Project Management

Project planning

 Stimulating the flow of ideas

 SWOT Analysis

SWOT analysis is a strategic planning technique used to help an organization to identify

strengths, weaknesses, opportunities, and threats related to business competition or project
planning

The four components of SWOT analysis

• Strengths.
• Weaknesses.
• Opportunities.
• Threats

A SWOT analysis helps find the best match between environmental trends (opportunities and
threats) and internal capabilities.

Strength is a resource or capacity the organisation can use effectively to achieve its objectives.

A weakness is a limitation, fault, or defect in the organisation that will keep it from achieving its
objectives.

An opportunity is any favourable situation in the organisation's environment. It is usually a trend

or change of some kind or an overlooked need that increases demand for a product or service and
permits the firm to enhance its position by supplying it.

A threat is any unfavourable situation in the organisation's environment that is potentially

damaging to its strategy. The threat may be a barrier, a constraint, or anything external that might
cause problems, damage or injury.

 Clear Articulation of Objectives

 Fostering a conductive climate
 Corporate Appraisal

A corporate appraisal is examining the operations of an entire company from different angles. It
is a measurement of the readiness of that corporation's internal culture to deal with external
environments and change.

The purpose of a corporate appraisal is to assess the strengths and weaknesses of the company.
This is similar to a SWOT analysis, which analyzes the strengths, weaknesses, opportunities, and
threats
  How to Conduct a Corporate Appraisal

The basis for conducting a corporate appraisal is to identify the strengths and weaknesses that
can influence the company's ability to achieve its goals.

Depending upon the company's strengths, it may be able to exploit its opportunities successfully.
A corporate appraisal is concerned with the company's current state of mind and how its culture
can change for its survival

A corporate strength is a strong point for the company, something that it does well, or something
that is unique. A strength can be a skill, competency, a certain resource, or a competitive
capability that gives the company an advantage. Regarding your family business, one corporate
strength is that it has developed a new type of plastic that is rigid yet durable enough to protect
cell phones

A corporate weakness is a constraint or obstacle which can block the company's desired
direction, or hinder the company in gaining a competitive advantage. A weakness can be any
number of things. It could be a resource that the company does not have, or a condition that
would put it in a disadvantageous position.

 Tools for identifying investment opportunities

1. Porters five forces Model

Michael E. Porter, a Harvard professor known as a leader in competitive and strategic

management, created a well-known model for determining the profitability of an industry.
Porter's model can be applied to any segment of the economy to search for profitability and
attractiveness.
1.Threat of new entry

If the nature of an industry is that firms can easily enter into the industry without facing any
entry barrier then it possesses threat of new entrant which reduce the attractiveness of that
industry. Threat of new entry depends on;

▪ Time and cost requirement

▪ Specialized knowledge requirement
▪ Economies of scale
▪ Cost advantages
▪ Technology protection
▪ Other entry Barriers

Threat of new entrants can be reduced through entry barriers. Entry barriers are high when:

– Need substantial resources to enter

– Economies of scale are enjoyed by the industry
– Existing firms control distribution channel
– Switching costs are high
– Rigid govt. policy

2.Power of supplier

This force addresses how easily suppliers can drive up the cost of inputs. It is affected by

▪ the number of suppliers of key inputs of a good or service,

▪ how unique these inputs are, and
▪ how much it would cost a company to switch from one supplier to another
3. Power of buyer

This specifically deals with the ability that customers have to drive prices down. It is affected by

▪ how many buyers or customers a company has,

▪ Size of each customer
▪ Differences than competitors
▪ how significant each customer is, and
▪ how much it would cost a company to find new customers or markets
4. Threat of substitute
▪ Threat of substitute

Substitute goods or services that can be used in place of a company's products or services pose a
threat. Intensity of threat depends on;

▪ Performance of the substitutes

▪ Switching cost (Cost of change)
3.Competitive rivalry

This force refers to the number of competitors and their ability to undercut a company. The
larger the number of competitors, along with the number of equivalent products and services
they offer, the lesser the power of a company

• Life Cycle Approach

Each product has four stages of life cycle:

 Pioneering stage
 Investment may have a low return and negative NPV.
 It create the options for participating in the growth stage.
 Rapid growth stage
 Significant expansion in sales and profit
 Investment in this stage earn a high return and generate positive NPV
 Maturity and stabilization stage
 Investment earn average return and be NPV –neutral
 Decline stage:
 Investment earn meagre return and produce negative NPV

4.Sources of positive net present value

 Economies of scale

Economies of scale means that an increase in the scale of production, marketing, or distribution
results in a decline in the cost per unit. It happens because at large production volume the fixed
cost is divided on more units. When substantial economies of scale are present, the existing firms
are likely to be large in size

 Product differentiation

A firm can create an entry barrier by successfully differentiating its products from those of its
rivals. The basis for differentiation may be one or more of the followings:

 Effective advertising and superior marketing

 Exceptional service
 Innovative product feature
 High quality and dependability
 Cost Advantag

If a firm can enjoy cost advantage vis-a-vis its competitors, it can be reasonably assured of
earning superior returns. Cost advantage may stem from one or more of the following
  Accumulated experience and comparative edge on the learning curve
 Monopolistic access to low cost materials
 A favorable location
 More effective cost control and cost reduction
 Marketing reach

A penetrating marketing reach is an important source of competitive advantage. Marketing reach

refers the wideness of a company’s distribution networks. Wide marketing reach creates the
potentiality of more customers to serve.

 Technological edge

Technological superiority enables a firm to enjoy excellent returns. Firms like Apple and Intel
earned superior returns over extended periods of time due to, their superior technological
innovation, the technological edge they had over their rivals.

 Government policy

A government policy which shelters a firm from the onslaught of competition enables it to earn
superior returns. Government policies that create entry harriers, partial or absolute, include the
following:

 Restrictive licensing
 Import restrictions
 High tariff walls
 Environmental controls s
 Special tax reliefs

Preliminary Screening
 Compatibility with promote
 Constancy with governmental priorities
 Availability of inputs
 Adequacy of market
 Reasonableness of cost
 Acceptability of risk level
Compatibility with the Promoter

The idea must be compatible with the interest. personality, and resources of the entrepreneur.
According to Murphy, a real opportunity has three characteristics

 It fits the personality of the entrepreneur- it squares with his abilities, training, and
proclivities
 It is accessible to him
  It offers him the prospect of rapid growth and high return on invested capital.

Consistency with Govt. Priorities

The project idea must be feasible given the national goals and governmental regulatory
framework. Project manager consider whether the project consistent with national goals and
priorities , project’s effect on environment, procedure of getting the license for the project etc.

Availability of inputs
The resources and inputs required for the project must be reasonably assured. Project
manager consider :
 Capital requirements of the project
 Technical knowledge and facilities
 Availability of Raw materials etc.

Adequacy of market
Factors to be considered:
 Total Present domestic market
 Copetitors and their market Shares
 Export Market
 Sales and Distribution system
 Barriers to the entry of new units

Reasonableness of Cost
 Consider following cost structure:
 Cost of materials
 Cost of labor
 Factory Overhead
 Administrative cost

Experience curve

Project Analysis

Steps in a sample survey

 Define the target Population

 Select the sample scheme and sample size
 Develop the questionnaire
 Recruit and train the field investigator
 Obtain information as per the questionnaire from the sample of respondents
  Scrutinize the information gathered
 Analyse and interpret the information

Characterization of the market

Based on the information gathered from secondary sources and through 
the market survey, the market for the product/service may be described 
in terms of the following:

 Effective demand in the past and present

 Breakdown of demand
 Price
 Methods of distribution and sales promotion
 Consumers
 Supply and competition
 Government policy

Methods of demand forecasting

 Qualitative Methods: Jury of executive method And Delphi method

These methods rely essentially on the judgment of experts to translate qualitative
information into quantitative estimates. The important qualitative methods are :
 Jury of executive method
 Delphi method
 Time series projection Methods: trend projection, moving average
These methods generate forecasts on the basis of an analysis of the historical time series .
The important time series projection methods are :
 Trend projection –method
 Exponential smoothing method
 Moving average method
 Causal Methods: Chain ratio, consumption level, end use, econometric etc.
More analytical than the preceding methods, causal methods seek to develop forecasts on
the basis of cause-effect relationships specified in an explicit, quantitative manner. The
important causal methods are :
 Chain ratio method
 Consumption level method
 End use method
 Leading indicator method
 Econometric method

Financial Estimates and projections

  To judge a project from the financial angle, we need the following information:
 Cost of project
 Means of financing
 Estimates of sales and production
 Cost of production
 Working capital requirements and its financing
 Estimates of working results
 Break-even-points
 Projected cash flow statements
 Projected balance sheet

Means of finance available for financing a project

 Share Capital
 Term loans
 Debenture loans
 Deferred credit
 Incentive sources
 Miscellaneous sources

Major components of cost of production

 Material Cost
 Utilities Cost
 Labour cost
 Factory overhead cost