PREPARED BY BEATRICE WEKHE
INITIATION PHASE: PROJECT SELECTION
(i) Ideas gathering and screening
Generation of project ideas and stimulating the flow of project ideas can be through:
a) SWOT analysis
Strengths, weaknesses, opportunities and threats. SWOT analysis represents a conscious,
deliberate and systematic effort by an organization to identify opportunities that can be
profitably exploited by it. Periodic SWOT analysis facilitates the generation of ideas.
b) Clear articulation of objectives
The operational objectives of a firm may be one or more of the following:
(i)Cost reduction (ii) productivity improvement (iii) increase in capacity utilisation (iv)
improvement in contribution margin (v) expansion into promising fields.
c) Fostering a conducive climate
To tap the creativity of people and to handle their entrepreneurial urges, a conducive
organizational climate has- to be fostered.
d) Monitoring the environment to identify investment opportunities
An entrepreneur or firm must systematically monitor the environment and assess its
competitive abilities. A promising investment idea enables a firm or entrepreneur to exploit
opportunities in the environment by drawing on its competitive strengths.
i) economic sector
i)state of the economy (ii)overall rate of growth (iii)growth rate of primary, secondary and
tertiary sectors (iv)cyclical fluctuations (v)linkage with the world economy (vi)trade
surplus/deficits (vii)balance of payment situation.
ii) Governmental sector
(i)Industrial policy (ii) government programmes and projects (iii) tax framework (iv) subsidies,
incentives and concessions (v) Import and export policies (vi)Financing norms (vii)Lending
conditions of financial institutions and commercial banks.
1
,PREPARED BY BEATRICE WEKHE
iii) Technological sector
(i)Emergence of new technologies (ii)Access to technical know-how, foreign as well as
indigenous. (ii)Receptiveness on the part of the industry
iv) Socio-Demographic sector
(i)Population trends (ii)Age shifts in population (iii)Income distribution (iv)Educational profile
(v)Employment of women (vi)Attitudes towards consumption and investment
v) Competition sector
(i)Number of firms in the industry and the market share of the top few (four or five) (ii) Degree
of homogeneity and differentiation among products (iii)Entry barriers (iv)comparison with
substitutes in terms of quality, price, appeal and functional performance. (v)marketing policies
and practices
vi) Supplier sector
(i)Availability and cost of raw materials and sub-assemblies (ii) Availability and cost of energy
(iii)Availability and cost of money.
e) Corporate appraisal to identify investment opportunities
A realistic appraisal of corporate strengths and weaknesses is essential for identifying
investment opportunities which can be profitably exploited through:
i) Marketing and distribution
(i)Market image (ii) product line (iii) market share (iv) distribution network (v) customer
loyalty (vi) marketing and distribution costs.
ii) Production and operations
(i)Condition and capacity of plant and machinery (ii)Availability of raw materials, sub-
assemblies and power (iii) degree of vertical integration (iv) locational advantage (v) cost
structure
iii) Research and Development
(i)Research capabilities of the firm (ii)Track record of new product development
(iii)laboratories and testing facilities (iv) Coordination between research and operations.
2
, PREPARED BY BEATRICE WEKHE
iv) Corporate resources and personnel
(i)Corporate image (ii)clout with governmental and regulatory agencies (iii)dynamism of top
management (iv)competence and commitment of employees (v) state of industrial relations
v) Finance and accounting
(i)financial leverage and borrowing capacity (ii)cost of capital (iii)tax situation (iv)relations
with shareholders and creditors (v) accounting and control system (vi) cash flows and liquidity
SCOUTING FOR PROJECT IDEAS
The following ways can be used to scout for project ideas:
a) Analyse the performance of existing industries
A study of existing industries in terms of their profitability and capacity utilization can indicate
promising investment opportunities –opportunities which are profitable and relatively risk free.
An examination of capacity utilization of various industries provides information about the
potential for further investment.
b) Examine the inputs and outputs of various industries
An analysis of the inputs required for various industries may throw up project ideas.
Opportunities exist when;
(i)Materials purchased, or supplies are presently being procured from distant sources with
attendant time lag and transportation cost, and;
(ii)Several firms produce internally some components/parts which can be supplied at a lower
cost by a single manufacturer who can enjoy economies of scale. Similarly, a study of the
output of the existing industries may reveal opportunities for adding value through further
processing of the main outputs, by-products, as well as waste products.
c) Review imports as well as exports
An analysis of import statistics for a period of five to seven years is helpful in understanding
the trend of imports of various goods and the potential for import substitution. Indigenous
manufacture of goods currently imported is advantageous because (i) it generates employment
(ii)it improves the balance of payments situation. Likewise, an examination of export statistics
is useful in learning about the export possibilities of various products.
3
INITIATION PHASE: PROJECT SELECTION
(i) Ideas gathering and screening
Generation of project ideas and stimulating the flow of project ideas can be through:
a) SWOT analysis
Strengths, weaknesses, opportunities and threats. SWOT analysis represents a conscious,
deliberate and systematic effort by an organization to identify opportunities that can be
profitably exploited by it. Periodic SWOT analysis facilitates the generation of ideas.
b) Clear articulation of objectives
The operational objectives of a firm may be one or more of the following:
(i)Cost reduction (ii) productivity improvement (iii) increase in capacity utilisation (iv)
improvement in contribution margin (v) expansion into promising fields.
c) Fostering a conducive climate
To tap the creativity of people and to handle their entrepreneurial urges, a conducive
organizational climate has- to be fostered.
d) Monitoring the environment to identify investment opportunities
An entrepreneur or firm must systematically monitor the environment and assess its
competitive abilities. A promising investment idea enables a firm or entrepreneur to exploit
opportunities in the environment by drawing on its competitive strengths.
i) economic sector
i)state of the economy (ii)overall rate of growth (iii)growth rate of primary, secondary and
tertiary sectors (iv)cyclical fluctuations (v)linkage with the world economy (vi)trade
surplus/deficits (vii)balance of payment situation.
ii) Governmental sector
(i)Industrial policy (ii) government programmes and projects (iii) tax framework (iv) subsidies,
incentives and concessions (v) Import and export policies (vi)Financing norms (vii)Lending
conditions of financial institutions and commercial banks.
1
,PREPARED BY BEATRICE WEKHE
iii) Technological sector
(i)Emergence of new technologies (ii)Access to technical know-how, foreign as well as
indigenous. (ii)Receptiveness on the part of the industry
iv) Socio-Demographic sector
(i)Population trends (ii)Age shifts in population (iii)Income distribution (iv)Educational profile
(v)Employment of women (vi)Attitudes towards consumption and investment
v) Competition sector
(i)Number of firms in the industry and the market share of the top few (four or five) (ii) Degree
of homogeneity and differentiation among products (iii)Entry barriers (iv)comparison with
substitutes in terms of quality, price, appeal and functional performance. (v)marketing policies
and practices
vi) Supplier sector
(i)Availability and cost of raw materials and sub-assemblies (ii) Availability and cost of energy
(iii)Availability and cost of money.
e) Corporate appraisal to identify investment opportunities
A realistic appraisal of corporate strengths and weaknesses is essential for identifying
investment opportunities which can be profitably exploited through:
i) Marketing and distribution
(i)Market image (ii) product line (iii) market share (iv) distribution network (v) customer
loyalty (vi) marketing and distribution costs.
ii) Production and operations
(i)Condition and capacity of plant and machinery (ii)Availability of raw materials, sub-
assemblies and power (iii) degree of vertical integration (iv) locational advantage (v) cost
structure
iii) Research and Development
(i)Research capabilities of the firm (ii)Track record of new product development
(iii)laboratories and testing facilities (iv) Coordination between research and operations.
2
, PREPARED BY BEATRICE WEKHE
iv) Corporate resources and personnel
(i)Corporate image (ii)clout with governmental and regulatory agencies (iii)dynamism of top
management (iv)competence and commitment of employees (v) state of industrial relations
v) Finance and accounting
(i)financial leverage and borrowing capacity (ii)cost of capital (iii)tax situation (iv)relations
with shareholders and creditors (v) accounting and control system (vi) cash flows and liquidity
SCOUTING FOR PROJECT IDEAS
The following ways can be used to scout for project ideas:
a) Analyse the performance of existing industries
A study of existing industries in terms of their profitability and capacity utilization can indicate
promising investment opportunities –opportunities which are profitable and relatively risk free.
An examination of capacity utilization of various industries provides information about the
potential for further investment.
b) Examine the inputs and outputs of various industries
An analysis of the inputs required for various industries may throw up project ideas.
Opportunities exist when;
(i)Materials purchased, or supplies are presently being procured from distant sources with
attendant time lag and transportation cost, and;
(ii)Several firms produce internally some components/parts which can be supplied at a lower
cost by a single manufacturer who can enjoy economies of scale. Similarly, a study of the
output of the existing industries may reveal opportunities for adding value through further
processing of the main outputs, by-products, as well as waste products.
c) Review imports as well as exports
An analysis of import statistics for a period of five to seven years is helpful in understanding
the trend of imports of various goods and the potential for import substitution. Indigenous
manufacture of goods currently imported is advantageous because (i) it generates employment
(ii)it improves the balance of payments situation. Likewise, an examination of export statistics
is useful in learning about the export possibilities of various products.
3
