Tuesday, October 5, 2010


Identification of Investment Opportunities

Investment opportunities have to be identified or created; they do not occur automatically. Investment proposals of various types may originate at different levels within a firm. Most proposals of various types may originate at different levels within a firm. Most proposals, in the nature of cost reduction or replacement or process or product improvements take place at plant level. The contribution of top management in generating investment ideas is generally confined to expansion or diversification projects. The proposals may originate systematically or haphazardly in a firm. The proposal for adding new product may estimate from the marketing department or from the plant manager who thinks be a better way of utilizing idle capacity. Suggestions for replacing an old machine or improving the production techniques may arise at the factory level. In view of the fact that enough investment proposals should be generated to employ the firm’s funds fully well and efficiency, a systematic procedure for generating proposals may be evolved by a firm.

In a number of companies, the investment ideas are generated at the plant level. The contribution of the broad in idea generation is relatively insignificant. However, some companies depend on the board for certain investment ideas, particularly those that are strategic in nature. Other companies depend on research carters for investment ideas.

Companies use a variety of methods used are:
  • Management sponsored studies for project identification
  • Formal suggestion schemes
  • Consulting advice
Most companies use a combination of methods. The offer of financial incentives for generating investment idea is not a popular practice. Other efforts employed by companies in searching investment ideas are:
  • Review of researches done in the country or abroad,
  • Conducting market surveys,
  • Deputing executives to international trade fairs for identifying new products and technology.
Once the investment proposals have been identified, they are be submitted for scrutiny. Many companies specify the time for submitting the proposals for scrutiny.

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