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GENERATION ANDSCREENING OF IDEAS

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3.6 Preliminary Expenses

Here, the suggestions made in the previoussections made the screening possible. A long

list of ideas are developed.C ompatibility with the promoter C onsistency with government priorities

Availability of input

Adequacy of marketReasonableness of cost

Acceptability of risk level

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Compatibility with the promoter

T he idea must be compatible with the interest,personality and resources of the entrepreneur

real opportunity must have followingcharacteristics:It fits the personality of the entrepreneur It is accessible to himIt offers him the prospect of rapid growth andhigh return on the invested capital

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Consistency with governmentpriorities

T he idea must be feasible to national goals andgovernment regulatory framework. T he

questions arise are:Is the project is consistent with national goal andpriorities?

Are there any governmental effects contrary to

governmental regulations?C an the foreign exchange requirements of theproject be easily accommodated?

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Availability of input

T he resources and inputs required for theproject must be reasonably assured such as:

Capital requirement?

Energy requirement?Material requirement?

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Adequacy of market

T he size of the present market must offer theprospect of adequate sales volume.

Total present domestic market

C ompetitors and their market sharesExport marketSales and distribution system

Projected increase in consumptionPatent protection

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Reasonableness of cost

T he cost of the proposed project must enable itto realize an acceptable profit with a price.Examination areas here are:

C ost of material inputLabor inputFactory overheadsGeneral administration expensesSelling and distribution costService costEconomies of scale

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Acceptability of risk level

T he desirability of a project is criticallydependent on the risk characterizing it.

Vulnerability of business cyclesT echnological changes

C ompetition from substitutesC ompetitions from imports

Govt. control over price and distribution

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3.7 PROJECT RATING INDEX

W hen a firm evaluates a large number of project regularly, it may be helpful to

streamline the process of preliminaryscreening. For this purpose,

Preliminary evaluation is translated into aproject rating index .

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Identify factors relevant for project rating

Assign weights to these factors

Rate the proposal on various factors, using a suitablerating scale

For each factor, multiply the factor rating with the

factor weight to get the factor score

Add all the factor scores to get the overall projectrating index

Process

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3.8 SOURCES OF NETPRESENT VALUE

T here are six entry barriers that results inpositive NP V projects. T hey are as follows:

Economies of scaleProduct differentiationC ost advantageMarketing reachT echnological edgeGovernment policy

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Economies of scale

Economies of scale means that an increase

in the scale of production, marketing or distribution result in a decline in the cost per unit.

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Product differentiation

A firm can create an entry barrier bysuccessfully differentiating its products from

those of its rivals.T

he basis for differentiationby one or more of the following:Effective advertising and superior marketingExceptional service

Innovative product featureHigh quality and dependability

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Cost advantage

If a firm can enjoy cost advantage vis-à-vis its

competitors, it can be reasonably assured of earning superior returns. It may: A favorite locationMore effective cost control and cost reduction.Monopolistic access to low cost materials.

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M arketing reach

A penetrating marketing reach is an important

source of competitive advantage. Examplesare: Avon productsHindustan lever¶s limited

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Technological edge

T echnological superiority enables a firm toenjoy excellent returns. Such as

IB MXEROX

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Government policy

A govt. policy which shelters a firm from the

onslaught of competition enables it to earnsuperior returns. Some policies are:Restrictive licensingImport restrictionHigh tariff walls

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3.9 ON BEING ANENTREPRENEUR

Now the entrepreneurial urge to set up their

own project. T he traits and qualities of anentrepreneur must answer the followingquestion:

Are my goal well defined?

Do I have the right strategy?C an I execute the strategy?

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Q ualities And Traits Of ASuccessful Entrepreneur

W illingness to make sacrificeLeadership

DecisivenessC onfidence in the projectMarketing orientation

Strong egoOpen mindedness