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GENERATION AND SCREENING OF PROJECT

A project is required for a successful venture so every venturist first search for a project .AS modern business is illusive in nature so it is difficult to find out the opportunities .To find out the opportunities there are so many steps which have to culture.

Generation and screening of project ideas consists nine steps

continued 1 Generation of ideas 2 Monitoring the environment 3 Corporate appraisal 4 Tool for identify investment opportunities 5 Preliminary Screening 6 Project rating Index 7 Sources of positive net present value 8 Self questions of entrepreneur

1 Generation of ideas
It is always seen that the ideas are based on existing field of technology to offer various present product or services. but sometimes the specialized technology and marketing expertise or some other competence feels that he can produce a product which carter to a presently unmeet need or serve a market where demand exceeds supply or effectively compete with similar product. then the idea supported by the associate and approved by financial institutions bank assist the project .it is the SWOT analysis which is used to stimulate the project idea.

Examples
Two successful companies which have been exceptionally in tapping the creativity of employees are Bell telephone laboratory and 3m telephone Hindustan uniliver in India is one of the company which follows the pattern

2 Monitoring the environment


Competitive abilities of a firm depend on its environment it is one of instrument to access the ability of the firm. So a corporate appraisal is needed for monitoring the environment .for monitoring the environment business sector divided Into six parts

1 Economic sector State of economics Overall rate of growth Growth rate of different sector Linkage with world economy Balance of payment

2 Governmental Sector Industrial policy Government programmes and projects Tax framework Import and export policy Financing norms

3 Technological sector Emergence of new technology Access to technological knowhow

4 Sociodemographic sector Population trends Age shift in population Income distribution Educational profile Employment of women

5 competitive sector No of firms in industry Entry barriers Degree of homogeneity Comparison with substitutes Marketing policies

6 supplier sector Availability of cost of product Availability of cost of money Availability of chain of supply

3. corporate appraisal
For identifying better investment opportunity appraisal of strength and weakness is necessary. Broad areas of corporate appraisals are Marketing and distribution Market image Product line Market share Customer loyalty

cont

Production and operation


Condition and capacity of plant and machinery Availability of raw material Degree of vertical integration Cost structure

Research and development


Research capability of the firm Track record of new product Laboratories and testing facilities

Corporate resources and personnel Corporate image Clout with government and regulatory authority State of industrial relation Accounting and finance Financial leverage Tax situation Cost of capital Relation with share capital

4. Tools for identifying investment opportunity


There are various framework for identifying various promising investment opportunity These are o life model cycle approach and experience curve oPorters model; profit potential of industries

Porters model ; profit potential of industries


Michel porters has argued that profit potential of industry depends on the combined strength of the following five competitive forces Threats of new entrants Rivalry among existing firm Pressure from substitute product Bargaining power of buyer Bargaining Power of seller

life cycle approach


There are mainly four stages of life of a product

1 pioneering

stage; in this stage the product and the technology are introduced and lured by promising entrepreneurs as a result competition arises and only new entrants are survives .
cont

2 Rapid growth stage


The chaotic development stage over ,the firms are survive and then they applied different marketing tricks to increase their sales and profits. 3 Maturity and stabilization stage After enjoying a rate of growth the industry enter into the maturity stage then after some extent of maturity it enter into stabilization stage. 4 Decline stage; with the due course of time the customer demand and preferences changes encroachment of new product occurred then the existing product demand down slow and the market share of the product declined

The experience curve


For long term survival of the firm optimum utilization of resources and minimization of cost is necessary .The experience curve is a useful tool for planning such investments. The experience curve shows how the cost per unit behaves with respect to the accumulated volume of product. The accumulated production means the total number of unit produced cumulatively from very beginning

5 scouting for project idea


It is hard to difficult to get a good project idea because it is illusive in nature Analyze the performance of existing industry; A study of existing industries in terms of profitability ,capacity ,utilization can indicate Promising investment opportunity investment .knowledge of capacity utilization provide potentiality for further investment. cont

Examine the input and output of various industry Review import and export; Study plan outlays and government guidelines Look at the financial decision of financial institutions and developmental agencies Analyze economic and social trends Study of new technological development Attained trade fairs

6 .Preliminary screening
When feedback phase is over a preliminary screening is required to eliminate the ideas which are not promising in nature. Following aspects are taken care for screening. Comparability with the promoter Consistency with government priorities Availability of inputs Adequacy of market Reasonableness of cost Acceptance of risk factor

Acceptability of risk level; Following points are consider for checking risk level Vulnerability to business cycles Technological changes Competition from imports Shifts in consumer preference Govt control over price and distrubution

Compatibility with the promoter; The idea must be matched with the interest ,personality and resources of the entrepreneur.

A real opportunities have three capabilities i. It fits with personality of the entrepreneur ii. It is accessible to him iii. It offers him the prospectus of rapid growth. Consistency with governmental priorities The project idea must be feasible given the national goals and governmental regulatory framework. Like

Is the project consistent with national goals and priorities Are there any environmental effects contrary to govt regulations Can the foreign exchange requirement may easily fulfilled. Will be there any difficulty in obtaining the license for the project. Availability of inputs; The resources required must be reasonably assured

Adequacy of market; To judged the adequacy of market following factors have to be examined Total present domestic market Competitors and their market share Export markets Competitors and their market shares export markets Sales and distribution system Barriers to the entry for new units

Reasonable in cost; the following should be examined in this regard Cost of material inputs Labour cost Factory overheads General administration expenses Selling and distribution cost Service cost Economic of scale

7 project rating index


For screening the proposal project rating is known as one of the best method and so many steps are involve in it. Identify factors relevant for project rating Assign weight to the factor Use suitable rating scale or and rate various factors Multiply factor rating with factor weight Add all to get proper rating

8 sources of positive net present value


The imperfection in entry barriers cause positive NPVs .there are six main entry barriers Economics of scale Cost advantages Marketing research Technological change Government policy

9 .on being an entrepreneur


Being an entrepreneur various self oriented questions are asked.

Thank you

Dr.Namita mishra

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