Generation and Screening of Project Ideas

Topics To Be Discussed
 Generation Of ideas
 Monitoring The Environment
 Corporate Appraisal
 Profit Potential Of Industries : Porter
Model
 Scouting of Project Ideas
 Preliminary Screening
 Project Rating Index
 Sources Of Positive Net Present Value
 On Being An Entrepreneur

Generation Of Ideas
 Most of the project
ideas involve
combining
existing fields of
technology or
offering variants
of present product
or services.

Stimulating The Flow of
ideas
 SWOT Analysis
 Clear Articulation Of Objectives
 Cost reduction
 Productivity improvement
 Increase in capacity utilization
 Improvement in contribution margin
 Expansion into promising field
A clear articulation and prioritization of objectives
helps in channelizing the efforts of employees and
production them to think more imaginatively

Stimulating The Flow Of
Idea
 Fostering The Conducive Climate

Monitoring The Environment
 Firm must systematically monitor the
environment and access its competitive
abilities. For the purpose of monitoring,
the business environment may be divided
into six categories:-
 Economic sector
 Governmental sector
 Technological sector
 Socio-demographic sector
 Competition sector
 Supplier sector

Economic Sector
 State Of The Economy
 Overall Rate Of growth
 Growth rate of primary , secondary
and tertiary sector
 Cyclical fluctuation
 Linkage with the world economy
 Trade surplus / deficit
 Balance payment situation

Governmental Sector
 Industry Policy
 Government Plans and Projects
 Tax Framework
 Subsidies, incentives and
concessions
 Import and export policies
 Financing norms
 Lending conditions of financial
institutions and commercial banks

Technological Sector
 Emergence of new technologies
 Access to technical know how,
foreign as well as indigenous
 Receptiveness on the part of
industries

Socio-Demographic
Sector
 Population trends
 Age shift in population
 Income distribution
 Education profile
 Employment Of Women
 Attitudes toward consumption and
investment

Competition Sector
 Number of firms in the industry and
the market share of the top few ( four
or few)
 Degree of homogeneity and
differentiation among products
 Entry barrier
 Comparison with substitutes in term
of quality, price, appeal and
functional performance
 Marketing policies and practices

Supplier Sectors
 Availability and cost of raw materials
and sub assemblies
 Availability and cost of energy
 Availability and cost of money

Corporate Appraisal
 A realistic appraisal of corporate strength
and weakness is essential for identifying
investment opportunities which can be
profitably exploited. The broad and
important aspects are:-
 Marketing and Distribution
 Production and Operations
 Research and Development
 Corporate Resource And Personnel
 Finance and Accounting

Marketing and
Distribution
 Market Image
 Product line
 Market Share
 Distribution network
 Customer Loyalty
 Marketing and distribution

Production And
Operations
 Condition and Capacity of plant and
machinery
 Availability of raw materials, sub-
assemblies and powers
 Degree of vertical integration
 Location advantage
 Cost structure

Research and
Development
 Research capabilities of the firm
 Track record of new product
development
 Laboratories and testing facilities
 Coordination between research and
operations

Corporate Resources and
Personnel
 Corporate Image
 Clout with governmental and
regulatory agencies
 Dynamism of top management
 Competence and commitment of
employees
 State of industrial relations

Finance And Accounting
 Financial leverage and borrowing
capacity
 Cost of Capital
 Tax Situation
 Relations with shareholders and
creditors
 Accounting and control system
 Cash flow and liquidity

Profit Potential Of Industries:
Porter Model
Profit potential of an industry depends
on the combined strength of the
following five basic competitive
forces:-
 Threats of new entrants
 Rivalry among existing firms
 Pressure from substitute product
 Bargaining power of buyer
 Bargaining power of seller

Forces Driving Industry
Competition
Potential
Entrants
Supplier
s
Substitute
s
Buyers
THE
INDUSTRY
Rivalry
Among
Existing
Firms
Threats Of
New
EntrantsBargainin
g Power
Of
Suppliers
Bargaining
Power Of
BuyersThreats
Of
Substitut
e
Products

Threats Of New Entrants
 New entrants add capacity, inflate costs,
push prices down, and reduce
profitability. If an industry faces the threat
of new entrant, its profit potential would
be limited. The threats from new entrants
is low if the entry barrier confer an
advantage existing firm and deter new
entrants.

Threats Of New Entrants
 The new entrants have to invests substantial
resources to enter the industry
 Economies of scale are enjoyed by the
industry
 Existing firms control the distribution
channels, benefit from product
differentiation in the form of brand image
and customer loyalty
 Switching costs- these are essentially one
time costs of switching from the products of
one supplier to another – are high
 The government policy limits or even
prevents new entrants

Rivalry Between Existing
Firms Firms in an industry compete on the basis of
price, quality, promotion, service, warranties
and so on. If the rivalry between the firms in
an industry is strong, competitive moves
and countermoves dampen the average
profitability of the industry. The intensity of
rivalry in an industry tends to be high when:-

Rivalry Between Existing
Firms
 The number of competitors in the
industry is large
 At least a few firms are relatively
balanced and capable of engaging in
a sustained competitive battle
 The industry growth is sluggish,
prodding firms

Generation and Screening of Project Ideas

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