Before identification the product or service to be launched, enterprise, the entrepreneur must assess the idea for its opportunity potential in the light of the prevailing socio-economic, politico-legal, technological and international environment. It should be noted that an idea that is not assessed for its opportunity potential may fail in business. For example, an NRI on the advice of his friends launched a herbal farm by investing huge amount for the purchase of agricultural land and development of irrigation system. But he venture suffered from early disaster. The reason was that the entrepreneur was failed in fulfilling the requirements of the purchasers like standard specifications and punctual delivery. The venture folded up in a very short time as the NRI had not investigated the idea thoroughly.

The steps involved in investigation ro assessment of an idea to gauge its potential are as follows:

(i)    Product Identification. An idea should lead the entrepreneur to a definite product or service which he can sell. SO the first step is to obtain a concept of the product or service suggested by one idea. It should be ascertained whether it is already available in the market. If it is, then the entrepreneur should identify the reason for introducing the same product or service in the market. If, one the other land, the product or service is totally new, he should develop strategies to popularize it among prospective consumers. The product should also be examined in the light of possible substitutes, preferences of customers, etc.

(ii)    Uses of the Product. The product should be examined for its real life use and application for its real life use and application if it already exists in the market. In case of new product, the possible uses and application of the product form the buyer’s point of view should be examined.

(iii)    Availability of Raw Materials. Availability of raw materials also determines the business opportunities as it decides the level of future production. Easy availability of raw material generally encourages the entrepreneur to adopt positive steps for establishment of industrial units.

(iv)    Average Cost of Production. The average cost or cost of production per unit will depend upon the level of operation. When production is carried on a small scale, per unit cost of production is usually higher when production is arrived on a large scale. Cost of productions an important determinant of price of any product.

(v)    Level or Volume of Operation. An entrepreneur should try to assess the pattern of demand of proposed product or insure in which he is planning to involve himself. Demand of product or industry is generally governed by the level of national income, per capital income and population etc. Normally, higher the level of income higher will be the demand fo product in the amrekt. Depending on the demand of the product or service, the entrepreneur can produce it in a cottage small scale industry or a large scale enterpise. Fro instance, it the product is wood-based handicraft item if can ebproduced in a very small cottage industry . If the product consists of spare parts for an automobile, it can be manufactured in a small scale industry. Another dimension to this is the quantity to be produced. The level of operation will depend on the quantity to be supplied to the market. Other factors like expertise and skilled labour will also depend on the level of operation.

(vi)    Competition in the Market. The entrepreneur has to analyse the extent and intensity of competition in the market. he should identify the product or service where competition in low.

(vii)    Type of Technology Required. What type of technology is required to produce the produce? Whether training and application of such technology will be locally available or will it have to be supported from other places? What would be the position of supply of plant and machinery for such a technology ? These are important issues that have to be resolved.

(viii)    Annual Turnover and Profit Margin. Every business idea needs to be examined on the basis of expected annual turnover and profit margin. Annual turnover must be sufficient to cover all the costs and achieve the break even stage where there would be ‘non profit, no loss’.

(ix)    Availability of Financial Resources. Generally, there are three phases fo a business of viable opportunity-promotion, expansion and diversification. Availability of viable opportunity and adequate rate of return motivate entrepreneur to undertake entrepreneurial activity but again with the condition that he has to have some seed capital of his own, personal connections etc. Existing entrepreneur is required to check his existing capability to mobilize internal resources for expansion. If he does not have any additional internal resources it may not be viable to increase the production capacity. Similarly he has to examine as to what extent internal resources can reutilized for future expansion programmed, and if he is ready to utilize those resources he will again thing that this diversion is not going to affect the level of present operation. So it is necessary to give due consideration to internal resources before initiating to give practical shape to a new business idea.

(x)    Degree of Risk. There are different types of risks generally involved in a particular business. These risks are technical risks, economic risks, social risks and environmental risks. Technical risks deal with the risk of not knowing enough about the technical processes, materials etc. However, economic risks are the risk of market fluctuations and changes in relation to raw materials etc. Risk inherent in the development of new relationship is treated as social risk. Environmental risks are the risks which result from environmental changes in the entrepreneurial work as on outcome of the new activity. Thus, entrepreneur has to assess the implications of these risks at the time of identification of business opportunities.

For more help in Assessment of Idea And Opportunity click the button below to submit your homework assignment