Project Management

MS-210
Unit-1
 What is a Project?
• Projects are complex, one-time processes.
• Projects are limited by budget, schedule, and
resources.
• Projects are developed to resolve a clear goal or set
of goals.
• Projects are customer-focused.

A project is a temporary endeavor undertaken to create a

unique product, service, or result.
 General project characteristics
• Projects are ad hoc endeavors with a clear life cycle.
• Projects are building blocks in the design and execution
of organizational strategies.
• Projects are responsible for the newest and most
improved products, services, and organizational
processes.
• Projects provide a philosophy and strategy for the
management of change.
• Project management entails crossing functional and
organizational boundaries.
 General project characteristics
• Traditional management functions of planning,
organizing, motivation, directing, and control apply to
project management.
• Principal outcomes of a project are the satisfaction of
customer requirements within the constraints of
technical, cost, and schedule objectives.
• Projects are terminated upon successful completion of
performance objectives.
 Process & Project Management

PROCESS PROJECT
• Repeat process or product • New process or product
• One objective
• Several objectives • One-shot-limited life
• Ongoing • More heterogeneous
• People are homogenous • Integrated system efforts
• Greater uncertainty
• Well-established systems • Outside of line organization
• Greater certainty • Violates established practice
• Part line organization • Upsets status quo
• Established practices
• Supports status quo
 Examples
• developing a new product or service
• effecting change in a structure, staffing or style of an
organisation
• designing a new transportation vehicle
• developing or acquiring a new or modified information
system
• constructing a building or facility
• building a water system for a community in a developing
country
• running at campaign for political office
• implementing a new business procedure or process
• implementing SAP in multi-sites company
 Project features
• Objective
• Unique
• Temporary Endeavour
• Life cycle
• Time Limit
• Team work
• Customised
• Dynamic
 Classification of Projects
• Activity based-Industrial and Non-industrial
• Size-Large, medium and small on the basis of
capital invested
• Time- Normal and Crash
• Ownership- Private or Public
• Location- National or international
• Need based- New Product, Expansion,
Diversification etc.
 Objectives of the Project
• Cost
• Time
• Quality
• Customer satisfaction
PROJECT LIFE CYCLES
 Project Life Cycles
A project life cycle refers to the stages in a project’s
development and are divided into four distinct phases:
•Conceptualization – development of the initial goal and
technical specifications of the project. Key stakeholders
are identified and signed on at this phase.
•Planning – all detailed specifications, schedules,
schematics, and plans are developed.
•Execution – the actual “work” of the project is
performed.
•Termination – project is transferred to the customer,
resources reassigned, project is closed out.
 Change during project life cycle

Client
Interest

Project
Stake

Resources

Creativity

Uncertainty
Four dimension of project success
 Project Initiation
It is the starting phase. It includes
1. Project identification
2. Generation and development of Ideas
3. Prefeasibility Study
4. Selection of a project after prefeasibility study
5. Feasibility Study or appraisal of project proposal
chosen
6. Getting the organisational’s commitment and
authorisation to commence the project.
 1. Project identification
Identifying a new worthwhile project is a
complex problem. It involves careful study from
many different angles. A wide variety of sources
should be tapped to identify them.
• Analyse the performance of existing industries
• Examine the inputs and outputs of various
industries
• Review imports & exports
 Project identification
• Study plan outlays and governmental
guidelines
• Look at the suggestions of Financial
institutions and developmental agencies
• Investigate local materials and resources
• Analyse economic and social trends
• Study New Technological Developments
• Draw clues from consumption abroad
 Project identification
• Explore the possibility of reviving Sick Units
• Identify unfulfilled psychological needs
• Attend Trade fairs
• Stimulate creativity for generating new
Product Ideas
 Tools for project identification
There are three more popular tools for
identifying promising investment opportunities
1. Porter Model
2. Life Cycle Approach
3. Experience Curve
Porter’s Five forces driving industry
competition
 Product Life Cycle Approach
• Introduction
• Growth
• Maturity
• Decline
 The Experience Curve
• It shows how the cost per unit behaves with
respect to the accumulated volume of
production.
• Cost per unit will decline with the increase in
volume of production due to
• Learning effects
• Technological improvements
• Economies of scale
 2. Generation of ideas
• SWOT analysis facilitates the generation of
ideas
• To do that two step process is required
1. Corporate appraisal(SW)
2. Monitoring the environment(OT)
 Corporate Appraisal
A realistic appraisal of corporate strengths and weakness
is essential for identifying investment opportunities
which can be profitably exploited. The key area to be
included in this part are
1. Marketing and Distribution: Market image, product
line, market share, distribution network, customer
loyalty, market and distribution costs
2. Production & Operations: Condition and capacity of
plant, Availability of raw material, Degree of vertical
integration, locational advantages, cost structure
3. Research & Development
 Corporate Appraisal
4. Corporate resources and Personnel:
Corporate image, clout with governmental and
regulatory agencies, dynamism of top mgt.,
competence and commitment of employees,
state of industrial relations
5.Finance and accounting: Financial leverage,
cost of capital, Tax situation, Relations with
shareholders, Accounting and control Sysytem,
cash flow and liquidity
 Environment appraisal
• Key sectors of environment appraisal are
1. Economic sector: State of economy, growth of economy, cyclical
fluctuations, linkage with the world economy, trade surplus, BOP
2. Government sector: Industrial policy, Tax framework, EXIM policy
3. Technological sector: New tech. and access to existing tech.
4. Socio-demographic sector: Population, income distribution,
education profile, employment of women, Consumption and
investment
5. Competition sector: degree of competition, entry barriers,
marketing policies
6. Supplier sector: availability of raw material, coat of energy and
money.
 3. Pre- Feasibility study
A long list of ideas are now with the project manager.
Some kind of preliminary screening s required to
eliminate ideas which prima facie are not promising. For
this following aspects may be looked into:
• Compatibility with promoter
• Consistency with governmental priorities
• Availability of inputs
• Adequacy of market
• Reasonableness of cost
• Acceptability of risk level
 Selection of a project after prefeasibility
study
After evaluating a large number of project ideas regularly,
it is easy to be translated into project rating index. The
steps are as follows:
1. Identify factors relevant for project rating
2. Assign weights to these factors
3. Rate the project proposal on various factors, using a
suitable rating scale.
4. For each factor multiply the factor rating with the
factor weight to get the factor score
5. Add all the factor scores to get the overall project
rating index.
 Feasibility study
When a Project is selected on the basis of higher rating
then a complete feasibility study or project appraisal is
required before putting the final proposal of project
before the competent authority. Appraisal of a proposed
project includes the following analyses :
• Economic analysis
• Financial analysis
• Market analysis
• Technical analysis
• Managerial competence
• Ecological analysis
 Economic Analysis
Under economic analysis the aspects highlighted
include
• Growth of Economy and the state of industry
• Level of capacity utilization
• Estimated demand &Anticipated sales
• Government Policies related to trade
 Financial Analysis
• Cost of capital
• Means of finance
• Cost of production
• Working capital requirement and its financing
• Estimates of working results
• Break-even point
• Projected cash flow
• Projected balance sheet.
 Market and Demand Analysis
Key Steps in Market & Demand Analysis &
their Inter-relationships
• Situational Analysis & Specification of
Objectives
• Collection of Secondary Information
• Conduct of Market Survey
• Demand Forecasting
• Market Planning
 Situational Analysis & Specification of
Objectives
In order to get a “feel” of the relationship between the
product and its market, the project analyst may informally talk
to the customers, competitors, middlemen, and others in the
industry. Wherever possible, he may look at the experience of
the company to learn about the preferences and purchasing
power of customers, actions and strategies of competitors,
and practices of the middlemen.
Suppose that a small but technologically competent firm has
developed an improved air cooler based on a new principle
that appears to offer several advantages over the
conventional air cooler. The chief executive of the firm needs
information about where and how to market the new air
cooler.
The objectives of the market and demand in this case
may be to answer the following questions:
• Who are the buyers of air coolers?
• What is the total current demand for air coolers?
• How is the demand distributed temporarily &
geographically ?
• What is the break-up of demand for air coolers of
different sizes?
• What price will the customers be willing to pay for the
improved air coolers?
• How can potential customers be convinced about the
superiority of the new air coolers?
• What price and warranty will ensure its
acceptance?
• What channels of distribution are most suited
for the air cooler?
• What trade margins will include distributors to
carry it?
• What are the prospects of immediate sales?
 Collection of Secondary
Information
General Sources of Secondary
Information
The important sources of secondary information
useful for market and demand analysis in India
are mentioned below:
• Census of India
• National Sample Survey Reports
• Plan Reports
• Statistical Abstract of the Indian Union
• India Year Book
• Statistical Year Book
• Economic Survey
• Guidelines to Industries
• Annual Survey of Industries
• Annual Reports of the Development Wing, Ministry
• of Commerce and Industry
• Annual Bulletin of Statistics of Exports & Imports
• Techno-Economic Surveys
• Industry Potential Surveys
• The Stock Exchange Directory
• Monthly Studies of Production of Selected Industries
• Monthly Bulletin of Reserve Bank of India
• Publications of Advertising Agencies
 Market Analysis(contd..)
• Conduct of Market Survey
• Demand Forecasting
• Market Planning
 Technical Analysis
• Availability of Land and site
• Availability of Water Power, transport,
communication facilities.
• Availability of servicing facilities like machine
shop, electric repair shop etc.
• Coping with anti pollution law
• Availability of work force
• Availability of required raw material as per
quantity and quality.
 Management Competence

Management ability or competence plays an

important role in making an enterprise a
success. In the absence of Managerial
Competence the project which are otherwise
feasible may fail. On the contrary, even a poor
project may become a successful one with good
managerial ability. Hence, while doing project
appraisal, the managerial competence or talent
of the promoter should be taken into
consideration.
 Ecological Analysis

In recent years, environmental concerns have

assumed great deal of significance. Ecological
analysis should also be done particularly for major
projects which have significant implication like
power plant and irrigation schemes, and
environmental pollution industries like bulk-drugs,
chemical and leather processing. The key factors
considered for ecological analysis are :
• Environmental damage
• Restoration measure
“Every idea, whether it is the
introduction of a new product line, the
opening of branch offices, or the hiring
of additional staff, must be tested
through basic business analysis."