Opportunity analysis is the strategy of assessing the potential for a change or enhancement to enhance the generation of revenue. The type of opportunity will vary, from small chances within a current production model that leads to expense reduction or increases overall efficiency, to the launch of new product lines that will increase profitability for the business as a whole. Whether the goal is to increase profits by reducing expenses or broadening the range of products offered, undergoing an opportunity analysis helps to provide an understanding of what effects, positive and negative, are likely to take place if a particular approach is implemented.
With any type of opportunity analysis, three key questions must be answered in order for the analysis to be effective. First, what are the benefits of implementing this opportunity? Next, what adverse effects are likely to occur when the implementation takes place? Finally, how will the implementation affect the overall function of the operation, and is the result worth making the change?
The first issue to address in conducting an opportunity analysis is to identify the benefits that the change will bring about. For example, if a bread company decides to broaden the product line by offering hot dog buns along with its loaves, the benefits may be meeting a need of current consumers who will now purchase buns along with loaves, leading to increased profits for the business. The analysis will look closely at what expense is involved in adjusting the production process so the buns can be produced, how the packaging should be designed, and what the unit price for a package of buns must be in order to be competitive in the marketplace. If it is determined that the associated costs can be offset by the sale of the buns and earn a profit for the venture, there is a good chance that this opportunity is worth pursuing.
Once it is determined that there is value in pursuing the idea, the opportunity analysis will then focus on the potential negative effects of implementing this new strategy. For example, how will the production of buns impact the production of loaves? If the bread production is adversely affected to the point that the company produces fewer loaves and cannot meet its production commitments to current vendors, then the profit from the bun production may be completely offset, leaving the company with no additional revenue to show for its efforts.
Any worthwhile opportunity analysis must look at the long-range effects associated with the change that is being considered. Often, this means looking at not only issues of production and cost, but also intangible factors. Should the addition of buns to the production process mean that consumers cannot buy the loaves they want, then they are likely to take their business elsewhere, an action that effectively undermines not only the profits from the loaves but also reduces the consumer market for the buns. Thus, the change would have a negative effect on revenue generation over the long-term and not be worth the effort.