1

UNIT-III
Project
identification
and selection
(PIS)
 Learning objectives:
 Define Project. 2
 Discuss the way to identify it.
 Elaborate upon the procedure to be followed to finally select a
project.

 Entrepreneur, entrepreneurship and enterprise go hand in hand.

By now, you have learnt who is an entrepreneur and what is
entrepreneurship.
 In practice ,an entrepreneur takes numerous decisions to convert
his business idea into a running concern.
 In setting up his/her enterprise, his/her decision making process
starts with project/product selection. The selection is the first
corner stone to be laid down in setting up an enterprise.
 The selection of a right project goes to validate the trite
proposition : “Well begun is half Done”
 Meaning of project: 3
 We just mentioned that the very foundation of an enterprise is
the project. Hence the success or failure of an enterprise
largely depends upon the project. In simple words, a project is
an idea or plan that is intended to be carried out. The
dictionary meaning of a project is that it is a scheme, design,
a proposal of something intended or devised to be achieved.
 Definition of “Project”
 A project typically has a distinct mission that it is designed to
achieve and a clear termination point, the achievement of
the mission.-Newman et.al
 As the whole complex of activities involved in using resources
to gain benefits.-Gillinger
 Now, a project can be defined as a scientifically evolved
work plan devised to achieve a specific objective within a
specified period of time.
 Here it is also important to mention that while projects 4
can differ in their size, nature, objectives, time duration
and complexity, yet they partake of the following three
basic attributes:

1. A course of action
2. Specific objectives, and
3. Definite time perspective
Project Classification:
Project classification is a natural corollary to the study of
project idea. Different authorities have classified projects
differently. Following are the major classification of projects:
1. Quantifiable and Non-Quantifiable Projects.
2. Sectorial Projects
3. Techno-Economic Projects
 Quantifiable and Non-Quantifiable
 projects for which a plausible quantitative assessment of 5
benefits can be made are called “Quantifiable projects”.
 Projects concerned with industrial development, power
generation, mineral development fall in this category.
 On the contrary, non-quantifiable projects are those in which
a plausible quantitative assessment cannot be made, projects
involving health education and defence are the examples of
“non-quantifiable projects”
 Sectorial Projects
 According to this classification, a project may fall in any one of
the following sectors:
 Agriculture and allied sector
 Irrigation and power Sector
 Industry and mining Sector
 Transport and communication Sector
 Social Service Sector
 Miscellaneous sector
 Techno-Economic Projects
 This classification based on techno-economic characteristic fall
6
in this category.
 Factor intensity-oriented Classification ,causation classification
and Magnitude-oriented classification.
 Factor Intensity Oriented Classification:
 There projects are classified as capital intensive or labour
intensive.
 If large investment is made in plant and machinery, the
projects will be termed as capital intensive..
 there are projects involving large number of human resources
will be termed as labour Intensive…
 Causation classification:
 There are projects classified demand based or raw material
based.
 The very existence of demand for certain goods or service
makes project Demand based..
 The availability of certain raw material, Skills or other inputs
makes the project Raw material based…
  Magnitude oriented classification: 7
 There are the projects classified based on the size of investment
involved in the projects.
 The projects are classified into Large Scale, Medium Scale or
Small Scale projects.
 There are project selection process consist of Two main Steps:

 Project Identification
 Project Selection
 Project Identification :
 Idea generation :
 Selection process starts with the generation of a product idea. In
order to select the Most promising project, the entrepreneur
needs to generate a few ideas about the possible projects
he/she can undertake.
 Project idea can be discovered from various internal and
external sources: 8

I. Knowledge of potential customer needs,

II. Watching emerging trends in demands for certain products,
III. Scope for producing substitute product,
IV. Going though certain professional magazines catering to
specific interest like electronic ,computer etc..
V. Success stories of known entrepreneur or friend or relatives,
VI. Making visit to trade fairs and exhibitions displaying new
products and services,
VII. Meeting with government Agencies,
VIII. Idea given by the knowledgeable person,
IX. A new product introduced by the competitor.
 This is called as the opportunity scanning and identification
Project Selection
9
 Project selection starts from where project identification
ends. After having some projects ideas,
 A tool generally used for this purpose is, what is called in
the managerial jargon, SWOT analysis.
 The intending entrepreneur analysis his /her strength and
weakness as well as opportunities /competitive
advantages and threads/ challenges offered by each of
the project ideas.
 Finally project selected to converted into enterprise.
 The process involved in selecting a project out of some
projects is also described as the zeroing in process
 Above the process having the time interval for project
identification and project selection.
 In some cases there may be almost no time gap between
the two.
 10
Product

Ownership
Rawmaterial

Location Market

Working
Capital
Labour

Total
Investment
Reference: 11
”Entrepreneurial Development”-S.S.Khanka..
Page no: 86-87