Evaluation of opportunities

Venkattaman (1997) argues that it is one thing to be aware that profitable opportunities exist, but a significantly different matter to know how to exploit these opportunities. How then does regional port management determine which opportunity to seize? Or how does port management decide which opportunity to commit resources and time to? Typically, port managers are presented with a range of opportunities, each of which has its own strengths and weaknesses. The real challenge is to ensure that the most valuable opportunities - opportunities that are aligned with shippers' desired value and the port's objectives and for which a regional port can mobilize key differentiating resources and capabilities – are selected and implemented.

At this point it is fair to say that the critical task for port managers is to evaluate or assess the identified opportunities in terms of their desirability or attractiveness and feasibility or implementability. Keh et al. (2002) contends that the evaluation is the key to differentiate an idea from an opportunity (Hills and Shrader 1998) and as such it is important to understand how entrepreneur managers evaluate the alternatives presented to them.

The evaluation of opportunities is important for another reason often referred to in the literature as the 'risk of missing the boat' and the 'risk of sinking the boat' (Dickson and Gigluerano 1986; Das and Teng 1997). By failing to perceive a profitable opportunity a business may forgo the opportunity to invest in a profitable venture; and as Chaneski (1996) suggests 'every opportunity that is not recognised by the company is one that is available to a competitor'. On the other hand evaluating an opportunity as valuable while in reality it is not may lead the organisation to commit valuable resources to costly and loss-making actions. Both cases are important but industry observers argue that missing an opportunity or losing it to competitor might in the long term affect the performance and profitability of the businesses of the firm.

Previous behavioural research on intentions to exploit opportunities have suggested that perceived desirability and perceived feasibility enhance the perception that an opportunity is viable or credible (Krueger 2000). Therefore, perceived desirability and perceived feasibility are the two most important dimensions on which the opportunity should be assessed.

The perceived desirability of a specific opportunity is determined by its nature; and the individual, social or organisational belief that the opportunity is desirable and that the expected value from the opportunity will be large enough to compensate for the opportunity cost of other alternatives. On the other hand the perceived feasibility is determined by the perceived collective and individual ability and the magnitude of constraint that the business environment may impose on the practicality of the opportunity.

Although opportunities within bulk and non-bulk business might be different in scope and architecture, they share some desirable generic characteristics that influence their expected value and that regional port managers would look at before deciding which opportunity to select and seize. For example, all opportunities incorporate some level of economic benefits and risk or require some sort of financial and technical resources to be implemented.

Figure 3.5 suggests that the process that successful regional ports use to discern and systematically evaluate valuable opportunities includes the following steps:

(1) determination of key evaluative dimensions; (2) determination of generic criteria;

(3) identification of factors underlying each generic criterion; (4) formation of opportunity profiles;

(5) evaluation of performance of each generic criterion and its underlying factors; (6) determination of the overall performance of each opportunity based on all

Factors Factors Factors Factors Factors

Figure 3.5 Process of evaluation of market opportunities

The main focus of the key evaluative dimensions is on the attractiveness or desirability and implementability or likelihood of success of an opportunity. The economic and business literature and the survey of port managers and port experts suggest that the generic criteria focus on economic and non-economic benefits for the shippers and the port and include accessibility to the markets and economic benefits on the attractiveness side. On the implementation side the focus is on resources and risks and include the

Market Access Perceived Benefits Availability of Resources Business Risk Political Risk

Attractiveness

Market Access Perceived Benefits Availability of Resources Business Risk Political Risk

Implementability

Market Access Perceived Benefits Availability of Resources Business Risk Political Risk • • • Opportunity Profile n Opportunity Profile 2 Opportunity Profile 1 Evaluation of Opportunities Dimensions Criteria

Evaluate the performance of each opportunity based on individual generic criterion

Determine the overall performance of each opportunity based on all generic criteria

• • • • • • • • • • • • • • • Criteria

The attractiveness aspect of an opportunity is related to potential benefits that a given opportunity promises to deliver not only to the shippers but also to the port. Conversely, the implementability side is related to the costs of exploiting the opportunity. In the context of regional port competition, attractive opportunities are seen as those that have the potential to provide shippers with superior access to markets through the provision of adequate cargo handling facilities, storage facilities, efficient land transport, and efficient shipping service; in sum, these are opportunities with potential to provide a cost-effective logistics service. Such opportunities have the potential to deliver enormous economic and non-economic benefits including business growth, financial, environmental and social returns to the port (Martellato and Nijkamp 1998; Reggiani 1998).

By the some token, opportunities are regarded as implementable if they are aligned with the value propositions of the shippers and the regional port and if the technical and financial resources they require in order to be actionable can be mobilized or developed within a desired time frame. Such strategic opportunities are also likely to earn government and community support and commitment. This last aspect is critical – for many opportunities fail to be exploited simply because they are seen by communities and the government as having some detrimental effects on economic and social welfare and for this reason often they attract strong opposition.

It is important to stress that the assessment of opportunities against the two key dimensions is essential, since it is perfectly possible, for instance, to find an opportunity which is attractive and which also has clear benefits and yet is extremely difficult to exploit. Conversely, it is possible that an opportunity may be relatively easy to implement but, not particularly attractive or beneficial in the sense that it does not deliver the sought benefits or because it has been exploited effectively by a competing metropolitan port. In general, the most desirable opportunities have been those that are very attractive and relatively easy to implement. But, such opportunities tend to be very competitive. For this reason, it is important that regional port managers develop a strong ability to 'see' and exploit valuable opportunities ahead of metropolitan ports.