PROJECT IDENTIFICATION

PROJECT IDENTIFICATION

SCOUTING AND SCREENING OF PROJECT IDEAS

An entrepreneur has an infinitely wide choice with respect to his project in different
dimensions such as product/service, market, technology, equipment, scale of production, time
phasing and location. Hence, the identification of investment opportunities (projects) calls for
understanding the environment in which one operates, sensitivity to emerging investments
possibilities, imaginative analysis of a variety of factors and also chance luck.
PROJECT IDEAS
It is the first and foremost task of an entrepreneur to find out suitable business which is
feasible and promising and which merit further examination and appraisal. Therefore, he has
to first search for a sound of workable business idea and give a practical shape to his idea.
While doing so, the entrepreneur has to tackle the various problems from time to time to
achiever the ultimate success. Since the good project ideas are elusive, a variety of sources
should be trapped to stimulate the generation of project ideas.

SOURCES OF PROJECT IDEAS

The various sources from which the project idea can be generated are explained below:

Analysis the performance of existing industries

A study of existing industries in terms of their profitability and capacity utilization is helpful.
The analysis of profitability and break even level of various industries indicates 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.
Examine the inputs and outputs of industries
An analysis of the inputs required for various industries may throw up project ideas.
Opportunities exist when (I) materials purchased parts, or supplies are presently being
procured from different sources with attendant time lag and transportation costs and (ii)
several firms produce internally some components/parts which can be supplied at a lower cost
by a single manufactures who can enjoy economies of scale.
Examine imports and 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 advantages for
several reasonsi)It improves the balances of payments situations(ii)It provides market for
supporting industries and services(iii)It generates employment
Plan outlays and government guidelines
The governments play a very important role in our economy. Its proposed outlay in different
sector provides useful pointers toward investment opportunities. They indicate the potential
demand for goods and service required by different sectors.
Suggestions of financial institutions and developmental agencies:
In a bid to promote development of industries in their respective states, state financial
corporations state industrial development corporations and other developmental bodies
conduct studies, prepare feasibility reports and offer suggestions to potential entrepreneur. The
suggestions of these bodies are helpful in identifying promising projects.
Investigate local materials and resources
A search for project ideas may begin with an investigation into local resources and skills,
various ways of adding value to locally available materials may be examined. Similarly, the
skills of local artisans may suggest products thay may be profitably produced and marketed.
Analysing economic and social trends
A study of economic and social trends is helpful in projecting demand for various goods and
services. Changing economic conditions provide new business opportunities. A great
awareness of the value of time is dawning on the public. Hence the demand for time saving
products like prepared food items, ovens and powered vehicles has been increasing.
Explore the possibility of reviving sick units
Industrial sickness is out of control in the country. There are over 20,000 units which
have been characterized as sick. These units are either closed or face the prospect of closure.
A significant proportion of sick units, however, can be nursed back to health by sound
management, infusion of further capital and provision of complementary inputs.
Visit to trade fairs
Attending the National and International trade fairs provides an excellent opportunity to know
about new products and new development.
The above said sources of project ideas may be generated by the Government
agencies, credit institutions, non-governmental organizations and also by public.
PURPOSE AND NEED FOR PROJECT IDENTIFICATION
The entire economic management planning is based on two fundamental assumptions. i.e. a)
limited means and b) unlimited ends. A planner has to select few important needs to cut it into
size of his/her means. This may be treated as fixing the priority is called identification of
project.. The essential conditions which should be taken into consideration for identification
and selection of production projects are as follows:
Project should be in conformity with the economic needs of the area.
It should take into account the depriving factors which might have adverse impact.
STEPS IN PROJECT IDENTIFICATION

Project ideas are like other ideas which dont take concrete shape immediately. There
are several stages of making propositions their considerations and scrutiny for their
soundness.
An idea is first born, it is under incubation for some time and subsequently is begins to take
some definite shape. The project ideas to develop take almost the same course. This project
identification may be broadly divided into four stages, viz.,
Conceptual stage
A number of project ideas may be generated either by those officials or non-officials and
entrepreneurs individually or collectively who are conversant with the area. In this context,
one has to examine the potentialities of development and the problems, needs and aspirations
of the people of the concerned area.
Screening stage
In the second stage project ideas generated above are screened n a preliminary exercise to
weed out the bad or unviable ides. All project ideas would not pass the screening test. ideas
may be imaginary to warrant any serious consideration.
SCREENING PROJECT IDEAS
After gathering the project ides from the various sources as aforesaid, it is essential to
eliminate ideas which prima facie are not promising. This process f eliminating the irrelevant
and unviable ideas is called screening of project ideas. It can be done with the help of testing
the following conditions of the propositions.
a.) Compatibility with the promoter
b.) Consistency with governmental priorities
c.) Availability of inputs
d.) Adequacy of market
e.) Reasonableness of cost
f.) Acceptability of risk level etc
The project idea must be compatible with interest personality and resources of the
entrepreneur. It should be accessible to him and also it offers him the prospects of rapid
growth and high return on invested capital. The project idea must satisfy or go along with the
governmental priorities, National goals. The resources and inputs required for the project must
be reasonably assured. Identifying the adequacy of market is the key factor to select, the
viable project idea.
Reasonableness of cost is another factor to screen the project ideas. The cost structure of the
proposed project must enable it to realize and acceptable profit with a competitive price.
Acceptability of risk level is another factor which helps to screen the project ideas and hence
determine the desirability of a project.
PROJECT RATING INDEX
When a firm evaluates a large number of project ideas regularly; it may be helpful to
streamline the process of preliminary screening. For this purpose, a preliminary evaluation
may be translated into project rating index
Identify factors relevant for project rating
Assign weights to these factors
Rate the project proposal n various factors ,using a suitable rating scale
For each factor, multiply the factor rating with the factor weight to get the factor score
Add all the factors scores to get the overall project rating

PROJECT IDENTIFICATION FOR AN EXISTING COMPANY

Existing companies essentially large scale company form of organizations are continuously
developing various projects for their developmental purposes. While doing so, the existing
company has to make a more intensive analysis of its resources and environment and conceive
of projects on the basis of its existing activities. An existing company which seeks to identify
new project opportunities should undertake a SWOT analysis, It is an acronym law of
strengths and weakness and opportunities and threats. This analysis evaluate all these four
characteristics of existing company.
A brief summary of the points required for SWOT analysis is given below:
Availability of internal financial reasons for new projects after taking into account the need for
replacement expenditure, increase in working capital, repayments of borrowings and dividend
payments.
Capability of raising external financial resources
Availability of production facilities
Technological capabilities of the company
Availability of different sources of raw materials and its utilization
Availibility of infrastructural facilities
Cost structure and profit margins of the company
Distribution network of the company
Market share of the company
Capability of top management of the company
State of industrial relations in the company
Impact of corporate laws on the growth of the company .
Likely changes in the governmental policies
Possibility of evolving new technology and its impact on the cost structure of the company
Existence and severity of competition
Changes in the customers preferences, tests etc.