UNIT-2

OPPORTUNITY
/IDENTIFICATION AND
PRODUCT SELECTION

MBA 12 Batch (2015-17)

Learning Objectives
To identify the business opportunities
- What is a project?
- How projects can be identified?

To understand procedures to set-up

small-scale industrial unit
- How projects feasibility reports are to
be made
and why?
To present a business plan
MBA 12 Batch (2015-17)

Identifying business
opportunitiesSearch for New Ideas

Opportunity

To be your own boss

To provide a product or service
To implement ideas which generate surplus
to the business

Qualities of a successful business

person are :
Hard work, skill and Perseverance
MBA 12 Batch (2015-17)

Contd
Business Person can be grouped into 2
broad categories:
1) People who know exactly what they
want to do and are only looking for the
opportunities and resources.
- They have developed many skills those are
needed to get success in their selected field.
- They are also familiar with industry customs
and
practices.
MBA 12 Batch (2015-17)

Contd
2) People dont have definite ideas
about what theyd like to do.
- They may have developed skills
during their education and employment.
- They are not interested.

MBA 12 Batch (2015-17)

Potential Sectors for Business

Opportunities
-

Green Business
Biotechnology
Events Mgt.
IT Enabled Services
Food Processing Sector
Mineral Water
Courier Services
Insurance sector
Telecom Sector
Tourism sector
MBA 12 Batch (2015-17)

Project identification
A PROJECT can be defined as:
Scientifically developed plan of work with
an aim to achieve a specific objective
within a specified time frame.
Three elements of a project are:
- specific objectives
- course of actions
- involve a definite time frame for
development
MBA 12 Batch (2015-17)

Contd

A project includes activities which are

aimed at:
- Production of goods and/ or services.
- Increase in the capacity of existing
plant or services.
- Increasing the efficiency or
productivity of the existing plant or
services.

MBA 12 Batch (2015-17)

Classification of Projects
Quantifiable and Non-Quantifiable
projects
QUANTIFIABLE
PROJECTS

NON-QUANTIFIABLE
PROJECTS

Manufacturing
Health Care
industrial development
Power Generation

Education
Defence

MBA 12 Batch (2015-17)

Contd
Projects named on Sectors
Agricultural sector
Transport sector
Social services sector
Industry sector
Mining sector

MBA 12 Batch (2015-17)

Contd
Techno-economic projects
a) Intensity factor :

Labour intensive or Capital intensive

b) Demand based:

Based on the demand of the goods whether

raw materials, skills, semi-finished or
finished
c) Size of investment based:

For eg: large scale, medium scale or small

scale projects
MBA 12 Batch (2015-17)

Type
Mfg. Enterprise
Service
Enterprise
Micro
Up to Rs.25 lakh
Up to Rs.10
lakh
Small
Rs.25 lakh to
Rs.10 lakh to
Rs.5.0 cr.
Rs.2.0 cr.
Medium Rs.5.0 cr. to
Rs.2.0 cr. to
Rs.10.0 cr.
Rs.5.0 cr.
(Values indicate investment in plant & machinery)
MBA 12 Batch (2015-17)

Project Opportunities

Peter Drucker an eminent mgt.

guru, finds 3 kinds of project
opportunities:
- Additive
- Complementary
- Breakthrough
MBA 12 Batch (2015-17)

Contd
i.

Additive type:

An entrepreneur uses the existing

resources and brings change to the
existing business.
ii. Complementary type:

Entrepreneur introduces new ideas

leading to changes in the existing
business and evolves new business
opportunities.
MBA 12 Batch (2015-17)

Contd
iii. Breakthrough type:

Opportunities involves basic changes in

both structure
business.

and

character

MBA 12 Batch (2015-17)

of

the

Identification of project has 3

attributes
Input characteristics: What project will
consume? Energy, Raw materials, Financial
Resources, Manpower etc.
Output characteristics: What project is
expected to generate?
Social
cost-benefit
characteristics:
Impact on environment, changes in the
current equilibrium in economy and its
implications on the society.
MBA 12 Batch (2015-17)

Formalities for setting up of a

Small Business Enterprise
1.

Selection of a Project

Product or service selection

Location selection
Project feasibility study
Business plan preparation
Prepare project profile

MBA 12 Batch (2015-17)

Contd
2. Decide on the constitution
3. Obtain SSI registration
4. Obtain clearances from deptts. as
applicable
5. Arrange for land/ shed
6. Arrange for plant and machinery
7. Arrange for infrastructure
8. Prepare project report
9. Apply and obtain finance
10. a. Proceed to implement
b. Obtain final clearance
MBA 12 Batch (2015-17)

Product or Service selection

Careful analysis of business situation
Examine the pros and cons of the
proposed business
Future demand and supply position of the
product

MBA 12 Batch (2015-17)

Contd
A successful entrepreneur consider
following factors before deciding a
suitable project:
-

Background and experience of the entrepreneur(s)

Availability of technology and know-how for the project
Marketability of the project/ service
Investment capacity
Availability of plant and machinery
Availability of raw materials
Availability of proper infrastructure facilities
MBA 12 Batch (2015-17)

Contd
Many organisations provide information on business
opportunities to get an idea about a product or service:
District Industry Centres (DICs)
Technical Consultancy Organisations (TCOs)
Small Industry Service Institutions (SISIs)
Banks
National Industrial Development Corp. (NIDC), New
Delhi
Khadi and Village Industries Commission (KVIC)
Entrepreneurship Development Institute of India,
Ahmedabad
National Institute of Entrepreneurship and Small
Business Development (NIESBUD), New Delhi
SIDBI, Lucknow
MBA 12 Batch (2015-17)

Contd
In the project conceptualization stage the
following factors related to the product need are to
be considered:
- Easy availability of raw-material
- Process technology
- Easy accessibility in the market
- Incentive and support from the Govt.
- Product line - depth, width
- Market information
- Packaging
- Branding
- Warranties
- After sales services
MBA 12 Batch (2015-17)

Contd
Products are having export potential, following
parameters need to addressed during selection:

Export demand conditions

Internal supply capability
Complexity of marketing
Investment limit to penetrate into the market
Quality specifications are being given by regulatory
bodies of various countries
Product adaptations

Some high export potential business areas are:

Leather garments
Apparel
Costume jewelleryMBA 12 Batch (2015-17)

Location selection
Some of the major aspects are to be considered:
-- Proximity to market
-- Availability of raw materials
-- Availability of transportation and
communication facilities
-- Availability of incentives/ concessions
-- Govt. policy
-- Availability of suitable infrastructure
facilities
-- Convenience for the promoter
MBA 12 Batch (2015-17)

Contd
A check list of points is to be considered for
evaluation of land/site:
(A) General considerations:
-- Location (city/town/village)
-- Nearest large city (Name and Distance)
-- Distance from major raw material sources
-- Availability of human resource with
desired skills and prevailing wage rates
-- Law and order situation in the area, etc.
MBA 12 Batch (2015-17)

Contd
(B) Industrial infrastructure position:
-- Land: availability and price
-- Existence of an organised industrial estate
-- Water supply (source, distance, quality,
operating authority -PWD, Municipality)
-- Power supply (nearest substation,
feeder type
(industrial/rural))
-- Effluent treatment and disposal
-- Bank, transport facility, warehouse facility
-- Professional resource position (various
consultants and advisers)
MBA 12 Batch (2015-17)

Contd
(C) Financial incentive position:
-- Investment subsidy (Central/State
govt.)
-- Income Tax Concession
-- Sales Tax Exemption
-- Octroi Exemption, Electricity Duty
Exemption,
Local Tax Exemption, etc.

MBA 12 Batch (2015-17)

Contd
(D) Social infrastructure position:
-- Housing: availability, price (ownership
and rent),
public housing.
-- Education: Primary, Secondary and
University
education
facility.
-- Health: Dispensary, Hospitals,
Physicians, etc.

MBA 12 Batch (2015-17)

Contd
(E) Site-specific considerations:
-- Direction of town growth w.r.t the site
-- Status of the site (Agricultural/ NonAgricultural)
-- Access to National/State highway,
-- Proximity to Railway line, National
Highway,
State Highway,etc.

MBA 12 Batch (2015-17)

Project feasibility study

-----

Market analysis
Technical analysis
Financial analysis
Economic analysis (social cost-benefit
analysis)
-- Ecological analysis

MBA 12 Batch (2015-17)

Market analysis
It is concerned with two questions:
What would be the demand of the
proposed product/service in future?
What would be the market share of the
product under appraisal?

MBA 12 Batch (2015-17)

Contd
Therefore the market analyst must provide a
wide variety of info and forecasting methods:
Consumption trends in the past and present
Supply position in the past and present
Production possibilities and constraints
Product import and export
Consumer behavior, motivations, preferences,
etc
Distribution channels and marketing policies in
use
MBA 12 Batch (2015-17)

Technical analysis
Deals with technical and engineering aspects
of a project.
It is concerned with:
Preliminary tests and studies
Availability of raw materials, power and other
inputs
Appropriate equipment or machinery
Appropriate Production Process
Work schedules are realistic
Proposed technology is appropriate from the social
point of view or not
MBA 12 Batch (2015-17)

Financial analysis
To ascertain whether the proposed project
is financially viable or not.
Financial appraisal should be conducted on
the following aspects:
Investment outlay and cost of the
project
Estimated profitability
BEP
Cash flows
PV & NPV
Levels of risk
MBA 12 Batch (2015-17)

Economic analysis
Social cost-benefit analysis which
includes:
Direct economic benefits and costs of the
project measured in terms of shadow
(efficiency) prices and not in terms of
market prices.
Impact of project on the distribution of
income in the society.
Contribution of the project towards the
employment in the society.
MBA 12 Batch (2015-17)

Ecological analysis
Projects have ecological implications like
power

plants

and

environment

polluting

industries like chemical industries, leather

processing industries.
The main concern in ecological analysis are:
Possible damage to the environment.
Cost of restoration.
MBA 12 Batch (2015-17)

Project Feasibility study

Generation of
ideas
Initial screening

Preliminary work

Is the idea prima facie

promising
ye
No
Plan feasibility
s
Terminate
analysis
Conduct market
analysis

Conduct technical
analysis
Conduct financial
analysis

Analysis

YES

Conduct economic &

ecological analysis
Evaluation

NO

YES

Is the project
worthwhile?
MBA 12 Batch (2015-17)

Prepare funding proposal

Terminate

Business Plan
Is a document where anyone can plan
his/her business
Provides an organised and effective
response to a business situation in future
Necessary for all levels of organisations
(i.e. start-up to growing)
Used to establish realistic goals or targets
to achieve in future and also determines
the current position of the business
MBA 12 Batch (2015-17)

Business Plan Contd

A workable business plan has the
following features:
-- Determines where the company
needs to go
-- Forewarns of possible roadblocks
-- Formulate responses to
contingencies
-- keeps the business on track to reach
its
planned goals
MBA 12 Batch (2015-17)

Contd
Followings points should be keep in
mind while preparing a business plan:
-- Keep target audience in view
-- Business Strategy- core of a business
plan
-- Thinking competitively throughout
-- Be realistic
-- Involve people
-- Factual and succinct
A Business plan should not more than 30-40
pages including the supportive documents.
MBA 12 Batch (2015-17)

Contd

A business plan focuses on the following:

- Product, Features, Capacity, Uses
- Market prospects, Selling price and Cost of selling
- Production process and technical arrangements
- Plants and Machinery, suppliers and cost
- Location
- Infrastructure facilities
- Raw material and other requirements
- Manpower
- Working Capital
- Project cost
- Means of finance
- Capacity utilization and income estimates
- Expenditure
- Profit and tax
- Risk analysis
- Other questions (Govt. policy, Govt. clearance and approvals, deadlines
of the projects etc.)
MBA 12 Batch (2015-17)

Contents of a business plan

I.
II.
III.
IV.
V.
VI.

Title page
Executive summary
Company Plan
Marketing plan
Financial plan
Supporting documents

MBA 12 Batch (2015-17)

Project Profile
To
obtain
PRC(Provisional
Registration
Certificate) from District Industries Centre (DIC).
For Land approval from Industrial Areas
Development Board or State Small Industries
Development Corporation (SSIDC) for shed and
other infrastructures like:
procurement and distribution of scarce raw materials
supply of machinery on hire-purchase basis
providing assistance to market the products, etc.

MBA 12 Batch (2015-17)

Project Profile Contd

Project Profile contains following information
heads:

Introduction
Promoter (s) background (education, experience, etc)
Product (s) description (specification, uses, etc)
Target market and Marketing strategies
Details of Infrastructure needed
Plants and Machinery (description, capacity, cost, etc)
Process details
Raw materials (requirements, specification, cost, etc)
Manpower required (types of personnel, their salaries/ wages)
Cost of the project and means of finance (% of share or bank
loans)
Batch (2015-17)
Cost of productionMBA
and12Profitability

Sources of Information
Sources
Examples
Unexpected occurrences
Unexpected success: Apple Computer
(Microcomputers)
Unexpected tragedy: 9-11 terrorist attack
Incongruities Overnight package delivery
Process needs
Sugar-free products
Caffeine-free coffee
Microwave ovens
Industry and market changes
homehealth
care
Demographic changes
older people

Health care industry: changing to

Rest homes or retirement centers for

Perceptual changes Exercise (aerobics) and the growing concern

fitness
Knowledge-based concepts Mobile (Cell phone) technology;
pharmaceutical industry; robotics, etc.
MBA 12 Batch (2015-17)

for

MBA 12 Batch (2015-17)