INTRODUCTION
The need to guide potential entrepreneurs regarding how to about selecting the right type of product is crucial for future Business survival. The point being made is that choosing the wrong products or
services could easily lead to business failure with disastrous impact on the entrepreneurs. Hence, an
attempt is made in this section to guide entrepreneurs to meticulous IN selecting the right products or services. At the end of the module students and entrepreneurs should be able to analyze a given case in product selection; select a product and prepare a feasibility report on a typical small business.
What is Product /Service?
- Definition I: A product/service is a transformed input via a throughput or the resulting output secured through the conversion of selected inputs in a transformation process (systems definition).
- Definition II: Any producible, manufacturable or serviceable items altered from the original state to a desired advanced state thereby creating specific values or objectives for its producers and users.
- Definition III: Anything that can be offered to a market for attention, acquisition, use or consumption (marketing definition)
- Definition IV: A bundle of complex tangible and intangible attributes or benefits. Such attributes/benefits include durability, finish, image, color, packaging, repair service, etc (marketing definition)
- Definition V: Any item, sub-assembly or cost unit manufactured or sold by an organization.
Nature and Characteristics Of Product /Services:
Product is an outcome of input-transformation-output. Where:
- inputs are men, methods, materials, money and machines,
- transformation is the production process where raw materials are changed into semi-finished products while
- output is the final product/ goods. Products/services must provide functional utility to the consumer, that is, it must give satisfaction.
he functional/performance characteristics may be in terms of weight, liability, size, maintainability or operating effectiveness.
Products or services must have the following economic attributes:
- Be capable of advancing the "profitability and survival"goal of the organization; and
- Satisfy a want
Product Selection Criteria
When a new product is to be acquired/produced, a company usually uses a defined product evaluation and selection process. Very early In the process, a list of relevant selection criteria is compiled and distributed to sales force, Later on, the criteria list is used to compare the various product offerings and create a shortlist with products selected for further evaluation, Early in the product evaluation and selection process you would Identify products that are expected to meet the Market requirements.
Other Selection Criteria for your Products/Services
- Give serious consideratton to these questions
- What are the product s or services you plan to sell?
- How will your target markets find out about you?
- Why should your target markets buy these goods or services
- When wil they buy hem? Hat (insurance), seasonally (Sports goods)?
- How will they pay? Cash or Credit? Will they purchase in large or small quantity.
- What price range are you going to offer?
- How are they going to find or use your product or service?.
Note that these questions have marketing components. Every decision you make in your business
should include consideration of your market if you forget your customers, your customers will definitely forget you. Fost. And remember that without customers, You don't have a business (Bangs and Halliday: 1997).
What makes you Product/Service different?
What will set you apart from your competitors?
Differentiation (Positioning) is arguably the most important small business marketing strategy.
Positioning or differentiation is a marketing.method in which you determine what market your business should fill and how it should promote its products or service in the light of competitive and other forces. In other words, market positioning means arranging for a product/service to occupy a clear distinctive and desirable place relative to competing products or service in the minds of target consumers (Oxford Dictionary of Business: 2 Edition, 1996).
Positioning or differentiation is important for all business but especially for small businesses that lack the depth of resources to weather a major marketing blunder.
The importance of establishing a market niche is hard to over state. You simply cannot afford to aim for a huge markets. So your recourse is positioning.
Pick a niche in which you can become a presence. This can be as simple as locating your convenience store where there is a little competitions except major supermarkets, keeping how to suit the convenience of your customers, and stocking the things they want at odd hours or you can become the only hairdresser who make house calls...
The idea is to differentiate your business from competing businesses, which means you must know what they are up to (hence, the study of the competition) and who your customers are and what they want that other businesses aren't providing.
Here are some ways business differentiate (position) their products and services.
- Quality, Service, Perceive Value, Convenience, reliability
- Price, familiarity, ethnic appeal, Warranty, flexible, payment offers,
- Product range, Specialization
As you become more familiar with your product or service, markets and competition, you will begin to see other ways to differentiate your business.
The important thing is to be careful and consistent. The image your business projects when it starts will be very hard to change later, if it can be changed at all.
Key Factors Associated with Product Selection:
- Infrastructure;
- Technology
- Availability of raw material;
- Government Policy/Regulation;
- Legal aspects of business;
Once a product has been selected for production, there is need for further analysis of some key factors to determine how production will proceed and what legal requirements and Licences must be met. Below are some of these factors that must be investigated.
Venture Idea Generation;
The starting point of being an entrepreneur and developing a new venture is the identification of the
basic product or service being offered. This part of the venture creation process is perhaps the most
difficult to actualize. The origin of the new product/service idea is usually internally generated through research and development, other sources of new ideas could be through creative problem solving. A wide variety of techniques can be used to obtain the new product idea. Whichever way it occurs, a sound idea for a new product/service, if properly evaluated, is essential to a successful launch of a new venture.
Some of the sources of new ideas include consumers, existing companies, distribution channels, Government, R&D, Hobbies/interests, Personal skills/experience, franchises, mass media, Exhibitions, Surveys, complaints, Brainstorming, creativity et cetera. The entrepreneur can also use several unconventional methods to help generate and test new ideas, including focus groups, brainstorming and problem inventory analysis.
Steps Involved in Preliminary Screening;
Entrepreneurs must know that every project has uncertainties. The nature of the uncertainties can be
expressed in the form of assumptions which must be valid but which cannot be directy controlled.
Assumptions can be the most critical factors in a development project. Many projects fail because
planners make unrealistic assumptions or forget to define and examine the implicit assumptions they
are making.
It is impossible fora an entrepreneur or project manager to control all the factors which can affect a project. There are always social, political, technical, economic, physical, and other factors beyond human control that are necessary for successful achievement of project objectives.
To have confidence in the design of a project, one must define, at each level, all the conditions necessary to reach the next level of objectives. These conditions Include
- Hypotheses (predictions), which are internal to the project, and
- Assumptions (conditions), which are external to the project. After identifying the assumptions affecting the project, one can deal with them in a way that increases the probability of success.
Before we start a project, we must be confident that we can achieve our objectives. We must, therefore, carefully examine what we are assuming about factors outside our control that could be detrimental to achieving our objectives. We identify those factors In the "assumption column" of the Project Design Chart at the same level with the objective they influence. After identifying as many critical assumptions as possible with the information at hand, they can be looked at more closely and defined more specifically.
In a rice production project, for example, "adequate rainfall" is obviously necessary, Project planners
and managers need more guidance, however, if they are to assess the valdty of this assumphion. Ho
much rainfall is adequate? We must know how much rain is required and when it should fall. If we find that the rains must begin in May and last through October, with a monthly average of 12 inches, the next step is to find out if it is reasonable to expect this level and pattern of rainfall, If review of the climate records in the region shows hat for eight of the last twenty years rainfall was less than 8 inches for the months of June and July, our assumption of adequate rainfall would not be valid.
If our assumptions are likely to be invalid, we have several options to consider. First, we could continue with the project "as is and accept the lower probability of success. Second, we could examine if there is some way to modify the project to overcome the weak assumption. In the rice production example, perhaps an irrigation system could be included in this (or another) project to bring a sufficient supply of water to the crops. Finally, f there are insufficient resources to develop an irrigation system, the project could be abandoned because it is unworkable thus averting project failure before large amounts of time and resources are expended.
Steps in Preparing Pre-feasibility Study
A pre-feasibility study (even the substantive feasibility study) looks at the viability of an idea with an emphasis on identifying potential constraints/problems and making deliberate efforts to provide answer to one major question: Will the idea work.and should you proceed with it?
It become pre-feasibility because before writing your business plan, you as an entrepreneur need to
identify how, where, and to whom you intend to sell a service or product You also need to assess your competition and figure out how much money you need to start your business and keep it running until is fully established. They provide in-depth details about the business to determine if and how i can Succeed, and serve as a valuable tool for developing a winning business plan.
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WHAT IS BUSINESS IDEA?
Model Feasibility Report-Starting a Small Scale Fish Farm
Fish farming or aquaculture is a growing business full of opportunities due to the increased demand for fish as a source of important nutrients for healthy ling. A small scale fish farm is relatively easy to establish since the requirements are minimal and the start up costs are not overwhelming. A feasibility report analyzes an intended project in terms of its viability, start-up costs and profitability. An ideal small Scale fish farming feasibility report should include the following steps
Step 1
Introduction. The introduction part of the feasibility report should outline the importance and the advantages of small scale fish farming, Explain your project fully in this section. Outline briefly how the project will be rolled out, how you plan to benefit from the project and the processes that will be involved. Basically it is a summary of the small scale fish farming project.
Step 2
Description of the project: In this section, clearly outline the project's location, the environment
Surrounding it and the availability of the resources required to start a small scale fish farm. Highlight the projects mission and vision. Business goals and the objectives should also be included. Also include brief history of the project and what motivated you to start the fish farm.
Step 3
Market description: Describe the type of industry you will be operating in, whether you will be selling your products as a wholesaler or a retailer. Identify your target market and how you plan to penetrate that market, Outline the marketing strategies you will employ to market your fish.
Step 4
Description of your products: Highlight different species of fish that you will be rearing. Describe
how you selected those species. Explain the pricing of your products and the competitive edge your fish products have over other products in the market.
Step 5
Organization plan: Outline the legal structure under which the small scale fish farm will operate,
whether it will be a sole proprietorship, partnership or a limited liability company. Identify the type of permits and Licences that will be required for the project. Explain the number of staff and their
qualifications that will be necessary to successfully run the fish farm. Outline how they will be organized in terms of duties and responsibilities.
Step 6
Marketing plan: Illustrate how you plan to conduct your market research to identify how you will
segment your market and how you plan to satisfy each market segment. Market segmentation entails identifying the different portions of the market that are different from one another in terms of lifestyle income levels, location and spending habits. Explain the strategies that will be used in the sale and distribution of your fish to each market segment to satisfy their unique needs. Also include the strategies you will employ to effectively compete with your competitors in the market.
Step 7
Financial management: identify the intended sources of capital for your fish farm and how you plan
to use this capital in your venture. Outline how the profits will be used to enhance the fish farm and the measures that will be put in place to prevent or reduce losses. In this step you should also be able to show the projected cash flow statement, income statement and the balance sheet statement for the next 12 months.
Step 8
Conclusion: Give your recommendations and conclusion in this section on the viability of the small
scale fish farm.
-Source: Paul Merchant, Demand Media
Assumptions of Feasibility study
To gain a clearer idea of what these factors include, consider how some of the following questions might come out of an investigation into these factors.
Market Factors - Do people have disposable income available at the time when the product is for sale?
s there a MARKET that can be reached and served profitably? What is the likely price (considering
seasonal swings)? What are the quality and quantity dimensions?
Cost Factors - What are all the major initial costs involved in production? What are the important recurring costs? How much is the labor cost likely to be?
Financial Factors - Are there sources of affordable credit in the community? Is there a plan for control of group money? is the cash flow sufficient?
Political Factors - Does the government support the general idea? What are the Licences and inspections needed? Is the activity legal?
Technical Factors - Is the technology easy to maintain? Are spare parts readily available? Is the scale appropriate? Is the level of risk appropriate? Are the inputs readily available?
Cultural and Social Factors - Does it help one group by hurting another? Does the project "fit" the culture? Is the level of risk acceptable?
Climatic Factors - Does the project hurt the environment? Does it use already dwindling natural
resources?
Managerial Factors -What are the training requirements?Is there a sufficient, available labor force?The type of assumptions chosen for analysis will determine the type of feasibility study needed to investigate them.
Then, identify the assumptions most appropriate for analysis. Out of the long list of assumptions, how do you choose the correct ones to study? We suggest a simple two criteria basis for selection
importance and uncertainty.
To begin, ask of each assumption whether it seems truly essential for achieving project success. If its influence seems more or less incidental, forget about it. If the assumption is judged to have high potential influence, then ask yourself how uncertain project designers are about the likely performance of that assumption. Only where assumptions are important and insufficiently understood is detailed investigation worthwhile.
Technical Analysis of Feasibility Study
The technical aspect of feasibility include:
Product:
- Description of the product including specifications relating to their physical, mechanical and chemical properties;
- Uses of the products
Processing Activities:
- Description of the process showing simplified flow charts indicating comprehensive material and energy requirements;
- Consideration of alternative processes and justification for the chosen process
Firm Size and Production Schedules:
- From market studies, indication of demand for the product
- Consideration of availability of inputs and possibility of importation of raw materials (where necessary)
- Consideration of the start up and technological know-how
Machines and Equipment:
- Machines and equipment layout
- Specification of the machinery and equipment required, indicating rated capacities of each.
- Source of supply of machinery and equipment (indicating whether local or foreign) and including costs and terms
- Comparative analysis of alternative machinery and equipment in terms of cost, reliability, maintainability and local technical expertise.
Project Location:
- Map showing project location
- Desirability of location in terms of distance from the source of raw materials, market and other factors
- Desirability of location in terms of infrastructures and utility supply.
- Comparative study of different locations indicating advantages and disadvantages;
Project Layout:
- Description of project layout showing building and facilities.
- Types of buildings and estimated cost
- Land improvements such as access road, drainage, etc
- Type of supplementary utilities and cost.
Raw Materials:
- Description and specifications relating to physical, mechanical properties
- Current and prospective cost of raw materials, including sources of materials
- Local availability, continuity of supply all year round, and prospect for importation.
- Evaluate the sources and adequacy of the raw materials needed to sustain viable production of the selected product(s).
Waste Disposal:
- Description and quantity of waste to be disposed of
- Description of the chosen waste disposal method and cost
- Comparison with other methods to indicate cost benefits
- Compliance with legal requirement with regards to environmental impacts
Environmental Impact Studies
- Description of the environment of the project location
- Description of the project needs and processing technologies
- Prediction of impact of the waste products and prOCessing actvity on the environment
- Mitigation measure to treat impacts
- Residual impacts and further studies to treat such residual impacts
Manpower Requirements
- Skilled and unskilled labor requirement
- Technical and managerial staff requirement
- Training needs assessment and training schedules
- Proposal remuneration including fringe benefits
Government Policy and Regulations on the Selected Product;
Your business may need permits and other Licences before you can start. The licensing are different depending on the type of business that you are setting up. These are examples of the sort of licences you might need, and where to apply for them:
Do a business registration with Corporate Affairs Commission (CAC). The agency has offices all over Nigeria. If there is need to get additional permits from the local government council, ensure this is done to make your business formal and lawful. If it is food processing, juices and related products, packages, snacks bottled or packaged drinking water etc as well as businesses dealing with drugs formulation, repackaging and distribution you need a Licence from NAFDAC.
Businesses dealing with children, such as nurseries or daycare centers, are Licenced by the Ministry of Education.
Land related businesses (Certificate of Occupancy) or if you are planning on applying for a piece of land for business purposes you will do that at Abuja Geographic Information Service (AGIS) and physical planning authority of the state.
Whatever your business is, engage a legal practitioner to tell you whether any special licences are needed.
Identify Legal Aspects of Business on Product Selection
In Nigeria different regulations apply to different products. The entrepreneur is advised to consult a
lawyer and/or technical service provider for guidance Below are some of the common regulations that must be met environmental impact report and certification, NAFDAC registration, copyright and trademark law, etc.
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ENVIRONMENTAL IMPACT ANALYSIS (ELA)
In sitting a factory in a location, it is important to analyze the impact of the production operations on the immediate or surrounding environment. It is essential that for any identified negative effect designs for corrective actions and or mitigation must be incorporated in the project implementation strategy. The environmental impact assessment (EIA) process must take account of the following:
Socio-Cultural Factors
- Community Structure
- Traditional Cultural Habits and Customs
- Historic Sites
- Religious and Social Services
- Recreation
- Housing
- Internal and External Relations
- Protection of Vital Natural Resources
Social Infrastructure
- Education
- Sanitation
- Health
- General Well-Being (Diseases, Physical Safety, Population Density, Etc)
Emissions
- Liquid Waste
- Solid Waste
- Air Pollutants (Gases, Dust, Fumes, Vapors)
- Noise and Vibrations
- Odors
- Chemical Reactants (Producing Colours, Odors, Poisons)
- Hazardous Substances
Health Risks and Hazards
- Health Risk to Workers and Staff
- Increase of Already Existing Risks
- Risk of Accidents Affecting Social and Natural Environment (During Construction and Operation,
- After Closing Down Operations, During Transportation of Hazardous Substances)
Degradation of Social Structures
- Migration
- Displacement of Human Habitation
- Displacement of Economic Activities
- Disruption of Culture-Specific Social Relationships and Infrastructures
- Deterioration of General Living Conditions
Degradation of Natural Resources
- Direct and Indirect Damage to Natural Water Resources
- Damage to Land Resources
- Uneconomic Use of Nonrenewable Natural Resources
- Damage to Plant Populations
- Disruption of Interlinked (Balanced) Ecosystems
- Displacement, Extinction of Species
Regulation and registration of food and drugs:
The National Agency for Food and Drug Administration and Control (NAFDAC) is the government
regulatory body responsible for food and pharmaceutical products manufacturing, importation, advertisement and distribution in Nigeria under the provision of the government of Nigeria Decree 19 of 1993 and its accompanying guidelines. No food item may be imported, advertised, sold or distributed in Nigeria unless it has been registered by NAFDAC.
NAFDAC was established to protect and promote public health by ensuring wholesomeness, quality and safety of food and drug consumed in Nigeria.
The main strategy employed by the agency for the enforcement of Nigeria's food law is the process of product registration. Contravention of the provision of existing food law is subject to prosecution and punishment, as specified in the code. NAFDAC appears to have become more active and more stringent in enforcing existing food law, but primarily to protect local producers. In theory, any food item not registered with NAFDAC is not legally importable
General Requirements
NAFDAC regulation requires food labeling to be informative and accurate, The following are NAFDAC'S minimum labeling requirements
- A product brand name or common name must appear in bold letters.
- A complete "location" address of the manufacturer showing country of origin must be provided on the product label
- The production 'batch"number, date of manufacture and expiry date must be indicated
- Net content, specifying essential ingredient in metric weight for solid, semi solid and aerosols and metric volume for liquids.
- Ingredient must be noted by their common names in order of their prominence by weight unless the food is standardized, in which case the label must include only those ingredients which the standard makes optional.
- Food additives and colors must be declared on the label. Spices, flavors and colors may be listed as Such, without naming the specific material; but any artificial color or flavor should be identified as such.
- Labeling should be in English. If it is in another language, an English translation must be shown on the label or package insert (where applicable).
- NAFDAC registration number must be included on the product label.
Registration
In January 2003, NAFDAC increased its fees for registration, vetting and documentation for all imports.
The fee tor registering each product was increased to 750, 000 Naira about ($6, 000) up from 10, 000
Naira ($100) in 2002
Additionally, NAFDAC Requires that:
- No applicant will be allowed to register a food product in more than one name.
- Where different flavors of the same food are produced, each flavor will have to be registered separately.
- Major supermarket operators or importer can import mixed container loads of high value product (HVP) under NAFDAC Global Moratorium of Supermarkets (GMS) and other specialties required by hotels, fast food, chain and international organizations, firms participating in the programme are routinely inspected by the agency.
Copyright And Trade Mark Law
The Nigerian Standards Organization is responsible for issuing patents, trademarks and copyright. Once conferred, a patent conveys the exclusive right to make, sell, use a product or to apply a patented process. The trademark Act of 1965 governs the registration. A trademark grants the holder the exclusive night to use the registered mark for a specific product or class of product.
Statutes which govern intellectual property regulation in Nigerian include the copyright Act of 1988 (amended in 1992). Copyright law makes counterfeiting, exporting, importing, reproducing, exhibiting, performing or selling any work, without the permission of the copyright owner a criminal offence.
The Nigerian government's lack of institutional capacity to address Intellectual Property Right (1PR)
issues is a major constraint to enforcement. Patent and trademark enforcement remains weak and
Judicia procedures are slow and subject to corruption. Companies rarely seek trademark or patent
protettioT because they generally perceive Nigerian enforcement institution as ineffective.
Nonetheless, recent government efforts to curtail IPR abuse have yield results. The Nigerian Police work closely with the Nigerian copyright commission in enforcing the copyright law.
