1. Generation And Screening Of
Project Ideas

2. 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

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

4. 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

5. Stimulating The Flow Of Idea
• Fostering The Conducive Climate

6. 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

7. 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

8. 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

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

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

11. 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

12. Supplier Sectors
• Availability and cost of raw materials and sub
assemblies
• Availability and cost of energy
• Availability and cost of money

13. 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

14. Marketing and Distribution
• Market Image
• Product line
• Market Share
• Distribution network
• Customer Loyalty
• Marketing and distribution

15. 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

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

17. 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

18. 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

19. 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

20. Forces Driving Industry Competition
Potential
Entrants
Threats Of
New Entrants
Bargaining
Power Of
THE INDUSTRY
Suppliers
Suppliers Rivalry Among Buyers
Existing Firms Bargaining
Power Of
Threats Of Buyers
Substitute
Products
Substitutes

21. 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.

22. 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

23. 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:-

24. 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