Project Management

Project
Project is planned to achieve a specific objective which calls for a specific authority
to implement it.
Every project has three attributes:
Input characteristics: Define what the project will consume(require raw material,
energy, manpower, financial resources etc)
Output characteristics: Define what the project will generate.(production of
additional goods, provision of additional resources, etc)
Social-cost benefit characteristics: affect the current equilibrium of availabilities
and non availabilities in an economy.

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 Search for a business idea
Industrialisation accelerates economic growth, effects structural changes in the
economy(resource utilization, production functions, income generation, foreign
trade etc).
Real progress must ultimately depend on industrialisation.
Choosing an idea
Idea should give satisfying results to you.
Develop five or more plan in parallel.
An entrepreneur has to weigh objectively his intrinsic capabilities in finalising an
idea.
Suggestion for new products are obtained from all possible sources.

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 Selection of product
Selection of right product is very essential for being successful in business venture.(RP-
>marketable at reasonable profit).
Various factor that influence in selecting right product:
Item selected are banned items would considerably weigh favourably or otherwise in the selection
of the product.
Entrepreneurs having substantial amount of experience will be a advantage
Selection of product will be based on degree of profitability.
Concessions from the government for few products.
Many products belongs to priority industries or SSI.
Market for the product plays a significant role.(export market->widens marketing)
Getting license.
Many product carry locational advantages.
Product belong to ancillary unit, it provides a ready demand.

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 The adoption Process
It is a process of bringing a change in a buyers attitudes and perception.
Consumer adoption process includes:
Awareness: A person learns about new idea, product.
Interest: Develops interest in innovation. Demands more information of the
product.
Evaluation: Accumulated information and evidence are weighed in order to access
the basic soundness or worth of the innovation.
Trial: Put the idea into practice.
Adoption: The person now decides to adopt new ideas, product or practice for
continued use.

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 Product innovation
Innovation alone assures growth and survival.
Evolution of new product is a practical business function and is described as a
process product management.
The process of product planning and development is always adopted for product
innovation.

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 Four basic types of opportunities for sales growth

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 Product planning and development strategy
Marketers have four alternative ways of bringing about an increase in sales and
profit:
Market penetration: Expansion of sales of the existing product in existing market
by selling more to present customers or gaining new customers in existing
markets.
Market development: Existing product is introduced to new market. It is the
creation of new markets by discovering new applications for existing goods.
Product development: It occurs when a firm introduces new product into market
in which it is well established.
Product diversification: It occurs when firm seeks to enter a new market with a
completely new product.

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 New product development process(Innovation
Management)

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 Product planning and development process
Seven steps:
New product ideas: ideas may be contributed by scientists, customers, deals etc.
we may need n number of ideas to get one commercial viable product
Idea screening: evaluate all ideas and inventions.
Concept development and testing: screening process developed to mature product
concepts. Concept testing the company to choose the best among alternative
product concepts.
Business analysis: It is a combination of marketing research, cost benefit analysis
and assessment of competition. It will prove the economic prospects of new
product concept.

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 Product development programme: three steps:
Prototype development giving visual image of product
Consumer testing of model
Branding, packaging and labelling
Test marketing: It is necessary to find out viability of a full marketing program for
national distribution.
Commercialisation: Finalising features of the product.

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 Characteristics of project & classification

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Concept of projects and Classification
Characteristics of a project
Investment pattern
Benefits of gain
Time limit
Location
Project is a economic activity with well defined objectives and having specific
beginning and end. It should be amendable to planning, financing and
implementation as a unit where cost and returns are measurable.
A well planned project includes a correct consideration of alternatives,
identification of key issues, broad participation, compactness and enforceability. It
should be neat , clear-cut and specific.
 It also involves cost investment for the purpose of developing facilities to provide
goods and services.
It may involves establishment of new plant , provision for additional educational
facilities or it may aim at developing infrastructure facilities.
Whatever might be nature of project, a project will involve allocation and
consumption of resources, on one hand and generation of resources, goods or
services on the other.
Project levels
National level: Where national level investment plans are formulated, priorities
among sectors are established.
Sector level: priorities for investment within each sector are determined and issues
and problems affecting the development of the sector are addressed.
Project level: where individual projects are identified, prepared and implemented
and attention is given to their technical, economic, financial, social, institutional
and other dimensions.
Project classification
Quantifiable and Non-quantifiable projects
Quantifiable projects are quantitatively assessed in terms of benefits they are going
to make. Eg: Industrial development, power generation, mineral development etc
Non Quantifiable projects Can not be quantitatively assessed in terms of benefits
they are going to make. Eg: projects involving health, education and defence
Sectoral Projects
Agriculture and allied sector
Irrigation and power sector
Industry and mining sector
Transport and communication sector
Social service sector
Miscellaneous
Techno-Economic Projects
Factor-Intensity oriented: on this basis project may be classified as capital intensive
or labour intensive depending on whether large-scale investment in plant and
machinery or human resources involved.
Causation-oriented classification: Projects are classified as demand based or raw
material based.
Magnitude oriented classification: Depending upon size of investment projects are
classified as small scale, large scale and medium scale projects.
Financial Institutions classification
All India and state financial institutions classify the projects according to their age
and experience and the purpose for which the project is being taken up.
New projects
Expansion projects
Modernisation projects
Diversification projects
Service projects
Welfare projects
Service projects
Research and development projects
Educational projects
Dimensions of a Project
They become the catalytic agents of economic development.
They initiates the process of development.
They have consequences which are long term in nature.
It provide the framework of the future activities of the enterprises.
They also shape the future pattern of services.
Project usually involves substantial financial outlays.
They also initiates development of basic infrastructure and environment.
Project commitment can not be reversed.
Project identification brings the necessary changes in society in course of time.
Project accelerate the process of socio-cultural development.
Conceptualising the project
Aspects of a project
Two aspects:
Preliminary aspects: Analysing the product, its marketing, technical, financial and
economic aspects.
Feasibility aspect: includes adequate information for decision making and
sometimes even implementation.
The Project Cycle
Project identification:
Identification of project ideas that appear to represent a high priority to achieve
important development objectives.
Project Preparation :
Feasibility study should be taken in its principal dimensions technical, economic,
financial, social and so forth to establish the justification of the project.
Project should be designed in such a way that how they are going to be
implemented. Design of project need to be adopted to local, political,
administrative, economic and cultural conditions.
Entire project should be objectively appraised.
Project implementation:
All project identification and preparation work is directed toward facilitating project
implementation and helping to ensure its success. Implementation is a critical stage of
project work.
Ex-Post Evaluation :
Project cycle does not end with when implementation is completed and the project goes in
to operation.
Main purpose is to learn lessons for the design of future projects and help ensure
accountability
It should provide a comprehensive and detailed review of the elements of success and
failure of the project for enhancing the development impact of project work.
Essential Requirements of project objectives
Specific, not general
Not overly complex
Measurable, tangible and verifiable
Realistic and attainable
Established within resource bounds
Consistent with resources available
Consistent with organisational plans, policies and procedures
Basic objectives of the project
Maximisation of the market value of equity.
Maximisation of net present value.
Maximisation of return.
Increase in the internal rate of return at low risk.
Increase in the net present value of monetary flows.
Project features
Simplicity and clarity.
Availability of attractive technology to promote the project.
Integration of basic production services, especially those of input supply, credit,
marketing and extension.
Compatibility of the project within the existing administrative mix.
Phases of project management
Requirements of phases
Basic tenets of managing projects
Define the objective of the project
Determine the constituent tasks
Identify important milestones.
Allocate resources to each task.
Re-evaluate task relationships and scheduling, pinpointing resource conflicts.
Execute the project.
Project management processes
Operational management processes
These activities are ongoing activities with neither a clear beginning nor expected
end.
Planning: Identifying objectives and devising a workable scheme to accomplish
them.
Executing: Co-ordinating people and other resources to carry out the plan.
Controlling: ensuring that the objectives are met by measuring the progress and
taking corrective actions when necessary.
Additional Project management Processes
Initiating: Recognising that a project should begin and committing to do so.
Closing: Formalising acceptance of the project and bringing it to an orderly end.
Technical Processes
These processes vary by application areas.
These are not discrete.
Basic process interaction occur within each phase such that closing one phase
provides inputs for initiating the next.
Project Interface Management
The core competence to manage the integrative system involves making offs among
competing objectives and alternatives in order to meet or exceed stakeholders
requirements.
With enormous amount of analytical techniques and advent of information
technology, numerous tools have been developed helping the project management
professionals to manage the day to day activities more efficiently.
 Project identification

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 introduction
First step of new venture
It is concerned with collection, compilation & analysis of economic data for the
eventual purpose of locating possible opportunities for investment & development of
such opportunities
Opportunities according to drucker
Are of 3 kinds
Additive: which enables decision maker to better utilise the existing resources without
involving a change in character of business
This involves minimum disturbance & least risk
Complementary: introduction of new ide leads to certain amount of change in the existing
structure
Breakthrough : fundamental changes in both the structure & character of business
minimum disturbance & least risk
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 Feasibity Report

Before starting SSI , It is mandatory for the entrepreneur to consult the director of
industries service institute(SISI) in one state
SISI guides as to type of industry to start ,where to start & how to start it
It suggest line on which project report for the proposed unit should be submitted
It also gives valuable information of various incentives available to small scale
industry

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 PROJECT FEASIBILITY ANALYSIS
It includes market analysis, technical analysis
Analysis consists of 3 factors: market, technical, financial
Market analysis is the method of screening project ideas as well as means of
evaluating a projects feasibility in terms of market
It covers following areas(market analisys)
Brief market description including market areas, method of transportation,
existing rates of transport, channel of distribution
An analysis of past & present demand determination of quantity value of
consumption
An analysis of past & present supply determining competitive position of product,
selling price quality & market price

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 A technical analysis reviews the technique or
processes to be applied(
Description of the product including specification relating to its physical
mechanical & chemical properties
Description of selected manufacturing process, shows detailed flow charts &
presenting alternative process
Determination of plant size & production schedule, includes expected volume for
given time period
Selection of machinery & equipment includes specification s
Identification of plant location & assesment of its desirability in terms of distance
from raw material sorces & market

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 A design of plant layout & estimate the cost of erection
Study of availability of raw materials & utilises & including physical &chemical
properties
Estimate labour requirement
Determination of type & quantity of waste to be disposed
Estimate the production cost of project

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 Financial analysis
For project it involves new companies, statement of total project cost, initial
capital requirement cash flow
For project it involves Supporting schedules for financial projection, payment
period of purchase& expense & element of production cost
For project it involves Return on investment ,return on equity break even volume
& price analysis
For project if necessary a sensitivity analysis to identify items which have
substantial impact on profitability or possibly a risk analysis

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 Economic feasibility
General information of project company history, nature of industry reputation &
qualification of the existing or proposed management
Description of project includes market production, marketing methods & financial
statements
Miscellaneous information like steps taken for implementation of project &
qualification of technical partner

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 Project formulation

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 Project formulation
It is defined as taking a first look carefully & critically at a project idea by an
entrepreneur to build up an all around beneficial to project after carefully weighing
its components

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 STEPS IN PROJECT FORMULATION
General objectives: merely states in board terms the achievement expected

operational objective: result expected from implementation of project or scheme

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 SEQUENTIAL STAGES OF PROJECT FORMULATION

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 Feasibility analysis
Project idea is examined from point of view of whether to go in for a detailed
investment proposal or not
Project idea is examined in context of internal &external constrains 3 alternatives
must be considered
Project idea seems to be feasible
Project idea seems to be not feasible
Unable arrive at a conclusion want of adequate data
If it is feasible we go for second step if not feasible we collect more data

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 Techn & o economic analysis:
Estimation of project demand potential choice of optimal technology is
made
Project design & network analysis:
It defines individual activities which constitute the project & their
inter relationship with each other
Sequence of events of project is presented
Project design is heart of project entity

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 Input analysis:
It asses input requirement during the construction & operation of project
Observe the input required for each activity & sum it up to get the total input
requirement on quantitative & qualitative terms
It include men material.
Financial analysis:
Estimating project cost operating cost & fund requirement
Helps in comparing various project proposal on common sale & thereby aiding the
decision maker
Analytical tools are discounted cash flow, cost volume, profit relationship, ratio
analysis

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 Cost benefit analysis:
Overall worth of project is main consideration
This will consider in national viability point of view
Pre investment analysis:
Gets formal & final shape stage
Project is presented in such a way that project sponsoring body, project
implementing body & external consulting agencies are able to decide whether to
accept the proposal or not

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 Project evaluation
In this we need to consider the total impact of project on economy of nation
Socio cost analysis is used
All cost & benefit can be classified into 3 categorise
Primary cost & benefits: which will be incurred & will accrue to project
implementing body
Secondary cost & benefits: benefits accrue to parties other than project
implementing body
tertiary cost & benefits: include all non quantifiable fill over & multiplier effects

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 PLANNING COMMISSION GUIDELINES
In order to process investment proposals and arrive at investment decisions, the planning Commission has
issued guidelines for preparing/formulating industrial projects.
1. General information: The feasibility report should include an analysis of the industry AND the past
performance of the industry.
2. Preliminary analysis of alternatives:
The gap between demand and supply for the outputs which are to be produced.
Data on the capacity that would be available from projects that are in production or under
implementation at the time the report is prepared.
A complete list of all existing plants in the industry, giving their capacity and their level of production
actually attained.
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 3. Project description: The feasibility report should provide a brief description

of the technology/process chosen for the project.

Information relevant for determining the optimality of the location chosen should also be included.

To assist in the assessment of the environmental effects of a project every feasibility report must present
the information on specific points, i.e., population, water land, air, flora, fauna, effects arising out of the
projects pollution, other environmental destruction, etc.

4. Marketing plan: It should contain the following items:

Data on the marketing plan, demand and prospective supply in each of the areas to be served.

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5. Capital requirements and cost: The estimates should be reasonably complete and properly estimated.

Information on all items of costs should be carefully collected and presented.

6. Operating requirements and costs:

Operating costs are essentially those costs which are incurred after the commencement of commercial

production.

Information about all items of operating cost should be collected.

Operating costs relate to cost of raw materials and intermediaries, fuel, utilities, labour, repair and

maintenance, selling expenses and other expenses.

7. Financial analysis: The purpose of this analysis is to present some measures to asses the financial viability

of the project.

A Performa
DEPT EC balance sheet for
VCET the project data should be presented.
PUTTUR
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 8. Economic analysis: Social profitability analysis needs some adjustments in the data relating to the costs

and return to the enterprise.

One important type of adjustment involves a correction in input and cost, to reflect the true value of foreign

exchange, labour and capital.

9. Miscellaneous aspects: Other relevant information must be included.

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Project design & network analysis
 introduction
Execution of project follows planning, scheduling & controlling
First & foremost is project design
Enables to identify flow of event which must take place for successful implimentation
Network techniques help the management of an organisation in performing these
functions effectively & efficiently

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 Importance of network analysis
Whole project should be considered with reference to sequence of activities &
event
Event should be thought of in different stream of operation
Whole project may be put on one network while different segments of project may
be detailed out in separate network for final integration
Time estimation is made taking into view 2 aspects
Project in which no previous experience & time estimation based on probabilities
time estimation may be deterministic
Cost estimates would depend on project time estimates & change in price of
different factors of production
The physical progress of the project ,individuality simultaneity of the events

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 Origin of CPM & PERT

CPM came into existence in 1957

PERT came into existence in 1958

Application of pert based on probability estimates, covering those pessimistic,

those optimistic & those considered normal

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 NETWORK
n/w analysis is a system which plans both large & small projects by analysing the
project activities
Projects are broken down into simple activities which are arranged in logical
sequence
It is also decided as which task will be performed simultaneously which other
sequentially

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 Network techniques
In project there are 2 categories of job or activities
Which can be taken up concurrently
Which can be taken up only after completing some activities-either completely or
partially
CPM is widely used in project management as they are very useful in basic
management functions

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 Need for n/w technique

It helps in designing planning coordinating controlling & decision making in order

to accomplish project economically in minimum available time with limited
available resources

It developed from MILESTONE CHART & BAR CHART

Because of their limitation it cannot be utilised for large complex project

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 DISADV OF MILESTONE CHART & BAR CHART

Bar chart becomes cumbersome while dealing with big & complex projects
Bar chart does not point out which task should be given priority as regards
resources
Effect of change in schedule cannot be evaluated with the help of bar chart
A bar chart neither tells the time at which activity begins & end nor does it
indicate tolerances in activity timing
PERT is concerned with 2concepts
Events: it is specific accomplishment that occurs at recognisable point of time & does
not call for either the time or resources
Activities: it is the work require to complete specific event

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 Steps in PERT
Establishment of objectives
Schedule work break down in great detail

Technical & managerial person should begin to work together

Each person who participates in application of pert to the control of project should
have some basic familiarity with the general nature of the work & with ultimate
objective desired

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 SOME AUTHOR ALSO INDICATED FOLLOWING STEPS
Development of project network
Time estimation
Determination of critical path, event slacks,& activity floats
Development of project schedule
Calculation of variability duration & probability of completion in given time

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 IN PERT time is the basic measure
Expressed in calendar weeks
Project should be completed within stipulated optimistic time
In order to arrive at most reliable estimation of time, 3time estimates are usually
employed
Optimistic time: it is the shortest time possible if everything goes perfectly well
with no complication, the chance of this optimum actually occurring might be one
in a hundred
Pessimistic time: it is the longest time conceivable, it includes time for unusual
delays & thus the chance its happening might be only one in a hundred
Most likely time: best time what normally would occur

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 ADVANTAGES OF PERT
It gives the mgt the ability to plan the best possible use of resources to achieve a
given goal within the overall time & cost limitation
It helps mgt to handle uncertainties involved in programmes where no standard
time data are available
It presses for right action, at right point& at right time in the organisation

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 LIMITATIONS OF PERT
Basic difficulty comes in the way of time estimates for the completion of activities
because activities are non repetitive type
this technique does not consider the resources required at various stages.
Use of this technique for active control of a project requires frequent updating &
revising the PERT calculations & this proves quite a costly affair

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 CPM
It has 2 time cost estimates for each activity
Normal situation
Crash situation
CPM operates on assumption there is a precise known time each activity in project
will take.

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 ADVANTAGES OF CPM
Helps in ascertaining the time schedule.
With its aid, control by mgt is made easy
It makes better & detailed planning possible
It provides a standard method for communicating project plans schedules time&
cost performance
It identifies most critical elements & thus more attention can be paid to these
activities

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 LIMITATIONS OF CPM
It fails to incorporate statistical analysis in determining the time estimates

It operates on the assumption that there is a known precise time that each activity
in the project will take but this may not be true in actual life

Difficult to use CPM as controlling device because , one must repeat the entire
evaluation of the project each time when changes are introduced into the network

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 Difference between CPM & PERT

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