UNIT 8

Preparation of Project
Presentation
by
Dr .V . S.Krushnasamy M.Tech ., Ph.D (Engg..)
Associate Professor
Department of EIE
DSCE

Topics going to be
discuss
Network
Analysis

Meaning of Project
Project Identification
Project Selection
Project Report
Need and Significance
of Report
Contents
Formulation;
Guidelines by Planning
Commission for Project
report

Errors of Project
Report
Project Appraisal.
Identification of
business opportunities
Market Feasibility
Study
Technical Feasibility
Study
Financial Feasibility
Study
Social Feasibility
Study.

Introduction

An Entrepreneur , before he sets up an enterprise , wants

to satisfy himself that it is a Profitable proposition.
He wants to gather critical information & take decisions
pertaining to various Aspects Technical arrangement ,
Plant & Machinery, Market, Financial Arrangement,
Location, Statutory Clearances, in order that the tasks
of establishing the project, & to some extent
managing it later, becomes easy.
One of the most needed skills for any entrepreneurs
would be documentation skills.
Before starting any business a detailed project report has
to prepared and submitted to banks and other boards
without which no loans are given nor any licenses will be
issued.
The entrepreneur should either be able to prepare project
report himself or get it prepared in such a way that it best
suits his business plan.

Meaning of Project
A Project is an idea or a plan that is intended to be carried
out.
Project is that it is a scheme of something intended to be
done ; a Proposal for an undertaking, design, speculative
imagination etc.
Project is a scheme for investing resources which can be
reasonably analyzed & evaluated as independent unit.
The world bank has defined project as an approval for a
capital investment to develop facilities to provide goods &
services.
A Project is an appraisal for investment with the definite aim
of producing a flow of output over a specified period of time.
A Project is defined as the whole complex of activities
involved in using resources to gain benefits.
A Project can be defined as a scientifically evolved work plan
devised to achieve a specific objective within a specified
period of time etc .

Meaning Project

The very foundation of an enterprise is the project.

The success or failure of an enterprise largely
depend upon the project.
A project is an organized unit dedicated to the
attainment of goal the successful completion of
development project on time within budget, in
conformance with predetermined programme
specifications.
The three basic attributes of the project are
A course of action
Specific objectives
Definite time perspective
Every project has starting point and end point with
specific objectives.

Objectives
To develop & strengthen their entrepreneur quality
To analyze environmental set up relating to small
industry & business
To select product
To formulate project report for a product
Good and bad about the entrepreneurship
To understand the process ,procedures and
formalities involved in setting up enterprise
To give knowledge of sources of help concessions.
To acquire basic skills
To enable them to communicate regularly
Develop broad vision of business passion for integrity
& unity

Classifications of project
They are classified on the following basis : (Major
Classifications)

Quantifiable & Non Quantifiable Projects.

Sectoral Projects.
Techno Economic Projects

Quantifiable & Non Quantifiable

Projects
Quantifiable
Projects for which a right quantitative assessment of
benefits can be made are called as Quantifiable
Projects.
Examples of this category are projects concerned with
Industrial Development, Power Generation, Mineral
Development etc.
Non Quantifiable
Non Quantifiable Projects are those in which a
quantitative assessment of benefits cannot be made.
Examples of non quantifiable projects are projects
involving health, education, & defense.

Sectoral Projects
The planning commission of India has accepted
sectoral base as the criterion for classification of
projects.
According to this classification, projects may be
classified as :
a) Agriculture & Allied Sector.
b) Irrigation & Power Sector.
c)
Industry & Mining Sector.
d) Transport & Communication Sector.
e)
Social Services Sector.
f)
Miscellaneous Sector.

Techno Economic Projects

Projects are also classified on the basis of their Techno
Economic Characteristics
Three Main Groups of Classification in this Category
(i) Factor Intensity Oriented Classification :
On the basis of this classification, projects may be
classified as capital intensive or labor Intensive or
power intensive depending upon large scale Investment
in plant & machinery or human resources or high power
input is involved.
(ii)Causation Oriented Classification :
In this category, projects may be classified as
demand based or raw material based projects. The very
existence of demand for certain goods or services makes
the project demand based & the availability of certain raw
materials , skills or other inputs makes the project raw
material based.

Techno Economic Projects

Magnitude Oriented Classification :
The Classification of Projects is based on the size
of the capital involved in the projects.
Depending on the total project investment, may
be projects may be classified as Large Scale,
Medium Scale & Small Scale Projects.
It is to be noted that, Techno Economic
Characteristics
based
Classification is
facilitating the process of feasibility appraisal.

Sources of Project
Identification
PI concerned with the of economic data, compilation and
analysis it to identify the possibility of investment to
produce goods or services for making profit observing.
There an element of risk also involved. We have to select
such projects as to minimize both resource consumption
and risk and to optimize the returns or gains.
Human mind has an infinite capacity to observe, to deduct
and to innovate. Observation is one of the most important
sources for project ideas.

The process of deduction is used to supplement and

rationalize the project ideas based on pure
observation.

Sources of Project
Identification
Trade and professional magazines provide a very fertile

source

of project ideas.
It is very necessary for the entrepreneur is to keep in touch
with the latest developments in his own field as well as other
fields which may be H/V linked with his own line of
specialization.
Bulletins of research institutes are fertile source of information
for the development of new ideas.
These bulletins generally give the broad outlines of the new
processes developed by research institutions and are useful in
identification of new opportunities.
The important source of project identification is the plan
document published by government.
The plan document generally analyzes the existing economic
situation and also pinpoints the investment opportunities which
is fit into the overall planning effort. Considerable information
can , t therefore be gathered from plan document.

Sources of Project
Identification
Departmental publications
of various departments of government
also provide useful information
development of new project ideas.

which

can

help

in

the

Some more sources

Knowledge of potential customer need.

Watching emerging trends in demands for certain products.
Scope for producing substitute product
Through professional magazines
Knowledge about government policy, concessions & Incentives
etc..
Ideas generated by concerned people.
Visits to trade fairs, exhibitions of new products etc..
Meeting with government agencies
Observation of market and similar products
A new product introduced by the competitors
Ideas given by success entrepreneurs, knowledgeable persons,
friends & relatives.

Project Selection
After deciding on a few project ideas, the entrepreneur has to
finally select, one project Idea most suited depending on the
following criteria.
A tool generally used for this purpose is called as SWOT analysis
is done. The intending entrepreneur analysis his Strengths &
Weaknesses, as well as Opportunities / Competitive Advantages &
Threats / Challenges offered by each of the project ideas.
On the basis of this Analysis, the most suitable project Idea is
finally selected to convert it into an enterprise. This process is also
called as a Zeroing In Process.

A few Important Criteria for selecting a particular project are

given below

Investment Size

Location

Technology

Plant & Machineries

Marketing

Project Selection
Investment Size
This is a very important criterion to decide success or
failure of the Project.
Entrepreneur should select only such projects which
are within his financial resources.
You cannot establish an Enterprise only on borrowed
funds & this may lead to severe financial problems in the
initial stages of the project implementation itself.
Location
A new entrepreneur should locate his project to the
extent possible, in and around a state head quarters.
Location chosen should have good infrastructural facilities
like good approach road , transportation facilities,
communication facilities, availability of power, water &
required Labor.
It is necessary to have
such a location to attract
competent managers.

Project Selection
Technology
The project chosen should not be for a product which
requires sophisticated technology, necessitating foreign
technical collaboration.
It is better to go in for a product with a proven technology
that is naturally available & where the entrepreneur
himself is well versed with the required technology.
Plant & Machineries :
The entrepreneur should select the best equipment based
on the advise of experienced technical consultants.
One should remember that one should not compromise
on the quality of the equipment even if there are little
expensive in the beginning , as they will pay back in the
long Run due to uninterrupted working. Cheap poor quality
equipment leads to frequent breakdowns.

Project Selection
Marketing
The success of any enterprise finally depends on
marketing capability of ones goods / products
services.
Direct selling to a large number of ultimate
customers
One should go in for products with a limited
number (say 10 or 15) of established industrial
customers.

SWOT
Strengths
Does the company have the necessary skills in-house?
Has a budget been assigned to the project?
What are the business benefits of completing the
project?
Will the project require new technology or equipment?
How experienced is the project team on similar
projects?

Weakness
Is there a reliable estimate of costs available?
Does the company have the budget to provide contingency
funding?
What are the drawbacks of the project?
Will parts of the project need to be outsourced?
Is the proposed schedule realistic?

Opportunities

SWOT

Can a local project be leveraged nationally or

internationally?
Do the competitors have any weaknesses?
What are the latest industry trends?
Are there any new, or imminent, technology
developments?

Threats
Is there well-established competition already in the
marketplace?
Are experienced staff difficult to replace?
Has new technology been fully tested?
Could national or global economic conditions affect
the project?

SWOT
The list of questions to use in a SWOT analysis could,
obviously, be much longer than the basic questions
listed above, but using these in your own particular
project will provide a good starting point.
Performing a thorough SWOT analysis at the
beginning, or any stage, of a project will provide you
with detailed information to help you in the planning
and decision-making processes of a project.

Factors to be considered for

selection of a product
An entrepreneur is concerned with identifying a particular product that he
hopes to market successfully at a reasonable profit.
The selection of a right product is very essential for being successful in
the business venture.
Various factors influence the entrepreneurs in selecting the product.
Whether import restrictions or the items selected are banned items.
If the entrepreneurs or his partners have experience in the manufacture or
marketing of certain products.
The degree of profitability
Concessions given by the government on certain products.
Whether belongs to priority industry or SSS
The market for the product whether export or local
Whether the product comes under licensing from government or is it
delicensed category.
Whether the location is a free trade zone or in backward areas with
special incentives & concessions.
Whether a product belongs to an ancillary limit end serves as major
component for the parent industry.

Project Identification and Selection

in Short form
The foundation of an enterprise is the project. The success
or failure of the enterprise largely depends upon the
project.
A project is an organized unit dedicated to the attainment
of goal the successful completion of a development
project on time within budget, in conformance with
predetermined programme specifications.
The three basic attributes of a project are
(i) A course of action
(ii) Specific objectives
(iii) Definite time perspective
Every project has starting point and endpoint with specific
objectives

Project Identification and Selection in Short

form
Project selection is a well outlined game plan. There is a definite
procedure of selecting a project.
Project selection consists of two main steps
(i) Project identification
(ii) Project selection
Project identification
Projects are selected which seemingly have a good market
potential.
The selection process starts with the generation of a product
idea.
In order to select most promising project, the entrepreneurs
needs to generate a few ideas about the possible projects he
can undertake.
The project ideas can be discovered from various internal and
external sources.

The various resources both internal

and external includes
Knowledge of potential customer needs
Watching emerging trends in demands for certain products.
Scope for producing substitute product
Through professional magazines
Success stories of known entrepreneurs or friends or
relatives.
Visits to trade fairs & Industrial exhibitions
Meeting with government agencies
Ideas given by knowledgeable persons
Government polocy,Concessions & Incentives, List of items
exclusively of SSI.
A new product introduced by competitor

PROJECT FORMULATION

It is a process where by the entrepreneur makes

an objective and assessment of various aspects
of an investment proposition of a project idea for
determining its total impact and also its liability.
To achieve the project objectives with minimum
expenditure and adequate resources.

OBJECTIVES OF PROJECT
FORMULATION
General objectives: States in broad terms the
achievement expected out of a project.
Operational objectives: Specifically mentions the
results expected from the implementation of the
project.

7 STAGES OF PROJECT
FORMULATION
Feasibility analysis
Techno-economic analysis
Project design & network analysis
Input analysis
Financial analysis
Social cost benefit analysis
Project appraisal/Pre-investment analysis

FEASIBILITY ANALYSIS
The project idea is examined whether to go
for detailed investment proposal or not.
It is done in the context of internal & external
constraints.
A market analysis is done.
If the project idea is feasible, we go for
second step or else abandon the idea.

TECHNO-ECONOMIC ANALYSIS
Estimation
of
project
potential & choice of
technology are made.

demand
optimal

Market analysis is in-built in this step.

This stage gives the project a unique
individuality & sets the stage for
detailed design development.

PROJECT DESIGN & NETWORK

ANALYSIS
Heart of the project.
Defines individual activities and their inter
relationship with each other.
The sequence of events of project is presented.
Detailed work plan of the project is prepared
with time allocation for each activity and
presented in a network drawing.

INPUT ANALYSIS
Assesses the input requirement during the
construction & operation of the project.
Quantitative & qualitative assessment.
Determines project feasibility from the
point of view of resource requirements.
It helps in financial & cost benefit analysis

FINANCIAL ANALYSIS
Estimates project cost, operating
cost and fund requirements.
Aids
the
decision
maker
by
comparing various project proposals.
It is necessary to exercise due care
and foresight in financial forecasts.

SOCIAL COST BENEFIT ANALYSIS

Overall worth of the project is the main consideration.
Three categories:

(a)Primary: From the point of view of project

implementing body.

(b)Secondary: Apart from the project implementing

body.

(c)Tertiary: Non-quantifiable spill-over.

SOCIAL COST BENEFIT

ANALYSIS

PRE-INVESTMENT ANALYSIS/
PROJECT APPRAISAL
The project proposal gets a formal and final shape
at this stage.
All results obtained in the above steps are
consolidated and arrived at various conclusions.
Project sponsoring body, implementing body and
external consulting agencies decide whether to
accept the project or not.
Investment decision is taken.

Project Appraisal
Project appraisal is the process of
assessing and questioning proposals
before resources are committed.

When is it done:
After preparation and design of the project
What is project appraisal:
Provides a comprehensive and systematic
review of all aspects of the project
Why the project Appraisal is Needed:
To development and successful completion of
projects

Project Appraisal
Appraise your identified projects in terms of the
following:
Technical analysis
Economic Analysis
Financial Analysis
Environmental Analysis, and
Social Analysis
Gender Analysis
Ecological Analysis
Political

Technical Appraisal
Will the project Work?
Availability of the required quality
and quantity of raw material.
Availability of utilities like power and
water etc
Follows anti pollution laws

Financial Appraisal
Can the project be financed properly?
Will there be sufficient funds to cover
the expenditure requirements during
the life of the project?
Means of financing

Social Aspects
What will be the effect of the project on
different groups? At
Individual
Household and
Community levels
How will the project impact on women and
men?

Environmental Appraisal
Will the project have any adverse
effect on the environment?
Have
remedial
measures
been
included the project design?

Ecological & Political

Appraisal
Environmental Damage.

Will the project be compatible with

government policy, at both central,
regional and local level?

Feasibility study
Any successful project, company, factory, individual
based on three main factors
Technical
Finance
Marketing
A feasibility study is the process that every person or
company should do before starting any project.
A successful feasibility study may be accepted or
rejected.
A feasibility study is a study looks at the viability of an
idea with an emphasis on identifying potential
problems and attempts to answer one main question:
Will the idea work
Should you proceed with it

Feasibility study
It helps avoid risk and answers
questions, like:

Will it work ?
How will it work ?
What is needed ?
When is the best time ?
How much investment is needed ?
What will the return be

The Components of a Feasibility Study

Market Feasibility:
Includes a description of the industry, current
market, anticipated future market potential,
competition, selling price, sales projections,
potential buyers, Demand, Market Share etc.
Financial Feasibility:
Projects how much start-up capital is needed,
sources of capital, returns on investment,
Break even analysis, Cost of manpower &
technology, proposed balanced sheet etc.

The Components of a Feasibility Study

Social Feasibility:
Defines the study of social environment
like Location, Social problems and
Pollution.
Technical Feasibility:
Details how you will deliver a product or
service
(i.e.,
materials,
labor,
transportation, Staff requirement, where
your business will be located, technology
needed, etc.).
Production process
includes input, processing and output.

Planning commissions guidelines for

a Project Report
In order to process investment proposals and arrive
at investment decisions, the planning commission
of India has issued some guidelines for preparing /
formulating industrial projects.
The guidelines are
General Information
Preliminary analysis of alternatives
Project description
Marketing plan
Capital requirements & Costs
Operating requirements & Costs
Financial analysis
Economic analysis

General Information
The feasibility report should include an analysis of
the industry to which the project belongs.
It should deal with part performance of the
industry.
The description of the type of industry,(i.e.) the
priority of the industry, increase in production,
role of the public sector, allocation of investment
of funds, choice of technique etc.,
This should also contain information about the
enterprise submitting the feasibility report.

Preliminary analysis of
alternatives
The details like gap between demand and
supply of proposed products, availability of
capacity, list of all existing plants in industry,
indicating their capacity, level of production
attained, list of present projects and list of
proposed projects.
All technically feasible options are considered
here.
Location of plant/project , requirement of foreign
exchange,
profitability,ROI,alternative
cost
calculation etc., are to be presented.

Project description
The feasibility report should provide a brief
description of the technology / process selected
for the project, information pertaining to the
selection
of
optimal
location,
population
,water,land,environment,pollution
and
other
environmental problems etc., are to be provided.
The report should contain details of operational
requirements of the plant, requirement of
water,power,personnel,land
,transport,
construction details for plant and offices etc.

Planning commissions guidelines for

a Project Report
Marketing plan
Capital requirements
Data on marketing
& Costs
plan
The estimates should
Demand
and
be
reasonably
prospective supply in
complete
and
each of the areas to
properly estimated.
be served
Information on all
Target
price
of
items of costs should
product
be carefully collected
Distribution methods
and presented.
Estimate
of
price

Operating requirements & Costs

Operating costs are those costs which are
incurred after the commencement of commercial
production.
Operating costs relate to the cost of raw materials
and intermediates,fuels,utilities,labour,repair and
maintenance, selling and other expenses.
Miscellaneous Aspects
Depending upon the nature and size of operation
of a particular project, any other relevant
information may be included in the project report.

NETWORK ANALYSIS
A network is a set of symbol connected with each other
with a sequential relationship with each step making
the completion of a project/event.
A business plan or any project plan contains various
activities. Any delay in any activity will effect the other
activities ,project is delayed,costs will go up leading to
reduced profit.
Here we discuss two networking techniques developed
for project scheduling. The following are most powerful
network analysis techniques in project management.
PERT Programme Evaluation and Review Techniques
CPM Critical Path Method

Importance of Network
Analysis
Network analysis helps
in identifying the hidden stages

involved in project estimates.

Whole project has to be considered with reference to the
sequence of activities and events.
Events should be considered as different branches of
operations.
Different segments of the project are treated as separate
network which are finally integrated to overall network.
Time estimates may be done based on either previous
experience of similar type of operations or may be based
on probabilities for ones where previous experience does
not exist.
Cost estimates would depend on project time estimates.
The physical progress of project work would call for
corrective action at appropriate time.

PERT Programme Evaluation and

Review Techniques
It was first developed as a management aid for
completing ballistic missile project in USA during 1958.
PERT schedules the sequence of activities to be completed
in order to accomplish the project with in a short period of
time.It helps to reduce both cost and time of the project.
Steps involved in PERT
Various activities involved in the project are drawn up a
sequential relationship to show which activity follows what
Time required for complete each activity of the project is
estimated and noted on network.
Critical activities of the project are determined
Variability of the project duration and probability of the
project completion in a given time period are calculated.

Advantages of PERT
Determines the excepted time required completing each
activity.
Help to complete the project with in expected time period.
Helps the management in handling uncertainties involved in
the project there by reducing the element of risk.
It enables detailed planning of activities
It stresses for correction action at a given time period there
by helping the project to be completed on time.
Limitations of PERT
Difficult to provide realistic or correct time estimates for
new activity in the absence of past data.
There is no provision in this technique about requirement of
resources at various activities.
For effective control of project using PERT, it calls for
frequent updates and revision of calculations which are
costly affair.

CPM-Critical Path Method

First developed by one of the USA government
department in 1956 for doing periodic overhauling
and maintenance of chemical plant.
CPM differentiates between planning and scheduling
of the project.
Planning refers to determination of activities to be
accomplished
Scheduling refers to introduction of time schedules
for each activity of the project.
Duration of different activities
in CPM are
deterministic ,there is a precise known time for each
activity in a project.

Advantages of CPM
Helps in ascertaining the time schedule of activities
having sequential relationship
Makes control easy for the management.
Defines most critical elements in the project. Thus
management is kept alert and prepared to focus their
attention on the critical activities.
Makes room for detailed and better planning.
Limitations of CPM
It operates on the assumption that there is a precise
known time that each activity in the project will take. But
this may not be true in real practice.
CPM estimates are not based on any statistical analysis.
CPM cannot be used as controlling device simple reason
that any change introduced will change the entire
structure of the network. It is not dynamic controlling
device.

PERT Versus CPM

PERT

CPM

Its origin is military

Its origin is industry

Event oriented approach

Activity oriented approach

Allows uncertainty

Does not allow

Time based

Cost based

Probabilistic model

Deterministic model

There is no separation
between critical and non
critical activities

Marks critical activities

It averages time

Does not average time

Suitable where high precision

is required in time estimates

Suitable where requirement

of precision is reasonable

ERRORS OF PROJECT
REPORT
Entrepreneurs often make errors while
preparing a project report.
Some of the widely noticed errors are
Product selection
Capacity utilization estimates
Market study
Technology selection
Location selection
Selection of ownership form

Product selection
Entrepreneurs commit mistakes by selecting wrong product for
their enterprise.
They select the product without giving due attention to the
product related and other aspects(like market need, life cycle,
availability of resources, skilled labor, technology etc..).
Capacity utilization estimates
Market study They many times makes over optimistic estimates
of capacity utilization.
Their estimates are based on completely false premises and are
made in complete disregard of present performance of the
enterprise, prevailing market conditions etc..
Market study
Some entrepreneurs assume that there will be good market for
their product without conducting effective market study, leading
to failure.
Technology selection
Technology varies from product to product.
Selection of wrong technology leads to wrong product or product
with inferior quality.

Location selection
Entrepreneurs make two types of errors here.
They are attracted by concessions and
government offers, financial incentives to
establish industries at a particular location.
They select location merely because it is nearer
to his place of living,or own land available.
Selection of ownership form
Many entrepreneurs fail merely due to ownership
form of enterprise is not suitable.