Project Planning, Analysis and Management

Market viability What is market viability? The aim of this study is to measure the market and calculate as to when the project will get enough market to achieve break-even. After break-even, what is the growth factor? Whether the to-be captured market will enable the project to be run on profitable lines and service the capital and debt? If only the break-even period is reasonable and further sustainability of the market is assured, market viability can be ensured. This can be done by making detailed study of the proposed market, getting data and analysing the same and arriving at conclusions.

Project Planning, Analysis and Management Market viability An exercise “Reliance Fresh” plans a project to extend its operations in Salem. You are asked to submit a feasibility report on “market viability” of the proposed project, as a marketing team leader. Please write down your plan of action as to how will you proceed.

Project Planning, Analysis and Management Market viability Market study will involve getting details on the following: -- nature and size of population of the targeted market -- income level of the targeted population -- level of demand and its elasticity -- sources of supply -- nature and strength of competitors -- any weakness of competitors which can be taken advantage of -- what should be the USP of the company -- availability of logistics -- distribution pattern liked by the target population -- preferred payment pattern by the target population What is the first step?

Project Planning, Analysis and Management Market viability The first step is to make a situational analysis. What it is? It involves the following: --specification of objectives --getting primary information and secondary information -- secondary information is one which is already available for study popularly known as “dossier” -- primary information is one which is gathered specifically for a defined purpose --conduct of market survey --characterization of the market --demand forecasting --market planning

Project Planning, Analysis and Management Market viability General sources of secondary information: Census of India—information on population National Sample Survey Report– released by Cabinet Secretariat, GOI Plan Reports—issued by Planning Commission Statistical Abstract of Indian Union—Central Statistical Organisation India year Book- Ministry of Information and Broadcasting Statistical Year Book– United Nations Economic Survey- Ministry of Finance Guidelines to Industries– Ministry of Industries

Project Planning, Analysis and Management Market viability Evaluation of secondary information: 1.Who gathered the information? Purpose? 2.When was it gathered and published? 3.How representative was the period for which information gathered? 4.How was the sample chosen? 5.How representative was the sample? 6.How accurately the information was processed? What can be the limitations of secondary information?

Project Planning, Analysis and Management Market viability Secondary information should always be substituted with primary Information. It is done through a a market survey specific to the project. Meeting and eliciting information from the following is essential: 1.Users 2.Competitors 3.Suppliers 4.Regulators Market survey can be 1.Census survey 2.Sample survey What are the information generally sought in market survey?

Project Planning, Analysis and Management Market viability The following information are sought: 1.Total demand and rate of its growth 2.Demand in different segments of the market 3.Income and price elasticity of demand 4.Motives of buying 5.Purchasing plans and intentions 6.Satisfaction with existing products 7. Unsatisfied needs 8. Attitude towards various products 9. Distributive trade practices and preferences 10.Socio economic characteristics of buyers What are the various steps involved in sample survey?

Project Planning, Analysis and Management Market viability Steps involved in sample survey: 1.Define the target population 2.Select sampling scheme and size. Different schemes are available like random sample, cluster sample etc. Sampling size is also important. The natural law is “larger the size larger is the reliability of data”. 3.Develop a questionnaire 4.Train the field investigators 5.Obtain information as per the questionnaire 6.Tabulate, analyse, interpret the data and then decide What are the general characteristics of markets?

Project Planning, Analysis and Management Market viability Based upon the survey, the market for the proposed project may show the following features: 1.Effective demand in the past/ present 2.Break down of demand 3.Price 4.Methods of distribution and sales promotion 5.Consumers 6.Supply and competition 7.Government policy Exercise Pepsi, Coca Cola, Mc Donald while entering Indian market what are the areas above, they would have focused? Please write them in order of priority Which type of sampling they would have chosen?

Project Planning, Analysis and Management Market viability Demand forecasting After making the survey, demand forecasting is made for the product. Wide varieties of methods are available. They all can be classified under three major heads: 1.Qualitative methods These methods rely mainly on judgmental expertise. Translating qualitative inputs in to quantitative estimates 2.Time series projection methods These methods forecast future behaviour based upon the past experience 3.Casual methods More analytical in nature. Makes forecasts based upon cause and effect method. Every method has limitations also

Project Planning, Analysis and Management Market viability Marketing Plan and action programme A good marketing plan involves the following: Current market situation -- market situation– feel, orientation of the customers -- competitive situation -- distribution situation Opportunity and issue analysis SWOT Objectives Then set a target. It can be “break-even first” or “stabilsation first” Marketing strategy It considers many things as -- how does the company position itself in the minds of the consumer -- product line -- price– how to price the product ? Which segment to target first? -- distribution -- sales force -- sales promotion– direct contact or advertising?

Project Planning, Analysis and Management Technical feasibility Even though, the finance manager is not directly connected with studying market viability or technical feasibility, he has to understand the basic issues, to ensure the total viability of the project. This study is done as under: Manufacturing process or technology For many products or services, often more than one manufacturing process or technology are available. Can you think of some such products or services? Fertiliser– feed stock can be naphtha or coal Cement– dry process or wet process Automobile– can be run on petrol, diesel or gas Rail- can be run on stem, diesel, electricity Electricity– water, solar, coal, nuclear So, the first task is to choose a particular process or technology.

Project Planning, Analysis and Management Technical feasibility Choice of technology will depend upon the following factors: 1.Plant capacity 2.Main inputs 3.Investment outlay and production cost 4.Use by other units 5.Product mix 6.Latest developments 7.Ease of absorption

Project Planning, Analysis and Management Technical feasibility Technical arrangements Technical know-how and collaboration Nature of support to be provided by collaborators Continuing benefit of R&D by the collaborator Process and performance guarantees Price of technology as one time fee and payment of royalty if any Assistance to be provided by the collaborator and restrictions if any The level of equity participation and management control Arrangements in case either party wants to change ownership Termination agreement or legal remedies in case either party fails to perform its obligations Approach in case of “force majeure” situations

Project Planning, Analysis and Management Technical feasibility Material inputs and utilities This is an important area which is related to location, technology and equipments of the project Materials can be classified under four heads as under: 1.Raw materials 2.Processed industrial materials 3.Auxiliary materials and factory supplies 4.Utilities Raw materials can again be 1.Agricultural products 2.Mineral products 3.Livestock and forest products 4.Marine products

Project Planning, Analysis and Management Technical feasibility Product mix What is product mix? If flexibility is available in product mix, it helps the company to make changes in product suited to changes in the market and keep growing. Plant capacity It refers to the number or volume of production that can be achieved during a given time. This depends on the following: Technological requirement Inputs availability Investment cost Market conditions Financial resources of the company Government policy

Project Planning, Analysis and Management Technical feasibility Location and site Proximity to raw materials and market Availability of infrastructure Labour situation Government policies Climatic conditions General living conditions Proximity to ancillary units Ease in coping with pollution control

Project Planning, Analysis and Management Technical feasibility Other aspects are: Machineries and equipments Structures and civil works Environmental aspects– emissions, pollution, displacement etc Project charts and lay outs Project implementation schedule BAR, PERT, CPM charts. PERT and CPM are network techniques which can handle a large number of activities, inter linkages, resource constraints, probability estimates and cost time trade offs. Need for considering alternatives– what is its importance?

Project Planning, Analysis and Management Technical feasibility Need for considering alternatives This is a very important aspect in project planning. The project must have alternate ways for transforming the project idea in to reality. -- Nature of project– mainly in vertically integrated projects -- Production process– alternate processes for the same product -- Product quality– varying depending upon the market need -- Scale of operation and time phasing of installed capacity -- Location and size