Identification of investment opportunities Idea generation Opportunity assessment Environment assessment

SCOUTING FOR PROJECT IDEAS

First know the regulatory framework to know--What is possible ? What incentives are available ? What controls are applicable ? Alternatively- select your product/ service idea; Then check the various rules/ regulations applicable to it !

contd

Analyse the performance of existing businesses Examine the inputs & outputs of industries Examine exports & imports for markets or substitutes Study plan outlays & governmental guidelines Investigate local skills/ materials/ resources Analyse economic & social trends Study new technological developments Draw ideas from consumption trends/ behaviour Explore possibility of reviving sick units Identify unfulfilled psychological needs Attend trade fairs/ exhibitions/ business meetings

Stimulate creativity & innovation

New ideas can be generated by adopting following approach to BUSINESS IDEAS

reversal

modification

reduction

aDAptaTIon

combination

Preliminary screening

Important issues in selection

PRODUCT / SERVICE MARKET TECHNOLOGY EQUIPMENT SCALE OF PRODUCTION LOCATION

GOVT. REGULATORY FRAMEWORK

SCHEDULING TIMING

COMMON CAUSES OF WRONG SELECTION/ FAILURE

LACK OF OBJECTIVE EVALUATION SUPERFICIAL KNOWLEDGE OF MARKET LIMITED UNDERSTANDING OF TECHNICAL REQUIREMENTS POOR FINANCIAL UNDERSTANDING ABSENCE OF UNIQUENESS IGNORANCE OF LEGAL ISSUES INVESTMENT At startup/ based on industry/ adequacy to cover fixed costs

GROWTH OF SALES & SUSTAINIBILITY

NEW VENTURE IDEA CHECKLIST

Basic feasibility of the idea Competitive advantage of the idea/ venture Understanding the market

Marketting issues
Production/ operational issues Criticality of staff Financing the venture

Elements of Industry-the 5 forces model ( Michael E Porter)

Barriers to entry Economies of scale Experience & learning effects Product differentiation Brand identification Switching costs Access to distribution channels Behaviourial entry barriers Bargaining power New entrants Rivalry among competitors No. of firms in Industry Industry growth rate Excess capacity

threat

Industry competitors

suppliers

Intensity of rivalry

Bargaining power

buyers

Power of suppliers No. of imp. Suppliers Importance of materials Being supplied

threat

Power of buyers No of important buyers Importance of product for them

substitutes Availability of substitutes Availability of close substitutes Their Value price ratio

Guide to using the 5 forces model for industry analysis ( Michael E Porter ) Barriers to entry. Can they be resolved ? New entrants Other new entrants- size/ number/ growth/ customer base etc. Probable strategies of entrants. Its influence on Industry. When will they enter our markets. Suppliers Position of Suppliers to Buyers ? Their number/ size/ market share/ domination/ Share of our mfg. cost/ chances of our backward-or their- forward integration? Bargaining power. Prospect of switching between suppliers. What firms are our major competitors and their basic features ? Their relative position in the industry? Competitive advantage of each- strategies of each competitor? Nature of competition- open/ secret/ limited or total? How is product differentiation achieved. How competitive is industry ?

Industry competitors

buyers

Who are customers of this industry? Their concentration? Their rankings ? Rate of growth in demand- segmentwise? Potential for creating new markets ? Switching costs? Sensitivity of each segment to prices of each service/product ? Threat of backward integration by our buyers ? Customers relative bargaining power? Substitutes for our products/ services? Impact of substitutes on customers costs/ quality/ production time etc.? How quickly can they penetrate our customers market? Which players in the industry can consider substitutes as an opportunity For diversification ?

substitutes

Environmental assessment in for project selection

Sustainable competitive advantage Environment for new venture

Within the industry Threat of new ventures Power of suppliers Power of buyers Product substitutes New business models

Outside the industry Social & cultural Economic Legal/ Regulatory Technology Global Political demographic

Competitive analysis
What drives the competitor FUTURE GOALS What competitor is doing & can do CURRENT STRATEGY How the business is currently competing

At all levels of the mgt. & in Multiple dimensions

Competitors response profile Is he satisfied with the current position ? What likely strategy shifts will the competitor make ? Where is the competitor vulnerable ? What will provide the greatest & most effective retaliation by The competitor ?

Assumptions Held about itself Held about the industry?

Capabilities In strength In weaknesses

Source- Michael e porter

Competitive profile analysis

Competitive factor Product uniqueness Relative prod. Quality Price Service Availability Reputation Location Advtg. Effectiveness Design, variety, capacity Raw material cost Financial condition

Co A

CO B

CO C

Your CO

Evaluation of the feasibility of Product / Service

Asking the right questions Profile analysis- Combination of many variables influences the business Feasibility criteria approach TECHNICAL FEASIBILITY MARKET FEASIBILITY FINANCIAL FEASIBILITY ORGANISATIONAL CAPABILITY ANALYSIS COMPETITIVE ANALYSIS