Technological Innovation Management & Entrepreneurship MODULE-4

TECHNOLOGICAL INNOVATION
MANAGEMENT & ENTREPRENEURSHIP
[Subject code: BEC501]

MODULE – 4

MODERN SMALL BUSINESS ENTERPRISES

&
IDEA GENERATION AND FEASIBILITY ANALYSIS

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MODULE- 4a

Modern Small Business Enterprises & Institutional Support for Business

Enterprises

Modern Small Business Enterprises

 Small businesses are privately owned corporations, partnerships, or sole

proprietorships that have fewer employees and/or less annual revenue than a regular-
sized business or corporation.

 Businesses are defined as "small" in terms of being able to apply for government
support and qualify for preferential tax policy varies depending on the country and
industry.

 Include service or retail operations such as convenience stores, small grocery stores,
bakeries.

Role of Small Scale Industries

 Today, the small-scale industry (SSI) constitutes a very important segment of the
Indian economy.
 The small-scale sector has emerged as dynamic and vibrant sector of the economy.
 A vibrant small-scale sector holds the key to economic prosperity in an economy like
India, characterized by abundant labour supply, unemployment and underemployment,
capital scarcity, growing modern large industrial sector providing scope for
ancillarisation and so on.
 Small-scale sector accounts for about 35 percent of the country’s industrial production,
40 percent of exports and 60 percent of employment opportunities.
 The SSI sector has acquired a prominent place in the socio-economic development in
the country.
 Various policy initiative undertaken by the government, have helped the sector in
acquiring the status of a major contributor in the growth process.
 The process of liberalization and economic reforms, created tremendous opportunities
for the growth of SSIs but even thrown up new challenges for the sector.
 In order to build the capability to withstand emerging pressure and ensure sustained
growth, SSIs need to address on vital issues like building competitive strength,
introducing technology up-gradation and quality improvement.

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Importance of Small-scale Industries

 Provide increased employment through labour-intensive process.
 Require lower gestation period.
 Easy to set up in rural and backward areas.
 Need small/ local market.
 Encourage growth of local entrepreneurship.
 Create a decentralized pattern of ownership.
 Foster diversification of economic activities.
 Introduce new products particularly to cater to local needs.
 Influence the standard of living of local people.
 Provide equitable dispersal of industries throughput rural and backward areas.

Impact of Globalization on SSI in India

 The small-scale industry never had a strong desire to grow to medium and large scale
because of the benefits of protection given to it.
 Many policies also discouraged the growth of small-scale units into large ones and had
a stunting effect on manufacturing, employment and output growth.
 With globalization, the SSIs are now more exposed to severe competition both from
the large-scale sector, domestic and foreign and from MNCs.
 The problems of SSIs in the liberalized environment are
o Multidimensional delay in implementation of projects
o Inadequate availability of finance and credit
o Expensive mode of communication
o Marketing problems
o Cheap and low quality products
o Delay in payment
o Technological obsolescence
o Imperfect knowledge of market condition
o Lack of infrastructure facilities
o Deficient managerial and technical skills.

 Globalization has resulted in the opening up of markets, leading to intense competition.

 India has asked to remove quantitative restrictions and on imports by 2001 and all
exports subsidies by 2003. As a result, every single individual enterprise in India has to
face competition.
 Competition in the domestic market has intensified with the arrival of multinational
companies as the restrictions on foreign direct investments have been removed.

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 To meet the present as well as future requirements of the sector and the national
economy satisfactorily, the policies and projects for the SSI sector will have to be
effective and growth oriented so as to achieve competitiveness, collective approach
and capacity to upgrade.
 In order to protect, support and promote small enterprise as also help the becoming
self- supporting, a number of protective and promotional measures have been
undertaken by central government.
 The promotional measures cover the following
o Industrial extension service
o Industrial support in respect of credit facilities
o Provision of developed sites for construction of sheds
o Provision of training facilities
o Supply of machinery on hire-purchase terms
o Assistance for domestic marketing as well as exports
o Special incentive for setting up enterprise in backward areas
o Technical consultancy and financial assistance for technological up-gradation.
 State governments also have provided supportive services like investments and
promoting small industries with a view to enhancing industrial production and
generating employment in their respective States.

Impact of World Trade Organization (WTO) on SSI

 The emerging challenges to the small-scale sector are due to the impact of the
agreements under the WTO to which India is a signatory along with 134 member
countries.
 The setting up of the WTO in 1995 has altered the framework of international trade
towards non-distortive, market-oriented policies.
 The main outcome of WTO- stipulated requirements will be brought about through
reduction in export subsidies, greater market access, removal of non-tariff barriers and
reduction in tariffs.
 There will be tighter patent laws through regulation of intellectual property rights
under the Trade-Related Aspect of Intellectual Property Rights (TRIPS) agreement.
 Worldwide market and opportunity to export.
 Intensified competition in the domestic market.
 Import of high quality goods.

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WTO: Pros and Cons

 In general policy literature on general impact of the WTO and its agreement on SSIs
are not different from its implications to industry.
 SSIs contribute about 54 percent of non-traditional and 10 percent of traditional
product export of our country.
 SSIs have to face threats and also avail opportunities owing to the WTO and its
agreements.
 The main opportunities of the WTO are classified into three,
o National treatment for exportable items across the countries all over the world,
with better market access through the Internet.
o Enlightened entrepreneurs have greater opportunities to benefit from their
comparative advantages due to lowering of tariffs and dismantling of other
restrictions.
o Industries that are in constant touch with the government, which in turn
negotiates in their best interests in the on-going dialogue with the WTO, are
going to benefit.

Characteristics of SSI
 Capital investment is small and most of them have small number of workers
 Generally owned by a single or at the most two persons and engaged in production of
small goods
 Most of them are family owned business
 Workers are not well recognized and they may do different types of works as need
arises
 Funded by owner’s savings or short-term loans
 SSI activity is mainly dependent on owner’s entrepreneurship
 Exploitation of human and natural resources
 Generally management and organizations are very poor
 Profit margin is less
 Innovation and risk bearing is high
 Generally found in urban and semi urban areas.

Objectives of SSI’s
 Creation of employment opportunity
 Improvement of output , income and better standard of living
 Elimination of economic backwardness of rural and underdeveloped areas.
 To reduce regional imbalance

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 To provide employment and means of a regular source of income to the needy people
living in rural and semi-urban areas
 To improve the quality of industrial products produced in cottage industries and
increase production and profits.
 To facilitate import substitution.
 To encourage entrepreneurship and self-reliance.
 To mobilize regional resources of capital.

Concepts and definitions of SSI Enterprises

 Small-scale Industrial Unit (SSI): An industrial undertaking in which the investment
in fixed assets in plant and machinery, whether held on ownership terms or on lease or
by hire purchase. Does not exceed Rs.100 lakh.
 Ancillary Unit: This is a sub-class of SSIs. An industrial undertaking which is
engaged or is proposed to be engaged in
o The manufacture of parts, components, sub-assemblies, tooling or intermediates.
o Rendering of services, or supplying or rendering not less than 50 percent of its
production or its total services.
 Export-oriented Unit (EOU): An industrial undertaking in which the investment in
fixed assets in plant and machinery, whether held on ownership terms or on lease or by
hire purchase. Does not exceed Rs.100 lakh and has an obligation to export 30% of
production.
 Tiny Unit: The investment limit in plant and machinery in respect of tiny enterprises is
Rs. 25 Lakh irrespective of the location of the unit.
 Women Entrepreneurs: A small-scale industrial unit/industry related service or
business enterprise, managed by one or more women entrepreneurs in proprietary
concerns. Share capital should not less than 51% as
partners/shareholders/directors/members of cooperative society.
 Small-scale services and Business (industry-related) Enterprises (SSSBEs):
Industry related services and business-related enterprises with investment in fixed
assets, excluding land and building, up to Rs. 10 Lakh. The services are advertising
agencies, Marketing consultancy, Industrial consultancy, equipment rental and leasing,
typing centre’s etc.
 Activities not recognized as SSIs and SSSBEs: Transportation, storage,
Retail/wholesale, Hotels etc.

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Definition of SSI
 Conventional Definition: Cottage and handicraft industries that employ conventional
labour–oriented methods to produce conventional products, mainly in the rural areas.
Some examples are handloom and handicrafts.
 Operational definition: “All the undertakings having an investment in fixed assets in
plant and machinery, whether held on ownership terms or by lease or hire-purpose, not
exceeding Rs. 60 lakhs”.
 National Income Accounting: A unit engaged in manufacturing in manufacturing,
servicing, processing, servicing and preservation of goods having investment in plant
and machinery, at an original cost not exceeding Rs.60 lakhs”.

Government policy and development of the Small Scale sector in India

 India’s concern and support for small-scale enterprises has focused excessively on the
small-scale industry.
 Various measures taken by the central and state governments for the development of
the SSI,
o Product reservations
o Fiscal concessions
o Preferential allocation of credit and interest
o Subsidy in a credit-rationing framework
o Extension of business and technical services
o Preference in government procurement
o Marketing assistance inc

Administratively, India’s SSI sector is divided into seven industry groups

 Traditional Sector:
o Handicrafts
o Handlooms
o Khadi, village and cottage industries
o Coir
o Sericulture

 Modern Sector
o Power looms
o Residual small-scale industries

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 Indian definition of small-scale enterprises (SSE) based largely on cumulative amount

of investment in plant and machinery whose limits have been periodically revised
upwards.
 Emerging liberalized and competitive economic environment necessitated structural
and fundamental changes in the policy framework, causing a shift in focus from
protection to promotion.
 Govt. has announced several objectives and intentions through SSI industrial Policy
Resolutions (IPRs).

Growth and Performance of Small Scale Industries in India

1. Pre- and Post- liberalization Periods.
o The potential for creating employment
o The output level of SSI went an increase of nearly 20 times over a period of 20
years.
o Exports have gone up by nearly 40 times.
o The pace of growth was relatively lower compared to that of the pre-
liberalization period.

2. Performance of small-scale Industries in India.

o The SSI contributes to the GDP
o The value of production has increased.
o The sector is estimated to grow at the rate of 7.5%

3. Share of small-scale Industrial Units in Total Exports.

o With the growing trend towards liberalization and globalization, export is one of
the focus areas of SSI units.
o The commodity-wise export of major products by SSI units has also increased
over a period of time.

Sickness in SSI sector

 Sickness was identified through the latest definition of RBI given by the Kohli
Committee. Incipient sickness was identified in terms of continuous decline in gross
output.
 Sickness in the total SSI sector was to the tune of 1%, whereas in the registered and
unregistered SSI sector it was 3.38% and 0.64% respectively.
 The maximum number of sick units-about 59.33% was located in West Bengal, Kerala,
Maharashtra, Karnataka and Andhra Pradesh.

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 Out of the units having lone outstanding with institutional source such as banks and
financial institutions, sickness was reported to be about 19.6% in the registered SSI
sector and 16.61% in the unregistered SSI sector. In the total SSI sector, this
percentage was 17.8.
 Incipient sickness, Identified in terms of a continuous decline in gross output was
11.5% in the registered SSI sector and 6.48% in the unregistered SSI sector. In the total
SSI sector, this percentage was 7.4.
 Combining the three yardsticks used to measure sickness:
o Delay in repayment of loan over one year.
o Decline in net worth by 50%
o Decline in output in last three years, about 13.98% of the units in the registered
SSI sector were identified to be either sick or incipient sick.
This percentage was only 6.89 in the case of unregistered units. In the total SSI
sector, this percentage was 7.82.
 The States of Kerala, Tamil Nadu, Andhra Pradesh, Karnataka, and Maharashtra had
maximum number of sick/incipiently sick SSI units. These five states together
accounted for 54.28% of the sick/incipiently sick SSI units in the country.
 “Lack of demand” and “Shortage of working capital” were the main reasons for
sickness/incipient sickness in both the registered and unregistered SSI sectors.

Problems for Small Scale Industries

 The problems of small industries may be divided into groups – External and Internal.
o External problems are those which result from factors beyond the control of the
industrialist such as the availability of power and other infrastructure facilities
required for the smooth running of small-scale industries.
o Internal problems are those which are not influenced by external forces.

Internal

o Choice of idea
o Feeble structure
o Faulty planning
o Poor project implementation
o Poor management
o Poor production
o Quality
o Marketing
o Inadequate finance
o Labour problems
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o Capacity utilization
o Lack of vertical and horizontal integration
o Inadequate training in skills
o Poor and loose organization
o Lack of strategies
External
o Infrastructure
 Location
 Power
 Water
 Post Office and so on
 Communication
o Financial
 Capital
 Working capital
 Long-term funds
 Recovery
o Marketing
o Taxation
o Raw Material
o Industrial and financial regulations
o Inspections
o Technology
o Policy
o Competitive and volatile environment

Problems faced by SSI

 Difficulty in obtaining credit from commercial banks because of their general inability
to provide security.
 Inability to offer liberal credit terms in the sale of their products.
 Absence of management expertise. Often managed by one person who performs a
number of functions usually with no formal training.
 Difficulty in competing with imported products due to high production costs.
 Competition from other local entrepreneurs in the same line of business competing for
the limited local market.
 Difficulty in obtaining industrial land in towns and cities. The shortage of industrial
land is giving rise to more and more backward operations.

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 Under capitalization
 Difficulty in identifying appropriate technology and technical assistance.
 Bureaucratic red tape and regulations.
 Identification of Industrial projects for development
 Project preparation and evaluation.
 Financial or credit support and investment promotion.
 Consultancy and counseling services.
 Development of infrastructure of various kinds in the appropriate areas.
 Entrepreneurship development
 Industrial training and skill formation
 Quality control and testing facilities.
 Market promotion, both domestic and export.
 Procurement of raw materials and equipment.
 Productivity increase through modernization.
 Incentive measures, by industry and by area.
 Local initiative.
 Regional and International technical and financial assistance.
 Cooperation among developing countries.

Ancillary Industry and Tiny Industry

Ancillary Industry
 Ancillary industries are small industries having investment in fixed assets, plant and
machinery not exceeding Rs.75 lakhs and engaged in
o Manufacturing of parts, components, sub assemblies, tooling or intermediates.
o The rendering of services, supplying, rendering or proposing to supply or render
30% production of the total services.

 All the service –oriented enterprises are now eligible for registration as SSIs and are
entitled for the same concessions and incentives that are offered for SSIs.
 Several clarifications are issued on the above definitions of ancillaries by government
from time to time. Some of them are:
o In calculations of plant and machinery, the original price paid by owner
irrespective of new or old is to be considered for accounting.
o The cost of equipment.
o Units producing intermediates are considered as ancillaries.
o Units providing service facilities like machining, pressure cleaning, sand
blasting etc., are recognized as ancillaries.

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Advantages of Ancillary Units

o Providing an effective solution to the marketing problems of SSIs
o Complementary with regard to output and enable reduction in the production
cost.
o Employment generation and utilization of money in untapped hands.
o Reduction in gestation period of production.

Tiny Industry
 A unit is treated as Tiny Industry where investment in plant and machinery does
not exceed Rs.5lakhs.
 The growth in Tiny industries industrial and economic activities and ensures
maximum utilization of local resources.
Advantages
o Utilization of local resources like men and material
o Limited capital to start the industry
o Less risk involved
o Smaller gestation period
o Production of goods as per choice of consumers
o Exports, there by earning foreign exchange
o Employment generation to rural people
o Regional development
o Entrepreneurial development

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MODULE- 4b
Idea Generation
 The feasibility study begins with the formulation of business idea, which you can
obtain through market research, family, friends, suggestion boxes or brainstorming. At
this phase, you can downsize the number of ideas and retain the most realistic one.
 Depending on your business culture, you can discard the extra ones or preserve them
for future references when you need to. You have to conceptualize and visualize your
business’s final product, a process that entails analyzing the product’s target market,
size, quality, color and weight.
 Establishing yourself as a successful entrepreneur depends upon choosing a good idea.
That idea must not only be good for the market, but good for the project and good for
the entrepreneurs. It should also be manageable by you without much dependence on
others. Importantly, the idea should give satisfaction results to you.
 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 is 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 a lot of them but about paying attention to the
quality of those as well.
 Idea generation is described as the process of creating, developing and communicating
abstract, concrete or visual ideas.
 The front end part of the idea management funnel focuses on coming up with possible
solutions to be perceived or actual problems and opportunities ,the fig below shows
the idea management

Idea management funnel

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As mentioned, ideas are the first step towards making improvement. Making progress as
individual human beings depends on new ideas. From the perspective of an individual, new
ideas can help you to move forward if you feel stuck with a task or are unable to solve a
certain problem.
Maybe you need new ideas so that you can fully explore a new opportunity
The ability to create and develop new ideas allows you to:
• Stay relevant
• Make positive change happen

“Creative thinking inspires ideas. Ideas inspire change” – Barbara Januszkiewicz

Regardless of your goals or the types of ideas you're looking for, the purpose of new ideas is
to improve the way you operate.
So, although innovation isn’t about ideas alone, they are an important part of the equation as
there wouldn’t be one without the other.
Favorite tips, tools and techniques that can be used to generate new ideas more
systematically.

Idea Challenge
Is a focused form of innovation where you raise a problem or opportunity with the hopes of
coming up with creative solutions.
The point of idea challenge is to participate in ideation and generate ideas around a pre-
defined theme for a limited period of time.
It allows you to form a specific question and direct that question at a specific audience to
receive new ideas and unique insights.

SCAMPER technique
It is a method used for problem-solving and creative thinking. It’s a holistic way of applying
critical thinking to modify ideas, concepts or processes that already exist.
The purpose of the SCAMPER is to make adjustments to some parts of the existing idea or
process to reach the best solution.

Opposite/reverse thinking
Is a technique that can help you question long-held assumptions related to your business.
It’s a useful tool to consider if you feel your team is stuck with the conventional mindset and
coming up with those “out-of-the-box ideas” seems to be difficult.
Often, finding the best solutions isn’t found through a linear thought process. Although our
brains are wired that way, opposite thinking can help us question the rule
With this type of thinking, you consider the exact opposite of what’s normal. You can even
think backwards to find unconventional solutions.

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Brainstorm Cards
Brainstorm cards are a useful tool created by the Board of Innovation for coming up with
dozens of new ideas related to whatever challenge or problem you are currently working
with.
Brainstorm cards help you consider external factors such as: societal trends, new
technologies, and regulation in the context of your business.

Analogy thinking
Is a technique for using information from one source to solve a problem in another context?
Often one solution to a problem or opportunity can be used to solve another problem.
Analogy thinking can, for example, be used for analyzing a successful business, identifying
what makes it great, and then applying those same principles for your business. This is an
effortless method for coming up with new ideas that are pre-validated.
The purpose of generating new ideas is about improving what already exists as well as
coming up with something new.
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.

Creativity and innovation

Creativity is thinking new things, the ability to develop new ideas and to discover new ways
of looking at problems and opportunities.
Innovation is doing new things, the ability to apply creative solutions to those problems and
opportunities in order to enhance people’s lives or to enrich society.
Creativity and innovation are two related but separate notions, and each is required for
workplace success.

Innovation is the process of turning a new concept into commercial success or widespread
use. Invention is the creation of a new idea or concept. Creativity is the act of turning new
and imaginative ideas into reality.

Creativity
Creativity is the act of turning new and imaginative ideas into reality. Creativity is
characterized by the ability to perceive the world in new ways, to find hidden patterns, to
make connections between seemingly unrelated phenomena, and to generate solutions.
Creativity involves two processes: thinking, then producing.

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If you have ideas but don’t act on them, you are imaginative but not creative.
“Creativity is a combinatorial force: it’s our ability to tap into our ‘inner’ pool of resources –
knowledge, insight, information, inspiration and all the fragments occupy our minds – that
we’ve accumulated over the years just by being present and alive and awake to the world and
to combine them in extraordinary new ways.” — Maria Popova, Brainpickings.

“Creativity is the process of bringing something new into being. Creativity requires passion
and commitment. It brings to our awareness what was previously hidden and points to new
life.
“A product is creative when it is (a) novel and (b) appropriate. A novel product is
original not predictable. The bigger the concept and the more the product stimulate further
work and ideas, the more the product is creative.”

Innovation

Is the implementation of a new or significantly improved product, service or process

that creates value for business, government or society?

Some people say creativity has nothing to do with innovation— that innovation is a
discipline, implying that creativity is not. Well, I disagree. Creativity is also a discipline and a
crucial part of the innovation equation. There is no innovation without creativity. The key
metric in both creativity and innovation is value creation.
Innovation is important because it’s the only way that you can differentiate your products and
services from those of your competitors. For customers and clients to choose your business,
your offer needs to be distinctive and valuable, and the only way to achieve this is through
innovation.
The main difference between creativity and innovation is the focus. Creativity is about
unleashing the potential of the mind to conceive new ideas. ... Innovation is about introducing
change into relatively stable systems. It's also concerned with the work required to make an
idea viable.
"Creativity" and "innovation" are two words that are constantly thrown around in
brainstorming sessions, corporate meetings and company mission statements.

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Business opportunity
In general sense, the term opportunity implies a good chance or a favorable situation to do
something offered by circumstances. In the same vein, business opportunity means a good or
favorable change available to run a specific business in a given environment at a given point
of time.
Business opportunity may be defined as a set of favorable circumstances in which an
entrepreneur can exploit a new business idea that has the potential to generate profits.
Business opportunities have the following three fundamental features:
 They solve a significant problem by removing pain points or meeting a significant
want or need for which someone is willing to pay a premium.
 They have a robust market, margin, and money making characteristics that will allow
the entrepreneur to estimate and communicate sustainable value to potential
stakeholders.
 They are a good fit with the founder(s) and management teams at the time and
marketplace along with an attractive risk—reward balance.

Business Opportunities in India

Being the seventh-largest country in the world by area and the second largest by population.
India has a growing market and is a land of opportunities. The opportunities for importing,
exporting, trading, investing, and franchising are immense. A potential entrepreneur needs to
take into account the economy, the consumer, and business trends. One should also
understand that what may be a good business opportunity for one entrepreneur may not be a
good opportunity for another. It is essential for entrepreneurs to pick opportunities that they
are passionate about.

There are several factors that create favorable business opportunities in India:
 India is a well-established democratic country with free and fair judicial system.
 The country also has a well-established banking system consisting of public and
private banks and other financial institutions.
 The country has a huge middle-class with enhanced purchasing power. Coupled with
high growth economy, this creates the potential for huge growth in manufacturing,
services, and the retail sector.
 India has vibrant trade links with the South Asian Association for Regional
Cooperation (SAARC) nations such as Sri Lanka, Pakistan, Nepal, Bhutan,
Bangladesh, and the Mal-dives.
 India has a competitive advantage in the global market with the availability of a huge
pool of cheaper labour and knowledgeable workers to enhance industrial productivity.

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 Economic reforms and policy changes have created an investment- friendly

environment.
 The capital markets in India are one of the fastest-growing markets in the world,
attracting huge foreign investments. A lot of international companies have started
outsourcing and setting up international operations in the country.
 The country is self-sufficient in agriculture and rich in natural resources.
 India is it part of the BRICS group of nations comprising Brazil, Russia, China, and
South Africa.
 India has developed vibrant trade links with these nations.

Market entry strategy in India

A market entry strategy is the planned method of delivering goods or services to a new target
market.
India is the second-most populous market in the world, but also among the most complex to
enter as a company without any previous experience in the region.

Five tips for better Indian market entry strategy,

1. Find the right partner

India is the world’s seventh largest economy in terms of GDP, and has a population of 1.3
billion people. It is a complex market for the best Indian companies, and even more so for
companies from abroad. Businesses with a pre-determined mindset and less exposure to
international markets might find the commerce culture in India too intimidating.
Identifying the right partner goes a long way in successfully navigating the complexities of
the local business environment for a new entrant into the Indian market. A local partner can
provide much-needed assistance in understanding the Indian market. This partner can give
you valuable market insights on competition, regulation and other important issues. They can
also introduce you to the network with the reach to target prospective clients without much
investment on the ground.
2. Localize your products to meet consumer needs and preferences
India is a vast and diverse country encompassing many different identities, languages,
cultures and religions. It is important to avoid making generalizations or assumptions, as
local practices and consumer behavior may vary substantially from region to region.
Since India has such a pluralistic, multilingual society, more often than not, a one solution fits
all approach doesn’t work. Even a global bigwig like McDonald’s had to localize its product
offerings based on the fact that half of Indians are vegetarian. They also have to leave their
most popular item, beef burgers, off the shelf given the religious sensibilities of the Indian
population.

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3. Remember the high level of price sensitivity

It is extremely important for a new entrant into the Indian market to get its price strategy
right, particularly if it’s targeted towards the low and middle income populations. Even with a
growing economy and a growing middle class, there’s no denying the fact that India is still a
low middle income economy, with a per capita income of around $2,000 and a huge
population still living below the poverty line. Since the government cannot afford to provide
for education and healthcare coverage, the majority of the population has to pay for these
necessities from their own income. With little disposable income left after covering basic
amenities, there’s not much money left in the hands of a significant portion of the population.
This makes the market price sensitive as many people need to spend judiciously.

4. Enter the Indian market for long-term growth, not to make a quick buck
India is certainly not a place for businesses to make quick gains – you need to be invested for
the long haul. Although it’s a huge market with a population of 1.3 billion people, including
400 million middle class consumers, it has its share of challenges when it comes to market
entry.
Because India is such a huge and attractive opportunity, there is no dearth of competition.
More often than not, you have companies looking for market share and compromising on
potential short-term profitability in order to establish themselves more firmly there. Given the
complexity of the market, it takes time for the companies to understand the environment and
develop the right strategy.

5. Prepare to navigate a much different legal and regulatory landscape

The Indian judicial system follows “common law”, and the constitution has provided for a
single integrated system of courts to administer both union and state laws. Due attention
should be paid, including seeking professional advice, before entering into a formal
agreement. Court judgments are often delayed because of the huge backlog of cases, so any
agreement should provide the scope for alternate dispute resolution mechanisms.

Feasibility Analysis or Project Analysis

Feasibility (possibility) analysis is used to determine the viability of an idea, such as ensuring
a project is legally and technically feasible as well as economically justifiable. It tells us
whether a project is worth the investment.
It ultimately tests the viability of an idea, a project, or a new business. A feasibility study may
become the basis for the business plan, which outlines the action steps necessary to take a
proposal from ideation to realization. A feasibility study allows a business to address where
and how it will operate, its competition, possible hurdles, and the funding needed to begin.

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The business plan then provides a framework that sets out a map for following through and
executing on the entrepreneurial vision.
A well-designed study should offer a historical background of the business or project, such as
a description of the product or service, accounting statements, details of operations and
management, marketing research and policies, financial data, legal requirements, and tax
obligations. Generally, such studies lead technical development and project implementation
This is also known as project feasibility study. Once a project proposal is identified and if the
project seems worthwhile, detailed analysis of the marketing, technical, economical, and
ecological aspects are under taken.
Based on the information developed in the analysis, the stream of costs and benefits
associated with the project can be defined. The important aspect of project analysis is market
analysis, technical analysis, financial analysis, economical analysis, and ecological analysis.

Types of Feasibility Analysis:

This feasibility can be ascertained on following parameters:

 Marketing feasibility
 Financial Feasibility
 Political feasibility
 Economic Feasibility
 Social Feasibility
 Legal feasibility
 Technical Feasibility
 Managerial feasibility
 Location and other feasibility

Marketing feasibility
This mainly deals with determining the potential market and the market share for the
proposed project. Market analysis is concerned with forecasting the demand for the
product/service under consideration. It requires finding a variety of information on
consumption trends, cost structures, structures of the competition, the elasticity of demand,
consumer behavior, and exports and imports.
In simple words it determines whether a product or service can sustain in a specific market or
not as well as whether it is capable of generating financial surplus for the firm or not.
Most market feasibility studies include:-
 Description of the industry
 Current Market Analysis
 Competition or presence of competing products.
 Anticipated future market potential.

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 Potential buyers and sources of revenues.

 Sales projections.

Market feasibility tests can be carried out not only on products but on ideas, campaigns,
processes and entire businesses too.

Financial Feasibility
This mainly deals with determining the risk and return for the proposed project. Financial
analysis seeks to ascertain whether the proposed project will be financially viable. It requires
finding a variety of inhumation on the cost of the project and the means of finance; the cost of
capital, the projected liability; cash flows of the project, the break-even point, the level of
risk, the investment outlay and worthiness, and projected financial position.
In order to ascertain financial viability, financial projections are made and on the basis of
such projections which need to be objective and realistic, the followings broad parameters are
evaluated for determining the feasibility of the project-
 Return on Investment
 Payback period of the outlay
 Internal rate of return
 Profitability index.

In case of a new project, financial viability can be judged on the following parameters:
 Total estimated cost of the project
 Financing of the project in terms of its capital structure, debt to equity
ratio and promoter’s share of total cost
 Existing investment by the promoter in any other business
 Projected cash flow and profitability

The financial viability of a project should provide the following information:

 Full details of the assets to be financed and how liquid those assets are
 Rate of conversion to cash-liquidity
 Project’s funding potential and repayment terms
 Sensitivity in the repayments capability to the following factors
 Mild slowing of sales
 Acute reduction/slowing of sales
 Small increase in cost
 Large increase in cost
 Adverse economic conditions.
If, on the above mentioned parameters, the project is found suitable, then only further
feasibility tests are carried out.

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Political feasibility
Political feasibility is a measure of how well a solution to a policy problem, will be accepted
by a set of decision makers and the general public. For a policy to be enacted and
implemented, it must be politically acceptable, or feasible.

Political feasibility analysis is used to predict the probable outcome of a proposed solution to
a policy problem through examining the performer, events and environment involved in all
stages of the policy making process. It is a frequently used component of a policy analysis
and can serve as an evaluative criterion in choosing between policy alternatives.

Feasible policies must be politically acceptable or at least not unacceptable. Political

unacceptability is a combination of two conditions too much opposition or too little support.
One common mistake is widespread in practice that feasibility becomes a dominant criterion
of preferable alternative. Feasibility is “the state or degree of being easily or conveniently
done.

Political feasibility is a measure of how well a solution to a policy problem, will be accepted
by a set of decision makers and the general public. For a policy to be enacted and
implemented, it must be politically acceptable, or feasible. Alternatively, a politically feasible
alternative is one that has the greatest probability of "receiving sufficient political push and
support to be implemented" given any specific constraints.

When policy analysis generates policy alternatives, the political risks and costs associated
with each can be important criteria for deciding between alternatives. A good policy
alternative requires a certain amount of political feasibility, or implementation of the policy
will be impossible. It is important to keep in mind; however, that feasibility alone does not
make a policy "good." Examining all criteria is necessary for the implementation of socially
responsible policy.

Politics are difficult to predict but it has been said that "no decision is ever made in complex
systems without political feasibility having played some role.

Economic Feasibility
This is also called social-cost benefit analysis and is mainly concerned with judging a project
from the social point of view. The focus is on the social costs and benefits of the proposed
project. It deals with determining benefits and costs in terms of shadow prices and other
social impacts. Economic analysis requires finding a variety of information on economic
costs and benefits measured in terms of the efficiency (shadow) prices, employment to be
generated by the project, impact of the project on the distribution of income in society; and
the impact of the project on the level of savings and investment in society.
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The purpose of an economic feasibility study (EFS) is to demonstrate the net benefit of a
proposed project for accepting or disbursing electronic funds/benefits, taking into
consideration the benefits and costs to the agency, other state agencies, and the general public
as a whole.
In sync with the phrase “Parity between haves and have not’s” a social cost-benefit analysis
(SCBA) of the project should be carried out. This ensures that the organization is contributing
to the GDP of the economy and is also discharging its social obligations, by providing
employment opportunities and bringing in improvement in quality of life.
The purpose of business in a capitalist society is to turn a profit, or to earn positive income.
While some ideas seem excellent when they are first presented, they are not always
economically feasible. That is, that they are not always profitable or even possible within a
company’s budget. Since companies often determine their budgets several months in
advance, it is necessary to know how much of the budget needs to be set aside for future
projects.
Economic feasibility helps companies determine what that amount is before a project is
ultimately approved. This allows companies to carefully manage their money to insure the
most profitable projects are undertaken. Economic feasibility also helps companies determine
whether or not revisions to a project that at first seems unfeasible will make it feasible.

Social Feasibility:
Social feasibility is a detailed study on how one interacts with others within a system or an
organization. Social impact analysis is an exercise aimed at identifying and analyzing such
impacts in order to understand the scale and reach of the project’s social impacts.

At a minimum, all projects demand a review of project data at the Appraisal Phase, so as to
identify if material social impacts exist. Social impact analysis greatly reduces the overall
risks of the project, as it helps to reduce resistance, strengthens general support, and allows
for a more comprehensive understanding of the costs and benefits of the project.

However, social impact analysis can be expensive and time consuming, so the full analysis
process cannot be justified for all projects. At a minimum, all projects demand a review of
project data at the Appraisal Phase, so as to identify if material social impacts exist. If they
do, a full social impact analysis should be conducted.

Legal Feasibility:
It should first be determined whether the proposed project conflicts with legal requirements,
and if the proposed venture is acceptable in accordance to the laws of the land. The project
team has to make a thorough analysis of the legal issues surrounding the project, across
several dimensions.

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A detailed legal due diligence should be done to ensure that all foreseeable legal
requirements, which have not or will not be dealt with, in other appraisal exercises, are met
for the development of the project.
The main objectives of the legal feasibility analysis are as follows:
 To ensure that the project is legally doable;
 To facilitate risk management, indicating the risks and obstacles that need to be
addressed within the technical analyses, the financial model and/or the Value for
Money analysis; and
 To avoid, to the extent possible, major problems in the project’s development and
implementation, specifying the requirements that need to be considered at subsequent
stages of the PPP process, [public private partnership]

Technical Feasibility
This principally deals with determining the technical viability for successful commissioning
of the proposed project and for ascertaining whether sensible choices have been made with
respect to location, size, process, etc. Technical analysis requires finding a variety of
information on the availability of raw material and various other inputs, the type of
technology to be adopted, choosing a suitable layout for the site, building and plant, and
choosing the appropriate plant, machinery and process.

This assessment is based on an outline design of system requirements, to determine whether

the company has the technical expertise to handle completion of the project. When writing a
feasibility report, the following should be taken to consideration.
The technical feasibility assessment is focused on gaining an understanding of the present
technical resources of the organization and their applicability to the expected needs of the
proposed system. It is an evaluation of the hardware and software and how it meets the need
of the proposed system.
An in depth and critical study of following parameters is done:
 Plant location
 Layout
 Plant & machinery and equipment
 Manufacturing process
 Infrastructure
 Technology
 Efficient waste disposal.
The technical feasibility assessment is focused on gaining an understanding of the present
technical resources of the organization and their applicability to the expected needs of the
proposed system. It is an evaluation of the hardware and software and how it meets the need
of the proposed system.

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Managerial feasibility
Managerial feasibility analysis is a form of project analysis that looks at every aspect of a
proposal to determine its likelihood of success before commencing. These types of studies
take an objective look at the strengths and weaknesses of the proposed project to see how
viable the idea is in terms of generating profit and meeting objectives.

Managerial Feasibility analysis objectively and rationally uncover the strengths and
weaknesses of an existing business or proposed venture, opportunities and threats which are
presented by the environment, the resources required to carry through, and ultimately the
prospects for success. In its simplest terms, the two criteria to judge feasibility are cost
required and value to be attained. Managerial feasibility study is an analysis of the viability of
an idea. The Managerial feasibility study focuses on helping answer the essential question of
“should we proceed with the proposed project idea?”

Location and other feasibility

Location feasibility
There is a saying that the three most important considerations in business are location,
location, location. If you’re starting a new business that operates primarily offline, location is
critical.
Your business location analysis should take into account demographics, psychographics,
census and other data, location analysis is to maximize chances of success in business.
The location of a retail outlet is the most influencing factor for the success of the business.
Therefore selecting a location for a retail store or an outlet is a challenging process. The
purpose of this study is to define a method and develop a system to analyze the feasibility of
a selected location for a retail store.
Consumer surveys were conducted in selected areas to get information about consumers'
shopping patterns and selections. From the web service, identify transport modes, locations of
competing stores and shopping areas.
The retail industry is a fast growing and a highly revenue generating industry. The location of
a retail outlet is the most influencing factor for the success of the business. Therefore
selecting a location for a retail store or an outlet is a challenging process. The purpose of this
study is to define a method and develop a system to analyze the feasibility of a selected
location for a retail store.
Many hospitality and restaurant businesses fail due to inappropriate location or market
entries.
Location feasibility and market studies are an essential part of the building or growing a
business.

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Other Feasibilities-
Schedule Feasibility:
A project will fail if it takes too long to be completed before it is useful. Typically this means
estimating how long the system will take to develop, and if it can be completed in a given
time period using some methods like payback period. Schedule feasibility is a measure of
how reasonable the project timetable is.
Some projects are initiated with specific deadlines. It is necessary to determine whether the
deadlines are mandatory or desirable. To do proper scheduling, the versatile techniques like
PERT & CPM is adopted.

Resource Feasibility:
This involves questions such as how much time is available to build the new system, when it
can be built, whether it interferes with normal business operations, type and amount of
resources required, dependencies, and developmental procedures with company revenue
prospects.
There are resources necessary to complete any project. All the important resources like
human resource, artificial resources, financial resource etc. are taken care of by indulging in
complete research on feasibility of the resources needed to complete the project.

Operational Feasibility:
Operational feasibility is the measure of how well a proposed system solves the problems,
and takes advantage of the opportunities identified during scope definition and how it
satisfies the requirements identified in the requirements analysis phase of system
development.
The operational feasibility assessment focuses on the degree to which the proposed
development projects fits in with the existing business environment and objectives with
regard to development schedule, delivery date, corporate culture and existing business
processes.
To ensure success, desired operational outcomes must be imparted during design and
development. These include such design-dependent parameters as reliability, maintainability,
supportability, usability, producibility, disposability, sustainability, affordability and others.
These parameters are required to be considered at the early stages of design if desired
operational behaviors are to be realized.

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Commercial Feasibility:
Commercial Feasibility is ascertained by finding out the following:
 Current and Potential competition
 Profit margin
 Size of the market.
 Degree of demand for the product
 Future growth of market

Environmental Feasibility:
The environmental feasibility study considers both human and environmental health factors.
The EF is a comparative process that looks at all potential solutions, and then evaluates them
against specific criteria to ultimately find the best choice. It is a fact that external
environment exerts considerable influence on the organizations. In fact the climatic
conditions in a particular area/region have a significant impact on the existence of an
enterprise. Therefore, it is necessary to ascertain the environment viability as well.

The parameters considered are:

 Overall protection of public and environmental health
 Effective reduction of hazardous waste toxicity, mobility and volume.
 Long-term and short-term effectiveness of environmental policies of the
company
 Potential consequences of the remedial measures taken for protecting
environment.

Ecological Feasibility
This mainly deals with determining the quantum of damage likely to be caused by the
proposed project to the environment, and the cost of restoration measures required to be
undertaken to ensure that the damage to the environment is within acceptable limits.

………………………

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