Criteria for Selection Process - Business Plan Preparation

Criteria for Selection Process

It starts from where project identification ends. After having some project ideas, these are analysed in the light of existing economic conditions, the government policy and so on. A tool generally used for this purpose is, what is called the managerial jargon, SWOT analysis. On the basis of this analysis, the most suitable idea is finally selected to convert it into an enterprise.

SWOT Analysis

Introduction

It has always been important for a business to know and understand how it fits in and interacts with the surrounding environment on both an internal (office/factory/shop environment) and external view (how your business operates with the outside world).

Researching your environment will benefit you and/or your management team by putting you in a position to develop a strategy for both the long and short term.

Analyzing the Business

The most influential way of doing this is to perform a SWOT analysis of the company. It is a common phrase used to abbreviate Strengths, Weaknesses, Opportunities and Threats.

Each term is a heading for a separate analysis of the business but they can be related as seen below:

Strengths provide an insight to your business opportunities & weaknesses in your business can cause immediate threats

A guideline of how to carry out the analysis is explained in the next section, but it is important to know that the SWOT analysis is only based upon information that is known by the assessors (you), and is seen as perhaps the more basic approach of analyzing a business‟ position: but SWOT is still a powerful tool when looking for immediate benefits.

Performing SWOT

Recognizing the Strengths and Weaknesses before tackling the Opportunities and Threats is the best way to approach the analysis: the more Strengths and Opportunities the better they can both be seen as the bigger influences for the success of your company. You need to be aware that the most important rule is not to leave anything out no matter how small the issue may be.

There is no fixed way of doing a SWOT analysis, but it should be done in a way that you feel most comfortable with, and more importantly that you understand it. The objective is to be in a position where you can determine a strategy for the future to improve your company‟s overall performance (or maintain it if you are happy with your final analysis).

Strengths

The Strengths can be considered as anything that is favourable towards the business for example:

1.     Currently in a good financial position (few debts, etc)

2.     Skilled workforce (little training required)

3.     Company name recognized on a National/Regional/Local level

4.     Latest machinery installed

5.     Own premises (no additional costs for renting)

6.     Excellent transport links (ease of access to/from the Company)

7.     Little/non-threatening competition

Weaknesses

Recognizing the Weaknesses will require you being honest and realistic. Don‟t leave anything out as this is an important part as to realize what needs to be done to minimize this list in the future. Here are a few examples:

1.     Currently in a poor financial position (large debts, etc)

2.     Un-Skilled workforce (training required)

3.     Company name not recognized on a National/Regional/Local level

4.     Machinery not up to date (Inefficient)

5.     Rented premises (Adding to costs)

6.     Poor location for business needs (Lack of transport links etc)

7.     Stock problems (currently holding too much/too little)

8.     Too much waste

Opportunities

Keeping in mind what you have listed as your Company Strengths, SWOT Analysis can now influence the Opportunities for the business. These can be seen as targets to achieve and exploit in the future for example:

1.     Good financial position creating a good reputation for future bank loans and borrowings

2.     Skilled workforce means that they can be moved and trained into other areas of the business

3.     Competitor going bankrupt (Takeover opportunity?)

4.     Broadband technology has been installed in the area (useful for Internet users)

5.     Increased spending power in the Local/National economy

6.     Moving a product into a new market sector

Threats

The final part of the analysis will also be seen as the most feared- the Threats. It has to be done and therefore taking into account what you have listed as your weaknesses, the threats will now all seem too clear. Examples

1.     Large and increasing competition

2.     Rising cost of Wages (Basic wage, etc)

3.     Possible relocation costs due to poor location currently held

4.     Local authority refusing plans for future building expansion

5.     Increasing interest rates (increases borrowing repayments, etc)

6.     End of season approaching (if you depend on hot weather, etc)

7.     Existing product becoming unfashionable or unpopular

Using the Analysis

Once the SWOT analysis is complete, it will then be time to put it all together and look closely to form a strategy. This will involve how you can exploit the Opportunities and how to eliminate or deal with the Threats. This may well depend on your company‟s original objectives and goals but the whole process will certainly give an overall look at the current position of your business.

You might argue that you can make a list in your head about the areas that make up your analysis and that no benefit can be derived from a SWOT exercise. Try a quick list with the four areas and identify where one area impacts on another. If you find one instance that is a current issue, you would then have cause to complete the full analysis.

Summary

As previously stated, SWOT analysis is used primarily to evaluate the current position of your business to determine a Management strategy for the future. It should also help you to look at how you may do this by looking closely at your Weaknesses and Threats that you have identified. Great care needs to be taken when planning a strategy not to disturb the balance of your Strengths as you could find that your Strengths suddenly become a Weakness if you don‟t use them.

The way that SWOT has been introduced to you is the simplest way that it can be found. It can be used further to analyze your business (depending on its size) on a Local, National and Global level. This is done by splitting up the Strengths, Weaknesses, Opportunities and Threats of your business into the appropriate category (e.g. High Unemployment in the area- Local Threat because of less spending).

It cannot be stressed enough that the analysis is carried out fairly and thoroughly. This will then put you in a position to forecast and prepare for the future accurately to give realistic objectives and tasks.

Project Appraisal

It means the assessment of a project. Project appraisal is made both proposed and executed projects.

Methods of Project Appraisal

1.     Economic Analysis. ( requirement of raw material, level of capacity, utilization, anticipated sales, anticipated expenses and the probable profits)

2.     Financial Analysis. (working capital, fixed capital, fixed asset and current asset)

3.     Market Analysis.

i)       Opinion Polling Method

a)     Complete Enumeration Survey

b)    Sample Survey

c)     Sales Experience Method

d)    Vicarious Method

ii)  Life Cycle Segmentation Analysis

a)     Introduction

b)    Growth

c)     Maturity

d)    Saturation

e)     Decline

4.     Technical Feasibility

i)       Availability of land and site

ii)    Availability of other inputs like water, power, communication facility.

iii)  Copying-with anti-pollution law

5.     Managerial Competence