MARKET SURVEY AND 2 OPPORTUNITY IDENTIFICATION SS OO 2.1 SCANNING OF BUSINESS ENVIRONMENT Business environment scanning’ can be defined as “the study and interpretation? of the political, economic, social and technological events and trends which influence @ business, an industry or even a total market.” The factors which need to be considered for environmental scanning are events, trends, issues and expectations? of the different interest groups. There are a number of common approaches for such type of analysis. One of the most important analysis is PESTEL analysis. The six environmental factors of PESTEL analysis are the following: — Political factors — Economical factors — Socio-cultural factors — Technological factors — Environmental factors — Legal factors @ Political factors * Taxation policy * Trade regulations * Government stability * Unemployment policy @i) Economical factors * Inflation‘ rate * Growth in spending power * — Recession® or boom® * Customer liquidations Gii)Socio-cultural factors + Values, beliefs + Language + Religion + Education latet 8 tar, 2rd, caveat, sane, “qa-feate, "nea, rare oat Peaoey 35oe Electronic media + Research and development. + Rate of technological change n ital factors © + Competitive advantage + Waste disposal Energy consumption! Pollution monitoring (vi) Legal factors Employment laws Health and safety Produce safety Labour laws Advertising laws 2.2 INPUTS REQUIRED FOR A NEW ENTREPRENEUR A new entrepreneur may not be possessing all the qualities, characteristics, skills and talent required for a successful entrepreneur. He may not be an expert in tackling? all the problems related to his new enterprise. He may not be able to decide what is right or what is wrong. Therefore, an entrepreneur needs a special training so that he can develop entrepreneurial abilities and skills sufficient enough to face the various business related problem boldly. Though there is no such formal training on all aspects yet he has to be given sufficient inputs to create confidence in him. An entrepreneur learns more from experiences. Therefore, lot of confidence in the entrepreneur and he will develop own activities and their implication on the future of the project. Apart from this, the entrepreneur may be given some input training on the followings :‘(Sale tax, income tax ete. (h) Collection and analysis of information for decision n 2.3 DATA COLLECTION FOR SETTING UP we o 3 __ (MARKET SURVEY) nd aotiner ae am During the preliminary stages of project planning, a new entrep) afinformations on various aspects of the proposed project. It is, therefore, during the planning stage of setting up an enterprise, 1 carry out a detailed market survey in order to informations will enable an entrepreneur to understand the and take final decision about viability of the project. ‘The data to be collected for setting up new ventures may be classified into following heads : Raw materials data Machinery and equipments data Market data Financial data Personnel data General data ‘ Raw materials data : : (@ Name of the major suppliers of the raw materials needed for the project. } (®) Materials to be imported, if any. Govt. policies regarding the import of — kee e oer this material. © Prices and availability of raw materials in the last few years: @ Does any govt. policy affect the price and availability of materials the market? ie (© Is there any alternative raw material which can be used? aISHAN'S Entrepreneurship Develop Jiers of the machinery needed fe inery and equipments data “Who are the manufactures/supp! i of machineries : oa. the specifications of different brands : “ - Bae a. rts of the machinery are easily available? et ota i hi chine manufacturer and i ‘ket standing of the ma fs A a ee Bee to sunpliod his machines in the past 2 whe » @ re Hace levels of these machines supplied already in — a : © What guarantee/warranty of performance is given manufacturer/supplier? (f) What are the terms of supply? : (g) What is the normal repair and maintenance cost? i (h) Whether special type of transport and handling will be required? @ Do you need any imported machine? Has permission been taken for import of such machine? 3. Market data: (@) Collect the data from the existin, proposed product regarding the foll @ Range of products (i) Installed and utilised capacity of their units (iii) Prices of their products (w) Their terms of business manufactures/competitors of the lowing : (») Their plans for expansion/diy. (v) Specific problem of the propo. 0) oe ee following data from the traders/suppliers of the Proposed @ Existing traders of the (i) Their terms? (iii) Are they deal (iv) Market area ersification’, if any. sed industry, if any Proposed product of business and commission ete, ling in other products also? and annual turnover? (ii) What are the Present sources of supply? ferfeettercor, 2ard, fara 3 ee i oh oaMarket Survey and Opportunity Identification 39 4. (iii) Whether he is satisfied with the present products? (iv) What are the preferences! of the customer in case of your product? (v) What are the purchasing criteria and how much purchasing power does the consumer hold for the products in consideration? (vi) Consumption pattern of the products which you want to manufacture. Any expected change in consumption pattern. (vit) Is the consumption of the product is uniform throughout the year? Financial data : (@ Approximate financial requirements of the proposed unit. (6) Prevailing? rates of interest on term loan and working capital loan offered by different financial institutions. (©) Financial incentives available in the present case (@® Financing pattern (e) Sources of term loan and working capital loan Personnel data : (a) Total manpower needed for the proposed unit (b) Categorywise requirement of manpower and their qualifications and skills required (c) Are the key personnel like engineers/technical personnel/supervisors easily available as per the requirement of the proposed project? (@ What are the prevailing wage and salary rates? General data: @ Is there a possibility of getting a shed on rent in the industrial estate? What are the prevailing rents? (®) Possibility of acquiring an industrial plot in the area identified for the project and cost of the same. (© Electric power supply position in the area identified for the proposed project. 2.4 ASSESSMENT OF DEMAND AND SUPPLY IN POTENTIAL AREAS OF GROWTH (SALES FORECASTING) The entrepreneur is required to know the demand of the product likely to be Manufactured. In other words, he must know the estimate of sale potential of the m in future. All manufacturing units are based on the sale forecasts. This forecast helps the management in determining as to how much will be the turnover, how ‘wafer, wee, Arete .: , ISHAN'S Entrepreneurship Development and F oitictes and what shall be the requirement of men, ANCE OF ASSESSMENT OF DEMAND & SUPPLY Sales forecasting is a very important function for manufacturing concern, it is useful in following ways : oe “a - @ It helps to determine production volumes considering availabili facilities like equipment, capital, manpower etc. i (i) It helps in taking decisions about the plant expansion and changes production schedule or should it divert! its resources for manufa other products. (iii) It facilitates in deciding the extent of advertising etc. (iv) Sales forecast helps in preparing production and purchasing schedules, 2.6 FACTORS FOR SALES FORECASTING Following factors should be considered while making the sales forecast : (@ Competition : To assess demand, it is most important to know about existing and new competitors and their future Programme, quality of their prod sales of their product. Opinion? of the customers about the pon the government policies and is affected. Demand of a product also depends k 7 “pon the factor whether government is a buyer of that product or not, ! “asd ‘a ie concern itself : These factors are related to the icity e plant, i i i i ane eee Plant, change in price due to the change in expenditure, 2.7 METHODS UsED FOR FORECA‘ STING THE Dy) Following methods YANMarket Suvey and Opportunity Identification at 4, Customer's views : This is the most direct method for making forecasting for short term, in which customers are asked what they are thinking to buy in near future. In this method, everything depends upon the customer's views, which may mis- judge or mislead! or may be uncertain about the quantity to be purchased by them in near future. 2, Salesmen’s opinion: In this method, forecasting depends upon the salesmen’s estimation for their respective areas. As the salesmen are closest? to the customers, they can estimate more properly about the customer's reaction, about the product and their future requirements. All the estimates of salesmen are consolidated to know the total estimate of the sales. 3. Trends projections : A well established firm has considerable data on sales. These data are arranged in a chronological® order, which is known as ‘time series.’ Thus time series are analysed before making the forecasts. The trend line is projected by some statistical method generally by least square method. 2.8 IDENTIFYING BUSINESS OPPORTUNITY To establish an enterprise, one needs a situation in which his ideas can be converted into project and profits. One has to catch the right opportunity and use this opportunity in his favour to establish a new enterprise. There are a lot of opportunities available in the world of business, but they are not visible’ to everybody. They are visible only to those who constantly remain in search of them. Opportunity does not come to anyone by chance, but the entrepreneur has to struggle’ for it. The entrepreneur has to collect necessary resources to convert the opportunity into a successful business venture. An entrepreneur is not expected to be an expert in searching and analysing business opportunities. When someone starts new venture, he needs guidance on various points. He has to contact various persons and collect a lot of information. He has to meet entrepreneurs in different lines of business to know their projects and activities, He has to meet some successful entrepreneurs to know about the secrets of their Success. Also he has to meet some entrepreneurs who could not be successful, to know the possible reasons of their failures. He has to collect informations on few business opportunities and analyse them so that he may be in a position to select the best opportunity. But before selecting an opportunity, the entrepreneur has to ensure two things : ec eea good demand for the a the igher then the supply. Not Pan studied but also the future 1s to be projected. While analysing the demand and supply ntrepreneur has to take into account the possibilities of establishing Rew units and intr-rogional ow ofthe peas the investment : If the rate , (b) There must be a good returns inci aee 2 returns on the investment is not attractive, the entrepreneur s not go ahead ~ explore! the opportunity even if there is a good scope for the product. The rate of return must be higher in comparison to other alternatives available. The rate of " return on the investment should also be such that it covers the remuneration of the _ entrepreneur, interest on the loans and something extra to repay the cost of project so that the entrepreneur will be able to recover the entire cost of the project in near future. There are several other factors also for the project related to technical, production, managerial and feasibility point of view which must be considered before taking the final decision about starting of a new enterprise. For all these informations, the entrepreneur has to remain in close touch with a number of other entrepreneurs, institutions and business publications so that he acquires a lot of knowledge and feedback regarding his proposed new ventures, 2.9 CONSIDERATIONS IN PRODUCT SELECTION Tt is the first step towards manufactured is profitable. Her business success. a successful venture that the product to be nce product idea is the single most important factor in es a successful product idea, as many Considered. Those products, that appear most > een ected to a more detailed feasibility analysis. 'e product to be selected must me et one of the following criteria : (@) The product is the : " care Pioneer in the market and will satisfy a Presently (6) The product is such that fc i i existing supply in the Reeako there is already more demand than the (© The product is such that whi, products in the market di promising?, must then be subjIdentification The following factors must be considered in product selection : (c) Present market : The size of the presently available market is the main deciding factor in the product selection. Estimates of the number of potential customers and their expected individual capacity to consume, gives the sales estimate of the product in consideration. The presence of similar products in the market and their quality and price also must be considered. (b) Scope of growth of market : There should be a prospect for rapid growth in the market. Projected! increase in number of potential customers, increase in need, favourable economic trends must be taken into account while selecting a product for manufacturing. (c) Costs : The cost of production and distribution must permit an acceptable profit when the product is priced competitively. Costs of raw materials, labour costs, distribution costs, after sale-service costs etc. must be considered before taking a final decision on product selection. (d) Availability of main production factors : Production factors such as raw materials, water, power, fuel and skilled labour should be examined to ensure their availability comfortably and at competitive rates. (e) Risks : It is impossible to look into the future with certainty®. While it may be difficult or impossible to predict the future, we can examine with considerable confidence the possible effect of unfavourable® future events on the product to be manufactured. The possible risks are technological risks, competition, market stability, quality and reliability‘ risks, predictability’ of demand, seasonal demand, change in Govt. policies towards the product etc. a Seeman, irae, sutra, favaattaer, qatqart SOLVED EXERCISE Q.1. What do you mean by business environment scanning? Ans. Business environment scanning can be defined as “the study and interpretation of the political, economic, social and technological events and trends Which influence a business, an industry or even a total market.” Q.2. What do you mean by PESTEL analysis? Ans. The six environmental factors of PESTEL analysis are the following : P — Political factors E — Economical factors S — Socio-cultural factorsneeds hot collecting various informations i ‘ket survey. Bee f new ventures? |. Which data is to be collected for setting up 0! : ; as ‘The data to be collected for setting up new ventures may be classified int following heads : 1. Raw materials data 2. Machinery and equipments data 3. Market data 4, Financial data 5. Personnel data 6. General data Q.5. Which financial data is collected for setting up of new ventur Ans. (a) Approximate financial requirements of the proposed unit. (®) Prevailing rates of interest on term loan and working capital loan offered by different financial institutions. (© Financial incentives available in the present case (d) Financing pattern (€) Sources of term loan and working capital loan Q.6. Define the term sale forecasting. Ans. The process of knowing the demand of the product likely to be manufactured is known as sale forecasting. Q.7. Which factors affect the sale forecasting of a Product? Ans. (i) Competition in the market (ii) Changes in technology (iii) Govt. policies related to the product (iv) Factors such as plant capacity, change in price or change in hae mix etc. Q.8. Which methods are used for forecasting the demand of a product? Ans. Following methods are generally used for forecasting of sales :OF AAI Tess io bo veneer jn tp marke und eal : Q.10. List the possible risks for a new venture. unserved need, od i z . () The product is such that for which there is already more demand than the existing supply in the market “an cme (©) The product is such that which can successfully compete with existing similar products in the market due to its pms design or lower price etc. a Ans.(i)_ Technological risks 4, 5. (i) Competition in the market (iii) Market instability anton 28 (iv) Quality and reliability risks Ne! (v) Changes in govt. policies related to the product. UNSOLVED EXERCISE Explain different methods used for forecasting the demand of a product, What do you mean by opportunity identification? Describe important tips which could help an entrepreneur in identifying a viable business ao >| Discuss elaborately the issues which need to be considered while selecting a 4 product for a proposed project. j What factors should be considered while making a final selection of the product to be manufactured? : What machinery and equipment data must be collected for establishing a small scale industry? ;