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Exploit New Business Opportunities

In this age of technology, it’s time for companies to be willing to exploit new business opportunities. More than ever before, companies are navigating this fast-pace and uncertain terrain. Bankruptcies, mergers, acquisitions, reductions, etc… It’s all changing the business landscape. But if companies do not exploit new business opportunities in fear of failing, then they are sure to fail or fall behind competitors. As financial leaders, how do we enable our leadership to take risks without neglecting the numbers?

Exploit New Business OpportunitiesWhy Exploit New Business Opportunities

The reason why one would exploit new business opportunities is to stay ahead of the ever-competitive marketplace. What needs are not being fulfilled yet? How can you gain more market share? What competencies does your company have that can be expanded into other areas – customers, markets, etc.? Opportunity exploitation is what keeps businesses moving forward. In this day and age, we need to continually reinvent our companies or we will not be around very long. Our competitors are doing this every day.

Have you identified any opportunities yet? If not, then click here to access our External Analysis Whitepaper.

Opportunity Exploitation Definition

According to Wiley Encyclopedia of Management, “opportunity exploitation refers to activities conducted in order to gain economic returns from the discovery of a potential entrepreneurial opportunity“. Typically, entrepreneurs are known to exploit opportunities or identify opportunities because it is in their nature; however, financial leaders know what the numbers say and can identify opportunities that make economical sense for the business while balancing risk and reward.

Example: Planet Fitness and Vacant Malls

E-commerce has been growing significantly while brick-and-mortar stores have been steadily decreasing. Shopping malls are more vacant than ever before. But there is one company that is taking advantage of those vacancies and benefitting from it. In a recent Wall Street Journal article, “Planet Fitness Inc. is the rare mall tenant expanding its share of commercial real estate even as many retailers shrink their physical footprint as more commerce moves online.” This is a great example how to exploit new business opportunities. Furthermore, Planet Fitness is focusing on those that do not already have gym memberships. This combination of target market and location is proving profitable for them as they have reported “revenue increase 31% to $140.6 million compared with the same three-month period last year”.

How Entrepreneurs Identify New Business Opportunities

According to Babson College, “entrepreneurs are often characterized by their ability to recognize opportunities (Bygrave & Hofer, 1991) and the most basic entrepreneurial actions involve the pursuit of opportunity (Stevenson & Jarillo, 1990).”

Steps to Identify Business Opportunities

There are several steps to identify and exploit new business opportunities that Babson has outlined:

  1. Preparation
  2. Incubation
  3. Insight
  4. Evaluation
  5. Elaboration

Preparation

Experience is the prime ground for preparing yourself or your company for opportunities. Identify what experiences your team has and what your company is good at. For example, if your company excels in supply chain and logistics, then an opportunity that needs incredible supply chain and logistics processes will be a good fit.

Incubation

Incubation refers to the brain processing a potential idea or opportunity subconsciously. They are already attempting to solve a problem that they haven’t yet written down. This is an ongoing process.

Insight

Then, in the insight stage, an entrepreneur will have the “eureka” or “ah-ha” moment where it all makes sense. As a financial leader, it’s important to talk with your CEO about their ideas so that you can engage in this insight stage. You may even see how to exploit the opportunity before the CEO does.

Evaluation

This step is where the financial leader truly steps up to the plate. Research and analyze whether this opportunity is worth pursuing. At the end of this stage, it could end up in either one of two ways:

  • The idea is not feasible and they kill it
  • The idea is feasible and you move forward.

Elaboration

Finally, the elaboration stage is where you exploit the new opportunity through business planning and implementation.

Example of Identifying a New Business Opportunity

For example, a steel manufacturer primarily sells to commercial developers who require the steel for building and/or roadways. One day, they realized that they were not using any scraps of steel, and the company was just throwing them away. Instead of continuing to throw away those scraps, they inquired whether there was an opportunity to take advantage of it. One day, the entrepreneur stumbles across a custom scrap metal design company where they create home decor out of scrap metal. The entrepreneur goes back to his CFO to discuss this potential idea. The CFO knows of a team member who actually does this in his spare time. They gather a team and start outlining a business plan. Eventually, they decide that it is a profitable idea, and they go forward with it.

If you are not familiar with the petrochemical sector, they are experts at this. Nothing goes to waste in the petrochemical business. A chemical is made or processed, it generates a bi-product or waste, and there is always another business in the petrochemical space that buys it to make yet another product, and on and on and on… Eventually, very little is true “waste”.

Manage New Business Opportunities

So, how do you go about managing new business opportunities? It is so easy for entrepreneurs to get caught up in their ideas and chase “squirrels“. They lose focus and may not capitalize on the opportunity sitting in front of them. As a financial leader, it is crucial for you to manage those new business ideas as part of your strategy to improve profitability.

Exploit New Business OpportunitiesConduct a SWOT Analysis

First, conduct a SWOT Analysis on your company with your team. A SWOT Analysis stands for Strengths, Weaknesses, Opportunities, and Threats. There are two view points in this analysis: internal focused and external focused. This analysis provides a comprehensive look at what your company does well and what it may be lagging in. This also helps the CEO/entrepreneur figure out what opportunities they need to look for to convert those weaknesses to strengths and those threats to opportunities.

If you want to get started on your SWOT Analysis, then click here to access our External Analysis Whitepaper.

Enable Your CEO to Make Calculated Risks

Then, enable your CEO to make calculated risks. Entrepreneurs need to take risks and make moves – that’s part of their nature and gift. But, they do not need to make uncalculated risks or risks that will cause more harm than good. As the financial leader, help them to mitigate risk and enable them to do what they do best – find opportunities and grow the business.

Do you know the opportunities and threats that your company faces? If not, then the time to figure it out is now. Click here to access our External Analysis to gear your business for change.

Exploit New Business Opportunities

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Exploit New Business Opportunities

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Core Competencies Definition

See Also:
How to Turnaround a Company
SWOT Analysis
How to Run an Effective Meeting
How to Train People for Success
Action Plan

Core Competencies Definition

The core competencies definition is a resource or capability that gives a firm competitive advantage. Core competencies are the business functions or operational activities that a company does best. A company’s core competencies are what differentiate it from the other competitors in its industry. They are also the resources and capabilities that allow the company to achieve profitability. A firm should devise its strategy so as to exploit the resources and capabilities that comprise its core competencies.

Resources

A company’s resources are the operational inputs that allow it to perform its business activities. Resources are often divided into three categories, including the following:

Resources can also be classified as either tangible resources or intangible resources. Tangible resources are physical assets, such as equipment or property. Intangible resources are non-physical assets, such as reputation, brand equity, or superior organizational architecture. Resources become core competencies or contribute to core competencies when they meet the criteria outlined below.

Capabilities

A company’s capabilities are the activities and functions it performs to utilize its resources in an integrative fashion. Capabilities are practiced and honed over time. As they become stronger, the company enhances its expertise in a particular functional or operational area. This expertise allows the company to differentiate itself from competitors. Furthermore, capabilities are operational activities that the company has mastered. They are inimitable or difficult for competitors to figure out and replicate. When capabilities meet the criteria outlined below, they contribute to the company’s competitive advantage and profit potential, and are considered core competencies.

When a company determines its core competencies, it may decide to focus on these activities only, and to outsource other peripheral or non-core activities. Provided that non-core activities can be performed more efficiently and economically by an outside organization that has expertise in that activity, it may benefit the company to outsource all possible peripheral business activities in order to devote itself to core business activities and competencies.

Core Competencies Criteria

When a company’s resources or capabilities meet certain criteria they can be called core competencies. If a resource or capability meets the following criteria it contributes to a firm’s competitive advantage over industry rivals and allows the firm to achieve profitability. A resource or capability is a core competency if it is valuable, rare, costly to imitate, and non-substitutable.

A capability or resource is valuable when it allows the company to capitalize on opportunities or defend against external threats. It is rare when few or no other industry competitors possess the resource or expert capability. A resource or capability is costly to imitate when competitors must incur heavy costs to replicate them or they are altogether inimitable. It is non-substitutable when no other resource or capability can be utilized as an equivalent.

See the following for the core competencies criteria:

1. Valuable
2. Rare
3. Costly to imitate
4. Non-substitutable

If you want to learn what your core competencies are, then click here to access our free Internal Analysis whitepaper.

core competencies definition
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core competencies definition

Source:

Harrison, Jeffrey S., Michael A. Hitt, Robert E. Hoskisson, R. Duane Ireland. (2008) “Competing for Advantage”, Thomson South-Western, United States, 2008.

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