CU-BBA-SEM-V-Entrepreneurship Development-Second Draft

4.7 REFERENCES Reference  Mohan-Neill, S. I. (1995). The influence of firm's age and size on its environmental scanning activities. Journal of Small Business Management, 33(4), 10.  McEwen, T. (2008). Environmental scanning and organizational learning in entrepreneurial ventures. The entrepreneurial executive, 13, 1.  Haase, H., & Franco, M. (2011). Information sources for environmental scanning: do industry and firm size matter?. Management Decision. Textbook  Mellor, R. (Ed.). (2008). Entrepreneurship for everyone: A student textbook. Sage.  Dutta, B. (2009). Entrepreneurship Management (Text and Cases). Excel Books India.  JANAKIRAM, D. B., &Rizwana, M. (2011). Entrepreneurship Development: Text and Cases. Excel Books India. Websites  https://www.toppr.com/guides/business-management-and- entrepreneurship/entrepreneurship-creativity-and-innovation/environmental-scanning/  https://myassignmenthelp.co.uk/freesample/opportunity-analysis-of-new-business- venture  https://www.shopify.in/blog/home-business 51 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT – 5: PROCESS OF GENERATING BUSINESS IDEAS STRUCTURE 5.0 Learning Objectives 5.1 Introduction 5.2 Screening and Selection and Process of Generating Business Idea 5.2.1 Importance of Business Idea Screening 5.2.2 Business Idea Screening 5.2.3 Business Idea Evaluation 5.2.4 Evaluating Business Ideas using Macro Analysis and Micro Analysis 5.2.5 Business Idea Selection Approach & Evaluation Criteria 5.2.6 Field Research For Information Collection 5.2.7 Finalization of the Best Business Idea 5.3 Summary 5.4 Keywords 5.5 Learning Activity 5.6 Unit End Questions 5.7 References 5.0 LEARNING OBJECTIVES After studying this unit, you will be able to  Describe the complex process of generating business ideas.  Explain the business idea.  Define and understand micro and macro analysis. 5.1 INTRODUCTION Ideas are the key to innovation. Without them, there isn't much to execute and because execution is the key to learning, new ideas are necessary for making any kind of improvement. It's obvious that ideas alone won't make innovation happen, as you need to be able to build a systematic process for managing those ideas. The point of ideation isn't just about generating tons of them but about paying attention to the quality of those as well. Idea 52 CU IDOL SELF LEARNING MATERIAL (SLM)

generation is described as the process of creating, developing and communicating abstract, concrete or visual ideas. It's the front end part of the idea management funnel and it focuses on coming up with possible solutions to perceived or actual problems and opportunities. Idea generation is described as the process of creating, developing and communicating abstract, concrete or visual ideas. It’s the front end part of the idea management funnel and it focuses on coming up with possible solutions to perceived or actual problems and opportunities. Idea generation or ideation is the act of forming ideas. It is a creative process that encompasses the generation, development and communication of new thoughts and concepts, which become the basis of your innovation strategy. Idea screening is the stage in the new product development process which follows idea (or concept) generation. It often involves use of scoring models, checklists, or personal judgments and is based on information from experience and market research. Sources of new product ideas include company employees, customers, competitors, outside inventors, acquisitions, and channel members. Learn how start-ups generate new product ideas and launch products. Consistent with this notion, significant scholarly attention has recently been devoted to understanding three sources of innovative new ventures: employee entrepreneurship, academic entrepreneurship, and user entrepreneurship. External sources: customers; lead-users (user solutions); patents/inventions; competitors; suppliers; acquisitions; trade fairs and conventions; published information; trade magazines; outside consultants; channel members; universities; government; law/regulations. Idea generation is described as the process of creating, developing and communicating abstract, concrete or visual ideas. It's the front end part of the idea management funnel and it focuses on coming up with possible solutions to perceived or actual problems and opportunities. The business idea creates a reason to invest and it also creates sales and profit. With sales and profits come the scope to invest in more products and services, enabling the business to grow. It is the pure essence of capitalism. All that said, if you have a bad idea, you are more likely to face competition 5.2 SCREENING AND SELECTION AND PROCESS OF GENERATING BUSINESS IDEA Idea screening is the stage in the new product development process which follows idea (or concept) generation. It often involves use of scoring models, checklists, or personal judgments and is based on information from experience and market research. Considerations include strengths versus weaknesses, the company’s mission, market trends, and the product ‘s potential return on investment. 53 CU IDOL SELF LEARNING MATERIAL (SLM)

Screening also calls for judgments that predict the organization’s ability to make the item and its ability to market the item successfully. It culminates in directions to guide technical personnel in their concept developmental efforts. 5.2.1 Importance of Business Idea Screening The business idea creates a reason to invest and it also creates sales and profit. With sales and profits come the scope to invest in more products and services, enabling the business to grow. It is the pure essence of capitalism. All that said, if you have a bad idea, you are more likely to face competition Generating and Screening Ideas for New Products Successful new product development (NPD) starts with identifying good product ideas and using reliable criteria to decide which ideas to pursue. You should take the following steps before you allocate funds to new product development. 1. Idea generation Write a customer needs list based on the information you gather from the sources identified below. You should try to identify existing weaknesses in your products, gaps in your product range and areas for product improvement. 2. Brainstorm product issues Work with your existing team members to brainstorm product issues. Your sales and service staff speak to your customer’s daily, hearing feedback about your products and the customers' needs. Capture the feedback, product observations and ideas from your team. Make sure you recognize their ideas and promote a shared culture of innovation. 3. Use your research and development (R&D) processes Use your business's existing R&D processes. Identify modifications you could make to existing products, or adaptations for new products, consistent with feedback from your market and customers. 4. Review your quality assurance (QA) processes Note any issues in your products and identify potential ideas for addressing gaps in quality. 5. Review your customer complaint records Identify common weaknesses in your existing product range, and look for areas where improvement is most needed. Learn about managing customer complaints. 6. Review your research Review your customer research and market research, and plan further market and customer surveys if you identify research gaps. What are your customers telling you they're looking 54 CU IDOL SELF LEARNING MATERIAL (SLM)

for? What do they find frustrating or limiting about your products? How do they use your products most? 7. Talk to your suppliers and other business partners Talk to manufacturers, retailers and sales reps to capture their knowledge of your products and thoughts for improving them. 8. Research and understand your competition Try to understand your competition. Review your competitors' product range and consider how the market is responding to them. Do any of their products seem to be meeting needs that yours aren't? 9. Study catalogues and product information Make sure you have a comprehensive understanding of existing products available in your market. 5.2.2 Business Idea Screening With your list of potential new product ideas, you now need to decide which ideas to pursue and which to discard. Consider your competition, your existing products, their shortcomings, and the needs of your market. Draw on the customer needs list you have developed, and the areas for product improvement you have identified. Develop a set of criteria to evaluate your ideas against. Your criteria might include  Most prominently identified customer needs.  Product improvements most needed.  The benefits to your target market.  The technical feasibility of the idea.  The level and scope of research and development required.  The profitability of the idea. What is its potential appeal to the market? How would you price it? What are the costs in bringing it to market — overall and per unit?  Where the product fits in the market. Is there a gap? How close is it to competitor products?  The resources it will require in development.  The marketing potential of the idea.  The fit with your business profile and business objectives. SWOT Analysis A SWOT analysis can help you to identify the strengths and weaknesses of each idea. 55 CU IDOL SELF LEARNING MATERIAL (SLM)

Innovation Support Your innovative approach and your steps to foster innovation in your team will help you realize your new product goals. Find out about innovation advice, grants and support. 5.2.3 Business Idea Evaluation An important aspect of successful business development is to follow a process of how you will assess a business idea or concept (project), decide whether to move forward with the project and build a business if it is decided to move forward. Screened business ideas should be evaluated for their respective position in terms of degree of effectiveness as a good business idea. This process is called business idea evaluation. Idea evaluation is a rolling process and has three important applications: First, ideas are evaluated at birth to decide on release. Secondly, ideas and then innovation projects are regularly evaluated in the course of a review to assess their value and benefits. Ideas always have a lot of uncertainty involved and little data to back them up. Thus, prioritizing ideas evaluation and making decisions on which ones to implement right away, which ones to test or pilot and which ones to keep for later will put you in a bit of a pickle. Idea evaluation definition revolves around one of the most complex and demanding tasks in idea management and, innovation management. So, let’s discuss how to make idea evaluation work for you. Evaluation criteria Evaluation criteria For an idea to be a good business idea, first of all the potential entrepreneur should like it. It should have a better market demand. The potential entrepreneur should be able to find out raw material easily to manufacture it. Thereby, the business idea should satisfy a set of vital criteria. These are called business idea evaluation criteria. It is important to assess the position of each business idea in respect of each factor such as ‘my interest’, marketability, availability ‘my interest’, marketability, availability of raw mater ‘my interest’, marketability, availability of raw material, ability to meet start of raw material, ability to meet start ability to meet start-up capital up capital requirement, competition, risks involved, and similar factors. Evaluating a Business Idea New opportunities for small business owners are always out there, provided entrepreneurs perform due diligence before taking the plunge. After a business idea occurs, the first steps should involve in-depth evaluation to make sure the idea and venture have merit. Evaluating an idea involves careful examination of the feasibility, the uniqueness, market analytics, and costs involved in launching and maintaining the business. After analysis, it may be time to take the plunge and start a new business. One of the biggest keys to starting a successful business from a great idea is comprehensive planning. Planning makes sure that the idea is 56 CU IDOL SELF LEARNING MATERIAL (SLM)

solid and that the steps involved in selling a service or product to customers are feasible given market conditions. 5.2.4 Evaluating Business Ideas Using Macro Analysis and Micro Analysis We are going to evaluate our 10 business ideas available with us to find out the most suitable business idea to start our business. This evaluation process has two steps namely, Macro Analysis and Micro Analysis. In both steps, the analysis is done after recording the facts in an Evaluation Matrix format. Evaluation matrix is a table-like format where we can give each business idea a score against a selected criterion. The process is simple and non-complicated. Macro analysis is the first step. Selected ideas are assessed against a few vital criteria using an evaluation matrix and then ideas are ranked according to the total score given. In the micro analysis, the same process is followed, using a broader set of criteria which include the criteria used in macro analysis. Ideas are then ranked accordingly. If there is a significant difference in ranking by macro analysis and micro analysis, we should re-check where the mistake is. The following example will provide practical insights in this regard. Example: Amal’s 6 business ideas Amal’s 6 business ideas Amal’s 6 business ideas Amal needs to find out the ranking position of the following 6 business ideas using macro analysis and micro analysis, so that he can check the viability of the best business idea. Six business ideas  Three wheeler service centre,  Manufacturing LED bulbs,  Web marketing consultancy,  Making first aid kits,  Publishing a business magazine, and  Manufacturing school bags He was advised by his consultant to use the under mentioned criteria sets for macro analysis and micro analysis. For macro analysis For macro analysis or macro analysis: 4evaluation criteria evaluation criteria evaluation criteria 1 Personal match (agree with my interest, my expectations, my personal values) [PM], 2 Market demand [MD], 3 Easy to start [ES], and 4 Manageable start- up capital [SC] 57 CU IDOL SELF LEARNING MATERIAL (SLM)

For micro analysis For micro analysis or micro analysis: 7evaluation criteria evaluation criteria evaluation criteria 1 Personal match (agree with my interest, my expectations, my personal values) [PM], 2 Market demand [MD], 3 Easy to find out raw material [RM], 4 Ability to get technology [TE], 5 Technical skills [TS], 6 Easy to start [ES], and 7 Manageable start-up capital [SC] 5.2.5 Business Idea Selection Approach & Evaluation Criteria We have three business ideas screened through several levels of screening. These three ideas should be tested using a deeper analysis of micro screening in order to find out the most suitable and growth-bound business idea. It is essential to have more reliable information to perform a deeper analysis. Therefore, this module involves some field research work. Business idea selection approach Business idea selection approach Our business idea selection process involves the following: a. Identification of the 1st , 2nd and 3rd ranked business ideas from the previous micro analysis b. Identification of the evaluation criteria c. Collection of information related to the above criteria for three business ideas through field research d. Micro analysis of the three business ideas using the identified criteria e. Selection of the best business idea. Practical application:  We should get ready to do micro analysis of the three business ideas using above criteria.  For that purpose, we need to understand the meaning and the contents of each criterion so that we can collect field information through field research.  We should use this knowledge to understand whom to get information from and what information should be collected. 5.2.6 Field Research for Information Collection Getting ready for field research Questions of Akila Akila wants to select the most promising business idea from three favourite business ideas screened from a large collection of ideas. They are “manufacturing and marketing a creative door-lock”, “Producing banana biscuit” and “Boat engine repairing service”. He has decided to use the set of 10 criteria given in the table above. He understands that he needs to find out answers to 5 questions mentioned below before going to the field for collection of information for micro analysis. Question 1: Whom to meet to collect information? What institutes to be visited? Question 2: What questions to be asked from relevant entrepreneurs? 58 CU IDOL SELF LEARNING MATERIAL (SLM)

Question 3: What questions to be asked from appropriate customers? Question 4: What questions to be asked from relevant experts? Question 4: What questions to be asked from relevant experts? Prior to going to the field to collect information, our basic preparation should focus on the above mentioned 4 questions. With this preparation, it is easy to go to the field and collect relevant information. We prepare the list of persons and institutions to be visited as the next step. Similarly, we should prepare the questionnaires for each interviewee category. Then, we go to the field, meet the interviewees and collect the information. After obtaining the above understanding through the example of Akila’s three business ideas, we can now undertake working on our main task. Let’s do the necessary activities that lead to finalize our best business idea out of three ideas already selected through a long screening and evaluation process. 5.2.7 Finalization of the Best Business Idea This is an important activity in our training process. It includes class room exercises in performing the micro analysis using the information collected from the field research. Activity Steps are lined up as follows. Entrepreneurs often live with the hope that if they build it, customers will come. But in today's economy, it takes a lot more than hope to get people to purchase your products or services: new business-building practices are a must if you want to expand. Another necessary element is a clear-cut plan for growth. But many entrepreneurs get obsessed with creating the perfect plan. Or they never get around to putting one together. Crafting a plan is necessary, quick and effective. And we can show you how to do it. The following seven steps should take you no more than four hours to complete-a small price to pay for a tremendous upside. The result? A road map that will infuse new energy, enthusiasm and vision into your company's growth plans. So, let's get started. Step 1: Focus on your Core Product A very successful e-newsletter entrepreneur has built his business around this mantra: \"Prospects buy when they trust your value is applicable to them and believe your company is stable.\" This strong position allows him to constantly check up on the services and value he's providing his customers. Keep this statement in mind as we go through the rest of the seven steps, because internalizing this mantra is the key to a solid plan. It's common in small, service businesses that the entrepreneur feels he or she must do everything the \"big guys\" do to compete. The truth is, small-business owners can really never compete in the same way. So, it's essential for small businesses to differentiate themselves by focusing on the unique capabilities and core products they bring to prospects. Specialization is the entrepreneur's greatest asset. Step 2: Keep your Pitch Simple 59 CU IDOL SELF LEARNING MATERIAL (SLM)

The last time you asked someone at a party what their company does, did you get a clear, concise response? Or did your eyes glaze over by the time they got to the end of their explanation? My guess is, it was probably the latter. Now imagine that same pitch being presented to prospects who don't have a glass of wine in their hands to distract them! It's not a pretty picture. What every company need is a simple \"elevator pitch.\" That's a short, concise message that can communicate your message to a prospect in 30 seconds or less. It explains the value your product or service provides so the prospect understands why it's applicable to them. Try this little exercise to test your pitch clarity quotient. Ask someone who doesn't know what you do to listen to your pitch. Explain what your company does, and watch for signs of fatigue-eyes watering, lids getting heavy, and so on. Of course, you may have the perfect pitch. But if you don't, you'll recognize it right away from verbal and physical responses. Step 3: Stay True to who you are Knowing who you are and what gets you excited (and bores you to tears) will help you reach your goals. Nothing can derail a growth plan more than discomfort and procrastination-it's simply human nature to procrastinate over things that cause discomfort. And there are dozens of daily business requirements that every business owner detests. If you're finding yourself putting things off, it's time to start delegating Stay true to who you are and what you do best: Hand off those tasks that will blow you off course because you don't like doing them, so you don't! Stretch and grow your capabilities in alignment with your interests and expertise. If accounting is your nemesis, hire a bookkeeper. If your personal organization is out of control, hire a temp to set up a new filing system. Always make sure that you're focused on your priority \"A\" tasks and delegate your Bs and Cs. Step 4: Map it Mapping your capabilities with your target clients' needs is an excellent way for you to determine your service strategy. You'll find that while you may be perfectly skilled in many areas, you're going after customers who don't need your particular expertise. One common trait among many entrepreneurs is the urge to \"cast a wide net\" by being all things to all companies. In almost every case, however, a small business flourishes because it has a narrower service offering. Remember, a small company's value is that it can specialize in unique, top-quality services. Develop a list of decision-making criteria that you expect your clients to use when choosing a provider in your industry. Then rank yourself (and be brutally honest) in terms of where you'd be positioned in each category. After this intense evaluation, make sure that your elevator pitch is still on target. Step 5: Utilize Marketing Tools that Work Best for you. 60 CU IDOL SELF LEARNING MATERIAL (SLM)

When deciding on a marketing strategy, implement one that fits your personality and the customers you serve. For instance, if you're terrified of getting up in front of a crowd, don't schedule yourself to participate on a panel in the hopes of generating business. You'll derail your efforts if you don't perform well. Identify the top two marketing tools you've used in the past that have worked for your company. Let's say that's cold calling and a Web site. Then start adding new ideas for a fresh perspective. When selecting your marketing tools, also evaluate them from a financial and cost basis. Decide what will yield the best return on your efforts. Each tool should lead to a revenue-producing result in one way or another. Step 6: Implement a Plan of Action Up until now we've been in the planning mode, but now it's time to dig in and put it to work. Your action plan will also give you the map you can use to measure your progress. Establish goals that can be reviewed at three and six months. At incremental points within each three-month period, keep checking your plan to see if you're meeting your goals. If you find you're missing the target, ask why. Were the tools appropriate for your target customer? Did you integrate the strategy, or did you just focus on one of the tools? And don't forget to plug in specific actions that you'll do every day to help you meet your goals. That daily strategy will keep the goals of the plan top of mind. Step 7: Exercise the Plan This final step is really straightforward: Just do it: Complete the daily actions, and then do something extra to accelerate your success plan. If you approach your plan and get butterflies in your stomach, either get over it or substitute an action that you're comfortable with so you stay on course. Don't let unplanned tasks waste precious time that should be applied toward reaching your goal. And most of all-enjoy the process. 5.3 SUMMARY  Business ideas are all around us. There are many places to start searching for ideas. Sometimes, it is an ongoing process where we are generally on the lookout for great new ideas. Over a period of time, you may end up recording a number of good business ideas that we come across while going about our day- to-day life.  You can then evaluate these ideas and when the time is ripe, these ideas can be taken further.  The purpose of generating new ideas is about improving what already exists as well as coming up with something new.  Often when trying to solve a problem or approaching a new opportunity, people use existing solutions or mental models instead of trying to come up with new ones. The 61 CU IDOL SELF LEARNING MATERIAL (SLM)

problem with this approach is that it doesn’t allow you to explore different opportunities and it narrows down the number of possible solutions.  Coming up with completely new ideas can help you approach your problem or opportunity from a new perspective. It enables you to expand the range of ideas beyond your current way of thinking which eventually leads to more ideas.  There are several different methods and techniques that can be used to challenge that conventional mindset and to get more of those high-quality ideas. The ones introduced in this post can be used as a reference in your brainstorming sessions or when generating ideas on your own.  The next step towards generating more ideas would be to try some of these methods in practice. You can download our idea generation toolkit that consists of some of our favourite tools for idea generation. 5.4 KEYWORDS  Idea Screening: Idea screening is the stage in which follows idea (or concept) generation. It often involves use of scoring models, checklists, or personal judgments and is based on information from experience and market research.  Idea Evaluation: Idea evaluation is a rolling process and has three important applications: First, ideas are evaluated at birth to decide on release. Secondly, ideas and then innovation projects are regularly evaluated in the course of a review to assess their value and benefits.  Idea Generation: Idea generation or ideation is the act of forming ideas. It is a creative process that encompasses the generation, development and communication of new thoughts and concepts, which become the basis of your innovation strategy.  Macro Analysis: Analysing the macro environment is an important part of strategic management. Business analysts often conduct a PEST (political, economic, socio- cultural, and technological) analysis to identify macro-economic factors that currently affect or in the future may affect business.  Micro Analysis: It is a collection of forces or factors that are close to the organization and can influence the performance as well as the day to day activities of the firm. Six components of micro environment are: Company, Suppliers, Marketing Intermediaries, Competitors, General Public and the Customers. 5.5 LEARNING ACTIVITY 1. What are the steps required before you allocate funds to new product development? 62 CU IDOL SELF LEARNING MATERIAL (SLM)

___________________________________________________________________________ _____________________________________________________________________ 2. What are the set criteria for developing and evaluating the business idea? ___________________________________________________________________________ _____________________________________________________________________ 5.6 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What do you mean by idea screening? 2. What do you mean by business idea evaluation? 3. Write any two advantage of business idea screening? 4. Expand SWOT analysis? 5. Write the importance of business idea evaluation? Long Questions 1. What do you mean by business idea screening? Explain the process in detail? 2. What are the factors influencing the selection of business idea? 3. Write the importance business idea evaluation? 4. Explain the pro and cons of screening the business idea? 5. Explain the evaluation criteria of business decision? B. Multiple Choice Questions 1. Who conceives the idea of the business? a. Promoters b. Directors c. Auditors d. None of these 2. Who is an innovator of new ideas and business processes? a. Entrepreneur b. Manager c. Employee d. None of these 63 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Who originated SWOT analysis? a. Albert S.Hoskey b. Albert S Humphrey c. John Schumpeter d. Joseph Schumpeter 4. What is the next process in entrepreneurship after the idea generation? a. Improving standards of living b. Development of managerial capabilities c. Feasibility study d. Creation of organizations 5. What is SWOT Analysis is sometimes called as? a. Internal-inside analysis b. Internal-external analysis c. External-outside analysis d. Outside-inside analysis Answers 1-a,2-a,3-b,4-c,5-b 5.7 REFERENCES Reference  Bernstein, A., Klein, M., & Malone, T. (1999). The process recombinator: a tool for generating new business process ideas.  Chollet, B., Géraudel, M., & Mothe, C. (2014). Generating business referrals for SMEs: the contingent value of CEOs' social capital. Journal of Small Business Management, 52(1), 79-101.  Cooper, R. G., &Edgett, S. J. (2009). Generating breakthrough new product ideas: Feeding the innovation funnel. Product Development Institute. Textbook  Biswas, D., & Dey, C. (2021). Entrepreneurship Development in India. Routledge.  BABU, D. A. S. ENTREPRENEURSHIP AND INCUBATION (TEXT AND CASES) 64 CU IDOL SELF LEARNING MATERIAL (SLM)

Websites  https://www.viima.com/blog/idea-generation  https://marketing-dictionary.org/i/idea-screening/  https://www.business.qld.gov.au/running-business/growing-business/becoming- innovative/developing-products/new-products/ideas  https://www.entrepreneur.com/article/65210 65 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT – 6: TECHNO-ECONOMIC FEASIBILITY STUDIES STRUCTURE 6.0 Learning Objectives 6.1 Introduction 6.2 Developing Detailed Project Report for Implementation 6.3 Summary 6.4 Keywords 6.5 Learning Activity 6.6 Unit End Questions 6.7 References 6.0 LEARNING OBJECTIVE After studying this unit, you will be able to  Explain techno feasibility aspects of a project.  Define economic feasibility factors of a project.  Estimate the project performance appraisal. 6.1 INTRODUCTION Techno-Economic Feasibility refers to the estimation of Project demand potential and choice of optimal technology. It is an analysis on the exiting market and technology which is helpful to make a right choice of technology based on the demand potential in project design. Techno-Economic feasibility analyse the project on individual criteria or different aspects and sets the stage for detailed design development. A feasibility report of a new enterprise or of an expanding enterprise consist of some background information about the industry to which the project belongs, and the enterprise submitting the report in general. After the planning and the designing part of a project are completed, a detailed project report is prepared. A detailed project report is a very extensive and elaborative outline of a project, which includes essential information such as the resources and tasks to be carried out in order to make the project turn into a success. It can also be said that it is the final blueprint of a project after which the implementation and operational process can occur. In this 66 CU IDOL SELF LEARNING MATERIAL (SLM)

comprehensive project report, the roles and responsibilities are highlighted along with the safety measures if any issue arises while carrying out the plan. The following points play an essential role in deciding whether a project turns into success:  Completion of the project within the stipulated period.  Priority to client satisfaction by delivering quality product after the completion of the project.  Completion of the project within the set limits of escalation of cost. The blueprint design's focus has to be to convert the corporate investment into a project idea that gives good monetary returns. A detailed project report depicts a practical viewpoint for the implementation of the project. The requirements and risks should also be highlighted in a detailed manner to prevent any troubles that can delay or halt the execution of the project. Hence effective measures must also be stated so that the execution of the project can be carried out hassle-free. Contents of a Detailed Project Report A detailed project report must include the following information.  Brief information about the project.  Experience and skills of the people involved in the promotion of the project.  Details and practical results of the industrial concerns of the promoters of the project.  Project finance and sources of financing.  Government approvals.  Raw material requirement.  Details of the requisite securities to be given to various financial organizations.  Other important details of the proffered project idea include information about management teams for the project, details about the building, plant, machinery, etc. 6.2 DEVELOPING DETAILED PROJECT REPORT FOR IMPLEMENTATION Meaning of Detailed Project Report (DPR) As the identification and intention for the implementation of the project grow, the depth of the study for the probable project has increased. Further analyses of the details relevant to such a project become imperative. We know that the feasibility report contains sufficient detailed information. It is from the study of the pre-feasibility or feasibility report that approval is made by the project owner (an 67 CU IDOL SELF LEARNING MATERIAL (SLM)

individual or a project director/manager or the management of a company) for the investment on the project or for a request to prepare the DPR. Preparation of DPR is a costly and time-taking job (which may even extend to one year) when reports of specialists from different streams like market research, engineering (civil, mechanical, metallurgical, electrical, electronics), finance etc.—as relevant to the project itself—are considered in the DPR. Objectives of Detailed Project Report (DPR) The objectives in preparation of the DPR should ensure that  The report should be with sufficient details to indicate the possible fate of the project when implemented.  The report should meet the questions raised during the project appraisals, i.e. the various types of analyses—be it financial, economic, technical, social etc.—should also be taken care of in the DPR. The DPR should be punctilious of all possible details to serve the objectives and should also reflect, amongst other points, the followings aspects 1. Technology and design aspects of detailed project report (DPR): Experience suggests that some projects are launched with clear objectives but with considerable uncertainty as to whether or how they will be technically achievable, not leading to project overruns. The DPR should deal with minimum technical uncertainties and the specialists’ findings/report in this area becomes helpful. Innovative designs are found to be tougher than even the technical uncertainties— designs, as such, may appear innocuous and less costly but later, in reality, may be found completely different. Hence the DPR should deal with Technology and Design which have already been tested, thus minimising the technical risk. Before going to overseas technical collaborator the repertoire of established technology available within the country should be explored. It would be both cheaper and nationalistic! 2. Economic aspects The DPR should emphasize the economic aspects of the project, which include: i. The location of the plant, the benefit for such location including the available infrastructure facilities; ii. The volume of the project, the capacity installed; iii. The availability of the resources and the utilisation of such resources in a comparatively beneficial manner, e.g. the ‘internal rate of return’ projected as 68 CU IDOL SELF LEARNING MATERIAL (SLM)

compared to the possible rate of return on investment from the market without inherent risks. 3. Social and political aspects Public attitude towards a project is becoming increasingly important—the displacement of people (Joint venture project for a major port at Gopalpur, TISCO’s expansion project at Gopalpur) and the concerned public attitude towards, the implementation of such a project can be very serious. The environmental pollution, the ecological balance (or imbalance?), the potential employment all are of important considerations in the DPR. The importance of ‘politics’ in a major project cannot be ignored—where the political considerations dominate. The ideal condition is that the project owners/management should be left to manage while the government should provide the necessary conditions to make it a success.But, in reality, the assurance/commitments are often politically motivated even before the finalisation of the DPR. Accordingly, the DPR should recognise this risky game. 4. Financial aspects The prime importance of a project is the assurance of the timely availability of funds/ resources. The availability of funds is to be ensured throughout, i.e. during the implementation period as well as during the second part of the project when it is supposed to start generating income/benefit. Whether such generation of income/benefit will be sufficient for the servicing of the borrowed funds to pay interest and also the repayment of principal as also the expected income from the owner’s capital invested in the project; whether such return on investment is adequate and, also, in excess of other possible incomes from such funds without taking the risk—these are the valid questions to be answered by the DPR. The report also provides the ‘Break-even point’ level of workings. Background of Detailed Project Report (DPR) When the project is found definitely feasible, the DPR should stand with a background dealing with the recommendation for the project, as supported by the forecasted details for the coming years when the project is put into operation. The background should also include details of the product, sizes with capacity, organisation and the technical know-how involved i. Project at a glance ii. Market report iii. Technical details with the process involved and the plant layout 69 CU IDOL SELF LEARNING MATERIAL (SLM)

iv. Plant and machinery and other equipment as required for the project v. Project schedule and vi. Organisation Total strength of personnel with their grades and the required training 1. Financial details of project costs, source of financing, 2. Cost of production 3. Projected profit and loss account 4. Projected balance sheet 5. Fund flow statement 6. Interest and commitment charges 7. Working capital requirements and 8. Debt service coverage. Break-Even Analysis As an illustration of a Detailed Project Report we would like to produce a DPR in a summarised form. The contents of this DPR is partly quoted from an actual report and is partly descriptive in nature indicating, in a summarised form, what should be the contents as under the relevant headings. The product names, the amounts in quality and value are for illustration only with the idea to describe a model DPR. Some points are narrated by way of description within brackets, instead of the actual contents of the report. All descriptions and figures are for illustration of a DPR. Detailed Project Report for Project ‘P’ Background  Organisation - A Greenfield project to be launched by Indian promoters in partnership with a foreign company renowned in the relevant business along with their equity participation and a representation in the company’s board.  Product - Manufacture of products Q, R, S etc. are mainly used in the medical field. These products are not currently manufactured in India, except one or two units with quality reportedly inferior to international standard. Hence, there is a need and opportunity felt by the promoters, as the project is favorable for the saving of foreign exchange.  Technical know-how - The know-how, along with the supply of the major plant and machineries, are to be provided by the foreign partner, who is well experienced in this 70 CU IDOL SELF LEARNING MATERIAL (SLM)

field.The required training of key personnel will also be provided by the collaborator. ‘ The participation in equity by the foreign company and also the terms of the ‘know-how agreement’ have been approved by the concerned authorities. The collaborator is ready to buy-back the entire production, but it has been agreed that about 20% of the total production will be marketed in India. In view of this, the company has been identified as an Export Oriented Unit (EOU). Project at a Glance A. Product: Q, R, S etc. for Medical Instruments. B. Capacity: 35,000 pcs per annum. C. Production: Year 1 2345 In ‘000 pcs. 9 15 22.5 30 33.75 D. Sales: 1 2 345 Year 360 600 900 1200 1,350 In lakhs Rs. E. Project costs in lakhs of Rs. F. Source of financing 71 CU IDOL SELF LEARNING MATERIAL (SLM)

Report on the Market Research on the Product: The special report indicates: 1. Expected volume of the market and its growth 2. Expected volume of the market share 3. The possible marketing channels and the need for the specific background of the dealers 4. The dealers’ expectation about their commission, discounts etc. 5. The credit period to be extended to the dealers, major customers etc., the prevailing market trend in this area 6. The requirement of service after sales 7. The behavioural pattern of the ultimate customers and their reaction to the availability of such products. (This is a delicate area and depends upon the sectors of the customers to whom the product is addressed housewives, executives, professionals, doctors etc. In the project under discussion, the customers are primarily the doctors who are interested in the usage of the Q, R, S etc. for medical instruments. 8. The competitors, their strength and weakness and their market share. Technical Details The usage of the product helps by directing a beam of laser light down a fibre and the operating surgeons can perform intricate surgeries inside human bodies, sometimes even eliminating grossly invasive and traumatic procedures involving cutting of healthy body tissues to reach the operating site. The details of the products include Products  ‘Q’: There are strands of high purity element with cylindrical inner core with high refractive index. The outer shell are called cladding with comparative lower refractive index, the light rays propagating within the core of the fibre is reflected back into the core. 72 CU IDOL SELF LEARNING MATERIAL (SLM)

 The fibre dia. varies between x microns toy microns and, as such, can work as flexible light cables.  ‘R’: This is used to transmit light through flexible cables.  ‘S’: This is ideal for usage as an accessory for surgical microscope in Ophthalmia, Gynaecology, Plastic and Neuro-surgery etc. where temperature is a critical factor. Manufacturing Process: Fibber Drawing The fibres are drawn from the element which is melted in a furnace. The process draws continuous length of fibre from the melting element whose softening temperature is lower than that of quartz; then the fibres are wound in large drums. The other operations to follow include: i. Fibre cleaning and washing ii. Fibre laying and cutting iii. Sheathing iv. End fitting v. Epoxy curing vi. Grinding and polishingand vii. Quality inspection Plant layout: The project report includes a diagram of the plant layout taking care of i. The suggestions from the building architect. ii. The site, the plant drawings with the locations of the machineries, centre for power house, the power connections. iii. The process work flow, taking care of the flow of the materials, manufacturing process and delivery to the finished goods store. iv. The passage for the inward delivery of the raw materials, their receipts, incoming equality inspections etc. should not cross the passage-for outward delivery of the finished goods. Similarly, within the manufacturing area, the production process centres follow the serial order of the production processes, with facilities for issue of the raw materials to the relevant process centre, their movements without disturbing other process centres. 73 CU IDOL SELF LEARNING MATERIAL (SLM)

There should be scope of ‘quality inspection’ in the stages of production process. The layout should take care of the delivery of the finished goods to the finished goods store with least disturbance of other movements within the production floor. The basic idea of the layout should also take care of i. The required space per head for direct workers. ii. Movement of materials and men should be without interruption. iii. Convenience to supervise with a clear overview for the plant manager. iv. Utilities including toilets, canteen, first-aid room, rest room etcand v. Security aspect. Plant and Machinery The plant and machinery required for the project include i. Drawing tower ii. Grinding and polishing machine iii. Diamond wheel saw / cut-off saw iv. Epoxy curing oven v. Electrolytic etching machine and vi. Optometer The auxiliary service equipment includes i. Power requirements for the plant ii. Utilities : water for the manufacturing process, air-washing plant iii. Equipment for maintenance workshop and iv. Requirements for pollution control. Project Schedule The project report should have complete details of the estimated time schedule for the implementation of the project from the start till the final ‘trial run’ i.e. just before the start of commercial production. The essential main steps for the implementation are listed in serial order of such steps. Such steps are then chronologically arranged along with the estimated time to complete the works involved in each step. While the actual step is to be taken at a certain point of time—whenever the situation permits—the necessary preparatory work should be carried out earlier so that the step can be taken in time. 74 CU IDOL SELF LEARNING MATERIAL (SLM)

For example, before a placement of order to an overseas supplier and opening of the necessary Letter of Credit (LC), the preparatory works include i. Establishment of the specification of the materials to be ordered along with its qualities. ii. Enquiries and their responses from different supplier. iii. The time schedule required for deliveries. iv. The final payment terms. v. The quality and the replacements in case of defectives/damages. vi. The insurance coverage. vii. The arbitration, in case of disputes etc. Similarly, the appointments of senior personnel such as Production Manager, Supervisor, technical hands, finance and administration, personnel, security etc. must precede the appointment of Directs and Indirect in the plant. The Project schedule with work packages in project implementation and time plan is presented as per the following bar chart: 75 CU IDOL SELF LEARNING MATERIAL (SLM)

Considerable amount of work is involved in procurement of materials from overseas, placing order with the delivery schedule, opening of letter of credit etc. including: 1. Quality of material available from different suppliers. 2. Time schedule required by suppliers for delivery. 3. Competitive prices, taking care of cost, insurance freight and inland transportation. 4. Replacement in case of defectives/damages, the relevant terms in this regard. 5. Arbitration in case of dispute. Besides the preparatory works necessary before the start of every major step as illustrated, there are also innumerable types of work involved in the business of starting a project, which may not be possible to describe in the Bar Chart. For example, before recruitment, it is desirable to decide the ‘personnel policy’, the various grades, the market rates and the rates and scales to be offered. 76 CU IDOL SELF LEARNING MATERIAL (SLM)

These things should be discussed, deliberated and finalised before the starting of recruitment process. Depending upon the gradual increase in the volume of production, recruitments should also be phased accordingly and appointments of key personnel including seniors should also precede the recruitment of the Directs as the suggestions/discussions of the functional managers and supervisors play an important role in this area. The Project Schedule becomes a tool to ensure timely implementation of the project and an aid to achieve the project objectives of Time, Cost and Quality. A delay in any step may lead to further delay of the subsequent steps and, as such, it may accumulate. The Project Schedule helps the management to review the progress and, thus, control the implementation while reviewing the actual progress against the schedule/budget. Even the ‘possible delay’ is analysed and all means explored to avoid the delay and maintain the time schedule. This is so important in every project implementation that the Project Manager maintains chart in his office showing the actual process as compared to the budgeted schedule, continuously updating the progress with the passage of time. Organization Considering the detailed volume of activities in Production, Selling, Administration and other support services, e.g. Procurements, Personnel, Maintenance etc., man-power requirements at different grades/levels like Manager, Supervisor, Skilled, Semi-skilled, Unskilled and other work-forces are estimated for each functional group. Pay scales for different grades should be ascertained and clearly defined to avoid anomalies/disputes in future. Recruitments should be planned in accordance with the strength of work-force required as per the volume of activities forecasted in stages. Considering the prevalent rates (in different grades) and the projected number of employees—salaries and wages are estimated. The personnel costs, e.g. medical, uniform, leave pay, bonus, canteen subsidy etc. should be added up as the total of such costs may even mount up to 25 to 30 per cent of salary itself! Project Costs and Source of Finance: [The project report should contain the salient features of the project costs as per the major heads of accounts.] The project costs of Rs. 9:1 crores are detailed as follows: 77 CU IDOL SELF LEARNING MATERIAL (SLM)

The project costs are codified and summarised along with the sourcing of the fund required for the project: 78 CU IDOL SELF LEARNING MATERIAL (SLM)

Notes: 1. Preliminary/pre-operative expenses - This includes all preliminary and preoperative expenses on overheads during the initial stage and up to the time of starting commercial production and sale of the projected product/service. These expenses are initially capitalized and subsequently written-off charging the Profit and Loss Account during a period of 10 years. 2. Interest and commitment charges - This includes interest and commitment charges on borrowings. It also includes charges by the Financial Institution (as their 79 CU IDOL SELF LEARNING MATERIAL (SLM)

administrative charges) providing the Term Loan. Withdrawal of Term Loan is made by phases, as per the fund requirement.The DPR shows estimated detailed movement of the Term Loan with the interest calculations: for the period of the project implementation. When the project starts operation and earnings, the repayment of the loan as permitted by the liquidity position is also reflected in the detailed movement. 3. Margin money - Besides the capital costs for the project, the cost for the project being fully implemented, funds are required on account of revenue expenses for starting of operation including cost of raw materials etc., the inventory required, the level of credit sales in the form of debtors, in short the working capital.This is normally funded by bank and the bank permits such funding restricted to a certain percentage of the level of current assets, i.e. inventory and debtors. The balance is called the margin money for working capital (all fixed assets already hypothecated with the Financial Institution providing the Term Loan). This ‘Margin Money’ is also considered part of the ‘Project Costs’. 4. Contingency - It represents a buffer to cover the risk of actual cost of the capital items being in excess of the estimated costs as considered in the project cost. Two Interesting Cases  Trans-Alaskan Pipeline (TAPS)—a project for a simple pipeline over 800 miles (1,280 kms), the estimated project cost was—without considering any amount as ‘contingency’—$ 900 million, it ended up (of course, including enormous engineering and regulatory charges) at $ 8.5 billion!  The “Apollo” project was completed at $ 21 billion, only 1 billion over its initial project cost. But, only a few know that the estimated project cost included $ 8 billion as contingency—nearly 67% of the total estimated cost for other capital items. Both the cases are of extreme nature in respect of considering the ‘contingency’ in the project cost but, nevertheless, exemplary. Cost of Production The DPR deals with the financial estimates of the project operation for five to eight years from the start of the commercial production. In our discussion hereinafter we have dealt with such estimates for five years. The report shows under this head the details of the cost of production depending upon the envisaged volume of activities. 80 CU IDOL SELF LEARNING MATERIAL (SLM)

The estimated cost of production for initial five years is shown in the following table: Profit and Loss Account: 81 CU IDOL SELF LEARNING MATERIAL (SLM)

Note: 1. Negative figures are shown within brackets. 2. Being an EOU no tax on profit during the initial years. 3. Due to availability of sufficient profit, Interest/Commitment Charges/Preliminary and Pre-operation expenses are written-off in full in 3rd year. 82 CU IDOL SELF LEARNING MATERIAL (SLM)

Balance sheet as at the end of the year: Fund flow statement: 83 CU IDOL SELF LEARNING MATERIAL (SLM)

Interest andCommitment Charges Interest and Commitment Charges @ 8.5% p.a. On (A) 55 full 11 months plus, (B) On 285 for 8 month plus, (C) On 25 for 5 months. 84 CU IDOL SELF LEARNING MATERIAL (SLM)

Note: 1. The expenses under this head in a new project is also capitalized like the Preliminary and Pre-operative expenses and are written-off when the organization starts its commercial activities of production and sales. 2. The rate of interest is taken as about half the rate of charges for interest for the purpose of averaging, as withdrawals of the term loan required are not necessarily at the beginning of the period. The rate of 8.5% p.a. as above also includes estimated commitment charges for undisbursed balance of the loan. Working CapitalRequirements The DPR also shows the detailed calculation of the working capital required by the project to carry out its operation including procurement of materials, and the overhead costs for the production activities and the level of debtors for the credit sales. The working capital represents the net current assets, i.e. the Current Assets less the Current Liabilities and, as such, generally includes: Inventories for Raw Materials, Finished Goods, W.I.P.; Debtors (less creditors); Overheads for 1 to 2 month(s). It is desirable to work out the policy for the level of inventories which will be depending upon the circumstances of individual cases, e.g. for imported raw materials, because of longer lead time, the inventory level may be between 4 to 6 months, whereas for local off- the-shelf items—one month,, and made to order supplies—may be 3 months. Debtor’s level may be of 1 month’s sales if the company allows 30 days’ credit to debtors. From the total of all these items, an assessment is made about the possible percentage of the value of total current assets which the banker is ready to finance. The balance amount of funds, blocked in the net current asset, is called ‘margin money’ and is treated as part of the project cost. The DPR shows the detailed calculation of the Working Capital and also the Margin Money. Debt Service CoverageRatio (DSCR) The DPR also shows the capability of the project to serve the borrowings for its implementation. The Project Owners as well as the financial institution lending the fund towards the implementation of the project likes to appraise and find whether the project can generate sufficient revenue to repay the loan borrowed (by instalments, as per the term loan agreement) together with the interest due on such loan. Of course, the project owner would like to have the return on investment which is on top of the interest payment, but the DSCR is also important to indicate the liquidity position of the project, i.e. generating not just the profit margin, but sufficient surplus cash to service the lenders, the shareholders (in the form of dividends). 85 CU IDOL SELF LEARNING MATERIAL (SLM)

It is healthy when the DSCR is one; above it is a plus point for the decision in favour of the implementation of the project. Working Capital Requirements: While the ‘amount required’ column shows the organisation’s money tied up in net Current Assets (the phenomenon of creditors is ignored), in spite of such assets being hypothecated, the Banker’s norm to lend money is not 100% and, as such, there are shortfalls for which ‘Margin Money’ is required. In this case the margin money is (in the first year) about Rs. 40 lakhs, i.e. 116.00 minus 77.32. Break-Even Analysis 86 CU IDOL SELF LEARNING MATERIAL (SLM)

The DPR shows a detailed calculation to indicate the level of activities (with the projected figures), when the organisation breaks even. We know that the excess of sales over the variable costs is called the ‘contribution’, that is, the contribution towards the company’s fixed costs and the contribution in excess of the fixed costs represents the profit margin.From the details of estimated sales and the projected cost structure, the particular level of activities is worked out to find when the ‘contribution’ equals the fixed costs and this level of activities is called the break-even point. The components of the total cost is analysed to the fixed cost and the variable cost. As the company’s activities are not stabilised during the initial years the break-even level is worked out from the details of the projected Profit and Loss Account of the third year. The Break- even analysis of the DPR is shown hereinafter. Note The allocation of costs between ‘fixed’ and ‘variable’ is to a certain extent arbitrary. The fixed cost does not remain fixed at all levels and scrutiny of some variable costs may reveal that some part of it may be treated as fixed. However, traditionally, expenses like Direct Costs are treated 100% variable and expenses in the nature of Depreciation as 100% fixed; the overheads are arbitrarily apportioned, considering the nature of expenses as revealed from the scrutiny of the costs. Break-even point, based on the activities at the third year’s operation is, Fixed Cost/ Contribution x 100 = 214/454 × 100 = 46, The project should break-even at the operating level of 46%. Project Report in ‘Offer Document’ Inviting the Public for Subscription to the Organisation Implementing a Project Project report when developed to a DPR with details of functional analysis and estimations of higher accuracy is appraised for making important decisions. 87 CU IDOL SELF LEARNING MATERIAL (SLM)

Such appraisals are made by the project owner for finding the rate of returns (when such owner is a private sector), by the government for cost-benefit (including the social welfare when the project is intended as such) by the financial institution for deciding to lend the fund. This report is also of immense importance for the project management while instituting control in project implementation. We will now detour from the normal text and discuss how a project report is used in the ‘offer document’ a document which includes, inter alia, main features of the project and is distributed to the public for public issue inviting their applications for Share Capital, Debentures etc. requiring such funds for the organisation implementing the project. There are in such ‘public issue’ lead managers to the issue who is supposed to verify all contents of the document (it also includes the terms of application, terms of debenture redemption etc.) and a copy of such document along with the verification certificate are submitted to SEBI, whose approval is required for any public issue. We will now illustrate an ‘offer document’: Project 1,350 tonnes per day (MTPD) new ammonia project. Ammonia from this plant will be used for in-house consumption as a feedstock for fertilizers already being manufactured by the company. The company has existing plant for manufacturing ammonia of 950 MTPD and the new plant will, eventually, replace the old plant. Background The company’s activity during the initial years was manufacture of fertilizers, while ammonia was sold as a by-product. Subsequently, the company diversified to other products like Nylon-6, Melamine and promoted a joint venture (with State Government share of 26% and own share of 25%) for manufacturing Ammonia and Urea. The company has taken over one unit manufacturing Nylon Filament Yarn and Nylon Chips and another unit, which is now ‘Polymers Unit’, manufacturing 5,000 tpa polymers. Note: Project in joint sector, project for diversification. Location The plant is located within the present activity site where space is no constraint. The suppliers of the feedstock, Natural Gas and also Naphtha are also located in the neighbourhood with all convenience for the supply of raw materials and, being housed with the present activities, the finished product can be conveniently used for captive consumption. Project Cost and Means of Finance The company’s project was initially appraised by IDBI in 1994 with the estimated project cost of Rs. 750 crores. Initially, the raw materials envisaged for the project was natural gas. 88 CU IDOL SELF LEARNING MATERIAL (SLM)

However, to enable the project, to have a greater flexibility, changes were made in the equipment design, drawing etc. for the use of naphtha as an alternate feedstock. This change along with the increase in the Customs Duty etc. duty to change in rupee parity raise caused a revision of the project cost finalised at Rs. 1,030 crores as detailed below: Note 1 89 Details of Rupee Loans from F.I. and terms: Othe r term s U p f r o n t f CU IDOL SELF LEARNING MATERIAL (SLM)

ee of 1.05% on loans are payable.  Security—first mortgage and charge on all the company’s movable and immovable properties.  Repayment by 24 equally quarterly instalments commencing from April 1, 1998. Note 2 Details of Foreign Exchange Loan as duly approved by RBI. 1. WFK Germany 135.4 million DM with the terms: i. Interest @ 7.32% p.a. payable semi-annually. ii. One time management fee @ 0.25% on loan amount. iii. Commitment charges @ 0.375% on undisbursed loan amount payable quarterly from 20.11.1992. iv. Repayable by 14 equal, consecutive, semi-annual instalments payable on 30th December and 30th June on and from 30th June on and from 30th December 1997. v. Security payment guarantee of IDBI and SBI. 2. XYK 42.5 million DM: i. Interest @ 7.35% p.a. payable semi-annually. ii. Other terms same as (A) above. Note 3: The company proposes to raise about Rs. 280 crore through Euro Issue/Public based on timing of the fund requirements and suitability of the market conditions. Market and Competition Almost the entire production of Ammonia will be used for captive consumption. Part will be used for production of Urea. Various other players in the industry have also announced capacity expansion in Ammonia and Urea. As per report on the fertilizer industry (December 1995) demand for Urea in India is expected to increase from 16.4 million tonnes in 1994 to 20.8 million tonnes in 2000 A.D. India would continue to be one of the largest importers of Urea with around 4.9 million tonnes of imports till 2000 A.D. Capacity The capacity utilisation of the new Ammonia Plant for four years after the commercial production from October 1997 is estimated as Year 1 80% 90 CU IDOL SELF LEARNING MATERIAL (SLM)

Year 2 90% Year 3 95% Year 4 95% Technology Arrangements: Agreements for technology involved with the technical contractors and the process licensors have been finalised as follows: 1. Engineering contractors: ABC of Germany a leading company in the field of engineering and contracting, material handling, refrigeration and industrial gases. The company will offer licence, know-how, basic engineering and design, training and expatriate services for detailed engineering. 2. Licence: Process 1: From BCD of Germany with a fee of DM 8, 40,000; Process 2: From CDE of Switzerland with a fee of DM 1.149.999; The total licence fee of DM 1.989.999 will be paid as: i. 5% upon effective date of contract; ii. 28% upon disbursement of loan agreement; iii. 33% upon 5 months from the date of contract or on completion of basic engineering, whichever is later; iv. 34% upon acceptance of the plant, at latest 39 months from the effective date of contract. Production Process: The generation of pure ammonia synthesis gas is achieved by adding nitrogen to the pure hydrogen produced. The process plant is divided into the following sections. i. Naphtha storage—pre-treatment ii. Natural gas compression iii. Generation of hydrogen and purification iv. Ammonia synthesis based on ‘Casale’ process; and v. Refrigeration Raw Materials The process technology selected as such that either naphtha or natural gas or a combination of the two can be used as feedstock. Natural gas is distributed by a local company and 91 CU IDOL SELF LEARNING MATERIAL (SLM)

requirement for the plant is now under consideration by the company. Additionally, a Memorandum of Understanding (MOU) has been signed for supply of 3.6 lakh M.T. of Naphtha. Utilities 1. Power The new plant has been conceived on a standalone basis and a 21 MW electro- generator has been incorporated in the design of the plant. A 100% capacity requirement is estimated as 19 MW. There is also a provision for emergency power generator. i. Water -The nearby river will be a source of raw water as approved by the State Government. The demineralised water (DM) will be met from the company’s water treatment facility. ii. Steam - Waste heat boilers in the plant will supply high pressure, steam and the medium pressure steam will be met from the Turbine of the synthesis gas compressor. iii. Compressed air - This will be drawn from the Air separation unit. Manpower The plant will employ 44 officers and 123 technicians for the operation and administration of the plant. Availability of key personnel has also been finalised and the company does not have any difficulty of fresh recruitments. Personnel will be imparted adequate training in the company’s own Training Institute as per the plan. Environmental Clearance: The plant indicates treatment of all factory effluents before it is discharged into the common effluent channel. The State Pollution Control Board has already issued a NOC for the plant. Schedule of Implementation: 92 CU IDOL SELF LEARNING MATERIAL (SLM)

Risk factors and management’s perception of the same. 1. Internal: The manufacturing plants are operationally interlinked. Management perception: The company maintains high safety standards, hence functioning of one plant does not affect the functioning of another. 2. External The profitability of the fertilizer operation is dependent upon the government’s subsidy policy which may come to the end by 31st March 1997. Management’s perception: Government is beginning the process of preparing the fertilizer subsidy policy commencing from April 1997. Financial Projections: As the project is planned within a large existing plant the financial projections of the new ammonia plant, separated from all other activities of the company, are not available in the offer document and the projections are for the company as a whole. Hence, not discussed here. Broad Criteria for Pre-Investment Decisions: The development of a project report, we know, passes through the stages of Project Profile, Project Pre-feasibility and feasibility report, the techno-economic feasibility report and the DPR. 93 CU IDOL SELF LEARNING MATERIAL (SLM)

Somewhere at these stages, a tentative decision is made by the project owner/ management for investment in the said project but before a firm decision—certain principles—which are the standards for judging the project and launching on it—are applied and followed. This exercise is called the criteria for pre-investment decision. We know that different considerations are applicable to different projects, and the projects for different sectors. Because projects are of innumerable types, these criteria vary with different projects. However, considering their commonality, we summarise below the broad criteria applicable to pre-investment decisions for a project: Objectives and Attitude The project is to satisfy the basic objectives for which the investment is planned. There should be good, positive attitudes of the project owner, parent company—if any—and the senior management involved. There should be a clear commitment for such a project. Definition The definitions should be comprehensive and clearly communicated including: 1. The various study on the project, carried out in an orderly fashion. In the absence of clarity in any, area further support study should be carried out in the relevant area. 2. Any area of uncertainty in the technology and/or design should be followed up till a clear, acceptable technology/design has been arrived at. The technology/design should be tested already (may be even in some other project). External Factors All external factors which are likely to influence the project (including its implementation) should be recognized, e.g.: i. Effect on prices; ii. Relevant rules and regulations; iii. Community factors, particularly in the neighbourhood of the site. (Note the big public and environmental outcry about the Rs. 1,800 crore project for Gopalpur port, the Tehri Dam project etc.). iv. Political support for the project, if any. Financial Aspect 1. There should be full financial analysis of the project due to the project risk undertaken. 94 CU IDOL SELF LEARNING MATERIAL (SLM)

2. The availability of the funding should be completely appraised till the commissioning of the project. In deciding about the total commitment, care should be taken to find out i. Opportunities available in the market. ii. Can the resources be alternatively used to serve the objectives? iii. How does the implementation reflect cost-benefit ratio? 3. Recognize that government finance may develop to political control on the project itself. Organisation Is there a proper organisation, particularly in the managerial grade, to match the project size and complexity so that there are no untoward surprises in the course of its implementation? The organisation should be manned by competent personnel for resource management with firm and effective leadership. Schedule The project should have a good planning with clear schedules and adequate back-up strategies, particularly for high-risk areas. Proper planning of the Quality Assurance (QA) is recognised. Communication and Control The system of communication in implementation and operation and the necessary control, as such, should be instituted in the proposed project as visible, simple and friendly. Resource Allocation Before making a final commitment on the project, particularly large projects with longer duration, a study is made to review whether other alternatives are available to satisfy the objectives. Or, does it entail the consumption of least resources for such a project? This is a matter of serious consideration in cases of major government projects as 1. Development of railways 2. Building of national highways 3. Development of major airports, harbours etc. The commitment involves resource allocation for years and, as such, a meaningful serious consideration before the start of investment. 6.3 SUMMARY  A detailed project report is extremely important in order to turn the idea of your project into a reality. A DPR acts as a ladder towards success to make your project 95 CU IDOL SELF LEARNING MATERIAL (SLM)

reach great heights. If the project report is prepared by putting a tremendous amount of effort into details, you will surely get good results later.  Managing the budget - Managing the budget or expenditure is not an easy task, especially when you have to look at so many aspects of your project. Hence a DPR comes to your rescue and helps your plan and manage your budget in such a manner that you do not go over your set budget.  Minimizing risks - Sometimes, despite giving great attention to details, risks, and issues arise during the implementation of the project. Hence it is crucial to identify and reduce these risks as much as possible so that the project is implemented without any hassles. It is reporting the risks to the project manager before the implementation that makes room for improvement.  Project progress follow up - One of the most important aspects of a detailed project report is to have a control on the project progress. Accordingly, one can keep track of the schedule of the project and eliminate the problems, if any.  Holdover the project - Project reporting maintains hold of the higher authority, such as managers, over the project so that they can keep a check on progress and eliminate factors that cause a halt in the progress of the project. The performance of the team members and their quality of work is also checked.  A detailed project report has innumerable benefits in order to drive a project towards the path of success. Hence it is vital to get a DPR prepared from an experienced person/firm that holds relevant experience and skillset to leave no stone unturned. It is also important that the person who is a part of the team for the project has relevant expertise in the field so as to take up the task of handling the project. Putting the DPR's preparation task into the hands of an inexperienced person can also cause you to lose a lot of money, so choose wisely. 6.4 KEYWORDS  Techno-Economic Feasibility: It refers to the estimation of project demand potential and choice of optimal technology.  Technical Know-how: It is referring to skills, abilities, and knowledge that people have; specifically, their ability to do things. In businesses, it is the knowledge and ability to run things within the company.  Management Perception: It is the idea of using an image as a tool for identification of sponsorship opportunities.  Feed Stock: It refer to any renewable, biological material that can be used directly as a fuel, or converted to another form of fuel or energy product. 96 CU IDOL SELF LEARNING MATERIAL (SLM)

 Memorandum of Understanding (MOU): It is a document that describes the broad outlines of an agreement that two or more parties have reached. 6.5 LEARNING ACTIVITY 1. Write the role of feasibility analysis in developing successful business idea? ___________________________________________________________________________ ___________________________________________________________________________ 2. Draft the techno economic feasibility report of any one Indian company? ___________________________________________________________________________ ___________________________________________________________________________ 6.6 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. What is the meaning to the Techno Economic Feasibility Report? 2. Write any two objectives of detailed project report? 3. What is project schedule? 4. Name any two contents included in detailed project report? 5. What is Break even analysis? Long Questions 1. What is Detailed Project Report? Explain in brief about the background of Detailed Project Report. 2. Explain the factors influencing the Detailed Project Report. 3. Discuss the criteria applicable to pre-investment decisions for a project. 4. Illustrate about the ‘Offer’ document. 5. Describe the advantage of Detailed Project Report to management. B. Multiple Choice Questions 1. What are the factors influencing the detailed project report? a. Technology aspect b. Social and political aspect c. Economic aspect d. All of these 97 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Expand DPR? a. Detailed Proposal Report b. Described Project Report c. Detailed Project Report d. Duplicate Project Report 3. Which of the following is not an easy task to manage? a. Budget b. Forecast c. Actuals d. Business 4. What does at the end of the feasibility study the systems analyst? a. Meets the users for a discussion b. Gives a summary feasibility report to the management c. Gives a systems proposal to management d. Tells the top management if the system is not feasible 5. What is the strength of the materials can be checked by? a. Visual inspection b. Quality control c. By asking the manufacturer d. By referring to various codes Answers 1-d, 2-c, 3–d, 4-b, 5-b 6.7 REFERENCES Reference  Tchalakov, I. (2015). The new space entrepreneurship and its techno-economic networks. International Journal of Actor-Network Theory and Technological Innovation (IJANTTI), 7(1), 43-63.  Freeman, C. (2009). Schumpeter’s business cycles and techno-economic paradigms. Techno-Economic Paradigms. Essays in Honor of Calota Perez, Anthem Press, New York, NY, 125-144. 98 CU IDOL SELF LEARNING MATERIAL (SLM)

 Perez, C. (2010). Technological revolutions and techno-economic paradigms. Cambridge journal of economics, 34(1), 185-202 Textbooks  Gordon, E. Natarajan, K& Arora, A. (2009). Entrepreneurship development. Himalaya publishing house.  Mellor, R(2008).Entrepreneurship for everyone: A student textbook. Sage.  Abenov, Y, M. Kirdasinova, K, A. Tulaganov, A, B. Zhumataeva, B, A. Mutalyieva, L. M&Issayeva, B, K. (2019). Entrepreneurship education: Teaching and learning modern mechanisms of entrepreneurship development based on public-private partnership. Journal of Entrepreneurship Education.  Janakiram, D, B&Rizwana, M. (2011). Entrepreneurship Development: Text and Cases. Excel Books India. Websites  https://www.resurgentindia.com/detailed-project-report-meaning-and-its-content  https://izzeetuts.com/techno-economic-feasibility-report/ 99 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT – 7: ANCILLARY INDUSTRY DEVELOPMENT STRUCTURE 7.0 Learning Objectives 7.1 Introduction 7.2 Identification of Opportunities for Ancillary Industries 7.2.1 Meaning 7.2.2 Opportunities in Transportation 7.2.3 Opportunities in Distribution 7.3 Summary 7.4 Keywords 7.5 Learning Activity 7.6 Unit End Questions 7.7 References 7.0 LEARNING OBJECTIVE After studying this unit, you will be able to  Know how an entrepreneur identifies an opportunity for ancillary industries.  Explain what entrepreneurs do to scan the opportunity.  Elaborate upon the framework for identification of opportunities for ancillary industries.  Describe about ancillary industries operations. 7.1 INTRODUCTION In terms of the processes through which an enterprise gets established, this Unit discusses how an opportunity is identified by one who wishes to set up his or her own enterprise. The process by which an opportunity is identified is at times described as Opportunity Scanning or Sensing and Identification (OSI). An opportunity is identified and an enterprise established so that the person who carries out all the operations is self-employed, earns some income and in some cases profit. This whole activity is at times covered under one term entrepreneurship and entrepreneurs are also self-employed. In this Unit Entrepreneur and Entrepreneurship are viewed as synonymous with self-employment. Such an identification does not hold good under all circumstances but in order to explain OSI we have taken the terms as synonymous. 100 CU IDOL SELF LEARNING MATERIAL (SLM)