy nexus is based on the sources of opportunity, the nature of the
firm’s resources and capabilities, which form the basis of strategy creation. The chapter
concludes with a brief discussion about the steps involved in environmental analysis.
Chapter six concerns strategy, where strategy is seen as a process of finding out what
works within the competitive field through effectuation and trial and error. Strategy is seen as
an intuitive rather than an analytical process. Developing strategy requires prior knowledge
and experience about ‘what works’, constrained by the firm’s resources and capabilities.

10. x Murray Hunter
There are a number of basic strategies, and those listed in this chapter are not exhaustive. A
firm will usually adopt and modify a particular type of strategy for specific purposes. Basic
strategic typologies may be modified or merged to form new types of strategies particularly
suited to the firm’s situation. The chapter concludes with a discussion on the components of
strategy, developing barriers to entry to prevent other firms imitating a firm’s strategic
position.
The final chapter synthesizes all the elements; time and space, the vision platform,
making connections, resources, skills, competencies and capabilities, networks, the
competitive environment, and strategy into what can be called the opportunity framework.
Each element is influenced by and influenced the other elements, forming an entropic pattern,
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where all the elements are required to create a true opportunity. The essence of the meta-
theory is that when any entrepreneur visualizes any potential opportunity. All the elements
must exist for there to be any real opportunity. Likewise when the entrepreneur attempts to
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exploit the opportunity, strategy must be built around these interrelationships.
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11. Chapter 1
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THE SOURCES OF OPPORTUNITY
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INTRODUCTION
An opportunity is a gap in the market where there is the potential to do something
different and create value (Wickham 2004). This represents a potential to serve customers
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better than they are already being served through a product or service that offers consumers
more utility in terms of satisfying human needs than existing products or services. An
opportunity must solve a problem, fulfil a need or want, create a fad or trend for any
exploitation of it to have a chance of succeeding. New opportunities continually emerge but
don’t necessarily present themselves openly. They must be seen, discovered, identified, or
constructed which is the task of entrepreneurs and managers of firms. Not every idea is
worthy enough to take action upon. The potential return on the investment of time and effort
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must be large enough to offset the opportunity cost of exploiting another idea or doing
something else (Kirzner 1973).
All opportunities have a basis or rationale of being. If the opportunity is to be considered
entrepreneurial, it must originate from a source of innovation, as entrepreneurial market
activity is novel by definition (Frederick & Kuratko 2010). An innovation can be seen as the
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source that enables the successful exploitation of ideas into new products, services, processes
or business models. Innovation is critical to enable a firm to grow and remain profitable.
Innovation combines knowledge and the needs and wants of consumers that are the base of
opportunities. Innovation is not just about the improvement of technology but covers all
aspects of a business and the way it organizes itself and operates. Innovation is an ingredient
needed to construct most opportunities that seek to exploit changes within the environment.
Innovation combines knowledge, resources, capabilities and competencies with social
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networks to create new means of creating value.
Innovation can create new sources of competitive advantage for a firm when it enables
incremental changes in the market. Revolutionary innovation can create new industries with
new breakthroughs in technology and methods of organization. However there must be a
reason for innovation and not just something done for the sake of doing it like what occurred
with the launch of New Coke, replacing the well accepted Classic Coke during the 1980s.
Likewise technology alone does not automatically yield innovation, imagination,
development and marketing skills are needed. Innovation must provide the basis or source of
opportunity that is intended to exploit a gap within the marketplace.

12. 2 Murray Hunter
However not all sources of opportunity need be innovative and most ventures usually
start with non-innovative ideas. In fact very few enterprises have neither, the time, resources,
technology or expertise to research and develop new business ideas and innovations (Johnson
& Tilley 1999).
A business begins with an idea that has been deemed an opportunity through some form
of analysis and a person is motivated enough to act upon it. The majority of ideas are derived
from the following categories;
1. An old type of business that can be given a new twist or professionalism, i.e.,
McDonalds or herbal products,
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2. A standard product or service that can be customised, i.e., recording birthdays on
customer records so that congratulatory messages can be individually sent to
customers by a company,
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3. New technology that can be adapted to manufacture old products, i.e., desktop
publishing, compact disks, faxes and email, etc.
4. Imported products that can be replaced with domestic products, i.e., the basis of
many domestic automobile industries,
5. The changing of business models, i.e., sourcing products from a third party rather
than manufacturing them,
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6. Developing the same business identity in another geographical location, i.e., The
opening up of Coca Cola, KFC and Pizza Hut franchises in other states and
countries, and
7. Replicating another business and competing against the original business, i.e., the
opening up of a bakery, milk bar, convenience store near another one.
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Although entrepreneurship has been associated with opportunity, there has been very
little written about the sources of opportunity. Attention has been focused upon the sources of
innovation, rather than the sources of opportunity, which can be innovative or non-innovative.
Joseph Schumpeter (1934), the famous Austrian economist was one of the first to recognise
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the role of entrepreneurship in economic development and identified five sources of
(innovative) opportunity;
1. The introduction of a new product, either novel or an improvement upon what is
available in the market,
2. The introduction of a new method of production, way of handling things, not
necessarily as a result of new technology,
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3. The opening up of a new market that has not previously been entered,
4. The conquest of a new source of supply of raw materials or intermediate goods, and
5. The development of a new way of organizating within an industry.
Schumpeter saw the economy developing across an evolutionary path where it is in a
continued state of dynamic disequilibrium (Schumpeter 1942). Entrepreneurs would find new
materials, new processes and ways of organizing that would replace the existing products,
methods of production and organization of the business, in a processes of creative
destruction. This is in contrast to invention, which may bring a revolutionary change to an

13. The Sources of Opportunity 3
industry. The effects of evolutionary and revolutionary change to industry are shown in Table
1.1.
Through the forces of change derived from dynamic disequilibrium new firms will be
formed by entrepreneurs commercializing new products or services, to create new demand
and wealth. Consequently the cycle leads to the formation, growth and decline of firms that
are replaced by new ones (Kirchhoff 1994). Firms therefore must either adapt through
innovation or die. Creative destruction continually changes the economic structure from
within, replacing it with a new one. This can be evidenced by the decline in the average
lifespan of companies on the S&P 500 from 35 years in 1975 to less than 20 years today
(Byers et. al. 2010).
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A good example of continuous change is the music industry. The first commercially
available recorded music medium was the vinyl record which lasted into the early 1980s,
when the cassette tape emerged. The cassette tape disappeared when the compact disk
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appeared the mid 1980s, completely overshadowing other recorded music mediums due to
better sound quality. The compact disk industry peaked around the mid to late 1990s when the
internet emerged as a means to obtain recorded music. Apple launched the iPod in 2001 and
iTunes eventually became accepted as a major means of obtaining music within the music
entertainment business. In a world of change entrepreneurs need to reinvent their existence
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and continue to seek new opportunities which include the development of new products, the
use of new materials in production, the development of new processes of production, the
creation of new ways of organizing and entry into new markets to prevent themselves
becoming irrelevant (Knopper 2009).
Igor Ansoff, regarded by many as the father of strategic planning applied Schumpeter’s
sources of opportunity to determining growth vectors and strategies for the firm. Ansoff
(1965) divided the product-market field into a grid representing four distinctive growth
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options available to a firm. Corresponding growth strategies based on appropriate sources of
opportunity could be developed to meet the growth objective of a firm.
Each sector of the field represents a potential growth vector. Pursuing growth through
existing products in existing markets requires market penetration strategies. Pursuing growth
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through existing products in new markets requires market development strategies. Pursuing
growth through new products in existing markets requires product development strategies and
pursuing growth through new products in new markets requires diversification strategies (see
Figure 1.1.).
Table 1.1. The effects of evolutionary and revolutionary change to industry
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Evolutionary Innovation Revolutionary Innovation
Incremental changes to the Major changes to the product/market/industry.
product/market/industry. Usually inter-industry changes.
Maintain the competitive position within the Creates new industries and may destroy old
industry. ones.
Part of rivalry strategies within an industry. Results in large scale industry transitions,
creating new positions and balances.
Short-run economic changes, maybe Long run economic changes of the industry.
providing temporary advantage.

14. 4 Murray Hunter
Markets
Existing New
Existing products to Existing products to
existing markets new markets
Existing Market Market
Penetration Development
Products
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New products to New products to new
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existing markets markets
New Product Diversification
Development
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Figure 1.1. The product-market field matrix.
Each sector implies corresponding sources of opportunities that consequent strategies
would be based upon. For example, the present technology processed by a firm for its existing
products can be utilized for developing similar new products. The firm will couple the source
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of opportunity with its objectives to develop a product-market and growth vector scenario.
Through the corresponding strategies the firm may develop a situation where its competencies
match the scenario and the objective-product/market-opportunity-strategy-competencies are
in synergy. This heightens the firm’s ability to compete in the market with competitive
advantage over its rivals (Ansoff 1968, P. 99). Competitive advantage is a driver of change as
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firms must respond to the development of new forms of competitive advantage by rivals
through new innovations to maintain their position in the market. However sources of
competitive advantage should not be mistaken for sources of opportunity.
Alternatively, a new technology through in-house R&D can be used to develop
breakthrough new products for the firm, which may make its competitors products obsolete.
These breakthroughs or disruptive innovations can create entirely new markets through the
introduction of a new kind of product or service that established market leaders have trouble
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coping with. This can be seen with the disruption to the airline industry through the
establishment of low cost airlines and the need of many post offices around the world to
diversify their business operations.
The basis of strategy depends upon finding opportunities in the product-market field and
synergising competencies to achieve its objectives through deliberate actions. According to
Ansoff (1968, P. 100) inherently profitable opportunities are found through threading the
product/market scope, growth vector, competitive advantage and competencies together in
response to the external environment. Ansoff saw the importance of synergy as a key
ingredient to make a product/market entry successful.

15. The Sources of Opportunity 5
Porter (1980) examined innovation in regards to industry evolution and saw that three
types of innovation can lead to opportunities for growth. Product innovation is a major source
of industry change through technological innovations. Product innovation can widen markets
and drive industry growth. Product innovations can come from outside the industry like
digital calculators and watches and completely change the marketplace where incumbents
within the industry have little flexibility (Porter 1980, P. 178). Marketing innovations involve
novel uses of advertising, new marketing themes and new channels to reach new consumers
and reduce price sensitivity through greater product differentiation. Innovation in marketing
and distribution can affect industry mobility and cost levels, thus changing the balance of
competitive advantage within the industry. Finally process innovation can change industry
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structure through changes in manufacturing methods. Innovation can make a manufacturing
process more of less capital intensive, thus changing the economies of scale of the process.
For example publishing technologies have reduced in cost allowing smaller firms or
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individuals to enter the industry. Polaroid cameras dramatically lost market share when digital
camera technology emerged.
Porter (1980, pp. 180-184) also mentioned a number of changes that would create new
sources of opportunities. Structural changes in adjacent industries could have potential
consequences for the direction of industry evolution. Hypermarkets and chain variety stores
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have changed the nature of retailing, thus lessening potential opportunities for individual
stand-alone retail formats but increasing opportunities for global distribution. Government
regulation change about what products can be sold and how products can be sold has great
affect upon the types of products in the market and companies that produce and sell them.
Government policy in various areas will affect the nature and structure of the products
companies offer and the nature of competition and the industry, i.e., medical insurance
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automobile insurance, medical services, types of agricultural products and medicines that
can be sold, entertainment and gambling laws, trade practices and regulation, etc.
The barriers of entry and exit and capital set up costs involved within an industry have
great bearing upon opportunities within that industry. Entry costs as a deterrent are relative to
the size and growth of an industry. Incumbents that have great infrastructure advantages,
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maybe sufficient to keep other companies out of the industry. However according to Porter
(1980, P. 183) sometimes these high entry costs can be circumvented by developing new
brands and business models as US firms did when they entered the low cost wine market.
Peter Drucker’s (1985) seminal book Innovation and Entrepreneurship stated clearly that
innovation is the specific function of entrepreneurship, whether it is in an existing business, in
a public service institution, or within a new venture. Innovation is the means by which the
entrepreneur develops new resources or improves the efficiency of existing resources by
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which more wealth is achieved (Drucker 1998). Drucker continues on to state that although
there may be innovations that spring from pure genius, but most innovations are the result of
conscious, purposeful, search for innovation opportunities, which are found only in a selected
number of situations. Drucker identified seven sources of innovation, which account for the
vast majority of all innovation opportunities;
• Unexpected occurrences,
• Incongruities,
• Process needs,

16. 6 Murray Hunter
• Industry and market changes,
• Demographic changes,
• Changes in perception, and
• New knowledge.
Drucker’s seven sources of innovation largely went unnoticed until a about decade ago,
when writers within the discipline of entrepreneurship realized their importance in explaining
the nature of opportunity and the practice of entrepreneurship.
Both Schumpeter’s and Drucker’s sources of innovation are very similar except where
Drucker identified unexpected occurrences as a source of opportunity. Although the
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unexpected success or failure shows a person’s or group’s limited vision or blindness
(Drucker 1985, P. 41), the unexpected should not directly be considered as a source of
innovative opportunity. The unexpected is a sign of other factors in operation. What may look
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like chance isn’t, as there are a number of underlying factors in the background, which can
either accelerate the process by which an industry develops (Porter 1990, P. 112). For
example, the Coca Cola Company by chance had the opportunity to rapidly expand
distribution around the world due to US involvement in World War II. In 1980 PZ Cussons
Australia launched the ultra dishwashing detergent Morning Fresh1. The product had poor
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consumer off-take until a transport strike in 1982. After a few days only bottles of Morning
Fresh remained in the dishwashing section of supermarkets and consumers had to purchase
the brand if they wanted any dishwashing liquid. Once consumers had the forced opportunity
to try the product sales continued to rise until it became the No. 1. dishwashing detergent on
the Australian market. Chance events are outside the control of firms. These can include
discontinuities that may cause demand surges, factors that nullify the advantages of natural
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leaders, breakthroughs in basic technologies, external political developments, or major shifts
in foreign based demand which create unforeseen opportunities from a number of different
sources of opportunity that can reshape the industry structure.
Chance is what happens when unrelated events churn around the planet. Luck occurs
when a highly alert person snatches meaning from chance. Luck doesn’t just happen, its
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arranged, by one’s own doing. Lucky people or firms are those that co-opt chance and exploit
it. Bad luck occurs when one is blind to events.
Edward de Bono (1993) gave a list of attributes that can in combination be seen as
sources of opportunity. If employed correctly these characteristics will place the firm with
distinct advantage in the marketplace, and thus may be seen as sources of opportunity. De
Bono talks about developing value monopolies, as against physical monopolies, where
competitors cannot complete. This is achieved through creating product/service value through
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some form or mix of;
• Physical uniqueness, i.e., a hotel or restaurant location,
• Technological uniqueness, i.e., a patent on a valuable technology behind a product
like Polaroid Cameras, where Polaroid won a court case over Kodak for infringement
over patents in 1986.
• Name recognition, i.e., James Bond, Disney, Calvin Klein, Caltex, Toyota, Soy,
Microsoft.
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An ultra dishwashing liquid is a concentrated one.

17. The Sources of Opportunity 7
• Dominance, i.e., Boeing, Toyota, IBM, Nokia.
• Cost of Entry, i.e., Disneyland, Boeing, Airbus, Toyota, etc.
• Brand Image, i.e., McDonalds, Nokia, Wal-Mart, London School of Economics, and
• Segmentation, i.e., McDonalds, Nokia, Wal-Mart.
Together these attributes can create a market positioning that is extremely difficult to
compete against, thus ensuring leadership for the firm that can develop these characteristics
and therefore in an integrated way be seen as a source of opportunity.
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THE PHASES OF OPPORTUNITY DEVELOPMENT
Business development is concerned about the art of seeing and exploiting opportunity for
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the creation of value, which may contribute to the firm’s profitability, growth and/or survival.
This process goes through four basic phases;
1. The discovery, identification or construction of ideas about opportunities through the
creative process,
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2. The screening of these ideas to determine whether an opportunity exists that has
potential to be exploited,
3. The crafting of a useful strategy that is able to exploit the identified opportunity, and
4. The implementation of the strategy in a way that adds value to the firm.
There is an abundance of management theory about the identification and exploitation of
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opportunities from various points of view. Andrews (1965), Ansoff (1965) and Porter (1980,
1985, 1990) take the point of view that opportunity identification and strategy development is
rational and analytical through convergent thinking process. Ohmae (1982), Mintzberg (1994)
and Stacy (1993) see opportunity identification and strategy development as more intuitive
and a creative process through divergent thinking. Others like Wilson (1994, 1998), Raimond
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(1996), Liedtka (1998a, 1998b) and Heracleous (1998) see opportunity identification and
strategy development as a mixture of art and science. What seems to be important is a firm’s
ability to recognise what information is important in opportunity recognition and subsequent
innovative processes, its prior and related knowledge and experience (Cohen & Levinthal
1990), and its alertness, self efficacy, creativity, social networks and the type of opportunity
itself (Ardichvili et. al. 2003). Previous entrepreneurial experience may assist in developing
an ‘opportunity intellect’ that aids the identification of opportunities and provides a
Pr
framework that allows informed and experienced based decisions about how to exploit an
identified opportunity (Kaish & Gilad 1991).
The process of opportunity identification would appear to be an emergent rather than a
deductive process, requiring divergent rather than convergent thinking. Innovation is
generated through social interaction where data cannot be analyzed in logical ways. For
example quantitative market research may be very limited in the information it can provide a
person who foresees the possibility of opening a sandwich bar next to a commuter train
station or a courthouse. Understanding consumer behaviour, their wants and needs will be
more important in making any decision to exploit the perceived opportunity. Therefore seeing

18. 8 Murray Hunter
opportunity is more related to the ability to imagine and associated emotions. New ideas are
constructed, not analyzed. The future cannot be forecast, it can only be explored (Schumacher
1974, P. 200).
In order to see the potential sources of opportunity one must be able to take a strategic
view of the firm and the environment. A strategic view is one that can pick up subtle changes
in the environment through a degree of sensitivity and alertness and be able to extrapolate any
linkages and connections discovered into idea scenarios that can be evaluated. An individual
will tend to be more sensitive and alert in domains that he or she already has knowledge and
experience.
To see opportunity there must be motivation or intent. Hamel and Prahalad (1989)
y
conceptualized the concept of strategic intent where there is an intuitive vision of the future
direction of the firm. This helps to provide focus on the domain and selective parts of the
environment that are considered important to the firm’s future. Therefore as well as being a
nl
motivator, strategic intent concerns itself with the immediate domain and the firm’s perceived
capabilities and prior learning linked through prior knowledge. Strategic intent also gives a
sense of destiny and direction (Hamel & Prahalad 1994, pp. 129-130).
The discovery of useful sources of opportunity in the construct of opportunities is tied to
observation of environment changes over time. Changes in the environment usually occur in
O
an evolutionary manner which the average person will not be aware and think about.
Connectiveness of the past and present to the future must be incubated by the individuals who
make up the firm over reflection and time.
Alternatively sources of opportunity may be driven by new technologies, either as an
incremental step or breakthrough. New technologies incorporated into products, services or
improve production processes can potentially add value to a firm. With novel breakthrough
technologies a firm may be able to create a new market segment, i.e., P&Gs development of
fs
Pert/Rejoice 2 in 1 shampoo, or even a new industry, i.e., the advent of cellular phones
created a new industry separate to existing landline phone networks.
The firm will operate according to a ‘self hypothesis’ which is influenced by learning and
prior knowledge. A ‘self hypothesis’ is a shared mental model of the environment and the
oo
firm’s place within it. The firm’s ‘self hypothesis’ is where the firm perceives its own
strengths and weaknesses, those of its competitors, the potential reactions of competitors to an
aggressive stance taken by the firm, weak spots and barriers within the field and areas where
the firm should not enter or is safe to enter. The ‘self hypothesis’ is the firm’s view of the
world, generating a perception of its own self efficacy. The ‘self hypothesis’ can be a barrier
to seeing opportunities if one is not aware of the assumptions behind it.
Most influence of prior knowledge is manifested through the firm’s ‘self hypothesis’.
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Prior knowledge contains learning about what can and cannot be done within the market by
the firm. One important role prior knowledge plays is in technical and tacit knowledge about
products, business models, technology, consumers, and competitors, etc. Through incubation
prior knowledge assists the cognitive system make linkages and connections which identify
new sources of opportunity for the firm. The huge majority of ideas already exist in one form
or another within the existing or another domain, another geographical location or in another
time. We remember different ideas from past experience or observation of the environment.
Past knowledge may assist in creating unique insights into the consequences of change
occurring within the environment.

19. The Sources of Opportunity 9
Alertness and sensitivity are qualities needed to see and pick up subtle changes in the
environment. Our focus also plays a role in assisting to narrow down our attention to what is
relevant to potential new opportunities. Finally it is important to know what to look for in
finding new opportunities. Our opportunity intellect is a specialised knowledge which guides
us through the discovery, evaluation and scenario building process of a potential opportunity.
It is a strong entrepreneurial intuitive ability. The components influencing the strategic view
are shown in Figure 1.2.
Therefore new sources of opportunity can be pushed out by a firm as a new product or
service into the marketplace or be pulled by unsatisfied customer needs. Some innovations go
on to be successful as the product or service is what customers are looking for, while others
y
miss fulfilling any latent customer need and fail. In the case of failure mistakes can be felt
very quickly with a product, service, or even business failure, which may prove very
expensive.
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Field Opportunities
O Domain Opportunities
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Motivation & Strategic View Time
Intent
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Self Hypothesis Prior Alertness & Opportunity
Knowledge Sensitivity Intellect
Self efficacy. Prior knowledge The ability to see An understanding
Perception of skills, within the domain change within the about what to look
capabilities, and field of environment that for in regards to
competencies & operations. the majority of potential
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resources. Experience. others cannot see. opportunities.
Views of ability to Expertise and The ability to focus An ability to visualize
influence the various types of in on these changes future scenarios
environment, etc. knowhow and see potential based on what is
A predictive value of connections and seen.
the future. scenarios. An intuitive ability to
weigh up a potential
opportunity
Figure 1.2. The components of the strategic view.

20. 10 Murray Hunter
THE SOURCES OF OPPORTUNITY
Peter Drucker (1985, P. 34) remarked that we cannot develop a full and complete theory
of the sources of opportunity, yet we can understand where opportunities may come from.
The overwhelming majority of successful innovations exploit social, economic and regulatory
change or new and improved technologies. New to the world breakthrough inventions may
provoke change as did the aeroplane to commercial aviation, the telephone to communication
and the television to entertainment, etc. New technologies often make great changes to the
way we live our lives as we are beginning to see through new advances in biotechnology and
genomics.
y
Innovation requires a systematic and disciplined way of work based upon what the
innovator sees and learns from the environment, particularly in his or her own domain. All
sources of opportunity must be based on purchasing power which is the ultimate driver of
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innovation. For example, very few people in Malaysia could afford to purchase a new Proton
Saga car when it was launched in 1984, if it was not for the innovative leasing packages
attached to purchases of the vehicles. Finance packages made the Proton Saga car available to
many new potential car buyers through its easy access to lower middle income groups. This
was the innovative part of the proton business model that enabled the company to gain over a
O
70% market share in Malaysia during the late 1980s and throughout the 1990s. Finance
changed the Malaysian car market from a supply driven to a demand driven market. These
forms of social innovation often have much more impact than technical innovation.
For the purposes of this meta-theory, the author has divided the sources of opportunity
into six main categories, market void, technology infusion, structural changes, resource
monopoly, regulation and non-innovative. Each main category has a number of sub-
fs
categories (see Figure 1.3.). Further, each source of opportunity will have a different impact
upon the environment. It may;
• Increase efficiency with small intensely focused productivity improvements by
improving what already exists through minimal investment. These types of sources
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of opportunity can be seen in many quality programs that manufacturing and service
industries engage upon.
• Make evolutionary changes incremental to the market place focused on improving
existing products and services like bank ATMs, Dell Computer’s mass customization
of home computers as per customer preferences and Toyota’s development of
specialized distribution channels for the Scion brand targeted at Gen Y, etc., and/or
• Make revolutionary changes through radical new additions to the market place that
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change the way people think about and do things, which may lead to changes in
existing structure of the industry and/or marketplace, like the invention of the motor
vehicle at the beginning of the 20th century and Henry Ford’s development of the
mass production line around 1914 which brought the product from something only
the elite could afford to something affordable to the middle classes of the United
States (Dent 1994).

21. y
nl
Sources of Opportunity
(Opportunity Anchors)
O
Market Void Technology Structural changes Resource Regulation Non‐Innovative
Infusion Monopoly
Incongruities Invention Changes in Physical Resource Effect on Personal
Industry Product Service &
Consulting
Incremental Capability Resource
Demographic Effect on Process
Improvement New
Changes Duplication
Processes
Legal Resource
Adaptation
fs
Perceptual Adaptation, Extension
Brand Resource
Changes combination &
integration
New Processes
Copy/
Scarcity Power
Imitation
New Materials
Cost/value Shift
o
Strategies for each source of opportunity
Figure 1.3. The potential sources of opportunity (Opportunity anchors) for a firm.
ro

22. 12 Murray Victor Hunter
The result of utilizing a source of opportunity will be;
1. The development of new products which may exploit established technology, simply
an improvement of what is already available or may offer a new radical way of doing
something.
2. New services,
3. New production technologies,
4. New operating practices,
5. New ways of delivering the product to the customer,
6. New means of informing the customer about the product, or
y
7. New ways of managing relationships between entities.
Sources of opportunities are also viewed from different perspectives depending upon who
nl
is looking at the environment. Individuals with limited ideas, capital, experience, expertise
and networks may look for an opportunity that returns them a wage rather than a profit. An
entrepreneur with good domain knowledge and experience within an industry may have his or
her own theory of ‘how things can be done better’ believing they have a personal theory of
success and be very focused upon specific types of opportunities. A corporation will take a
O
strategic view and analyse potential opportunity space looking at how to minimize or
eliminate risks and uncertainty before moving into any form of action. Therefore each
individual will look at different levels of return and profitability and approach the
environment with different levels of capital, resources, skills and capabilities and networks.
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MARKET VOID
Market void opportunities are those potential opportunities that may exist due to an
unnoticed gap or un-serviced portion of the market. They include incongruities, demographic,
and perceptual changes, discussed below.
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Incongruities
Peter Drucker in his book Innovation & Entrepreneurship identifies incongruities as a
source of innovation. He defines an incongruity ‘as a discrepancy, a dissonance, between
what is and what ‘ought’ to be’ (Drucker 1985, P. 57). An incongruity is a symptom of an
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opportunity to innovate. Consumers are aware of them, but not in an overtly conscious way
that leads to the expression of their unmet needs. It may be a latent need, a yearning for some
improvement or a want that there was something that could solve their problem. However
these incongruities may only be visible to people with experience of the industry, being very
difficult to detect by those outside the industry. Alternatively they may be visible to people
who have that need. If incongruities are detected and exploited, they can be very powerful
sources of opportunities that can lead to substantial growth for a firm.

23. The Sources of Opportunity 13
Incongruities express change whether caused by changing industry structures, changes in
perception, changes in demographics, changes in regulations, or changes in technologies.
Therefore there are several different types of incongruities.
The first type of incongruity is between what an industry is today and what it should be
because of the economic realities of the time. For example, tariffs put on to protect many
automobile industries in the 1950s and 1960s led to the production of basic, inefficiently
produced and overly priced cars in many markets. With rapid improvements in the production
of Japanese cars with lower prices, good fuel economy and many standard extras, an
incongruity grew between what is available and what Japanese cars could offer the consumer.
This type of incongruity showed how difficult it is to sustain a protected industry producing
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inferior goods to those available in other markets.
The second form of incongruity is between a present reality and what could be. This
source of opportunity occurs where improvements in a business process could bring new
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potentials to the business or industry. Drucker (1985, pp. 62-63) cited the transformation of
the international ocean freight industry that transported loose cargo within their ships up to
the 1950’s with roll-on, roll-off container shipping that came in the 1960’s. People wrongly
perceived that ocean freight would be replaced by air freight, except for bulk commodities
and were looking at speeding up ships rather than changing processes as the solution.
O
There are incongruities between perceived and actual customer values and expectations.
This congruity can often occur because of own sets of assumptions about consumers or
arrogance in believing we know what consumers want. For example, many pet food
companies believed that only low cost pet food would sell in developing markets because
consumers would not pay premium prices for the product. However premium pet food sells
well in many developing countries because some consumers care deeply for their pets and
want the best for them. Likewise, cosmetics are one of the first luxury goods, before other
fs
types of luxuries that people begin to buy when income gets above a certain threshold in
developing markets because of women’s improving sense of self identity. Modelling and
acting schools appeal to peoples’ aspirations, an incongruity between what where they are and
where they want to be. Companies that can see these types of incongruities before others have
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a strong source of opportunity to fuel rapid growth.
There are sometimes incongruities with a process that consumers have to undertake,
where one action in the process is out of step with all the others. Most consumers or users are
aware of this it, but it takes someone to pick up this problem and find a solution to it. For
example, dishwashing machines need a precise dosage of a caustic detergent to clean dishes
and glassware properly. These products are usually powders which have to be scooped from a
box and placed in a small compartment inside the door of the dishwashing machine. A
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household cleaning product manufacturer adopted the concept of using a tablet rather than a
powder to provide a precise dose to the dishwashing process with great success, making the
whole machine dishwashing process much cleaner and streamlined1.
1
Ironically this same idea was tried earlier for laundry but failed miserably.

24. 14 Murray Hunter
Demographic Changes
Demographics represent differences in population distribution, age structure, ethnic and
racial composition, employment levels, education status, and income distribution, etc. The
proportion and number of women in the population, ratio of blue to white collar workers,
unemployed to self employed, births, deaths, and immigration influences both the types and
magnitude of opportunities available in a society. What people want, need, and purchase in
aggregate can be correlated to specific demographic groups.
Age distribution within a specific population is an important determinant of consumption
patterns because different age groups buy things for different reasons throughout their life.
y
For example, teenagers may buy shoes for the brand image and style, but later in life buy
shoes for comfort and durability. Peoples needs change over their lives and therefore as
demographics change, so do opportunities.
nl
Consequently demographics are patterns that exist in the external field of the firm where
new opportunities can be seen as demographics shift, if studied carefully. Demographics are
far from static and continually evolve, change, and underlie emerging trends in an
industry/market. A firm must continue to study shifting demographics to maintain its
relevance to the community of consumers it serves.
O
Demographic change has two affects. Firstly, a change in any major demographic
distribution shifts demand away from where it exists presently towards new market and
industry sectors that may or may not exist. This in turn triggers a shift in resources towards
these new market and industry sectors, thus changing its structure and nature of economic
activities within it. Demographics therefore has a strong impact on demand, and viewing
changing demand through defined demographic definitions and vice versa, helps us identify
potential opportunities.
fs
For example, nations with a high proportion of children are likely to devote a high
proportion of resources to their care, which will provide opportunities in related
market/industry sectors. In contrast if most of the population is of working age, this will add
greatly to economic growth and domestic consumption, providing opportunities in relevant
oo
market/industries. If a large proportion of the population consists of the elderly then large
resources will have to be allocated to their care, which will open opportunities in relevant
market/industry sectors. Age distribution is an influential demographic, which affects the
level and type of savings, investment, productivity, and consumption in an economy (Bloom
& Canning 2001). So as the age distribution changes resources will be reallocated towards
producing goods and services that emerging dominant age groups require. The different types
of products and services a person requires throughout their life are depicted in Figure 1.4.
Pr
Other demographics also influence demand and the types of opportunities that will
prevail within any economy. Different demographics combine their effect in complex ways
and change markets. The surge of young people in many countries within South-East Asia is
increasing the affluence of their respective countries through the increases in productivity
they bring once entering the workforce, increasing demand for consumer goods, housing,
motor vehicles and education, etc. The increasing urbanized workforce quickly dilutes
established traditional and replaces them with new modes of behaviour. Demand for
traditional goods and services declines in favour of branded goods. With rural-urban drift the
cost of firms servicing rural areas is increasing as markets are declining. Urban markets are
becomes cheaper to service as population intensifies in concentrated areas. The position of

25. The Sources of Opportunity 15
women within the workforce is also intensifying, leading to a new class of single professional
women with wealth and spending power. Consequently women are having children later in
life or forgoing childbirth to concentrate on their careers (McElroy 2001). People’s values are
shifting leading to more demand for consumer goods and branded products, rather than the
lower quality generic products they bought in the past. Wars and natural disasters also alter
demographics, demand patterns, and shape opportunities. Immigration can create an
abundance of opportunities through the multiplier effect within an economy (Straubhaar &
Zimmermann 1993). Very rarely does a population remain static and different parts of the
world will go through different demographic changes, as can be seen through the selected
demographics of some countries in Table 1.2. below.
y
Changing demographics leads to changes in demand for goods and services. Urbanization
brings new demand patterns from the same population that once lived in rural areas. The first
generation of offspring will be completely urbanized, tending to adopt new urban
nl
cosmopolitan values, rather than traditional values. With urban values come tastes for the
latest electronic gadgets, brands, and goods not long before seen as luxuries to the country. In
countries where young populations are declining, local university enrolments will decline,
requiring the recruitment of foreign students or investments in lifelong education programs to
take up the slack in university enrolments. Aged population will require more care and
O
medical services, leading to a larger need to retirement and special care homes. Changing
demographics lead to behavioural changes which lead to new opportunities.
Retirement Age
fs
Medical
Services Entertainment
Working life Retirement Clothing
Elderly
Homes Computer
Hobbies equipment
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Lifelong etc
Fashion
Education
Travel & (various forms
Leisure and types
through age
Childcare
spectrum)
Accommodation Working
Dependency Car & Transport Adulthood
University
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Sports
Schooling Teens
Toys
Kindergartens
Baby products Infant
Figure 1.4. Timeline showing the different types of products and services a person requires during their
life.

26. 16 Murray Hunter
Table 1.2. Selected demographics of Some Countries2
Country Population 0-14 15- 65+ Pop. % % % Net
% 64 % Growth Unemployed Poverty Urban Mig.
% % /1000
Argentina 41,343,201 25.5 63.6 10.9 1.036 8.7 13.9 92 0
Australia 21,515,754 18.4 67.8 13.7 1.171 5.6 N/A 89 6.13
Austria 8,214,160 14.3 67.7 18.1 0.042 4.8 6 67 1.83
Bangladesh 158,065,841 34.1 61.8 4.1 1.274 2.5 36.3 27 -1.97
Belgium 10,423,493 16 66.2 17.8 0.082 7.9 15.2 97 1.22
y
Bolivia 9,947,418 35.1 60.4 4.5 1.72 8.5 60 66 -1.01
Brazil 201,103,330 26.5 66.9 6.6 1.166 8.1 26 86 -0.09
Canada 33,759,742 15.9 68.6 15.5 0.804 8.3 10.8 80 5.63
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China 1,330,141, 295 17.9 73.4 8.6 0.494 4.3 2.8 43 -0.34
Denmark 5.515.575 17.9 65.5 16.6 0.267 4.3 12.1 80 2.47
Egypt 80,471,869 32.8 62.8 4.4 1.997 9.4 20 43 -0.21
France 64,057,792 19.6 64.9 16.5 0.525 9.1 6.2 77 1.47
Germany 82,282,988 13.5 66.1 20.4 -0.061 7.5 11 74 2.14
Greece
Hong Kong
India
Indonesia
Iran
Italy
10,749,943
7,089,705
1,173,108,018
242,968,342
67,037,517
58,090,681
14.2
11.9
30.1
27.7
21.3
13.4
O
66.4
74.8
64.4
66.2
73.2
66.2
19.4
13.3
5.3
6.1
5.4
20.3
0.106
0.476
1.376
1.097
0.94
-0.075
9.5
5.3
10.7
7.7
11.8
7.7
20
N/A
25
17.8
18
N/A
61
100
29
52
68
68
2.33
4.22
-0.05
-1.23
-2.17
2.07
fs
Japan 126,804,433 13.3 64.1 22.6 -0.242 5.1 N/A 66 N/A
Kenya 40,046,566 42.3 55.1 2.7 2.588 4- 50 22 0
Madagascar 21,281,844 43.3 53.7 3 2.993 N/A 50 29 N/A
Malaysia 26,160,256 31 63.9 5.1 1.704 3.7 5.1 70 N/A
Netherlands 16,783,092 17.2 67.7 15.2 0.39 4.9 10.5 82 2.83
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Nigeria 152,217,341 41.2 55.7 3.1 1.966 4.9 70 48 -0.1
Philippines 99,900,177 34.9 60.9 4.2 1.931 7.5 32.9 65 -1.31
Russia 139,390,205 15 71.7 13.3 -0.465 8.4 15.8 73 0.28
Saudi 29,207,277 38 59.5 2.5 1.75 11.7 N/A 82 -8.26
Arabia
Sierra 5,245,695 41.8 54.6 3.6 2.216 N/A 70,2 38 -4.66
Leone
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Singapore 4,701,069 14.1 76.9 9 0.863 3 N/A 100 4.79
South 48,109,107 28.5 65.9 5.5 -0.051 24 50 61 -3.13
Africa
South 48,636,058 16.1 72.7 11.1 0.258 3.7 15 81 0
Korea
Tanzania 41,892,895 42.5 54.6 2.9 2.032 N/A 36 25 -0.81
Thailand 66,404,688 20.3 70.7 9 0.601 1.5 9.6 33 N/A
Turkey 77,804,122 26.9 66.9 6.2 1.272 14.1 17.11 69 0.53
2
CIA The World Factbook, https://www.cia.gov/library/publications/the-world-factbook/, (accessed 26th July 2010)

27. The Sources of Opportunity 17
Country Population 0-14 15- 65+ Pop. % % % Net
% 64 % Growth Unemployed Poverty Urban Mig.
% % /1000
Uganda 33,398,682 50 49.7 2.1 3.563 N/A 35 13 -0.02
Ukraine 45,415,596 13.7 70.7 15.5 -0.619 8.8 35 68 -0.1
United 61,284,806 16.5 67.1 16.4 0.282 7.6 14 90 2.15
Kingdom
United 310,232,863 20,1 66.9 13 0.97 9.3 12 82 4.25
States
Uzbekistan 27,865,738 27.3 68 4.7 0.938 1.1 26 37 -2.84
Venezuela 27,223,228 30 64.7 5.3 1.515 7.9 37.9 93 0
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Vietnam 89,571,130 25.6 68.8 5.5 1.096 6.5 12.3 28 -0.37
Yemen 23,495,361 43.5 53.9 2.6 2.713 35 45.2 31 N/A
Zambia 12,056,923 44.8 52.9 2.3 1.617 50 86 35 -2.61
nl
Shifts in demographics do not occur instantaneously, they slowly drift towards new
patterns, in a similar waythat the age structure of the population evolves. For example, the
aging of the baby boomer generation is a gradual process, where demand for products and
services that the aged require increases on a year to year basis. Therefore new opportunities
O
based on changing defined demographics occur gradually and grow according to the size and
distribution of the demographic (see Figure 1.5.).
Magnitude
fs
Opportunity too
small for incumbent
firms to exploit
Fertile area for Opportunity
start‐up firms
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Increasing shift in demographic
Time
Pr
Figure 1.5. The growing magnitude of an opportunity as demographics change.
When potential opportunities based on demographics begin to emerge they are often
ignored by firms within the industry, which either just don’t see the changes occurring or
refuse to acknowledge that change is occurring. Many established firms that actually spot the
changes early also fail to act because the new emerging opportunities represent very small
market segments initially. Small market segments suit small start-up firms who can grow with
a new emerging market rather than incumbent firms whose infrastructure is organized around
existing market segments. Once an incumbent firm sees that the new emerging market

28. 18 Murray Hunter
segment is growing rapidly, it is often too late for them to dominate the new segment because
start-up firms have become the new incumbents in the newer segments.
Changing demographics together with advances in technology can shift the boundaries of
an industry. This is especially so if incongruities develop, which cannot be met by existing
products3. For example the colour television market once consisted of portable, table models,
and consoles, etc. However LED and plasma technologies have created new television market
segments, along with home movie systems and colour televisions incorporated into cellular
phones. These new market segments merge into other industries.
Changing demographics create new market/industry segments where opportunities are to
be discovered. To find new opportunities, one must look at the market through currently
y
defined demographics or create new demographic definitions, see how they are changing, and
work out what it means. Creativity is the key here in finding new ways to segment the
market/industry, and in identifying new classes of potential new buyers (Porter 1985, P. 248).
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This may involve the discovery of new segments which don’t yet exist in the market and go
beyond conventional and accepted industry classification schemes. For example the
automobile market was defined by the U.S. automobile industry by income segmentation.
This missed the potential of segmenting cars according to lifestyle where many new potential
opportunities for creative segments could have been identified and were identified by others
O
in the 1980s. These were the safety segment – Volvo, SAAB and Mercedes Benz, city
commuting segment– many Honda, Toyota, and Suzuki models, and the off road 4WD and
SUV models. It can then be appraised how these new potential segment appeals to different
demographics and what designs, functions, benefits and channels they would require (this
may result in eliminating features that the identified group does not consider important in
their purchase decisions). This may create a new product bundle that can exploit a newly
discovered opportunity like the development of discount, no frills hotels that have the
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important amenities that the buyer group requires, without services that are not considered
important4.
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Perceptual Changes
Opportunities are created when a sizable proportion of a population change perception. A
change in perception does not alter the facts, but the understanding and identity of a
population alters to the point where meanings change. Changing perception is about changing
attitudes, which lead to changing habits. For example some countries in the South-East Asian
region have been developing economically very rapidly over the last few decades. Sizable
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population has groups have transformed from living a quiet rural life to a hectic urban
3
New technologies can on their own create incongruities where consumers decide that the new functions and/or
benefits of the new technology, reflected in the product become a desire, want, or need.
4
Various models for budget hotels exist. The US first saw budget hotels in the 1970s. Motel concepts often follow
budget concepts. Japan saw the introduction of capsule hotels in 1979 where the basics are provided within a
small capsule the size of a bed. More recently another no frills or limited service concept Tune Hotels was
launched by Air Asia in 2007 for the Malaysian market with basic and clean amenities that can be booked
online in advance at various rates according to season and demand. These hotels don’t have conference rooms,
swimming pools or other amenities one would expect in other hotels, but they are conveniently located near
airports, railway stations and shopping centres. New outlets are being currently opened around the Asian
region, UK, and Australia.

29. The Sources of Opportunity 19
lifestyle, in the quest for economic prosperity, by taking up employment opportunities in the
large cities. This demographic change has occurred relatively quickly in South-east Asia,
changing drastically self perception and the nature of markets. A once rural orientated person
is now a prosperous urban consumer. Although the change can be seen as economic and
geographic, the major importance of this change is attitudinal.
Perceptual changes occur because of transformative drifts in attitudes originating from
transitions in lifestyle, working life, education, domicile outlook, and evolving aspirations
driven by increasing affluence. Transformative drifts in attitudes are also by influenced
experience and new knowledge, global convergence within society, and exposure to new
consumer technologies that create new desires. This must be a societal rather than individual
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phenomenon. Figure 1.6. shows some of the factors that influence perceptual changes in
society.
Paramount to any perceptual change is a person’s domicile outlook, explained in chapter
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three of volume one of this book. Domicile outlook to a great degree frames a person’s self
identity. If one was born into the black working class of the United Sates in the 1950s or the
rural aboriginal population of Australia in the in the last decades of the 20th century, one may
feel that this is their station in life that is fixed and adopt a self identity compatible with that
belief. As a consequence aspirations will be confined to that station in life where one will
O
accept where they are now and not aspire to other potential lifestyles. However growing
education and employment opportunities and contact with urban culture and global-centric
ideas can bring very quick change to perceptions and attitudes, resulting in very different
demand patterns.
New knowledge
about health, fitness,
fs
food, etc.
Urbanization,
New
growing
Changing confidence about Knowledge
Domicile social status, etc. Experience
Outlook
oo
Changing traditions
Perceptual The
Aspirations Changes Environment
Where am I
now?
Where do I Attitudes
want to be?
Pr
Peers and Role
New
Changing Models
Global technology
Affluence
Convergence
Figure 1.6. Some of the factors that influence perceptual changes in society.

30. 20 Murray Hunter
In China during the 1970s, the “Flying Pigeon” bicycle was called by Deng Xiaoping a
symbol of prosperity, as the whole country moved by bicycles. However over the last decade
the bicycle has been almost totally replaced by cars in urban centres. The bicycle is seen as a
working class relic, where they now have very little place in daily life. They are reserved for
old ladies and men. Car ownership in China has risen from one million in 1999, to over 4.5
million today, and is expected to be over 6 million by 2015. The bicycle today is seen as the
past, something old and Chinese now aspire to owning a car and very proud of it once they
get it.
Table 1.3. Purchases by major US Food Companies of Ethical/Organic Companies
y
Purchasing Company Purchased Company Takeover date
Kraft Boca Foods February 2000
nl
Back to Nature September 2003
Pepsi Naked Juice November 2006
General Mills Cascadian Farm December 1999
Larabar June 2008
Dean Horizon May 1999
Alta Dena July 1998
ConAgra
Cadbury Schweppes
Coca Cola
Kellogg
O
White/Wave Silk
Lightlife
Alexia Foods
Green & Black’s
Odwalla
Honest tea
Morning Star Farms/Natural Touch
May 2002
July 2000
July 2007
May 2005
October 2005
February 2008
November 1999
fs
Kashi June 2000
Bear Naked November 2007
M&M Mars Seeds of Change 1997
Hershey Foods Dagoba October 2006
Hain Celestial Westbrae October 1997
Westsoy
oo
Bearitos
Little Bear
DeBole’s April 1998
Garden of Eaten
Arrowhead Mills
Nile Spice December 1998
Breadshop April 1999
Casbah
Pr
Health Valley
Earth’s Best September 1999
Celestial Seasonings March 2000
Imagine Rice/Dream Soy December 2002
Walnut Acres
Spectrum Organics June 2003
SunSpire August 2005
MaraNatha March 2006

31. The Sources of Opportunity 21
The benefits of exercise and
working out in a gym
Changing
Perceptions Women wanting a safe and
secure environment
Result in creation
Pick up women’s of Fernwood
changing perceptions Women’s Health
Club Concept
y
Women feeling intimidated in Not working
conventional gyms in the weight out in
conventional
nl
areas.
Current situation gyms
Figure 1.7. shows the earlier and changing perceptions of women.
Australia has long been considered a sporting culture where Australian Rules Football
O
(AFL) and the National Rugby League (NRL) are believed to be almost sacrosanct in the
Australian way of life. However in a recent study undertaken by Live Performance Australia,
it was found that Australians now spend more money on art and cultural performances than
the football codes, horse racing and film and video production combined (ABC/AAP 2010).
New information and knowledge can change perceptions to varying degrees. Smoking
once had glamour about it and was the thing to do socially to show sophistication. However
fs
information emerging about the damaging health aspects of smoking changed peoples’
perceptions about the habit to the point where smoking is now prohibited on air flights, public
buildings, and inside private cars, etc. Further knowledge emerging about the effects of
inhaling second hand smoke has led to bans of smoking in any public place in some countries.
Increasing beliefs about the importance of healthy eating and pesticide residuals in
oo
conventional foods has led to double digit growth in the purchase and consumption of organic
foods. Likewise consumer concerns about exploitation is also bringing double digit growth to
the ethical products industry, where major companies have bought over many companies
specializing in ethical and organic products to cater for changing perceptions. Table 1.3.
shows purchases by major US companies of ethical/organic companies over the last decade.
The growth of nutraceuticals, health and ethical products, the fair-trade and Buy local
movements have all resulted from changing perceptions of consumers based on new
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knowledge and resulting attitudes.
In addition to demand influencing technology development, technology also has a role in
influencing demand (van den Ende & Dolfsma 2005). The appearance of new technology that
solves specific problems can lead to changes in perceptions that would not be possible
without the emergence of the new technology. For example, the oral contraceptives allowed
women to change their perceptions about their own empowerment, control of the choices they
make, and lifestyle they lead. Once the technology existed, perceptions changed when free of
the constraints that existed before the technology was available. There are arguments both
ways as to whether demand drives technology development or technology development
pushes new demand (Nemet 2009).