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Project Identification/ Screening of Project Ideas

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Project Identification/ Screening of Project

Ideas
Project Identification/ Screening of Project
Ideas (Tasks involved)
• Generation of project ideas
• Monitoring the environment
• Corporate appraisal
• Preliminary screening
• Project rating index
• Sources of NPV
• Entrepreneurial skills
Generation of Ideas

• SWOT Analysis
• Brainstorming
SWOT Analysis
Brainstorming
• Brainstorming is a group creativity technique by which
efforts are made to find a conclusion for a specific problem
by gathering a list of ideas spontaneously contributed by its
members. ... All ideas are noted down and those ideas are not
criticized and after brainstorming session the ideas are
evaluated.
Sources of Project Ideas
• Analysis of performance of existing industries
• Analysis of inputs and outputs of various industries
• Review imports and exports
• Review of five year plans and government policies
• Suggestions of financial institutions and development agencies
• Survey of local resources
• Analysis of economic and social trends
• New technological developments
• Emulating consumption patterns from abroad
• Exploring possibility of reviving sick units
• Analysis of unsatisfied needs of consumers
• Trade fairs
• Others
Monitoring the Environment
Economic Government Technological Socio-Demographic Competition
State of the Industrial Policy State of technology Population trends No of firms and
economy their market share
Overall rate of Tax Framework Emergence of new Income profile Entry barriers
growth technology
Macro-economic Subsidiaries, Technical know-how Education & Marketing policies
factors Concessions Employment details
Balance of Payment Import and Export Attitude towards Comparison with
Situation Policies consumption and substitute etc
investment etc.
Linkage with World Financing Norms
Economy
Growth of Primary,
Secondary, Tertiary
Corporate Appraisal
Market & Productions & Research & Corporate Finance &
Distribution Operations Development Resources and Accounting
Personnel
Market Image Availability of Research Corporate image Cost of capital
resources capabilities of firm
Market Share Capacity of plant & Track record of new Dynamism of Top Taxation
machinery product Management
development
Product Line Location & layout Laboratories & Industrial Relations Financial Leverage
testing facilities
Distribution Cost Structure-Fixed Competence & Cashflows &
Network & Variable commitment of Liquidity
employees
Customer Loyalty Accounting &
Control System
Preliminary Screening
• Compatibility with promoter
• Consistency with government regulations
• Availability of inputs
• Adequacy of markets
• Reasonableness of cost
• Acceptability of risk level
Changing technology
Project vulnerability through business cycles etc
Project Rating Index
• Identify the factors relevant for project rating
• Assign weight to these factors
• Rate the project proposal
• All factor scores are added to get the overall project rating index
• Cut off value is determined, project below this cut off value are
rejcted
Sources of Net Present Value
• Economies of scale
• Product differentiation
• Cost advantage
• Market reach
• Technological edge
• Government policy
Entrepreneurial Skills
• Willing to take risk
• Leader
• Able to exploit opportunities
• Rational decision maker

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