Project Management

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Unit II - Project Planning

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Project

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 • Think about project ideas in and
Exercise 1 around BML Munjal University.

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 Group 1 – Chancellor’s and
Vice Chancellor’s team

Group 2 – Deans’ and

Project Ideas Faculty members’ team

Group 3 - Students’ team

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 SWOT analysis

Determining objectives

Generation of • Cost reduction

Ideas • Productivity improvement
• Increase in capacity utilisation
• Improvement in contribution margin
• Expansion into promising fields

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Generation of Ideas

• Fostering a conducive climate

• Monitoring the environment 

 Economic sector

 Technological sector

 Governmental sector

 Competition of the firm

 Socio-demographic sector
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 Compatibility with the business

Input availability

Identifying Consistent with government policies

Investment
Market adequacy
Opportunities
Risk level of project

Cost involved in the project

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Capital Budgeting

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Capital budgeting
is the process by which a
business determines which
fixed asset purchases or project investments
are acceptable and which are not.
Features of Capital Budgeting

 Long duration between initial investments and expected returns

 Process involves high risks
 Fixed investment over long run
 Determines future financial condition of an organization
 Projects require significant funding
 Amount of investment determines profitability

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Case 3 - Five Rules for Managing Large,
Complex Projects
(MIT Sloan Management Review)

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Market and Demand
Analysis

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Market Potential Analysis

i) Situational analysis and specification of objectives

ii) Collection of secondary information

iii) Conduct of market survey

iv) Characterization of the market

v) Demand forecasting

vi) Market planning

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Situational Analysis and Specification of Objectives

• Customers

• Competitors

• Middlemen

• Others in the industry

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 • Census of India

• National Sample Survey Reports

Collection of • Plan Reports
Secondary
• Statistical Abstract of the Indian Union
Information
• India Yearbook

• Statistical Yearbook

• Economic Survey of Industries

• Annual Survey of Industries

• Annual Reports of Ministry of Commerce

and Industry, etc.

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 • Total demand and rate of growth of demand
• Demand in different segments of the market
• Income and price elasticities of demand
• Motives for buying
• Purchasing plans and intentions
Conduct of Market • Satisfaction with existing products
Survey • Unsatisfied needs
• Attitudes toward various products
• Distributive trade practices and preferences
• Socio-economic characteristics of buyers

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Characterization of the Market

Effective Methods of
Demand in the Break-down of Distribution
Price
Past and Demand and Sales
Present Promotion

Supply and Government

Consumers
Competition policy

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 • Opinion Polling Method
Consumers’ Survey Method
Sales Force Opinion Method
Delphi Method

Demand • Statistical or Analytical Methods

Forecasting Naïve Approach
Moving Average Method
Exponential Method
Regression Method

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Exponential Smoothing Method

Ft = Ft-1 + (At-1 - Ft-1)

Ft = Forecast value for time t

Ft-1 = Forecast value for time t-1

At-1 = Actual value at time t-1

 = Smoothing constant

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Linear Regression
• y = a + bx
y = Dependent variable
x = Independent variable
• 
• xy - nx y
• b = ----------- 2

• x2 – nx
 
• y = a + bx

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Regression Equation of Y on X

• Y = a + bX ----------------------------(1)
• Where Y is dependent and X is independent variable
 “a” and “b” are two unknown constants where “a” is distance of the
line directly above or below the origin. “b” determines slope of the line
• “N” is total number of observed pairs
• By using differential calculus, equation (1) can be written as  
• ∑Y = Na + b∑X ---------------------------(2)

• ∑XY = a∑X + b∑X2 ____________(3)

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Question 1
The company’s sales data for the last 6 years is given along with the
promotional expenses made in these years.
Promotional Expenses (Rs million) Sales (Rs billion)
2 1
3 3
2.5 4
2 2
2 1
3.5 7

Determine the sales forecast for the 7th year if the budgeted promotional
expenses are Rs 3.25 million.

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Market Planning

Current Marketing Situation

Opportunity and Issue Analysis

Objectives

Marketing Strategy

Action Programme

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Technical Analysis

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Components of Technical Analysis

i) Choice of Technology/Manufacturing Process

ii) Technical Arrangements

iii) Material Inputs and Utilities

iv) Product Mix

v) Plant Capacity

vi) Location and Site

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Components of Technical Analysis

vii) Machinery and Equipment

viii) Structure and Civil Works

ix) Environmental Aspects

x) Project Charts and Layouts

xi) Schedule for Project Implementation

xii) Need for considering Alternatives

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Choice of Technology/Manufacturing Process

• Plant capacity

• Principal inputs 

• Investment outlay and production costs

• Use by other units

• Ease of adoption and modernization 

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Technical Arrangements

• Price of technology 
• Nature of support provided
• Process and performance guarantees
• Continuing benefit of R&D
• Period of collaboration agreement
• Termination of agreement and other remedies
• Force majeure condition

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Material Inputs and Utilities

Raw materials Utilities

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Product Mix

Product Assortment Range of Products offered

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Factors that have bearing on Plant Capacity

Technological
Input constraints Investment cost
requirement

Resources of the
Market conditions Government policy
firm

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 Proximity to raw materials

Proximity to markets

Location and Site Availability of infrastructure

Government policies

Other factors

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Location Analysis Methods

• Analysis follows 3 step process:

 Step 1: Identify dominant location factors
 Step 2: Develop location alternatives
 Step 3: Evaluate location alternatives
• Factor rating method
• Load-distance model
• Center of gravity approach
• Locational breakeven analysis
• Transportation method
Factor-Rating Method

1. Develop list of relevant factors.

2. Assign weight to each factor.

3. Develop rating scale for factors.

4. Score each location on each factor.

5. Multiply scores by weights for each factor and total the weighted
scores for each location.

6. Make recommendation based on the maximum point score.

 Factor Rating Method – Q2

Make a recommendation based on the maximum point

score, considering other factors.

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Load-Distance Model – Q3
Matrix Manufacturing is considering where to locate its warehouse
in order to service its four Ohio stores located in Cleveland,
Cincinnati, Columbus, Dayton. Two sites are being considered;
Mansfield and Springfield, Ohio. Use the load-distance model to
make the decision.

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Calculate
rectilinear
distance

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Two sites
for W/h
considered

Springfield
&
Mansfield

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Calculating the Load-Distance Score for Springfield
versus Mansfield
Computing the Load-Distance Score for Springfield
City Load Distance ld
Cleveland 15 20.5 307.5
Columbus 10 4.5 45
Cincinnati 12 7.5 90
Dayton 4 3.5 14
Total Load-Distance Score(456.5)

Computing the Load-Distance Score for Mansfield

City Load Distance ld
Cleveland 15 8 120
Columbus 10 8 80
Cincinnati 12 20 240
Dayton 4 16 64
Total Load-Distance Score(504)

• Load-distance score for Mansfield is higher than Springfield.

Choose lowest load-distance score. Warehouse should be
located in Springfield.