Project management

CHAPTER –THREE
1. PROJECT IDENTIFICATION
Project identification is the first step towards establishing a successful venture.
This stage is about finding potential projects that will result in positive net present
value or that provide benefits for the society.
Projects usually start as new ideas which are carefully examined and if found
feasible and desirable are translated in to projects. Such initiation of project ideas
is called project conception.
Project conception is forming or developing ideas regarding a required intervention
in a specific area to address a problem or take advantage of opportunities.
Identification of project idea requires:
 imagination,
 sensitivity to environmental changes and
 Realistic assessment of what the firm can do.
Project identification is interrelated with the government policies, infrastructural
developments and skill of people.
The first step in the project cycle is to identify candidate project ideas and develop
project portfolios from which feasible projects are going to be selected.

Project identification is the first phase in the Project Life Cycle and essentially
involves starting up the [Link] is a stage where one project-idea out of
several alternatives is chosen and defined.

It involves identifying environmental /societal/ economic problems to be addressed

and the needs and interests of possible beneficiaries and stakeholders.

The search for promising project ideas is the first step towards establishing a
successful venture.

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Identifying suitable project ideas is the most important and crucial step in the
whole process of project preparation.

Identification of opportunities requires imagination, sensitivity to environmental

changes, and realistic assessment of what the firm/individual can do.

 Projects are identified because either … There is a need or problem or an

opportunity
 Need is a condition or situation in which something is required or wanted
 Problems are undesirable situations that prevent the organization from fully
achieving its purpose, goals and objectives
 Opportunities are chances to improve the organization even in the absence
of specific problems.
2. Sources of project Ideas
Generally, project ideas are born at two levels, the micro-level and macro-level.
 Micro level sources- Project ideas originated at individual or household
level that can be further developed through discussion with friends and
colleagues.
 Macro Sources: Project ideas originated by institutions at regional or
federal level.
3. Sources of Project Ideas
3.1. SWOT analysis
3.2. Need and Problem analysis
3.3. Stakeholder analysis
3.4. Objective analysis
3.5. Alternative analysis
3.1. SWOT Analysis
It facilitates and stimulatesthe flow of ideas:
Periodic SWOT analysis stimulates the flow of [Link] firms adopt a
somewhat casual and haphazard approach to the generating of project idea.
 SWOT is an acronym for strengths, weaknesses, opportunities and threats.

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 It represents a conscious deliberate and systematic effort by an organization

to identify opportunities that can be profitably exploited by it. Periodic
SWOT analysis facilitates the generation of idea
 Once the problem is defined and formulated, both internal and external
environment shall be analyzed to define and set achievable objectives of the
project.
 SWOT analysis is used to analyse the internal strengths and weaknesses of
an organization and the external opportunities and threats that it faces.
 The idea which sounds relatively most promising must be put under SWOT
analysis.
 SWOT analysis is a tool used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project idea.
 It involves specifying the objective of the business venture or project and
identifying the internal and external factors that are favorable and
unfavorable to achieve the objective.
 A SWOT analysis must first start with defining a desired end state or
objective.
 The aim of any SWOT analysis is to identify the key internal and external
factors that are important to achieve project objectives.
 SWOT analysis groups key pieces of information into two main categories:
 Internal factors – The strengths and weaknesses— internal to the
organization.
 External factors – The opportunities and threats presented by the external
environment to the organization.
 Strengths: characteristics of the business or team that give it an advantage
over others in the industry.
 Weaknesses: are characteristics that place the firm at a disadvantage relative
to others.
 Opportunities: external chances to make greater sales or profits in the
environment.

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 Threats: external elements in the environment that could cause trouble for
the business.
 Identification of SWOTs is essential because subsequent steps in the process
of planning for achievement of the selected project idea may be derived
from it.
 First, the decision makers have to determine whether the objective is
attainable, given the SWOTs. If the objective sounds NOT attainable a
different project idea must be selected and the process shall be repeated.
3.2. Need and Problem analysis
Need and Problem analysis is a critical step in the project identification process
and is an important sources of project idea. On the basis of available information,
the existing situation is analysed: that is, the major needs and problems are
identified and the main causal relationships between these are visualized.
In formulating problems, needs and existing problems should be identified and will
serve as source of project idea.
The following are possible sources of project ideas related to need and problem
Analysis andsometimes with opportunity sensing
A. Analysis of the performance of existing industries
B. Examination of the inputs and outputs of various industries
C. Reviewing import and exports
D. Analyzing Economic and Social Trends
E. Drawing Clues from Consumption Abroad
F. Attend trade fairs
G. Stimulate Creativity for Generating New Product Ideas
H. Government policy
A. Analyze the performance of existing industries:
A study of existing industries in terms of their profitability and capacity
utilizations indicates promising investment opportunities.

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An examination of capacity utilization of various industries provides information

about the potential for further investment.
Such a study becomes more useful if it is done region wise, particularly for
products which have high transportation costs.
B. Examine the inputs and outputs of various industries:
An analysis of the inputs required for various industries may throw up project
ideas. Opportunities exist when:
a) Materials, purchased parts or supplies are presently being procured from
distant sources with attendant time lag and transportation cost and
b) Several firms produce internally some components/parts which can be
supplied at a lower cost by a single manufacturer who can enjoy economies
of scale.
c) Similarly, a study of the output of the existing industries may reveal
opportunities for adding value through further processing of the main
outputs.
C. Review import and exports: An analysis of import statistics for a period of
years is helpful in understanding the trend of imports of various goods and the
potential for import substitution.
Indigenously manufacturing of goods currently imported is advantageous for
several reasons:
(i) It improves the balance of payments situation,
(ii) It generates employment, and
(iii) It provides a market for the supporting industries and services.
Likewise an examination of export statistics is useful in learning about the export
possibilities of various products.
D. Analyze Economic and Social Trends: A study of economic and social trends
is helpful in projecting demand for various goods and services. Changing
economic conditions and consumer performances provide new business
opportunities.
Example: Increasing desire for leisure and recreational activities. This has caused a
growth in the market for recreational products and services.

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E. Draw Clues from Consumption Abroad: Entrepreneurs willing to take higher

risks may identify projects for the manufacture of products or supply of services
which are new to the country but extensively used abroad.
F. Attend trade fairs: national and international trade fairs provide an excellent
opportunity to get to know about new products and developments.
G. Stimulate Creativity for Generating New Product Ideas: New product ideas
may be generated by thinking along the following lines: Modification,
rearrangement, reversal, magnification, reduction, substitution, adoption and
combination.
[Link] policy: In the planned economy, the government plays a major
role in the industrial development and spells out priorities for the economy and
lays the framework for development and resource allocation, which in turn can
serve as sources of project ideas
3.3. Stakeholder Analysis
Analyzing the stakeholders who need to be involved is one of the most crucial
elements of any project planning. Stakeholder analysis is a useful tool or process
for identifying stakeholder groups and describing the nature of their stake, roles
and interests.
A stakeholder can be defined as: ‘any person, group, organization or institution
with a direct interest or ‘stake’ in something.’
The aim of stakeholder analysis is to:
 Identify and define the characteristics of key stakeholders
 Assess the manner in which they might affect or be affected by the proposed
outcomes.
 Understand the relationship between stakeholders
 Assess the capacity of different stakeholders to participate.
 Ultimately to identify their unfulfilled needs.
Stakeholder analysis helps to identify unfulfilled Psychological needs: For well-
established, multi-brand products, the question to be asked is whether there are
certain psychological needs of the consumers which are presently unfulfilled.

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To find out whether such an opportunity exists, the technique of spectrum analysis
is useful. This analysis is done in the following manner:
i. Important factors influencing brand choice are identified,
ii. Existing brands in the market are positioned on a continuum in respect of
the factors identified in step (i),
iii. Gaps which exist in relation to consumer psychological needs are
identified.
Some potential groups who may be considered are:
 Users groups - people who use the resources or services of the firm.
 Interest groups - people who have an interest in or opinion about or who
can affect the use of a resource or service of a firm.
 Winners and losers
 Beneficiaries
 Intermediaries
4. Objective analysis
After defining project problems and identifying stakeholders, the next step is to
analyse the objectives.
From objective analysis, the findings and gaps may be transformed into a specific
project idea.
In objective analysis, the aim is to ensure the relevance and timeliness of
objectives.
A clear articulation and prioritization of objectives helps in channelizing the efforts
of employees & helps them to think more imaginatively.
5. Alternatives Analysis
Project identification is the stage where one project-idea out of several
alternatives is chosen and defined.
The purpose of alternatives analysis is to identify most possible alternative
projects options, assess their feasibility and agree upon on oneproject.
A project idea may also originate from multiple sources. For instance:
 New experiments emerging from previous project failures,

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 Expansion and replication of successful projects tested locally or proven

feasible in other developing countries,
 From the discovery of critical economic and social bottlenecks of shortages,
excess or idle resources,
 Forward & backward linkages with existing projects,
In general a proposal may be deemed to have passed the identification test
and be ready for detailed preparation when:
Major options and alternatives have been identified and some initial choices made;
The principal institutional and policy issues affecting project outcome have been
identified and deemed amenable to solution;
The project options selected are expected to be justified, given rough estimates of
the expected costs and benefits;
There is justifiable expectation that the project will have adequate support from the
relevant political authorities, other stakeholders and the intended beneficiaries.

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