Generation and screening of project ideas

Right Business At Right Time

1 Generation of ideas
Swot Analysis Cost Reduction Productivity Improvement Increase in Capacity Utilization Improvement in Contribution Margin Expansion in to Promising Fields

2. Monitoring the Environment

Fostering conducive Environment

Tap the creativity of people

Harness their entrepreneurial urges

Motivate to think out out box

(A) Economic Sector

State of the Economy

Cyclical Overall fluctuations growth rate BOP situations Trade surplus/defects

Growth rate of primary And tertiary Sectors

linkage as the work economy

(B) Govt. Sector

Industrial policy Govt. Programme - Tax and project Tax framework Subsidies Incentives and concessions Import & export policies Financing norms Lending conditions of FIs & CBs

(C) Technological Sector

Emergence of new technologies

Access to technical know how-foreign as well as indigenous

Receptiveness on the part of Industry

(D) Socio Demographic Sector

Population trends Age shift in population Income distribution Educational profile Employment of women Attitude towards consumption and investment

(E) Competition
No. of firms in the the industry and market shares Degree of homogeneity and differentiation among products Entry barriers Comparison with substitutes in terms of quality price appeal and functional performance Marketing policies and practices

(F) Supplier Sector

Availability and cost of
raw material sub assemblies Energy

3. Corporate Appraisals
A. Marketing and distribution
Market image Product line Market share Distribution network Customer loyalty Marketing and Distribution costs

B. Production & Operations

Condition and capacity of plant and machinery Availability of raw Materials, sub-assemblies And power Degree of vertical integration Location advantage Cost structure

C. Research & Development

Research capabilities of of the firm Track record of new product development Laboratories and testing Facilities Coordination between Research and operations

D. Corporate Resources & Personnel

Corporate image Clout with governmental and Regulatory services Dynamism of top management Competence & commitment of Employees State of industrial relations

E. Finance and Accounting

Financial leverage and Borrowing Capacity Cost of capital Tax situation Relations with share holders and creditors Accounting and control system Cost flow and liquidity

Profit Potential of Industries: Porter Model

Forces Driving Industry Competition
Potential entrants
Bargaining power Of suppliers Suppliers Threat of new entrants The Industry rivalry among Existing firms Threat of substitute product
Substitutes

Bargaining power of buyers

Buyers

BOTTLENECKS

Factors which affect the exercise for an effective project formulation.

project not fitted in overall socio-economic development of country Frequent changes in a host of Govt. directives, licensing procedures, import and export obligations, pricing controls etc Political stalemate in the country Non-preparation reports of detailed project

Manipulation of project report by giving wrong assumptions regarding life of the project, cost structure, ROI, SCB etc. Use of inappropriate project technology

Application of sophisticated technology leading to vast investments right from the start.

Selection of optimal size of plants without keeping an eye on market conditions. No planning of product mix at initial stage

Market analysis based on hunches and guess Sudden changes in market conditions Financial projections too much exaggerated Underestimating project cost Delay in collaborating with foreign collaborators for technical assistance. Frequent transfers of top management engaged in project formulation

Promoters ability to take up new ventures not assessed in proper perspective Promoters tendency to spend lavishly in initial stages of project formulation. Over ambitions plans of promoters.