Module 2 Papc

8/16/2019 Module 2 Papc

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MODULE 2

Generation and

Screening of

ideas


2/73

Generation and screening of ideas

• Generation of ideas – monitoring the environment – regulatory

framework for ro!ects – cororate araisal – reliminary

screening – ro!ect rating inde" – sources of ositive #$% –

&ualities of a successful entrereneur – the orter model for

estimation of rofit otential of industries'

• Market and demand analysis( situational analysis and secification

of o)!ectives – collection of secondary information – conduct of

market survey – characteri*ation of the market – demand

forecasting – market lanning'

•

+echnical analysis( Study of material inuts and utilities –manufacturing rocess and technology – roduct mi"es – lant

caacity – location and site – machinery and e&uiment –

structures and civil works – ro!ect charts and layouts – work

schedule


3/73

Generation of ideas• ,om)ining e"isting field of technology

• Offering variants of $roducts or services• Stimulating the flow of ideas

– S-O+ .nalysis

– ,lear .rticulation of O)!ectives• ,ost reduction

• $roductivity imrovement

• /ncrease in caacity utili*ation

• /mrovement in contri)ution margin

• E"ansion into romising fields

– 0ostering a conducive climate


4/73

Monitoring the Environment

• 0or the urose of monitoring )usinessenvironment may )e divided into si" )road

categories(•

Economic Sector – State of the economy

– Overall 1ate of Growth

– Growth .te of $rimary Secondary and tertiary sector

– ,yclical fluctuations

– Linkages with the -orld Economy

– +rade Surlus 3 deficit

– 4alance of ayment situations


5/73


• Governmental Sector – /ndustrial $olicy

– Government rogrammes and olicies

– +a" framework

– Su)sidies incentives and concessions

– /mort and e"ort olicies

–0inancing norms

– Lending conditions of financial institutions and

commercial )anks


6/73

Monitoring the Environment• +echnological Sector

– Emergence of new technologies

– .ccess of technical know5how foreign as well as

indigenous

– 1ecetiveness on the art of industry

• Socio5demograhic sector – $oulation trend

– .ge shifts in oulation

– /ncome distri)ution – Educational rofile

– Emloyment of women

– .ttitudes towards consumtion and investment


7/73


• ,ometition Sector – #um)er of firms in the industry and the market share

of the to few 6four or five7

–Degree of homogeneity and differentiation amongroducts

– Entry )arriers

– ,omarison with su)stitutes in terms of &uality rice

aeal and functional erformance – Marketing olicies and ractices


8/73


• Sulier Sector

– .vaila)ility and cost of raw materials and su)5

assem)lies

– .vaila)ility and cost of energy

– .vaila)ility and cost of money


9/73

,ororate .raisal• . realistic araisal of cororate strengths

and weaknesses is essential for identifying

investment oortunities which can )e

rofita)ly e"loited' +he )road areas of

cororate araisal and the imortantasects to )e considered are ( – Marketing and distri)ution

–

$roduction and oerations – 1esearch and develoment

– ,ororate resources and ersonnel

–

0inance and .ccounting


10/73

,ororate .raisal

Marketing and distribution

– Market image

–

$roduct Line – Market Share

– Distri)ution #etwork

– ,ustomer Loyalty

– Marketing and distri)ution

costs

Production and operations – $8 M condition and

caacity

– .vaila)ility of 1'M

su)assem)lies and ower

– Degree of vertical

integration

– Locational advantages

–

,ost Structure


11/73


12/73

,ororate .raisal

• 0inance and .ccounting – 0inancial Leverage and )orrowing caacity

– ,ost of caital

– +a" situation

– 1elations )etween shareholders and creditors

– .ccounting and control system

– ,ash flows and li&uidity


13/73

+ools for identifying investment

oortunities

• $orter Model( $rofit $otential of /ndustries

•

Life ,ycle .roach• +he e"erience curve


14/73

$orter Model( $rofit $otential of

industries• $rofit otential deends uon the

com)ined strength of the five )asic forces( – +hreat of new entrants

– 1ivalry among e"isting firms

– $ressure from su)stitute roducts

– 4argaining ower of )uyers

– 4argaining ower of sellers


15/73

0orces driving industry

cometition$otential Entrants

+he industry rivalry

among e"isting firmsSuliers 4uyers

$otential Entrants

+hreat of new

entrants4argaining ower

Of suliers 4argainingower of )uyers

+hreat of

su)stitute

roducts


16/73

+hreat of new entrants• #ew entrants add caacity inflate costs

rices down and reduce rofita)ility'• Entry )arriers are high when

– +he new entrants have to invest su)stantial resources

to enter the industry – Economies of scale are en!oyed )y the industry

– ,ontrol of distri)ution channel )y the e"isting firms

– $roduct diffrentiation in the form of )and image and

customer loyalty – Switching costs are high

– +he government olicy limits or even revents new

entrants


17/73

1ivalry )etween e"isting firms• 0irms in an industry comete on the )asis

of rice &uality romotion servicewarranties and so on' +he intensity of

rivalry in an industry tends to )e high

when – #um)er of cometitors in the industry are large

– +he industry growth is sluggish

– +he level of fi"ed cost is high

– +here is ,hronic overcaacity in the industry

– +he industry confronts high e"it )arriers

– +he industry9s roduct is regarded as a commodity or

near commodity stimulating strong rice and service

cometition


18/73

$ressure from su)stitute

roducts• Su)stitute roducts may limit the rofit

otential of the industry )y imosing a

ceiling on the rices that can )e charged

)y the firms in the industry' +he threatfrom the su)stitute roducts is high when – +he rice5erformance trade5off offered )y the

su)stitute roducts is attractive – +he switching costs for rosective )uyers are

minimal

– +he su)stitute roducts are )eing roduced )y

industries earning suerior rofits


19/73

4argaining ower of )uyers

• /f )uyers are owerful they can deress

the rofita)ility of the sulier industry'

+he )argaining ower of a )uyer grou is

high when – /ts urchases are large relative to the sales of

the seller

–/ts switching costs are low

– /t oses a strong threat of )ackward

integration


20/73

4argaining ower of suliers

• 4uyer can hurt the rofita)ility of the

)uying industry when( – . few suliers dominate and the sulier

grou is more concentrated on the )uyergrou

– +here are hardly any via)le su)stitutes

–

+he switching costs for the )uyers are high – Suliers do resent a real threat of forward

integration


21/73

Life ,ycle .roach

• Many industrial economists )elieve that

most roducts evolve through a life cycle

aroach which has four stages( – $ioneering Stage

– 1aid Growth Stage

– Maturity and sta)ili*ation stage

– Decline stage


22/73

+he e"erience curve6 :;


23/73

Scouting for ro!ect ideas•

Good ro!ect ideas5key to success – .nalyse the erformance of e"isting industries

– E"amine the inuts and oututs of various industries

– 1eview imorts and e"orts

– Study lan outlays and Governmental Guidelines – Look at the suggestions of 0inancial /nstitutions and

Develomental .gencies

– /nvestigate local materials and resources

– .nalyse economic and social trends – Study new +echnological develoments


24/73

Scouting for ro!ect

ideas6contd'7

– Draw clues from consumtion a)road

– E"lore the ossi)ility of 1eviving Sick units

– /dentify Unfulfilled sychological needs

– .ttend trade fairs

– Stimulate creativity for generation new roduct ideas

– =oe that the chance factor will favor you


25/73

$reliminary screening

– ,omati)ility with the romoter

– ,onsistency with governmental riorities

– .vaila)ility of inuts

– .de&uacy of market

– 1easona)leness of cost

– .cceta)ility of risk level


26/73

$ro!ect 1ating /nde"•

/n order to streamline the reliminary screeninga reliminary evaluation is translated into ro!ect

rating inde"' +he stes involved in ro!ect rating

inde" are –

/dentify factors relevant for ro!ect rating – .ssign weights to these factors

– 1ate the ro!ect roosal on various factors using a

suita)le rating scale6>5oint or ?5oint7

–0or each factor multily the factor rating with thefactor weight to get the factor score

– .dd all the factor scores to get the overall ro!ect

rating inde"


27/73

Sources of ositive net resent

value• .n understanding of entry )arriers is helful in

identifying ositive #$% ro!ects' +here are si"

main entry )arriers that result in ositive #$%

ro!ects – Economies of scale

– $roduct differentiation

– ,ost advantage

–Market reach

– +echnological edge

– Government olicy


28/73

On )eing an Entrereneur • @uestions every entrereneur must answer • i7 .re my goals well defined

– $ersonal asiration

– 4usiness sustaina)ility and si*e

– +olerance for risk

• ii7 Do / have the right strategy – ,lear definition

– $rofita)ility and otential for growth

– Dura)ility

–

1ate of growth• iii7,an / e"ecute the strategy

– 1esources

– Organi*ational /nfrastructure

– +he founder9s role


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@ualities of a successful

Entrereneur • -illingness to make sacrifices

• Leadershi

•

Decisiveness• ,onfidence in the ro!ect

• Marketing orientation

•

Strong ego


30/73

Market and Demand analysis•

+he first ste in ro!ect analysis is to estimatethe otential si*e of the market for the roduct to

)e manufactured and get an idea a)out the

market share that is likely to )e catured' Market

and demand analysis is concerned with two)road issues(

• -hat is the likely aggregate of demand for the

roduct3serviceA

• -hat share of the market will the roosed ro!ecten!oyA

• Given the imortance of market and demand analysis it

should )e carried out in an orderly and systematic

manner'


31/73

Bey stes in Market and Demand .nalysis

,ollection of

secondary

information

Situational .nalysis and

Secification of

o)!ectives

,onduct of

market survey

,haracteri*ation

of the Market

Market

lanning

Demand

0orecasting


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Situational .nalysis and Secification of

o)!ectives

• /n order to carry out market and demand

analysis it is necessary to sell out its

o)!ectives clearly and comrehensively' . helful

aroach to sell out o)!ectives is to structurethem in the form of &uestions'

• 0or e"amle a small )ut technologically

cometent firm has develoed an imroved air

cooler )ased on a new rincile that aears to

offer several advantages over the conventional

air cooler'


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Evaluation of Secondary /nformation

• +he market analyst should seek to know –

-ho gathered the informationA -hat was the o)!ective – -hen was the information gatheredA -hen was it u)lishedA

– =ow reresentative was the eriod for which the information was

gatheredA

– =ave the terms in the study )e carefully and unam)iguously

definedA -hat was the target oulationA – =ow was the samle chosenA =ow reresentative was the

samleA

– =ow satisfactory was the rocess of information gatheringA

– -hat was the degree of samling )ias and non5resonse )ias in

the information gatheredA

– -hat was the degree of misreresentation )y resondents

– =ow accurately was the information edited ta)ulated and

analy*edA

– -as statistical analysis roerly aliedA


36/73

,onduct of market survey

•

Secondary information needs to )esulemented with rimary information gathered

through market survey

• Market survey may )e a ,ensus survey or a

samle survey• ,ensus survey covers entire oulation

• Samle survey covers a art of the oulation


37/73

Market Survey

•

+he information sought in the market surveymay relate to one or more of the following( – +he total demand and rate of growth of demand

– Demand in different segments of the market

– /ncome and rice elasticities of demand

– Motives for )uying

– $urchasing lans and intentions

– Satisfaction with e"isting roducts

– Unsatisfied needs

– .ttitudes towards various roducts – Distri)utive trade ractices and references

– Socio5economic characteristics of )uyers


38/73

Stes in samle survey• Define the target oulation

•

Select the samling scheme and samling si*e• Develo the &uestionnaire

• 1ecruit and train the field /nvestigators

• O)tain information as er the @uestionnaire from the

samle resondents• Scrutini*e the information gathered

• .naly*e and interret the information

• Limitations of samle survey

– =eterogeneity of the ,ountry – Multilicity of languages

– Design of &uestionnaire


39/73

,haracteri*ation of the Market

•

4ased on the market survey the market for theroduct 3 service may )e descri)ed in terms of

the following( – Effective demand in the ast and resent

– 4reak5down of demand – $rice

– Methods of distri)ution and sales romotion

– ,onsumers

– Suly and cometition



40/73

Demand 0orecasting

Estimation of future demand is the ne"t ste after gathering

information a)out various asects of the market anddemand from rimary and secondary sources'

Methods of Demand 0orecasting(

• @ualitative Methods –

Hury of E"ecutive Method – Delhi Method

• +ime Series $ro!ection Methods – +rend $ro!ection Method

– E"onential Smoothening Method

– Moving .verage Method


41/73

Demand 0orecasting

• ,asual Methods – ,hain 1atio Method

– ,onsumtion Level Method

– End Use Method

– 4ass Diffusion Method – Leading /ndicator Method

– Econometric Method


42/73

Demand 0orecasting Uncertainties

•

Uncertainties in demand forecasting arisefrom three rincial sources( – Data a)out ast and resent market

• Lack of standardi*ation

• 0ew o)servations

• /nfluence of a)normal factors

– Methods of forecasting•

/na)ility to handle un&uantifia)le factors• Unrealistic assumtions

• E"cessive data re&uirement


43/73

Demand 0orecasting Uncertainties

– Environmental change• +echnological change

• Shift in Government olicy

•

Develoments on the /nternational Scene• Discovery of #ew sources of 1aw Material

• %agaries of Monsoon


44/73

=ow to coe u with uncertainties• ,onduct analysis with data )ased on uniform and standard

definitions

• /n identifying trends relationshis and coefficients ignore the

a)normal or out5of5the ordinary o)servations

• ,ritically evaluate the assumtions of the forecasting methods and

choose a method which is aroriate to the situation

• .d!ust the ro!ections derived from &uantitative analysis in the light

of un&uantifia)le )ut significant influences

• Monitor the environment imaginatively to identify imortant changes

• ,onsider likely alternative scenarios and their imact on market and

cometition

•

,onsider the sensitivity analysis to assess the imact on the si*e ofdemand for unfavoura)le and favoura)le variations of the

determining factors from the most likely levels'


45/73

Market lanning

• Marketing lan usually has the following

comonents(

–,urrent Marketing situation

– Oortunity and issue analysis

– O)!ectives

– Marketing strategy

– .ction rogramme


46/73

Market $lanning

• ,urrent market situation e"amines the

following( – Market situation

– ,ometitive situation

– Distri)ution situation

– Macro Environment

• Oortunity and issue analysis e"amines – S-O+


47/73

Market $lanning• Market Strategy covers the following(

– +arget Segment

– $ositioning

– $roduct Line

– $rice

– Distri)ution

– Sales $romotion

– .dvertisement

• .ction rogramme oerationalises the

strategy


48/73


49/73

Manufacturing rocess or technology

• +here will )e two or more technologies to

manufacture a roduct or service' 0or E"( – Steel can )e made either )y the 4essemer rocess or

the oen hearth rocess

–

,ement can )e made either )y the dry rocess or thewet rocess

– $aer using )agasse as the raw material can )e

manufactured )y the kraft rocess or the soda

rocess or the Simon ,usi rocess

– Soa can )e manufactured )y semi )oiled rocess or

fully )oiled rocess


50/73

,hoice of +echnology

• ,hoice of technology is influenced )y a

variety of considerations( – $lant ,aacity

– $rincial inuts

–

/nvestment outlay and roduction cost – Use )y other units

– $roduct mi"

– Latest develoment

– Ease of a)sortion


51/73

.roriateness of +echnology

• /t refers to those methods of roduction which

are suita)le to local economic social andcultural conditions' +he advocates of aroriate

technology urge that the technology should )e

evaluated in terms of the following &uestions( – -hether the technology utilises local raw materialsA

– -hether the technology utilises local man owerA

– -hether the goods and services roduced cater to

the )asic needsA

– -hether the technology rotects ecological )alanceA

– -hether the technology is harmonious with social and

cultural conditionsA


52/73

Material inuts and utilities

• Material inuts and utilities may )e classified

into four )road categories( – 1aw Materials

– $rocessed /ndustrial Materials and comonents

– .u"iliary materials and factory sulies

– Utilities

• 1aw materials are further classified into the

following –

.gricultural roducts – Mineral roducts

– Livestock and 0orest $roducts

– Marine $roducts


53/73

$rocessed /ndustrial Materials and ,omonents

4ase metals semi5rocessed materials

manufactured art comonents and su)5assem)lies are some e"amles

.u"iliary materials and 0actory sulies are like

chemicals additives ackaging materials

aint varnishes oils grease etc'

Utilities are like fuel water ower steam etc'

. detailed study of all the a)ove has to )e made

at the time of inut study and also at the timeof formulating the ro!ect with resect

location technology and lant caacity'


54/73

$roduct Mi"

• Market re&uirement guides the choice of roduct

mi"' /n the roduction of most of the itemsvariations in si*e and &uality are aimed at

satisfying a )road range of customers' %ariation

in &uality can ena)le a ,omany to e"and its

market and en!oy higher rofita)ility' -hilelanning the roduction facilities of the firm

some fle"i)ility with resect to the roduct mi"

must )e sought' +he degree of fle"i)ility chosen

may )e )ased on a careful analysis of theadditional investment re&uirement for different

degrees of fle"i)ility


55/73

$lant ,aacity

• $lant ,aacity or $roduction ,aacity refers to

the volume or num)er of units that can )e

roduced during a given eriod'

•

0easi)le normal caacity which is nothing )utthe caacity attaina)le under normal working

conditions'

• +he nominal ma"imum caacity is the caacity

which is technically attaina)le and this oftencorresonds to the installed caacity guaranteed

)y the sulier of the lant


56/73

• ,aacity decisions are influenced )y the

several factors( – +echnological 1e&uirement

– /nut constraints

– /nvestment cost

– Market conditions

–1esources of the firm



57/73

Location and site

• Location refers to a fairly )road area like a

city an industrial *one or a coastal area

• Site refers to a secific iece of land

where the ro!ect would )e set u'

• +he choice of location and site follows an

assessment of demand si*e and inut

re&uirements'


58/73

• +he choice of location is influenced )y a

variety of considerations( – $ro"imity to 1a materials markets

– .vaila)ility of infrastructure

– La)our situation

– Governmental $olicies

– Other factors• ,limatic conditions

•

General living conditions• $ro"imity to ancillary units

• Ease in coing with environmental ollution

M hi i d i t


59/73

Machineries and e&uiments

• +he re&uirement of machineries and e&uiments

is influenced )y roduction technology and lantcaacity it is also influenced )y the tye of

ro!ect'

• E"( 0or a rocess oriented industry like a etro5

chemical unit machineries and e&uiments

re&uired should )e such that various stages are

matched well'

•

+he choice of machineries and e&uiments issomewhat wider for a manufacturing industry


60/73

Machineries and e&uiments

•

+he e&uiments re&uired for the ro!ect may )eclassified into the following tyes( – $lant e&uiments

– Mechanical e&uiments

– Electrical e&uiments – /nstruments

– ,ontrols

– /nternal +ransortation System

– Others

– /n addition to the a)ove sare arts and tools list also

has to )e reared

, t i t i l ti hi i d


61/73

,onstraints in selecting machineries and

e&uiments

• ,ertain constraints that should )e )orne in mindwhile selecting machineries and e&uiments are( – +here may )e a limited availa)ility of ower to set u

an electricity intensive lant

– +here may )e difficulty ion transorting a heavye&uiment to a remote location

– -orkers may not )e a)le to oerate at least in the

initial eriods certain sohisticated e&uiments like

numerically controlled machines – +he imort olicy of the Government may reclude

the imort of certain machineries and e&uiments


62/73

$rocurement of lant and machinery

•

+he factors to )e considered / selectingthe sulier of lant and machinery are – Desired &uality of machinery

– Level of +echnological sohistication

– 1elative reutation of various suliers

– +he e"ected delivery schedules

– $referred ayment terms

– $erformance guarantee

St t d ,i il - k


63/73

Structures and ,ivil -orks

• /t is divided into three categories( –

Site rearation and develoment• Grading and leveling of the site

• Demolition and removal of e"isting structures

• 1elocation of e"isting ielines ca)les roads

ower lines etc'• 1eclamation of swas and draining and removal of

standing water

• ,onnection for the following utilities from the site to

the u)lic network – Electric ower water communications roads railway

sidings

• Other Site rearation and develoment work



64/73


• 4uilding and structures – 0actory or rocess )uildings – .ncillary )uildings

– .dministrative )uildings

– Staff welfare )uildings

– 1esidential )uilding

• Outdoor works – Suly and distri)ution of utilities

– =andling and treatment of effluents and wastages

– +ransortation and traffic signals

– Outdoor lighting

– Landscaing

– Enclosure and suervision


65/73

Environmental asects

• . ro!ect may cause environmental ollution in

various asects' +he key issues that need to )e

considered in this resect are(

• -hat are the tyes of effluents and emissions

generatedA• -hat needs to )e done for roer disosal of

effluents and treatment of emissionA

• -ill the ro!ect )e a)le to secure all

environmental clearances and comly with all

statutory re&uirementsA

$ ! t h t d l t


66/73

$ro!ect charts and layouts

• Once the via)ility of the ro!ect is analy*ed

)ased on various asects ro!ect charts andlayouts may )e reared

• +he imortant chars and layout drawings are( –

General functional layout – Material 0low Diagram

– $roduction Line diagram

– +ransort layout

–Utility consumtion layout

– ,ommunication Layout

– Organi*ational Layout

– $lant Layout

$ ! t h t d l t


67/73

$ro!ect charts and layouts

• +he lant layout is concerned with the hysical

layout of the factory' $lant layout deends uonthe tye of manufacturing rocess' +he imortant

considerations in rearing the lant layout are( – ,onsistency with roduction technology

– Smooth flow of goods from one stage to another

– $roer utili*ation of sace

– Scoe of e"ansion

–

Minimi*ation of roduction cost – Safety of ersonnel

Schedule of ro!ect imlementation


68/73

Schedule of ro!ect imlementation

• 0or rearing the ro!ect imlementation

schedule the following information is re&uired( – List of all ossi)le activities from ro!ect lanning to

commencement of roduction

– +he se&uence in which various activities have to )e

erformed – +he time re&uired for erforming various activities

– +he resources normally re&uired for erforming

various activities

–+he imlications of utting more resources or lessresources than are normally re&uired


69/73

-ork schedule

• -ork schedule is nothing )ut the lan of work

concerning installation as well as initial oerations' +heurose of work schedule is – +o anticiate ro)lems likely to arise during the installation

hase and suggest ossi)le means for coing with them

– +o esta)lish the hasing of investments taking into account the

availa)ility of finances

– +o develo a lan of oerations covering the initial eriod

• +o avoid losses idle caacity and deterioration of stocks

of material work schedule should )e drawn u with care

and realism so that the commissioning of lant isreasona)ly synchroni*ed with the availa)ility of the )asic

inuts

#eed for considering alternati es


70/73

#eed for considering alternatives

• +here are alternative ways of transforming an

idea into a concrete ro!ect' +hese alternativesmay differ in one or more of the following

asects( – #ature of ro!ect

– $roduction rocess

– $roduct &uality

– Scale of oeration and time lanning

– Location

Bey ro!ect inter5linkages


71/73

Bey ro!ect inter5linkages

$roduct3service

Demand

Si*e

Location

$roduction costs

0inancial

1e&uirements

$rofita)ility

/nvestment outlay

+echnology

Selling $rice


72/73

QUESTIONS???


73/73

THANK YOU

Module 2 Papc

Documents

Transcript of Module 2 Papc