PROJECT IDENTIFICATION AND FORMULATION

HOW TO START A NEW VENTURE Idea generation Primary screening or pre-feasibility study Project feasibility or detailed feasibility study Support study Detailed project report (DPR) Design or planning Implementation or execution Termination of project

Idea generation or project identification Support Study Preliminary screening or pre feasibility study Project feasibility or feasibility study Market & demand Analysis Technical Analysis Financial Analysis Social cost benefit Analysis Environmental & risk analysis Detailed project reporter formal approval from sponsors Planning, organizing & scheduling of project activities Direction & controlling of activities Termination of project (commissioning)

IDEA GENERATION OR IDENTIFICATION OF INVESTMENT OPPORTUNITIES Idea generation is the process of grouping logical thoughts based on some factors.

IMPORTANCE OF IDEA GENERATION Basis for other steps in completing steps. Important for continuous growth of organization. Survival in the competitive market. Contribution towards development of society.

SOURCES OF IDEA GENERATION Performance of existing industry Examining the inputs and outputs of various industries Review of imports and exports Availability of cheap materials & labor locally Price trend, to find demand – supply gap Government guidelines Analysis of economic and social trends Study of new technological developments others

PRELIMINARY SCREENING OR PRE-FEASIBILITY STUDY Preliminary screening is done with a view to avoid unnecessary cost and efforts in detailed study, if idea is not looking worthwhile in first instance DEFINITION : Preliminary screening can be defined as a series of steps to know whether or not a complete detailed feasibility study should be made.

OBJECTIVES OF PRELIMINARY SCREENING To determine whether project (idea) is promising business opportunity or not. Whether it justified a detailed analysis or not To find out any critical aspect on which success or failure depends To formulate a plan for detailed feasibility study

ASPECTS OR AREAS OF PRELIMINARY SCREENING Acceptable risk level Consistency with government priorities Availability of inputs Adequacy of market Reasonableness of the costs Compatibility with promoters

SUPPORT STUDY Support study can be defined as – An in-depth investigation into any one or a couple of critical aspects (areas) of a project, to help the feasibility study. Critical aspect here means those areas whose success or failure decides the success of failure of business or project.

OBJECTIVES OF PROJECT FEASIBILITY STUDY It guarantees the success of Project It works as basic terms of reference for Project It describes the nature and complexity of Project It gives an idea about investment in Project It also provides us the possible future difficulties It gives an idea about economic and social benefits

Pre-Feasibility Study Difference between Pre-Feasibility Study or Project or Detailed Feasibility Study Pre-Feasibility Study Feasibility Study Objective To determine whether or not the Project idea needs further investigation To determine the true profitability of the Project and selecting the Project. Scope Over-view study Detailed study Type of Data Secondary Data Primary Data Time involved Low High Accuracy Cost involved

Components of Project of Detailed Feasibility study Market and Demand analysis Technical analysis Financial analysis Social Cost-Benefit analysis Environmental and risk analysis

Detailed Project Report (DPR) Meaning: “Doing project feasibility is not the end of Project formulation stage. It also includes documentation of it, which is known as Detailed Project Report.”

Definition: “A formal written document containing the process of Project formulation and briefing the Project scope”

Objectives: It work as formal communication to Project Promoters for their approval. It also fulfills the need of Project Report to be provided to the financial institutions/banks It can also be submitted as Project Reports to Govt. Departments for necessary approval.

Format of DPR General information about the Project Background and experience of the Project Promoters Details and working of already owned businesses. Details of the proposed Projects Schedule of implementation Project costs Means of financing the Project Marketing and selling arrangements Profitability and cash-flow estimates Mode of payment of term-loans Government Approvals.

PROJECT MARKET & DEMAND

Market Demand Analysis Objective Specification Collection of Data Market Survey Market Description Demand Forecasting MARKET PLANNING

Market Survey “Market Survey is a technique that is aimed at gathering all possible information (primary data) by conducting interviews.”

Steps under Market Survey Defining the Target Market Selecting the Sample Developing the Questionnaire Training the Surveyors Recording the Information Interpreting the Information

Market Descriptions Competition in Market Study of Market Segments Price Methods of Distribution Sales Promotion Consumers Interest

Demand Forecasting “Demand Forecasting is the art of predicting demand for a product or a service at some future date on the basis of certain present and past behaviour patterns of some related events.”

Characteristics of a Good Demand Forecasting Accuracy Simplicity Economy Timeliness Availability

Methods of Demand Forecasting Survey of buyer’s intentions Collective opinion method Expert opinion method Controlled experiments Study of general economic environment

Statistical Methods Trend Projection Method Graphical Method Regression Analysis

Market Planning This steps under Market and Demand Analysis is not related to actual analysis, but related to Market plans of new firm (if idea under consideration is selected). Under this step, four P’s of Marketing viz Product, Price, Place and Promotion should be well designed to achieve the expected level of Market Penetration.