LESSON TEN: PRODUCT/PROJECT IDENTIFICATION

Identifying the right product is the first step to success for any entrepreneur. Right kind of
product for which there is an unfulfilled demand will ensure minimum expenditure on sales
promotion as well as higher sale price.
Entrepreneurial success is about identifying human and social needs; overt, covert, apparent or
even dormant and finding products to meet them. In order to identify the opportunities, it is
necessary to scan the customers‘ environment for identifying the unfulfilled needs opportunities.
There are sometimes gaps between demand and supply (Apparent/Overt Demand) which can be
exploited by an entrepreneur. But such occasions are few and far in between. Such opportunities
do not last long. They are lapped up by the existing players before an entrepreneur can move in.
Entrepreneur‘s opportunity lies in coming up with a better product or same/substitute product at
cheaper price. But the better option for entrepreneurs is to scan the customers environment for
identifying the dormant/hidden demand. Take the case of Nirma washing powder. There was
always a demand for washing powder among the lower income segment of the society for the
convenience it offered compared to soaps. However, the demand was hidden behind the high
cost of washing powders available then. Nirma launched the washing power at low cost (even
though the quality was far inferior to Surf and other washing powders) and succeeded.
Similarly, there was always a demand for Hair Shampoo. But it was again hidden behind high
cost of shampoo bottles which were beyond the reach of middle and lower income group
households. The strategy to launch Re 1 sachets brought the shampoo within purchasing power
of relatively poor households. Today, there is a hidden demand for liquid soap among the middle
class homes which is hidden behind the high cost (Rs 50 -75 for a 250 ml bottle) of liquid soap
and dispensers. If someone can tap this demand, there is a windfall waiting for him.
But this exercise of product identification is easier said than done and requires enormous amount
of creativity and energy.–

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Product Identification Process
Idea Generation
Search & Screen
Evaluation
1. Idea Generation
Product Idea can be generated in a number of ways. They are as follows
(a) Observations
(b) Foreign publications (import of ideas from products launched overseas)
(c) Brainstorming sessions
(d) Talking to various bodies like SISI, SIDC, The national small Industries Corp. Ltd. & the
National Institute for Enterpreneurship & Small Business Development
(e) Talking to large scale pvt/public co. can also generate ideas
2. Product Search & screening
After we come up with product ideas, we look at products presently available & products related
to those products ideas. Then pose the exploratory questions –
(a) Are customers satisfied with what they are getting?
(b) Can we identify a better method of production?
(c) Can the basic design be changed?
(d) What is the present demand, future demand likely to be & so on?
(e) What are the skills?
(f) Can I handle the technical aspects?
(g) If not, is the expertise available for hire easily?
(h) Does the product idea generated match my competencies or do I have to
develop new competencies?
(i) How much knowledge do I have about the market for this product?
(j) Can I dig more info easily?
3. Evaluation
As a prospective entrepreneur one should know the bent of mind one has by asking the following
questions: -
(a) Am I comfortable in a room full of strangers?
(b) Can I deal efficiently with people in position of power?

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(c) Can I communicate efficiently & freely with people?
If yes, marketing is the strong area. Or, may be one has a head for figures and details. Then
finance may be the area of strength. One could be interested in mechanical & technical matter
with flair for conceptualising & design. Then production or product design can be the areas of
strength.

Product Evaluation Techniques

Once the products have been short-listed through exploratory questions and own SWOT
analysis, these items are required to be critically evaluated for their success potential. This
evaluation is carried on the following factors –
Growth potential for the product
Stability of demand
Marketability – Some products have unshakable hold of existing players. In the shock absorbers
and spark plugs business, it is difficult to replace existing players like Mico, Bosch, TVS, etc, as
OEM suppliers.
Company Position – Does company have any past record in the field?
Production Capabilities – Can the existing production plants be utilised to produce the product or
new facilities are required to be built?
(a) Growth Factors
(i) Uniqueness of Product – A product that satisfies market need exclusively or can replace a
more costly product by material substitution or better design possess a high degree of uniqueness
and may be rated very good.
(ii) Demand Supply Relationship – If demand is greater than supply, uniqueness loses
relevance and a good rating can be given to the product idea.
(iii) Rate of Technological Change – Areas where rapid changes in technology are likely to
occur are risky and deserve poor rating. Such products become obsolete faster.
(iv) Export Potential – The products which enjoy international demand & can be exported
easily command a good rating.

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(b) Stability
(i) Performance of Market – A product for which there is likely to be long lasting demand
would enjoy a higher degree of market permanence than an item likely to become obsolete
quickly. Fashion accessories often have very short demand cycle.
(ii) Breadth of Market – A product, used by a variety of customers belonging to various market
Segment and covers greater number of consumers, is rated very well.
(iii) Possibility of Captive Market – A product, which provides a unique and exclusive solution
to specific market needs, should be rated very high. (Shops in various military cantonments have
captive customers since there are very limited numbers of shops and new shops cannot be
opened inside cantonments. Also, most cantonments are located far from markets).
(iv) Difficult to Copy – Any idea however good and unique is not much good if it can be easily
copied by others. Its uniqueness is not going to last. But ideas which cannot be copied due to any
reason, whether technical complexity or sourcing difficulties, or anything else will be rated high.
(Strawberries are one such product which cannot be grown everywhere. Similarly, saffron grows
only in certain parts of Kashmir. These products cannot be grown by people not holding land in
those areas).
(v) Stability in Recession – Luxury items are rated poor because they are highly susceptible to
drop in demand levels during economic recession. On the other hand consumer goods having
regular demand may be rated very good.
(c) Marketability
(i) Ease of Distribution – A good rating would be given to a product, which can be transported
from point of manufacture to a point of sale easily, quickly & with minimum breakage or
transmission loss. Higher shelf life is also criterion. Products with short shelf life pose
considerable risk of loss of capital. (Milk products hardly last beyond a day unless refrigerated.
Fruits and vegetables last a few days at the most. Newspapers last only a few hours in the
morning).
(ii) After Sales Service – Products that have to be provided with after sales service, specially at
customers location, like computers and washing machines are rated poorly.
(iii) Average Order Size /Per Customer – Greater the average order size per customer, better
would be the rating. It would be relatively easier & more beneficial to cater to large order sizes.

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But, shampoo sachets are an anti thesis of this concept because the marketing philosophy was to
catch low capacity customers.
(iv) Product Variations – products that have to be made available in a wide range of grade, size,
shape, etc. result in huge inventories and all the attendant problems like high working capital
investment and spoilage/non moving inventory. Thus, they are rated poorly. (Take the case of
paints. Packing sizes start from 50 ml tins for touching up a scratched car to 20 litres paint
drums. And colours? Don‘t even ask. You will go mad with Mera wala Blue and uska wala
yellow).
(v) Seasonal Fluctuations – While seasonal variations are common place, some products are
highly seasonal. Umbrellas sell only in monsoons and sweaters sell only in winters. What will
the company and its employees do in off season? Therefore, such products are rated poorly.
Alternative products will have to be thought of to sustain profit during such lean periods.
(d) Company Position Factors – Time required to get established. Projects having higher
gestation period are more risky for entrepreneurs as he exposes himself to a greater risk of
changes in technology, competition & economic conditions.
(i) Degree of Value Addition – Greater the value addition better the rating. Hence, it is better to
carry out the entire manufacturing process yourself rather than subcontracting.
(ii) Availability of Raw Material – If crucial raw material and other materials are available
during varying conditions than a good rating can be aMSMEgned.
(iii) General Labour Atmosphere – The project should be located in a area enjoying a good
labour climate.
(e) Production Factors
(i) Equipment Availability – Will it be poMSMEble to get machinery & equipment easily &
quickly ? Are the suppliers reliable & conveniently located? If your answer is yes, rating is good
(ii) Utilities / Facilities Required – Some projects are highly dependent on clean water, steam,
electricity and good sewage system & if these are not available regularly then that project would
be rated poorly.
(iii) Training of Personnel – Are technical people easily available ? If yes, how quickly can
they be inducted into the company? If no, then, is the training likely to be time consuming.
(iv) Ease of Maintenance

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(v) Hazard – Does the project involve a manufacturing process, which is hazardous, which
could affect the well being of not only the work place but also the community at large. A poor
rating follows.
(vi) Waste Disposal Problem – Both governments. & societies are becoming more conscious of
pollution and its dangers. If your project calls for an expensive waste disposal system to
neutralise the effluents, then it will be a negative factor.
Conclusion – the list of factors is by no mean exhaustive and can be modified to suit specific
products. A comparison of product profile would help us to decide which product to pick up.

Q What is the importance of International Entrepreneurship in a developing country like

Kenya. Please give your suggestion in building a Kenyan MNC. Mention in brief factors
you consider favourable as well as barriers.?

Ans. For any nation aspiring for growth, entrepreneurship is the key requisite.
Entrepreneurship is about value addition to the resources. And it is here that the real opportunity
lies, in GOKng for international entrepreneurship.
Every country has some resources that are unique to that country and often in abundance.
Due to oversupply within the country, such resources do not fetch good price in domestic
market. However, same products are scarce in many countries around the world. If these
products can be exported to those countries, much higher revenue and profits are assured in
foreign exchange which is a scarce commodity for every developing nation.
Unfortunately, most developing countries, in their exasperation to earn foreign exchange, export
their natural resources in raw or semi-finished form without much value addition and do not
extract full potential of their export capabilities. Take the case of Kenyan traditional export of
leather. We have been exporting shoe uppers and leather sheets for ages but have failed to
establish an international brand in leather product which could have commanded probably 10
times the price of raw material or semi finished products. We had the skilled manpower,
technology and every resource and yet were content to produce raw material and semi finished
products for foreign companies.
International Entrepreneurship will benefit our country in the following ways

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It will lead to improved foreign exchange earnings and strengthen the economy by improving the
balance of payment position.
It will generate employment amongst the local people and will benefit the society at large.
The earnings will add to the GNP/GDP & will be a source of tax collection for the government
besides contributing to increasing the per capita income and basic standard of living.
Export being the priority sector of the country, government will invest in the much needed
infrastructure which will help in development of the country.

Suggestions for building Kenyan MSMES

International business is not easy. Firstly there is often an inherent bias against foreign firms
from developing countries in terms of quality. Even in cases where quality is not an issue, racial
and nationalistic chauvinism surface to deny them the business. Uproar in US
UK and other European countries against process outsourcing is a case in study. Secondly,
regulations, social habits, business systems, legal systems, etc are often drastically different.
Therefore, international business is never an easy task. Before an entrepreneurial venture thinks
of doing business on foreign soil, it should first consolidate domestically and try to achieve a
leadership position in the domestic market. Before venturing into foreign business, an Kenyan
entrepreneur must understand how international business differs from his local business . The
key to his success lies in being able to understand the above & respond accordingly. International
entrepreneurial decisions are more complex due to the following factors –
Economics – Creating a business strategy for a multi country business means dealing with
differences with levels of Economic development, currency valuations, and government
regulations, banking systems, as well as market /distribution systems. The extent of the quality of
these factors significantly impacts the ability to successfully engage in international business.
The Country‟s Balance of Payment (BOP) Position – BOP affects the cross currency
exchange rates which affect the margin since there is often considerable time gap between
contract and realisation of payments in foreign business.
Political Environment – The differences in political & legal environments across international
markets pose different challenges in doing business in foreign markets. Each element of the
business strategy of the international entrepreneur can be affected by political/legal
environments.

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Culture – The impact of culture on Entrepreneurs is significant with respect to the strategies that
they intend to employ. Each element of the business plan has to be in congruence with local
culture . Understanding local culture is essential to development of business. The product and
marketing strategies have to be adoped to the local culture. Mr Vijay Mallya cannot distribute his
annual bikini calendar as a product promotion article in Middle East Countries while it will be
pretty welcome in Europe and US.
Technology – Many of the production technologies are not acceptable in certain countries.
As a gradual approach, a new company should preferably try to tap the markets in other
developing and underdeveloped countries where quality consciousness and bias against Kenyan
growth is less or absent. Thereafter, the company can start moving gradually towards more
sophisticated markets of Europe and US. Hence the major steps should be
1. Stage 1 – Make initial movements into international business following a highly centralised
decision making process. Tread carefully & start operations through direct or Indirect exports. In
this stage the entrepreneur & his organisation undergo the learning & experience curve effects
which will help in the long run
2. Stage– 2 – After the product and the company has gained acceptance in foreign market, the
decision making process has to get de–centralised. The firm could employ a multi country
strategy by tailoring its products to suit each countries preferences & culture or go in for high
degree of integration & standardisation.
3. Stage– 3– Once decentralisation has been achieved, the HQ should retain tight control over
corporate strategy and divest tactical implementation to the local units.
Trade Barriers
Import quotas imposed by developed nations on goods allowed from developing nations .
Local tariffs/import duty in developed nation making Indian goods non– competitive.
Subsidies to local manufacturers makes imports unviable
Trade blocks & free trade areas between developed nations & their neighbours favours trade
between them. For eg, EU countries, NAFTA, etc. which reduces Kenya‘s chances of doing
business in these sectors.
Trade barriers increase an entrepreneurs cost of exporting products & hence such increased cost
will force entrepreneur to establish the manufacturing base in those countries to surmount such
barriers .

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Favourable Conditions
The Kenyan government is encouraging international entrepreneurship by offering the following
initiatives –
Tax sops on export earnings
Setting up of export processing zones close to ports
Waiver of import duties on essential raw material meant for processing export goods
Waiver of sale tax & other government levies on export goods
Providing for cheaper land
Duty Drawback Schemes.

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