Chapter 1

Introduction
 Contents
Project defined
Project life cycles
Idea generation
Preliminary screening

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 1. Introduction
Project defined
 A temporary endeavor undertaken to
produce a unique product, service, or result.
 A unique set of coordinated activities, with
definite starting and finishing points,
undertaken by an individual or
organization to meet specific objectives
within defined schedule, cost and
performance parameters.

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 1. Introduction…
 Is unique set of coordinated activities
 Has definite starting and finishing points
 Is designed to meet specific objectives
 Has a defined schedule, cost and
performance parameters

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 1. Introduction…
Key features of a project
 Has a long-term effect: impact extends far into
the future. Present outlays generate benefits in
the future.
 Irreversibility: a project once implemented may
not be reversed. In other words, the time and
cost spent on an ill-conceived project may not
be recovered at all or without a substantial
loss.
 Substantial outlay: a project often demands a
substantial outlay implying that any fault in its
design or implementation leads to a huge loss.

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2. Project life cycles

Pre- Investment
investment

Operation

UNIDO Project life cycle

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 2. Project life cycles…
1.Pre-investment Phase
 Opportunity study/identification
 Pre-feasibility study/pre-selection
 Feasibility study/preparation
 Appraisal/appraisal report

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 2. Project life cycles…
2. Investment
Negotiation and contracting
Engineering design
Construction
Pre-production marketing
Training

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 2. Project life cycles…

3. Operation
Commissioning and start-up
Replacement & rehabilitation
Expansion and Innovation

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 2. Project life cycles…

Project Life cycle(Chandra)

Planning

Review Analysis

Implementation Selection

Financing

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 2. Project life cycles…
1. Planning
 Involves identifying an economically or
financially worthwhile project idea
 Also involves conducting a preliminary
screening

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 2. Project life cycles…
2. Analysis
Involves assessment of whether a
product/service intended to be
produced by the project has adequate
demand
Technical requirements of the project
can be met
The project is commercially,
economically, or socially viable
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2. Project life cycles
3. Selection
Decision as to whether to accept or
reject a project
4. Financing
Identifying the source of funds for
covering project costs

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2. Project life cycles
5. Implementation
translating a project idea into a
tangible project
6. Review
assess whether what has been
projected comforms to the reality or
not.

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3. Idea generation
 A worthwhile project idea can be
generated by chance or by using
structured techniques

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3. Idea generation…
By chance
Charles Goodyear
discovered a rubber
used for making tires
when an accidental
drop of chemical on a
rubber gave it the
strength needed to
produce vehicle tires

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3. Idea generation

By chance
Three employees of
PayPal invented
YouTube, the first
video-sharing
website, after they
had difficulty sharing
a video clip taken at
a dinner party

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 3. Idea generation…
Structured techniques
 Stimulating the flow of ideas
 SWOT analysis
 Clear articulation of objectives
 Cost reduction
 Productivity improvement
 Increase in capacity utilization
 Improvement in contribution margin
 Expansion into promising fields

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 3. Idea generation…

Structured techniques...

Monitoring the Corporate

environment Appraisal

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3. Idea generation…
Structured techniques...

Monitoring the environment

Economic Technological
Sector sector

Government
sector Supplier sector

Socio-demographic Competition
sector sector

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 3. Idea generation…

Corporate Appraisal

Finance &
accounting

Production & Corporate resource

operation & personnel

Marketing &
Research &
distribution
development

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 4. Preliminary screening
(i) Compatibility with the promoter
compatible with the interest,
personality and resources of the
entrepreneur

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 4. Preliminary screening…
2. Consistency with government
priority
Consistency with national goals and
priorities?
Environmental effects contrary to
governmental regulations?
Foreign exchange requirement can
be easily accommodated?
Difficulty in obtaining license?
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4. Preliminary screening…
3. Availability of inputs
Capital requirement within manageable
limits?
Technical know-how required
obtainable?
Raw materials available domestically at a
reasonable price? Import possibility?
Power supply obtainable from external
sources?
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4. Preliminary screening…
4. Adequacy of market
Total present domestic market
Competitors and their market share
Export markets
Quality-price profile of the product
vis-à-vis competitive products
Projected increase in consumption
Barriers to entry of new units
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4. Preliminary screening…
5. Reasonableness of cost
Cost of material inputs
Labor costs
Factory overhead
General administrative expenses
Selling and distribution costs

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4. Preliminary screening…
6. Acceptability of risk level
Vulnerability to business cycles
Technological changes
Competition from substitutes and
from imports
Governmental control over price
and distribution

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End of Chapter 1