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Product Selection

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Page 1: New_Product_Selection

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Product Selection

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Product Selection Process

� New product idea selection is not merely

about using a method.

A process that needs to be managed in orderfor it to be effective and beneficial.

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Guidelines

1. Adopt a Holistic Perspective

2. Be Flexible

3. Take a Continuous Approach4. Familiarize Everyone with the Selection Task

5. Pay Attention to Implementation

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Criteria to Select a Product

� Demand of the Product

� Cost of manufacturing

� Cost of Selling� Purpose the product serve

� Time and effort required to sell the product

� Analysis of owns strength and weakness

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Feasibility Analysis

� Preceded by the decision to choose

entrepreneurship as a career and

identification of promising business ideas.

� Conduct an in-depth examination of the

chosen three-four before settling for the one.

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PROJECT FEASIBILITY STUDY

� Feasibility literally means whether some idea will workor not.

� whether there exists a sizeable market for theproposed product/service?

� what would be the investment requirements andwhere to get the funding from?

� wherefrom the necessary technical know-how toconvert the idea into a tangible product may be

available?The feasibility analysis is designed to determinewhether or not, given the project environment, aproject will be successful .

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A Multivariate Concept

� Market Analysis

� Financial Analysis

� Technical Analysis� Economic Analysis

� Ecological Analysis

� Legal and Administrative

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Market Analysis� Aggregate demand of the proposed product.

� Market Share expected to be captured

� Segment the market

� Consumption trends

�Past and present supply positions

� Production possibilities and constraints

� Imports and exports

� Competition

� Elasticity of demand

� Consumer behaviour, intentions, motivations, attitudes,preferences and requirements

� Distribution channels and marketing policies in use

� Administrative, technical and legal constraints impinging on

the marketing of the product

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Financial Analysis

� Whether the proposed project will be financiallyviable in terms of meeting the burden of servicingdebt and meeting the return requirements.

� Considerations1. Investment outlay and cost of project2.Means of financing3. Projected profitability

4. Break-even point5. Cash Flows of the project6. Investment worthiness7. Projected Financial Position

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Technical Analysis

� Input Analysis: Identification, Quantification andEvaluationAvailability at right time, right costSupply ChainManagement

� Throughput Analysis: Operations performed on theinputs to add value.Location of factory, plantSequence, Layout

Quality control measures� Output Analysis: Product specification in terms of 

physical features Color, weight, length, heightStandards to be complied with (ISI, BSI)

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Economic Analysis

� Study of costs and benefits

� Whether the price justify the cost of product

�Economic and Commercial Feasibility

� Consider Social-Cost-Benefit-Analysis also

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Ecological Analysis

� What is the likely damage caused by the

project to the environment?

What is the cost of restoration measuresrequired to ensure that the damage to the

environment is contained within acceptable

limits?

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Legal and Administrative

� Choice of the form of organization

� Registration Procedure

Approvals from authorities1. Printing Press DistrictMagistrate

2. Pesticides Central / State Agricultural Deptt

3. SafetyMatches/ Fireworks License under

Explosives Act from Directorate of Explosives4. Wood Working Industry District Forest Officer

5. Drugs and Pharmaceuticals State Drug Controller

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Registration

� Not necessary for an SSI to register, but it entitles to

avail certain priviliges.

� Point of contacts are District Industry Centres

(DICs) or the Directorate of Industries (DIs) of the

concerned StateG

overnment.� A SSI can get itself registered with Director General

of Supplies and Disposal (DGS&D) or National Small

Industries Corporation (NSIC) if it wants to avail of 

the benefit of purchases made for governmentoffices.

� Two stage Process

1. Provisional Registration Certificate (PRC)

2. Permanent Registration Certificate (PMT)

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Provisional Registration Certificate

(PRC)

� Application to be submitted along with projectreport, partnership deed,MOA, AOA etc

� Valid for two years and can be renewed

� Used for:1. Obtaining term loans2. Obtaining facilities for accomodation, land etc3. Obtain NOC and clearances from regulatory authorities

4. Applying for Power and Water connections5. Applying for procuring machinery on hire purchasebasis

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Permanent Registration Certificate

(PMT)

� When the unit goes for production.

� Used for1. Apply for raw materials

2. Get Working Capital from banks3. Obtain central excise duty concessions4. Apply for registration under variousgovernment schemes to get purchase andprice preferences.5. Apply for incentives for sales tax exemption

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Business Plan

� A written document that serves as a road mapin the entrepreneurs journey from start up toproject implementation.

� Describes all the relevant elements involved.

� An integration of functional plans - marketing,finance, manufacturing and HR.

� Potential investors and suppliers areinterested in business plan for decisionmaking.

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Need for a Business Plan

� Depth and detail depends on the size and typeof business.

Need:

1. Helps to decide where he wants to go2. Helps to determine the viability of theventure3. Guide to make realistic goals and targets4. Helps in identifying possible roadblocks5. Pre-Requisite to obtain finance

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Considerations while making BP

� The target audience

� Business Strategy

�Competition

� Be realistic

� Involvement of people for creating the

business plan� Keep the business plan factual and brief 

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Outline of a Business Plan

1. Introductory Page

(a) Name and address of business(b) Name(s) and address (es) of principals(c) Nature of business(d) Statement of financing needed

(e) Statement of confidentiality of report

2. Executive Summary Three to four pages summarizing the completebusiness plan.

3. Industry Analysis

(a) Future outlook and trend(b) Analysis of competitors(c)Market segmentation(d) Industry forecasts

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4. Description of Venture(a) Product (s)(b) Services (s)

(c) Size of business(d) Office equipment and personnel(e) Background of entrepreneurs

5. Production Plan(a)Manufacturing process

(b) Physical plant(c)Machinery and equipment(d) Names of suppliers of raw materials

6.Marketing Plan(a) Pricing(b) Distribution(c) Production(d) Product forecasts(e) Controls

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7. Organisational Plan(a) Form of ownership(b) Identification of partners or principal shareholders(c) Authority of principals(d)Management-team background(e) Roles and responsibilities of members of organization

8. Assessment of Risk(a) Evaluate weakness of business

(b) New technologies(c) Contingency plans

9. Financial Plan(a) Pro forma income statement(b) Cash flow projection

(c) Pro forma balance sheet(d) Break-even analysis(e) Sources and application of funds

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10. Appendix (contains backup material)

(a) Letters(b)Market research data

(c) Leases or contracts

(d) Price lists from suppliers

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BASIC START UP PROBLEMS

� Selection of the Industry

� Product Selection

� Choice of Factory Site

� Form of Organisation

� Problem of Construction

� Supply of Raw Materials

� Financing the Unit

� Recruitment and Training of Staff 

� Trial Run� Marketing

� Gestation Period