GENERATIO

N&
SCREENING
OF
PROJECT
IDEA
 Generation & Screening Of Ideas

❑ IDEA GENERATION is the process of creating,

developing and communicating abstract, concrete
or visual ideas. It means coming with many ideas
in a group discussion, selecting the best ideas,
working to create a plan to implement the idea.
❑ Before making investment in a project, the
entrepreneur must undertake a detailed study to
ensure that the project is viable. Such study is
 FEASIBILITY STUDY

❑ Feasibility study is the initial design stage of any

project, which brings together the elements of
knowledge that indicate if a project is possible or not.
❑ This study includes an estimate of the level of
expertise required for a project and who can provide it,
qualitative and quantitative assessments of other
essential resources, identification of critical
points, a general timetable, and general cost
 Tasks Involved in the generation &
screening of Product Idea
a) GENERATION OF IDEA
Most of the project idea involve combining existing field
of technology or offerings variants of present product &
services. A panel is formed for the purpose of identifying
investment opportunities. It involves the following tasks
which must be carried out in order to come with a
creative idea:-
a) SWOT analysis b) Determination of
SWOT Analysis:- SWOT is an acronym for strengths,
weaknesses, opportunities and threats. SWOT analysis
represents a conscious, deliberate and effort by an
organisation to identify opportunities that can be profitably
exploited by it.
Determination of objectives:- The operational objectives
of a firm may be one or more of following:
a)Cost Reduction b) Productivity improvement
c)Increase in capacity utilisation
d)Improvement in contribution margin e) Expansion into
promising fields
 B) SCOUNTING FOR PROJECT IDEAS

Various sources to look for good project ideas include:

a)Trade fairs and exhibitions b)Studying government
plans and policies c) Suggestion of financial institutions
and development agencies d) Investigating local
materials and resources
e) Studying the consumption pattern of people abroad f)
Stimulating creativity to produce
g) Analysing social and economic trends h) Analysing
 SOURCES OF IDEA GENERATION

a) Customers: All marketing activities focus attention on

customer needs& wants. It has been observed in various
research study that customer often and gives very good
suggestion
b) Competitors: All marketing companies keep a close
watch on development carried out by competition & these
are collected by their own sales force. A company should
monitor such development activities of competitors.
c) Company Management: Many times, owners and
d) Distribution and channel members: Distribution
Personnel who are in touch with customer often give
excellent suggestion for new product development. Good
marketing companies generally keep regular contact
dealers not only defined various information from their
existing but also find information about the new product.

e) Own Sales Force: The company’s sales force who is

actually working but have failed in selling but are in touch
with dealers and consumers know about shortcomings of
their products& they can often give good ideas for new
product development.
 f) Scientist& Consultant: New innovative ideas have
been developed through basic& industrial research
centres. The pharmacy industry has been greatly helped
by scientific programmes carried out in various research
laboratories.
 C. Monitoring the Environment

The firm must systematically monitor the environment and

assess its competitive abilities. This section looks at the
monitoring of environment and the following at corporate
abilities. This purpose of monitoring the business
environment may be divided into six broad sectors.
 Economic
sector
Supplies Government
sector sector

Environment

Competition Socio
sector demographic
sector
Technological
sector
 MONITORING OF ENVIRONMENT

An organization should systematically monitor the environment

and assess its competitive abilities in order to profitably exploit
opportunities present in the environment. The key sectors of the
environment that are to be studied are:-
a) Economic Sector-
I. State of economy
II. Overall rate of growth
III. Trade surplus/ Deficit
IV. Growth of primary, secondary& tertiary sectors
 b) Government Sector-
I. Industrial Policy
II. Government programmes and projects
III. Tax Framework
IV. Subsidies, incentives, concessions
V. Import and export policies
c) Technological Sector-
I. State of technology
II. Emergence of new technology
III. Receptiveness of the industry
IV. Access to technical know how
 d) Socio-demographic Sector-
I. Population trends
II. Income distribution
III. Education Profile
IV. Employment of women
V. Attitude towards consumption and investment
e) Competition Sector-
I. No. of firms and their market share
II. Degree of homogeneity and production
differentiation
III. Marketing policies and prices
IV. Comparison with substitutes in terms of
 D) CORPORATE APPRAISAL
A corporate appraisal is examining the operations of an entire company
from different angles. It is the measurement of the readiness of that
corporation’s internal culture to deal with external environment and
changes. The important aspects that are to be considered are:
a)Market and Distribution-
I. Market Image& Market share
II. Product line
III. Marketing and Distribution Cost
IV. Distribution Network
 b) Production and Operations-
I. Condition and capacity of plant and machinery
II. Availability of raw materials and power
III. Degree of vertical integration
IV. Locational advantage
V. Cost structure- Fixed and variable costs
c) Research and Development-
I. Research capabilities of a firm
II. Track record of new product developments
III. Laboratories and testing facilities
IV. Coordination between research and other
departments of the organisation
 E) TOOLS FOR IDENTIFYING
INVESTMENT OPPORTUNITIES
a) Porter 5 forces Model- It helps in
analysing profit potential of an industry
depending upon strength of:
I. Threat of new entrants
II. Rivalry amongst existing companies
III. Bargaining power of buyer
IV. Bargaining power of suppliers
V. Pressure from substitute products
• b) Life Cycle Approach- There are four
stages a product goes through during his life
cycle:
• Pioneering Stage- In this stage the
technology and product is new, there is
high competition and very few entrants
survive this stage.
• Rapid Growth Stage- This stage
witnesses a significant expansion of sales
and profit.
• Maturity Stage- It marks developed
industries with mature product and
already growth rate.
• Decline Stage- Due to introduction of
new products and changes in customer
preference the industry incurs a decline in
 F) PRELIMINARY SCREENING
It refers to elimination of project ideas which are not
promising. The factors to be considered while screening
for ideas are:-
▪ Compatibility with the promoter- The idea must be
consistent with the interest, personality and resources
of entrepreneur.
▪ Consistency with government priorities- The idea
must be feasible with national goals and government
regulations.
▪ Availability of inputs- Availability of power, raw
material, capital requirements, technology.
▪ Adequacy of Markets- Growth in market, prospect of
 • Compatibility with the promoters

The idea must be compatible with the interest , personality ,and

resources of the entrepreneur.
According to Murphy , a real opportunity has three characteristic :
1. It fits the personality of entrepreneur- it squares with his
abilities ,training and productivity.
2. It is accessible to him
3. It offers him the prospect of rapid growth and high returns on
invested capital
• Consistency with Government Priorities
The project idea must be feasible given the national goals and
government regulatory framework . The questions to be raised in the
context are:
Is the project consistent with the national goals and priorities?
Are there any environment effects contrary to government regulations?
Can foreign exchange requirement of the foreign exchange will be
easily accommodated ?
Will there be any difficulty in obtaining the license for the project ?
 • Availability of Inputs
The resources and the inputs required for the projects must be
reasonably assured. To assess this following questions need to be
answered:
1. Are the capital requirement of the project withing the
manageable limits ?
2. Can the technical know-how required for the project be
obtained?
3. Are the raw material required for the project available
domestically at a reasonable cost ? If the raw material has to be
imported what will be problems ?
4. Is power supply for the project is reasonably obtained from
external and captive powers ?
 • Adequacy of Market
It refers to the;
oGrowth in the market
oProspectus of adequate sales
oReasonable return on the Investment

Things that must be examined are;

1. Competitors and their market share
2. Export market
3. Barrier to the entry of new units
4. Sales and distribution system
5. Increase in consumption
 • Reasonableness of cost
The project must be able to make reasonable return on
investment.

Things that must be examined are;

1. Cost of material input
2. Cost of labor
3. Factory overhead
4. Selling and Distribution Cost
5. Service cost
 • Acceptability of risk level

The desirability of project also depends upon risks involved

in executing it. Things that must be examined are;

oTechnological Change
oCompetition from substitutes
oCompetition from imports
oShifts in consumer preference
oGovernment control over price distribution
 G) PROJECT RATING INDEX
It is a tool used for evaluating large number of project
ideas. It helps in streamlining the process of preliminary
screening. Hence a preliminary evaluation may be
converted in project rating index.
Steps to evaluate Project Rating Index:
a) Identifying the factors relevant for project rating
b) Assigning weights to these factors according to their
relative importance
c) Rate the project proposal on various factors using
suitable scale.
 H. Feasibility Analysis
• Market Analysis
• Technical Analysis
• Financial Analysis
• Economic Analysis
• Ecological Analysis