Environmental Trends That Create Business Opportunities - Essay Example

Environmental Trends that Create Business Opportunities Barringer (2009, p. 30) s that “the first approach to identifying opportunities is to observe trends”. There are four environmental trends which, when encounter changes, bring about opening of new business opportunities. Let’s explain these with examples. Economic Trends Changes in economic trends determine the level of consumers’ income which they can afford to spend on buying products. In other words, their buying patterns are determined by the state of the economy. A rise or decline in the stock market decides whether the people are going to spend more or less. Who holds the disposable income also matters. When women workforce increased, companies started targeting female consumers (Barringer, 2009). When teenagers were given large sum of pocket money, they helped increase business opportunities to compact disk warehouse, designer clothing, sunglasses and cellphones. Example. More and more teenagers are buying Apple iPods that are handheld devices for multimedia applications, and this enhanced business opportunities for Apple company. Social Trends Social trends include the family life and their working patterns; workplace diversity; increased attention to health care; friendships; increased use of cell phones and internet, and etcetera. People started buying readymade frozen food which they could microwave at home not because they wanted to eat frozen stuff, but because they were too busy to cook for themselves. This gave rise to business opportunities for companies that prepared frozen food. Example. Internet cafés, also called net cafés, continued to grow in the last decade due to increasing number of people using internet for developing friendships. CoffeNet in USA is one such cyber café. Technological trends Technological advances have greatly increased business opportunities over the last decade. This is because whenever a new technology arises, it has to be accompanied by products and equipment that supports it. This directs opening up of new companies because the number of consumers who incorporate technology into their lives increase. However, it is not the technology itself that the consumers love; instead, it is the sophistication, ease and reliability the technology provides that is looked forward to by the consumers. Technological trend is the one that results from changes in current environment due to growing use of technology in our everyday lives. Example. Barnes and Noble is an e-bookseller company that enables people to shop books online that are then shipped to them after online payment. This company evolved when the number of consumers increased who wanted access to books without having to go to the shop and buy because their lives have become busy. Political and Regulatory Trends Political and regulatory changes have also given rise to many business opportunities. For example, designing of new laws regarding internet fraud brought with it the need of new companies to be opened that took measures in reducing online fraud like identity theft and fraudulent shopping. Political threats like vandalism, violence and terrorism gave rise to companies that sold ammunition and weapons for security purposes. Example. US. Security Associates, Inc. is a company that provides security solution like security surveillance equipment and security guards. The company evolved because of rising risks of terrorism. Differences between the Organizational and Financial Feasibility of a Venture A feasibility study for a potential venture is very important to evaluate its sustainability in the competitive market industry or to restructure or grow the existing venture. The two important analyses that are conducted for this purpose are described below. Organizational feasibility analysis, according to Barringer (2009, p. 64), focuses at analyzing if the future business will have adequate management and organizational proficiency to manage the business and whether or not there are sufficient resources to run it. Hence, the two major issues that this analysis deals with are: “management prowess and resource sufficiency”. Financial feasibility analysis is conducted to have an idea what will be the expected financial outcome or anticipated revenue of the potential venture. This financial result approximation, which is done by making a market and demand analysis, will determine whether the venture will be financially feasible or not. The main purpose of this analysis is to enable the management in making decision whether or not extra resources should be attained or additional funds should be arranged to financially support the business. The above given description of the two types of analyses clearly describe the difference between the two. To sum up, organizational analysis is conducted to assess the level of management competency and the satisfactoriness regarding the number of resources available to run the business; whereas, financial analysis is conducted to have an approximation of financial factors (like financing, capitalization, personnel requirements, revenue, cash flow, debt capacity and construction costs) to decide the financial status of the business. Importance The importance of both types of analyses lies in the fact they make it easier to assess whether a business project is going to be successful in given project environment (Roitha, 2007). According to Roitha, “feasibility analyses are used to present an approach or a series of alternatives and to offer decision-making guidance based on the climate in which the project will evolve”. These are actually the preliminary tests that are done before starting a new venture. Organizational analysis makes it possible to make predictions about the skills of management regarding productivity which is very important because a good management promises a well-coordinated team effort that guarantees high output. The number of resources and where they will come from also need to be given importance. Profit is the first thing the entrepreneur thinks about before starting a venture, to predict which, feasibility analysis is important. Which Type of Analysis is the Most Important? After going through different kinds of feasibility analyses, the financial feasibility analysis seems to be the most important for an entrepreneurial venture, according to me. This is because finances are the backbone of a business. If the financial results are predicted to be strong, then there is little left to stay worried about. Financial studies make it clear whether or not the entrepreneur is going to afford the business at all. It is very important to make approximations about expenditures, expected cash flows, rate of return on investment, risk analysis, revenue calculation, and overhead costs. Financial feasibility analysis does not “necessarily have to include all the fine financial detail that is required for business plan financial projections, but must include reasonable estimates about financial expectations” (The Business Plan Store, 2009). References Barringer, BR. (2009). Entrepreneurship: Successfully Launching New Ventures. India: Pearson Education India. Roitha, D. (2007). Feasibility Analysis. Retrieved September 9, 2010 from http://e-articles.info/e/a/title/Feasibility-Analysis/ The Business Plan Store. (2009). Is Your Business Financially Viable? Retrieved September 10, 2010 from http://www.thebusinessplanstore.com/financial_feasibility_analysis.htm Read More