Starting an Organization

Important steps involved in planning a new enterprise are discussed here under:

Product Analysis and Market Survey

As we know that it is the customer who keeps a business going, therefore it is most important for entrepreneur to carry out analysis of the product and its market to know the view point of the customer. Consumer preferences, his expectation and his needs are analyzed so as to ascertain the 'stability' of the proposed product. Proper share should be given to the design aspect as it has an important role on marketability. The design should be economical, aesthetical, and should be able to meet expectations of the customers. New enterprise should in initial stage concentrate on the manufacture of one or a limited range of products, other varieties can be added thereafter.

In market survey information's should be collected about existing competitors, suppliers, customers, financial and manpower requirements. Market survey can be conducted to know about; raw material and manufacturing equipment, extent of competition in the market, to know about traders and distributors, Geographical locations of distributors and customers, type of customers, and information about manpower and finances. It is also necessary to know whether the demand is seasonal (Air conditioners, water coolers etc.), repeat sale (soap, toothpaste etc.) or a durable article like T.V., V.C.R., a watch, or a refrigerator.

Determine Size of the Enterprise

This size or capacity of the enterprise to be started is very important while planning for new industry. The size should be based on judicious sales estimates. While fixing the size, due consideration should be given to technical managerial, marketing, and financial aspects.

Location of the Industry

Utmost care must be exercised while selecting the area of the proposed industry and to the selection of a specific site, as mistakes of location are very difficult and expensive to rectify. Therefore, location is decided in s systematic and well planned manner. Location is decided in two stages, namely (i) selecting an area (ii) selecting exact site. Location of the enterprise is decided by considering: availability of raw material, nearness to the market, availability of labor, facilities of transport and its cost, availability of power, labor relations in the area, working climate, availability of land, government and facilities.

Exact location is decided based on availability of land, water, power, road, bank, colony etc. while factory layout is designed in such a way that it helps in achieving: maximizing utilization of floor area, smooth floor of material (raw as well as finished), minimum movement of men and material minimizing accidental charges, provides better working condition, and flexibility for future expansion.


Selection of Equipment

Next step an entrepreneur is to decide about the manufacturing process and the machineries to be used for the manufacture. Process and equipment selection depends upon volume of production requires automatic, specialized and complicated machineries. He has to select equipment out of large variety or range of available equipment. Layout plan is drawn after deciding the equipments and the process of manufacture and the space availability. The layout should be such that it helps in achieving efficient production with minimum delays, minimum movement of material and least cost.

Financial Planning

Success of an enterprise depends upon technical planning (as discussed in earlier paragraphs) as well as financial planning. Without proper financial planning industry may fail even if sound technical planning is done. Financial planning involves:

(i) Correct estimation of funds requirements.

(ii) How much loan shall be required, and what will be the source of finance?

(iii) What will be the interest of finance and what will be there terms and conditions?

(iv) Estimation of profits in relation to investment.

(v) What are the financial incentives available from the Government?

Organization Structure

For the success of the enterprise, it is necessary to have proper organization structure. Depending upon the size of the concern, functions involved and quantum of work, departments with sufficient manpower of right quality are constituted. The level, span of control, chain of command, and interrelation must be properly defined. Selection of manpower should be done according to these parameters i.e. job specifications.

Project Report

A project report also known as feasibility report is a written account of various activities proposed to be taken up by the enterprise, and their technical, financial, commercial and social viabilities. Thus the project report, after giving systematic and critical analysis states as to whether the project is physically possible, financially viable, commercially profitable and socially desirable.

Project report gives detailed project planning including financial resource planning, optimum utilization of resources, planning of scientific managerial system, marketing system, selection of technology and arranging technical know-how.

A project report generally covers following points in detail in addition to other relevant details:

(i) Site and exact location of the project, after discussing few good alternatives.

(ii) Details of the products proposed to be manufactured.

(iii) Market demand of the product, and proposed production capacity.

(iv) Space area needed.

(v) Floor area required, whether it should be constructed or hired or renovated after purchasing accommodation.

(vi) Types of number of machinery required.

(vii) Manufacturing process.

(viii) Arranging technical know-how.

(ix) Requirement of raw material.

(x) Requirement of power and water and their availability.

(xi) Cost of production.

(xii) Funds requirements, Loan to be arranged.

(xiii) Sources of finance.

(xiv) Cash flow position i.e. pattern of financing.

(xv) Profitability analysis.

(xvi) Plan for future expansion.

(xvii) Organization structure, description of job specification.

(xviii) Social considerations.

(xix) Environmental considerations.

(xx) Details of facilities available from Government.

Next Chapters

Estimating Procedure
Difference between Estimating & Costing
Depreciation & Obsolescence
Material Cost Calculation
Calculating Labor Cost
Direct and Indirect Expenses
Component Cost
Machine Shop Estimating
Forging and Forging Types
Starting an Organization
Welding Cost Estimation
Jigs and Fixtures
Qualities of an Entrepreneur
Starting Small Scale Industries
Budget and Budgetary Control
Supply & Law of Supply
Exchange and Barter Exchange
Classification of Market
Money and Types of Money
Trade Cycle
Break Even Analysis
Financial Management

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