Opportunity analysis evaluates potential changes to improve revenue, considering benefits and negative effects on production, costs, and long-term revenue. Three key questions must be answered: benefits, adverse effects, and overall function. Long-term effects, including intangible factors, must also be considered.
Opportunity analysis is the strategy of evaluating the potential for a change or improvement to improve revenue generation. The type of opportunity will vary, from small opportunities within a current manufacturing model that lead to reduced expenses or increased overall efficiency, to the launch of new product lines that will increase profitability for the entire company. Whether the goal is to increase profits by reducing expenses or expanding the range of products offered, undergoing an analysis of opportunities helps to understand what effects, positive and negative, could occur if a particular approach is implemented.
With any type of opportunity analysis, three key questions need to be answered for the analysis to be effective. First, what are the benefits of implementing this opportunity? Next, what are the adverse effects that can occur when implementation occurs? Finally, how will the implementation affect the overall function of the operation and is the result worth making the change?
The first problem to be faced in conducting an opportunity analysis is to identify the benefits that the change will bring. For example, if a bread company decides to expand its product line by offering hot dog buns alongside its loaves, the benefits could be a need to satisfy current consumers who now purchase buns alongside their loaves, leading to an increase of profits for the company. The analysis will closely examine what the costs are related to adapting the production process to be able to produce the sandwiches, how to design the packaging and what the unit price must be for a package of sandwiches to be competitive in the market. If it is determined that the associated costs can be offset by selling the sandwiches and earning a profit for the venture, this opportunity is likely worth pursuing.
Once it is established 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 of bread? If bread production is adversely affected to the point where the company produces fewer loaves and is unable to meet its production commitments with current vendors, the profit from the production of buns could be fully offset, leaving the company no additional income to prove for its efforts.
Any worthwhile opportunity analysis must examine the long-term effects associated with the change being considered. Often, this means looking not only at production and cost issues, but also at intangible factors. If adding buns to the production process means consumers can’t buy the loaves they want, they are likely to take their business elsewhere, an action that effectively undermines not only loaf profits but also shrinks the consumer market. for sandwiches. Therefore, the change would have a negative effect on long-term revenue generation and would not be worth the effort.
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