Rift valley University

Sabbata Campus
Target Group : MBA Program
Course Title: Project Management (MBA 711 )
Contact Hour: 2hrs
Instructor
Tessema Amente

Contact Address:
E-mail: tessema2@yahoo.com
Cell Phone: +251912455292
Office: RVU, Sabbata Campus
 Course Outline: Project analysis & Mgt
1.1.Concept, scope & definition of project
Unit One 1.2. Characteristics of project
1. Introduction 1.3. Classification of project
1.4. Project Vs program
1.5. An overview of project Cycle

Unit Two Phase1: Researcher as a multicultural subject

2. Project Identification,
(Idea generation)
2.1. Market and Demand analysis
2.1.1. Situational Analysis and specification of objectives
2.1.2. Collection of information
2.1.3. Characterization of the market
2.1.4. Market planning
2.2. Technical analysis
2.3. Institutional and Social aspects
 Course Outline: Project analysis & Mgt
3.1. Cost of project
Unit Three 3.2. Means of finance (project financing)
3. Financial analysis 3.3. Estimation of sales and production
and projection 3.4. The cost of production
3.5. Cash flows in financial analysis

Unit Four 4.1. Overview and meanings of Environmental Analysis

4. Environmental Phase1:4.2.
Researcher as impact
Environmental a multicultural
Statementsubject
(EIS)
Analysis 4.3. Project category

Unit Five
5.1. Non-discounting Methods
Project Appraisal (The 5.1.1. Ranking by inspection
project Selection 5.1.2. The payback period
5.1.3. Proceeds per unit of outlay
Criteria) 5.2. Discounting methods of project selection
5.2.1. The Net present Value (NPV)
5.2.2. The internal rate of return of a project (IRR)
5.2.2.1. Modified Internal Rate of Return
5.3. Problem with project ranking
 Course Outline: Project analysis & Mgt

6.1. Rationale for SCBA

Unit Six 6.2. UNIDO approach
6. Social Cost Benefit 6.3. Socio culture and demographic factors
Analysis 6.4. Project cultural acceptability
6.5. Net benefit in terms of economic price
6.7. Saving Impact
Phase1: Researcher as a multicultural subject

Unit Seven 7.1. Project planning

7. Project Management 7.2. Project organization
(Implementation) 7.3. Project direction
7.4. Monitoring and Evaluation
 Unit One: Introduction
1.1.Concept, scope & definition of project

Concept and Definition of Project

W A Project is a temporary, unique & progressive attempt or endeavor made to produce some
kind of a tangible or intangible result (a unique product, service, benefit, competitive
advantage, etc.).
å Temporary;- means that every project has a finite start and a finite end. The start is the
time when the project is initiated and its concept is developed. The end is when all
objectives of the project have been met (or unmet if it’s obvious that the project cannot
be completed – then it’s terminated).
åUnique Deliverable(s). Any project aims to produce some deliverable(s) which can be a
product, service, or some another result.
åProgressive Elaboration. With the progress of a project, continuous investigation and
improvement become available, and all this allows producing more accurate and
comprehensive plans.
 Unit One Introduction
1.1.Concept, scope & definition of project….
W Project usually includes a series of interrelated tasks that are planned for
execution over a fixed period of time and within certain requirements and
limitations such as cost, quality, performance, others.
W In simple terms, Project is a collection of activities that are interrelated with a
specific over all purpose.
WIt is planning , monitoring and controlling of all aspects of a project and
motivation of all involved to achieve project objectives of safety and within
a defined time, cost & performance.
WA project is a series of complex, connected activities with a common purpose.
 Unit One: Introduction
1.1.Concept, scope & definition of project
Generally the easiest ways to define project is to outline the common
characteristics that it might be excepted to have:
Project involves the investment of scare resources in the expectation
of future benefit
A Project can be planned, financed, and implemented as a unit.
Project have specific starting time and finishing time in which
clearly defined sets of objectives expected to achieved
Project has a conceptual boundary, usually geographical, but some
times organizational.
 Unit One Introduction
1.1.Concept, scope & definition of project….

Scope of Project
¶ Project scope is the part of project planning that involves determining and
documenting a list of specific project goals, deliverables, features, functions,
tasks, deadlines, and ultimately costs.
¶ The scope of the project outlines the objectives of the project and the goals
that need to be met to achieve a satisfactory result.
¶ The work and resources that go into the creation of the product or service
are essentially the things that frame the scope of the project.
¶ Every project manager should understand how to define the project scope
and there are some steps that can be followed when doing this.
 Scope Definition
Inputs Tools and Techniques
¨ Product analysis
¨ Alternatives identification
¨ Expert judgment
¨ Organizational process ¨ Facilitated workshops
assets
¨ Project charter
¨ Requirement
documentation Outputs
¨ Project scope statement
¨ Project document updates

9
 Steps for defining the scope of a project

• A well-defined project scope is a necessity to ensure the

success of your project. Without it, no matter how efficient,
how effective and how hard you work, you won’t be able to
succeed in your project.
• Defining the project scope entails adopting a clear vision and an
agreement on the outcomes of the project. This allows each
milestone of the project to stay on target.
• The following steps can help you to effectively define the scope
of a project:

Step 1
Identify the project needs
Phase1: Researcher asSMART
Step 2
Confirm the objectives and
goals of the Project
Variables of the Study
Unit One Introduction….
Six Steps of defining Project Scope
æ Clearly identifying the need of the project
æ Understanding the ‘what and why’ of a project - set specific goals &
objectives.
æ Sets the groundwork for what tasks are to follow and how they are
to be performed.
Establish
enough project
a multicultural subjectGoal
1. Specific–This involves stating accurately what the project wants to achieve. That is,
what, why and how these will be done
2. Measurable –Are your goals and objectives able to provide feedback and be accountable
for?
3. Achievable –Can your project’s goals and objectives be achieved, given the resources on
hand
4. Realistic –Are the goals and objectives easy to deliver, especially if you face problems or
complications.
5. Time bounded –Can your project goals and objectives be met within the allocated time
frame? Is it a key criterion to meet these deadlines?
 Variables of the Study
Unit One Introduction….
Six Steps of defining Project Scope………………..

¶ Set clear features &functioning required for your product or

Step 3 service.
Project Scope description
¶ Successful projects are ones that take into account the satisfaction of
the end-user. Whether they meet the end-users expectations and
accept the product, service or process.
Step 4
Phase1: Researcher as a multicultural subject
Expectations and acceptance ¶ There are always roadblocks to achieving what you were set out to do.
When being aware of possible limitations along the way, it can help
you minimize problems that may delay or constrain your ability to
achieve your project’s outcome.
Step 5
Identify constraints
¶ It is always best to avoid reworking the scope of your project, as it
means investing in more time, money and resources. However, at
Step 6
times these changes are inevitable and necessary. Limit changes by
Identify necessary
taking on the perspectives of customers, stakeholders, and employees
changes
involved in the project.
 1.2. Characteristics of project

1) A project is typically for a customer

2) The project is temporary in nature. It typically
has a defined start and a defined end-point
Characteristics'
3) The project will have a unique set of requirements that
of Project need to be delivered within the boundaries of the project.

4) A project can typically be more of a once off endeavor,

rather than something that’s happening all the time in a
repeated fashion.
5) A project is not ‘business as usual’, which is more
akin to a process.
6) A project can very often be cross-functional, or indeed
cross-organization.
 1.3. Classification of Project
• Every Project is different. Projects can be classified on several different points.
The classification of projects in project management varies according to a number
of different factors such as complexity, source of capital, its content, those
involved and its purpose. Projects can be classified on the following factors.

Project can be classified into;

1. Geographical setting; location of project in
different climate, topography, network density, and
distance between cities
According to 2. Social setting: social density and SES of an areas
setting 3. Economic setting: patterns of unemployment and
economic growth in the time of project
construction
 Variables of the Study
Unit One Introduction….
Classification of Project …………………………………..

Project can classified as .

According 1) Easy Project: project is classified as easy when the relationships
between tasks are basic and detailed planning or organization are not
to complexity required. A small work team and few external stakeholders and
collaborators are common in this case.
2) Complicated: The project network is broad and complicated. There are
many
Phase1: task interdependencies.
Researcher Withsubject
as a multicultural these projects, simplification where
possible is everything.

1. Public: Financing comes from Governmental institutions.

According to Relatively-Moderate level of capital
source of 2. Private: Financing comes from businesses or private
capital incentives. Relatively small level of capital
3. Mixed (Mega project): Financing comes from a mixed source
of both public and private funding. Relatively Large level of
capital.
 Variables of the Study
Unit One Introduction….
Classification of Project …………………………………..

1. Construction: These are projects that have anything to do with the

construction of a civil or architectural work.
According to 2. IT: Any project to do with software development, IT system etc.
Project 3. Business: These projects are involved with the development of a business,
contents management of a work team, cost management, etc., and usually follow a
commercial strategy.
4. Service
Phase1: or product
Researcher asproduction: Projects
a multicultural that involve themselves with the
subject
development of an innovative product or service, design of a new product, etc .

1. Experimental project: Attempt to address a problem in an innovative

Major Types of manner using alternative approach e.g. crop innovation
Project 2. Pilot project; applicability of the experience derived form experimental
project to local level
3. Demonstration project: is basically a forum to exhibit new techniques
or approach of pre-tested experiment
4. Production Project : attempt to increase production
5. Service project: the project intended to delivery fast, quick and efficient
service
 1.4. Project Vs program
Project Program
• Project is defined as “A • Program is defined as “A
temporary organization group of related projects
that is created for the managed in a coordinated
purpose of delivering one way to obtain benefits and
or more business products control not available from
according to a specified managing them
Business Case”. individually”.
 Project Vs program Differences
Project
å Is specific in objective/purpose
å The components of programs are projects
å Has specific area/geographic units
å Has specific target groups
å Has clearly determined and allocated fund
å Has specific life
å Projects are typically confined to a single
functional unit (vertical unit) within an
organization.
å It is vulnerable to major changes in the market
and country policies
å It has multiple stakeholders of diverse field
å Complexity and variation in the availability of
Program
¶ Has general objectives
¶ The components of projects are smaller
tasks/activities
¶ May not have specific area
¶ May not have specific target group
¶ May not have clear and detailed financial
allocation
¶ May not have specific time of ending
¶ Programs will typically span multiple functional
units within an organization.
¶ Less vulnerable to market changes and country
policies
¶ Limited number of stakeholders
¶
 Similarity between project and program

• Has purpose or Objectives

• Require inputs, financial, manpower, materials etc
• Generate output goods or services
• Operate over space and time
• They are temporary
• They have business cases
• They deliver change
 1.5. An overviews of project Cycles
• Project usually go through a series of identifiable stages. According to Bauma
1978, project cycle have five stages; these are;

Analysis of existing situation

Problems or need identification
Stage 1 Problems analysis
Identification Prioritization of issues
Decision on whether a project is appropriate
Definition of project ideas
Consultation with stake holders
Establishment of overall objectives
 1.5. An overviews of project Cycles..
This stage is called stage of project formulation where both pre-feasibility
and feasibility study is undertaken by external consultation. This would
specifically includes:
¶ specification of objectives and results
¶ Identifying resources available for the project
Stage
Stage 2
2 ¶ Identifying resources needed for the project
Preparation
Preparation ¶ Design of the project
¶ Packaging and planning of the project

This stage involves a systematic reviews of all aspects of the project in order that a
decision can be made as to whether to proceed; These stages of appraisal involves;
•Technical appraisals- is it designed appropriately
Stage 3 •Financial appraisals- Is it get appropriate and sufficient financial requirement
Appraisal •Economic – is the project is advantages from the point views of economy as a whole?
•Social appraisal- is it advantageous and acceptable for the people
•Institutional appraisal- is it suitable for the organization in all aspects
•Environmental appraisal- is it suitable to the environment being implemented
•Sustainability appraisal- is it sustainable for long term both financially and institutionally
 1.5. An overviews of project Cycles..
Is the stage of actually performing the project & ensuring the objective
®Mobilization of resources for each task & objectives
®Project marketing
®Ongoing monitoring and reporting arrangement
Stage 4 ®Identifying problems
Implementation ®Addressing failures
®Modification of the planned results and project objectives as
appropriate

This is the process of reviewing the completed project to see whether

the intended benefit are likely to be achieved. This involves;
Stage 5 YAssessing whether the contractors has truly completed the task
Evaluation YIdentifying best practice for further project
YIdentifying what resources are required for the future
YIdentifying the need for the future projects
 Chapter Two
Project Identification, preparation
and Analysis
Project identification
―The purpose of project identification is to develop a preliminary proposal for
the most appropriate set of interventions and course of action, within specific
time and budget frames, to address a specific development goal in a
particular region or setting.
―Investment ideas can arise from many sources and contexts.
―They can originate from a country’s sector plan, programme or strategy, as
follow-up of an existing project or from priorities identified in a multi-
stakeholder sector or local development dialogue.
Project Identification involves:
• Review of alternative approaches or options for addressing a set of
development problems and opportunities;
• Defining of project objectives and scope of work at the degree of
detail necessary to justify commitment of the resources for detailed
formulation and respective preparatory studies; and
• Identification of the major issues that must be tackled and the
questions to be addressed before a project based on the concept can
be implemented
Sources of Project Ideas identification
• Good identification is critical to project success. If there is insufficient
focus on expected results, or if the potential of the most viable
concepts has been overlooked at the identification phase, there is
little prospect that they will be retrieved at a later stage, when the
emphasis shifts from examining options to elaborating the details of a
specific proposal.
• Project ideas may arise from national strategies or plans, emerging
needs or findings from evidence based analysis, evaluation findings
and opportunities for scaling up, Problems arise in the community,
From prior successful project experience.
 Steps of Project identification
1. Review of the national and sectoral analyses, plans and priorities of both
the government and the potential financing agency.
2. Social analysis– understanding the socio-economic context, and examining
the dynamics of rural livelihoods, social diversity and gender in the context
of agriculture and rural development
3. Stakeholder analysis – assessment of relevant stakeholders and institutions
and their respective interests, roles and capacities to inform definition of
outcomes and interventions. Mapping stakeholders can be a helpful
analytical exercise, but care should be taken that preliminary analysis does
not cement a status quo at the expense of developing a common vision for
change.
4. Diagnosis and preliminary assessments of technical, institutional or socio-
economic constraints and opportunities. Diagnosis of the underlying
causes of the problems – for instance, by using a problem tree approach –
and of the factors which underpin the opportunities;
5. Review of alternative possible solutions or development strategies;
6. Review and assessment of relevant past and current development efforts
and projects in the same or related fields or geographic area, considering
the evidence base and lessons learned.
7. Preliminary financial and economic analysis
8. Consideration of major cross-cutting issues such as: climate change,
gender, nutrition, governance, War, Pandemic diseases like COVID-19,
Ebola Outbreak, Epidemic Diseases and displacement.
 Phases of Project Identification
1. Initiation:
• The purpose of the initiation phase is to analyze the statement of requirements
and to provide an initial description of the project objectives, and related
issues.
• The project description must be sufficiently detailed to allow a preliminary
determination that the approach is appropriate and aligned with Public
Services and Procurement Canada (PSPC) objectives and that the initiative is
of high enough priority for management to commit the appropriate level of
resources to the next phase.
2. Feasibility:
• The purpose of the Feasibility Phase is to develop the project requirements and
identify a range of solutions that meet those requirements.
 Phases of Project Identification….
3. Analysis: The purpose of the Analysis Phase is to identify and
substantiate the optimum solution that will satisfy the project
requirements and constraints and to establish the project
budget, schedule, controls, and evaluation criteria that will be
put forward for preliminary project approval.
4. Identification close out: The purpose of the identification close
out phase is to ensure that an appropriate level of assessment,
reporting, evaluation, handover, and administrative closure has
taken place that will provide enough directional detail to
seamlessly proceed to the Delivery Stage.
 Market and Demand Analysis

• In most cases, the first step in project analysis is to estimate the potential size of the market for
the product proposed to be manufactured (or service planned to b offered) and get an idea
about the market share that is likely to be captured. Put differently, market and demand analysis
is concerned with two broad issues:
1. What is the likely aggregate demand for the product/service?
2. What share of the market will the proposed project enjoy?

Given the importance of market and demand analysis, it should be carried-out in an orderly
and systematic manner:

1) Situational analysis and specification of objectives,

2) Collection of secondary information,
3) Conduct of market survey,
4) Characterization of the market,
5) Demand forecasting,
6) Market planning
Project market and Demand Analysis
1. Situational Analysis
Project situational analysis is a means by which a company can
―Understand how it related to the environment in which it operate
Collection of Secondary Information
• Secondary information is the information that has
been gathered in some other context and is already
available. Primary information, on the other hand,
represents information that is collected for the first
time to meet the specific purpose on hand. Secondary
information provides the base and the starting point
for the market analysis.
• General Sources of Secondary Information
i) Ethiopian Census
ii) National sample survey reports
iii) National or Institutional Plan reports
iv) Statistical abstract of the Ethiopian (CSA)
v) Ethiopian year book
vi) Statistical year book
vii) Economic survey of industries
viii) Annual survey of industries,
ix) Annual reports of the development wing, Ministry of Commerce,
Agriculture, and Industry, etc.
• Conduct of Market Survey: Secondary information, though useful, often does
not provide a comprehensive basis for market and demand analysis. It needs to
be supplemented with primary information gathered through a market survey,
specific to the project being appraised.

The market survey may be census survey or a sample survey. In a census

survey, the entire population is covered. The word ‘population’ is used here in a
particular sense. It refers to the totality of all units under consideration in a
specific study.

The market survey, in practice, is typically a sample survey. In such a survey a

sample of population is contacted or observed and relevant information is
gathered. On the basis of such information, inferences about the population
may be drawn.
The information sought in a market survey may relate to one or more of the following:
a) Total demand and rate of growth of demand,
b) Demand in different segments of the market,
c) Income and price elasticities of demand,
d) Motives for buying,
e) Purchasing plans and intentions,
f) Satisfaction with existing products,
g) Unsatisfied needs,
h) Attitudes toward various products,
i) Distributive trade practices and preferences,
j) Socio-economic characteristics of buyers.
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:

i) Effective Demand in the Past and Present: To gauge the effective demand in the past and
present, the starting point typically is apparent consumption which is deemed as:

Production + Imports - Exports - Changes in stock level

The figure of apparent consumption has to be adjusted for consumption of the product by the
producers and the effect of abnormal factors. The consumption series, after such adjustments,
may be obtained for several years.

ii) Break-down of Demand: To get a deeper insight into the nature of demand, the aggregate
(total) market demand may be broken-down into demand for different segments of the market.
Market segments may be defined by:
a) Nature of product.
b) Consumer group, and
c) Geographical division.
iii) Price:
Price statics must be gathered along with statistics pertaining to
physical quantities. It may be helpful to distinguish the following types of
prices.
a) Manufacturer’s price quoted as FOB (Free on Board) price or CIF (Cost,
Insurance and Freight) price,
b) Landed price for imported goods,
c) Average wholesale price and
d) Average retail price.
iv) Methods of Distribution and Sales Promotion: The method of distribution
may vary with the nature of the product. Capital goods, industrial raw materials
or intermediates and consumer products tend to have different distribution
channels. Likewise, methods used for sales promotion (advertising, discounts,
gift schemes, etc.) may vary from product to product.
• Consumer; Consumers may be characterized along two dimensions
as follows: Demographic and Sociological & Attitudinal
• Supply and Competition: It is necessary to know the existing sources
of supply and whether they are foreign or domestic. For domestic
sources of supply, information along the following lines may be
gathered;
a) Location,
b) Present production capacity,
c) Planned expansion,
d) Capacity utilization level,
e) Bottlenecks in production and
f) Cost structure.
• vii) Government policy: Thee role of the government in influencing the
demand and market for a product may be significant. Governmental plans,
policies, and legislations, which have a bearing on the market and demand of
the product under examination, should be spell-out. These are reflected in:
a) Production targets in national plans,
b) Import and export trade controls,
c) Import duties,
d) Export incentives,
e) Excise duties,
f) Sales tax,
g) Industrial licensing,
h) Preferential purchases,
i) Credit controls, financial regulations and
j) Subsides/ penalties of various kinds.
• b) Sample Survey and Test Marketing: Under this method some representative
households are selected on random basis as samples and their opinion is taken as
the generalized opinion. This method on random basis as samples and their
opinion is taken as the generalized opinion. This method is based on the basic
assumption that the sample truly represents the population.
• End–use Method: In this method, the sale of the product under consideration is
projecting on the basis of demand survey of the industries using this product and
intermediate product. In other words, demand for the final product is the end use
demand of the intermediate product used in the production of this final product.
ii) Sales Force Opinion Method: This is also known as Collective Opinion Method.
In this method, instead of consumers, the opinion of the salesman is sought. It is
sometimes referred as the “grass roots approach” as it is a bottom-up method
that requires each sales person in the company to make an individual forecast for
his or her particular sales territory
Demand Forecasting: On the basis of analysis and interpretation of information gathered
about various aspects of market and demand from primary and secondary sources, an
attempt is made to forecast the future demand of the proposed product or service. There
are various methods of demand forecasting available to the market analyst.

Methods of Demand Analysis

The various methods of forecasting demand may be grouped under the following
categories:

1) Opinion Polling Method: In this method, the opinion of the buyers, sales force and
experts could be gathered to determine the emerging trend in the market. The opinion
polling methods of demand forecasting are of three kinds:
i) Consumers Survey Methods: The most direct method of forecasting demand in the
short-run is survey method. Surveys are conducted to collect information about future
purchase plans of the probable buyers of the product. Survey methods include: Complete
Enumeration Survey: Under the Complete Enumeration Survey, the firm has to go for a
door to door survey for the forecast period by contacting all the households in the area.
2. Delphi Method: This method is also known as Expert opinion method of
investigation. In this method instead of depending upon the opinions of
buyers and salesmen, firms can obtain views of the specialists or experts
in their respective fields. Opinions of different experts are sought and
their identity is kept secret. This method is best suited in circumstances
where intractable changes are occurring.
3. Statistical or Analytical Methods: Statistical methods are considered to
be superior techniques of demand estimation because:
i) The element of subjectivity in this method is minimum,
ii) Method of estimation is scientific,
iii) Estimation is based on the theoretical relationship between the
dependents and independents variables,
iv) Estimates are relatively more reliable and
v) Estimation involves smaller cost.
• Thread Projection Method: An old firm can use its data of past years regarding its
sales in past years. These data are known as time series of sales. A trend line can
be fitted by graphic method or by algebraic equations. Equations method is more
appropriate. The trend can be estimated by using any one of the following
methods.
a) Graphical Method: A trend line can be fitted through a series graphically. Old
values of sales for different areas are plotted on a graph and a free hand curve is
drawn passing through as many points as possible.
• Least Square Method: The least square method is based on the assumption that
the past rate of change of the variable under study will continue in the future. It is
a mathematical procedure for fitting a line to a set of observed data points in such
a manner that the sum of the squared difference between the calculated and
observed value is minimized.
• Time Series Methods: Time series forecasting methods are based on analysis of
historical data (time series; a set of observations measured at successive times or
over successive periods). They make the assumption that past patterns in data can
be used to forecast future data points.
6) Market Planning: The market plans usually have the following components:

i) Current Marketing Situation: This part of the marketing plan deals with the different
dimensions of the current situation. It examines the market situation, competitive situation,
distribution situation and the macro-environment. In other words, it paints a pen-picture of
the present.

ii) Opportunity and Issue Analysis: In this section a SWOT (Strength, Weakness, Opportunity,
Threat Analysis) is conducted for Alpha and the core issues before the product are identified.

iii) Objectives: Objectives have to be clear cut, specific and achievable.

iv) Marketing Strategy: The marketing strategy covers the following: target segment,
positioning, product line, price, distribution, sales force, sales promotion and advertising.

v) Action Programme: The last component of market planning is the action programme.
Action programmes operationalized the strategy.
 Key steps in Market and Demand Analysis
• Situational analysis and specification of objectives: In order to get a “feel” of the
relationship between the product and its market, the project analyst may
informally talk to customers, competitors, middleman, and others in the industry.
• Collection of Secondary information: In order to answer the questions listed while
delineating the objectives of the market study, information may be obtained from
the secondary source and primary source. Secondary information that has been
gathered in some other context and is already available, census, national survey
plan report, economic survey etc are the source of secondary information.
• Conduct of market survey: For getting primary and secondary information market
survey is needed to be done the market survey may be a census survey or a sample
survey. In a census survey entire population is covered. On the other hand in a
simple survey, a sample of the population is contracted or observed.
Characterization of the market: Based on the information gathered from
secondary sources and through the market survey, the market for the
product or 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;
Demand forecasting: After gathering information about various aspects of the market and
demand from primary and secondary sources, an attempt may be made to estimate
future demand. A wide manage of forecasting methods is available to the market analyst.
Uncertainties in demand forecasting: Demand forecasts are subject to error and
uncertainty which arise from three principal sources:-
• Data about past and present market;
• Methods of forecasting;
• Environmental change.
Market planning: A market planning usually has the following components.
• Current marketing situation;
• Opportunity and issue analysis;
• Objective;
• Marketing strategy;
• Action programmed.
•
 Chapter Three
Financial analysis and projection
Introduction
• Project financing is the activity of raising funds from the market, required to
finance an investment finance.
• All businesses, whether startup or growing, will be required to supply prospective
financial data for creditors or investors.
• Project finance is the long-term Financing of infrastructure and industrial
projects based upon the projected cash flows of the project rather than the balance
sheets of its sponsors.
• Usually, a project financing structure involves a number of equity investors,
known as ‘sponsors’; a 'syndicate' of banks or other lending institutions that
provide loans to the operation.
 Project financing …
¶ According to International project finance Association (IPF) project financing is defined as; “
financing of long-term infrastructure, industrial projects and public services based upon a
non-resources or limited resource financial structure where project debt and equity used to
finance the project are paid back from the cash flows generated by the project”
¶ Project financing is especially attractive to private sector because they fund major project off
balance sheet.
¶ Project financing refers to the means of financing employed for meeting the cost of project

¶ Project finance is a method of financing very large capital intensive projects, which long
gestation period, where the lenders rely on the assets created for the project as security and
the cash flow generated by project as sources of funds for repaying their dues.
 Key characteristics of project financing
Financing of long term infrastructure and or industrial project using debt and equity

Debit is typically repaid using cash flows generated from the operation of the project

Limited resource to project sponsors

Debt is typically secured by project’s asset, including revenue producing contracts

First priority on project cash flows is given to the lender

Consent of the lender is required to disburse any surplus cash flows to project sponsors

Higher risk projects may require the surety/guarantees of the project sponsors
 Advantages of project Financing
åEliminate or reduce the lenders' resources to the sponsors
åPermit an off-balance sheet treatment of the debt financing
åMaximize the leverage of a project
åAvoid any restriction or covenants binding the sponsors under their respective
financial obligations
åAvoid any negative impact of a project on the credit standing of the sponsors
åObtain better financial conditions when the credit risk of the project is better
than the credit standing of the sponsors
åAllow the lenders to appraise the project on a segregate and stand-alone basis
åObtain a better tax treatment for the benefit of the project, the sponsors or
both.
 Disadvantages of project Financing

• Often takes longer to structure than equivalent size corporate

finance
• Higher transaction costs due to creation of an independent entity
• Project debt is substantially more expensive due to its non-
recourse nature
• Extensive contracting restricts managerial decision making
• Project finance requires greater disclosure of proprietary
information and strategic deals.
 Project financing …
Project finance projection
• All businesses, whether startup or growing, will be required to supply prospective
financial data for creditors or investors. Financial projections, determines effective
resource allocations and sets clear objectives.
• Financial projections; a forecasting of the income statement, the balance sheet, and the
cash flow statement. Projections are made by the month for the first year and then by
the year for the next two years.
Creditor requests for historical data related to your company's performance for the
last three to five years, depending on the length of time you have been in business.
Typically, the historical financial data to includes; company's income statements,
balance sheets, and cash flow statements for each year you have been in business
(usually for up to three to five years).
 Cost of project

• Cost is an amount of money needed to pay or compensate to buy or take a

service or good. Moreover, costs is the value or total amount of money to do the
work or needed for a business that is the sum of fixed and variable costs.
• Project Cost is the total funds needed to complete the project or work that
consists of a direct and in direct cost.
• The Project Costs are any expenditures made or estimated to be made, or
monetary obligations incurred or estimated to be incurred to complete the
project which are listed in a project baseline.
• The project cost is a cost required to procure all the needed products, services
and resources to deliver the project successfully.
• Example: In an example of a construction project, the cost estimation starts from
land acquisition cost, construction cost, materials cost, administration cost, labor
cost and other direct and indirect costs.
 Types of Project cost
• There are 5 types of project costs incurred in any project;
1. Fixed Cost
• Is the any cost which is fixed throughout the project life cycle and would not
change by quantity, time or any other project factors.
Fixed cost Example: In a software project, rent for the company space, systems
cost, software license cost, salaries are considered as a fixed cost.
To conclude “In short term, the costs are fixed, however, the costs are variable
in the long term”
2. Variable Cost
• The Variable cost is a cost which varies or changes in proportion to product or
service that the project produces.
3. Direct Cost (DC); Costs which are directly visible and accountable to
produce the project output are called direct costs.

Example of direct project costs are:

• Cost of the employees; equipment and materials; outsourcing contractor's

cost, Logistics, human resources costs, project development cost, project
management cost; procurement and procurement related cost such as
transportation and custom clearance; construction management,
construction labour, and consumable materials & sub-contractor's cost etc.
which are directly involved efforts or expenses.
4. Indirect Cost means that are not directly involved in a specific task or project, and
can not be accurately attributed to a specific cost centre. Main indirect cost of
project are company overhead (operating expenses) and profit.

Example: Overhead Cost, indirect field costs (i.e., direct management and
supervision, temporary facilities, construction equipment and small tools, start-up
costs, insurances and taxes etc), Electricity consumption, rent, salary,
administrative, security cost. These costs are not directly related to the
production.
5. Sunk costs
Sunk Costs are costs which are already spent, but failed to incur any business value
and cannot be recovered and permanently lost.
Means of finance (project financing)

Sources of project finance may be either

Internal External

Internal project financing can be

cheaper, but spending this money on Are usually come form outside
the business, means the money can’t This usually more as interest may
spent on other project like investing be charged
Generally sources of project finance includes;
1.Share capital
Ordinary shares are held by the owners of the business who have a right to a share of the company
profits through dividends, which vary in value depending on performance.

Preference share; Preference shares are less risky as the holders of preference shares are not
owners of the company. They offer a guaranteed dividend although this may be less than that
received by ordinary shareholders. As preference shareholders are not owners of the company they
have limited voting rights

Issuing shares; cost can be issued through new issues or rights issues. New issues are generally
made at the same time as the company is floated on the stock market, and the capital raised is
significant. The price of the new share is based on project growth rates, stability, market sentiment,
and comparison with other similar companies and the capital structure of the company.
2. Equity Finance : costs far less than external sources that charge interest and
can be distributed as the company sees fit. Retained profits not all profits are
distributed to shareholders: the company retains a proportion as reserves.
3. Loan Capital Debentures; Some loans are secured by a fixed or floating charge
against a company’s assets and are known as debenture loans. Debenture
holders receive their interest payment before any dividend is paid to
shareholders and if the business fails the holders will be preferential creditors.
4. Overdrafts sources of project finance
• Are useful sources of short-term finance due for repayment in less than
a year. Interest is only charged when the facility is used and the interest
payments are tax-deductible. Loans generally have higher rates of
interest and are less flexible as payments need to be made for a pre-
agreed amount and at a pre-agreed time.
• The cost of borrowing money can be compared with the return from a
project by calculating the Internal Rate of Return (IRR).
5. Business Angels; These are private investors who invest directly in a
company in exchange for an equity stake and perhaps a place on the board.
They invest in order to receive a capital gain, they are usually experienced
entrepreneurs and can be a source of useful knowledge for the business.

6. Venture Capital; venture Capitalists usually offer funds to companies that

other financial institutions might consider too risky. They exchange their
capital for an equity share and involvement at a strategic level often
through a non-executive position on the board. Their prime aim is to
increase the value of their shares so that they can sell them at a profit
7. Private finance initiative
• The private finance initiative (PFI) was launched in 1992 with the purpose of
transferring the risk of designing, building, constructing and operating public
services to the private sector.

8. Project Grants and funding Grants; are given to individuals or a business for a
specific project. They don't need to be paid back, but they do need to be applied
for, and the application process can be highly competitive and time consuming.

9. Other sources include: the National Lottery, sources from wealthy country (i.e.,
European Union, USADP, UN, JAPAN DP) philanthropy/charity, trusts and
foundations, direct endowments and specific fundraising initiatives.
Project sales and production financial Estimation
Financial Projection Ratios Analysis
There are different financial ratios which can be used to monitor a business. To provide a
simple and meaningful financial analysis, the following four key financial projection ratios
which aims to highlight a different aspect of the business are used;
1. Profitability
• Profitability is the ability of the business to generate profit from its revenue and is
indicated in the financial projections template by net the profit margin ratio.
• The ratio is an indicator of how well a business can control its costs in relation to its
revenue. The higher the net profit margin ratio the more profit it earns from its revenue. A
negative ratio indicates the business makes a loss.

Profitability= net income/revenue

2. Efficiency
• Efficiency is used to indicate the ability of the business to perform effectively and utilize its
assets to generate revenue (which in turn generates profit).
• The financial projection template indicates efficiency using the ratio of revenue to assets,
sometimes referred to as asset turnover ratio.
• The higher the asset turnover ratio the more efficient the business is at generating
revenue from its asset base.
Efficiency or Asset turnover ratio = Revenue / Assets
Note: From the accounting equation Assets = Debt (Liabilities) +
Equity and so the ratio also measures how efficient the business is
at generating revenue from the total debt and equity funding used
in the business.
3. Leverage
• Is refers to the extent to which a business relies on liabilities including debt finance to fund
its operations.
• The financial projection template indicates leverage using the ratio of liabilities to assets,
sometimes referred to as the debt ratio , debt to assets ratio or liabilities to assets ratio.
• The higher the ratio, the higher the level of liabilities and the greater the liabilities relative
to assets in the business.
• If the debt ratio is equal to 1, the liabilities are equal to the assets. The assets are funded
entirely by liabilities, and the business is said to be highly leveraged.
• If the debt ratio is 0, the liabilities are also equal to 0. None of the assets are funded by
liabilities and must therefore all be funded by equity.
• A debt ratio of 50% is a reasonable level, and indicates that the assets are 50% funded by
liabilities and 50% funded by equity
Leverage or Debt ratio = Liabilities/Assets
4. Liquidity
• Liquidity is a measure of whether a business can utilize its current
assets (cash, accounts receivable, and inventories) to pay its current
liabilities (accounts payable and other) as and when they fall due.
• The financial projection template indicates liquidity using the ratio of
current assets to current liabilities, referred to as the current ratio.
• The higher the ratio, the higher the level of liquidity the business
has. It varies from industry to industry, but generally the ratio should
be at least equal to 1, and nearer 2 to allow a margin of safety.
Liquidity or Current ratio = Current assets / Current liabilities
Project cost estimation methods
• There is three effective cost estimating methods can be used to calculate project cost.
1. Parametric Estimation
• This estimation uses the historical data to calculate the cost estimation. Most of
the time this estimation works well as it’s based on the real data and saves lots of
time.
• E g: In a construction project, how much cost spent per square feet in the same
locality for a similar project, would help to calculate the cost estimation for the
new project.
2. Bottom-up approach
• Bottom-up approach otherwise called as definitive technique is all about
breaking up all the activities of the project to the micro level and do the cost
estimation.
• This is the most accurate method to calculate the cost estimation. However it
might be time-consuming and a costly technique.
3. Three-point Estimation
• This estimation is commonly called as PERT (Program Evolution and Review
Technique). It includes all the possibilities, assumptions and uncertainties in
cost estimation. They are;
Most Likely cost (Cm): It refers the regular case where everything goes well.
Pessimistic Cost (Cp): It refers the worst case where everything goes against the plan.
Optimistic Cost (Co): It refers to the scenario where everything works better than planned.

• PERT(program evaluation & review technique formula is

Expected cost = (Co+ Cp+4 Cm)/6 .
• This method is considered as a best and accurate method to calculate the
project cost estimation.
• The more accurate your estimate of project cost is, the
better able you will be to manage your project’s budget.
Therefore, estimating a project’s costs is important for
several reasons;
It enables you to weigh anticipated benefits against
anticipated costs to see whether the project makes sense.
It allows you to see whether the necessary funds are
available to support the project.
It serves as a guideline to ensure that you have sufficient
funds to complete the project.
 UNIT 4
Project Environment analysis

• A project does not exist in a vacuum but is always dependent on various internal and external factors
that can threaten its successful completion.

• Project managers need to take into account factors such as the political, social and economic
environment which can affect a project’s outcome.

• Understanding the external forces that have an effect on the project means that project managers can
make more strategic decisions and steer the project into the right direction.

• A project is always part of a larger project environment, which makes managing projects so challenging.

• Generally project environmental analysis contain tool that helps project managers identify all
possible threats, as well as opportunities, is the PESTLE analysis.
• In general project environmental analysis is also known as PESTEL o, depending on how
many environmental factors are included.
• This method takes a big picture or birds view approach, which means that it looks at the
project in a wider context and takes into account how changes in the project’s environment
affect the project.
• This enables project teams to anticipate changes and include these changes into their
planning instead of being surprised by them.
Project
Environmental
analysis model
1. Political analysis includes
• Tax policies and other government policies
• Elections
• Trade reforms
• Example: If you’re working on an international project which spans across several
countries, you will have to keep in mind that different countries have different rules and
regulations. Some countries have stricter regulations than others, especially when it
comes to health and safety issues.
1. Economical analysis involves;
• Budget availability
• Import and export taxes
• Interest rates
• Economic growth or recession
• Inflation rate
• Exchange rate
• Minimum wage
• Example: If your supplier is located in another country and the exchange rate between
the two countries changes, it means that your costs might increase. If the exchange rate
3. Social analysis should consider
• Cultural norms and expectations
• Population demographics (age, gender, mobility etc.)
• Population’s general attitude towards certain issues (health, environment, etc.)
Example: If you are planning on building an additional landing strip for an airport, you
have to take the local population, who will be affected by the construction. Because in
order to build it, the people living there will have to relocate and people living close to
the airfield will have to expect increased noise from the arriving and departing
airplanes. You have to devise a strategy to address these concerns.
4. Technological analysis have to consider
• New technologies that replace older technologies
• Technical constraints
• Automation
• Research and development
Example: A new technology or a technological shift could speed up your project’s
progress, which also means that you could decrease your project costs.
5. Project Legal environment analysis
• Employment law
• Health and safety laws
• Regulatory frameworks
• Example: Before you can start a construction project, you will have to get a
building permit and have to make sure that the construction plan is in
accordance to regulations.
6. Project physical Environmental analysis
• Climate and weather conditions
• Geographical location
• Natural disasters
• Geopolitical issues
• Example: A great example of taking environmental factors into account is
Ethiopian Great Dam construction (Abay Dam).
• In conducting project environmental analysis (PESTLE) the following major point should
be considered ;
1. Brainstorm: The project manager and the project team should get together in a
meeting or a workshop setting to come up with all the possible (and impossible) factors
that could affect the project. This step is very important because the more threats and
opportunities you identify, the better you can plan your project.
2. Sort and prioritize; The next step is to sort the factors identified into the different
PESTLE categories and then sort them by relevance, i.e. importance. Which factors will
have the biggest or the least impact on the project?
3. Determine probability: Now determine which factors have the highest probability of
occurring. You should not just concentrate on factors that have a high probability, but
should also make plans for threats that have a low probability of occurring. This
ensures that you are ready for any possible scenario.
4. Create action plan: Create an action plan that takes all the factors into account. The
action plan should include measures to eliminate or mitigate threats that could cause
your project to go off track.
•
 Environmental impact Statement (EIS)

• Environmental impact assessment (EIA) is the process of determining and

evaluating the effects that a proposed action would have on the environment
before the decision is taken on whether or not to proceed with it.
• This normally includes identification of ways to minimize those effects, and
may include provisions for on-going monitoring and management during
implementation of the proposal. EIA may be divided into two broad
components: the procedures which must be followed and the methods which
may be used.
• In many, but not all, nations and states, several other names are also used in
explaining EIS like; environmental impact report and environmental review.
Components of Environmental impact statement (EISP
¶Relevance of the purpose and need statement
¶ Adequacy of range of alternatives and alternative analysis
¶Adequacy of impact analysis or documentation
¶Cumulative impacts
¶Adequacy and feasibility of mitigation measures; and
¶procedural matters, such as improper public notice or
review period, or failure to consult with other agencies, etc.
 UNIT FIVE
Project Appraisal (The project Selection Criteria)
• Project selection techniques help us to select a project which could provide us with a better
return on investment and recognition. There are various methods to select a project; however, if
the project is small and not very complex, it seems better use the benefits measurement model
• In order to have good understanding of project selection process, understanding the basic terms
related it is crucial.
1. Time value of money
• Time value of money is an equally important finance concept that helps to understand
economic or profitability of project selection. It simply means that money received now
has more value than the same amount received in future.
• The value of future cash flow is significantly affected by inflation and risk.
• Thus, risk free rate of interest compensates for time as well as inflation. Whereas risk
premium provides a cover for investments risks.
• Therefore, interest rate helps to convert future cash flow to an equivalent amount of
money in the present time.
2. Present Value
• Present Value (PV) is the current value of future cash flows. Computing present value uses
the principle of discounting.
• Further, discounting is calculating the present value of future cash flows using a specified
compound interest rate.
Where, PV-present value, FV- future values, K-

discounting factors/interest rate,

N= number of time period,

3. Future Value
• Future value (FV) is the value of current investment at any specified future date. Computing
future value uses the principle of compounding.
• Likewise, compounding is calculating the future value of current investment using specified
compound interest.
• There are various project selection methods. Although there is a difference
among methodologies used in each technique, the basic principle and
ultimate goal are the same, which is to provide organization earn maximum
profit and recognition.
• Every organization has a defined process that helps them to choose the right
project aligned with its strategic objectives.
• Generally methods of project selection is divided into two categories:
1. Benefit Measurement Methods
2. Constrained Optimization Method
 A. Benefit Measurement Methods of project selection

• This technique is widely used in the selection of projects, which is based on the present
value of estimated cash inflow and outflow. Here, you calculate the cost and benefits and
then compare them with other projects to make a decision.
• Discounted Cash Flow; it is obvious that the worth of money received today is more than
the money received in the future. For example, the value 10,000 Ethiopian birr after ten
years will not be the same as today; its worth will be far lower than the current value of
10,000 ETB. Therefore, we have to consider the concept of discounted cash flow while
calculating the cost invested and return on investment.
• The following is a list of techniques used in benefit measurement methods
1. Benefit/Cost Ratio
• This technique is also known as the Cost-benefit ratio anaysis
• As the name implies, it is the ratio between the present value of inflow (cost invested in the
project) and the present value of outflow (value of return from the project). If the budget is
not a constraint, the project with a higher Benefit-Cost Ratio (BCR) will be selected.
2. Economic Value Added (EVA)
• Economic Value Added (EVA) is a performance metric that calculates the worth creation for
the organization and defines the return on capital (ROC). It is the net profit after deducting
all taxes and capital expenditure.
• The project with the higher Economic Value Added (EVA) will be selected if you have
many projects.
3. Scoring Model
• This is more like an objective technique. Here, the project selection committee will list a few
relevant criteria, weigh them according to their priorities and importance, and then will
add all these weighted values.
• The project with the highest score will be selected once you complete scoring the projects.
4. Payback Period = Initial Investment/Annual Cash Inflow
• This is the ratio of total cash out with an average per period cash in. In other words, it is the time
required to recover the cost invested in the project.
• The project with the minimum payback period will be selected if other parameters are the same
5. Net Present Value (NPV)
• This is the difference between the current value of cash inflow and the
current value of cash outflow of the project.
• Net Present Value (NPV) should always be positive, and the project with the
highest NPV will be the better option.
6. Internal Rate of Return (IRR)
• This is the interest rate at which the Net Present Value becomes zero. In other
words, it is the rate at which the present value of the outflow is equal to the
present value of inflows.
• The project with the highest IRR will be the better option being selected.
7. Opportunity Cost
• This is the cost that are given up by choosing some other project.
• The project with minimum opportunity cost will be the better option being
selected.
 B. Constrained Optimization project selection methods
• This model is also known as the Mathematical Model of project selection,
which is used for large projects requiring complex mathematical calculations.
• The following is the list of techniques used in the Mathematical Model of
project selection.
1. Linear Programming
2. Non-linear Programming
3. Integer Programming
4. Dynamic Programming
 UNIT 6
Social Cost Benefit Analysis

Social-cost-Benefit –Analysis
Scopes of Social-Cost-Benefit-Analysis

SCBA can applied to both public and private

Time
investment
Public Investment: SCBA is important specially for
the developing countries where govt. plays a
significant role in the economic development. Scope
andh
Quality
Private Investment: here SCBA is also important as Budget Resources
the private investment are to be approved by
various governmental and quasi-governmental
agencies.
 Importance of Social-Cost-Benefit-Analysis
1. Market importance
• Market failure when a big project is not affecting everyone but only a few
• A private firm would only look at profitability and related market prices to take up a deal
but the government has to look at other factors
• To determine the social cost in the case of market failure and when market prices are
unable to define them.
• These social costs are known as shadow prices
2. Saving and Investment importance
• Impact of the project on general saving and investment level
• A project that induces more savings are investment in an economy and not the other way round
3. Distribution and redistribution of income importance
• The project should not lead to accumulating income in the hands of a few but, it should
equally distribute the income
4. Employment and Standard of Living
• How a project affects employment and standard of living will be taken into account
as well.
• The deal should lead to increase in employment and standard of living
5. Externalities
• Externalities are impacts of a project which can be both harmful and beneficial
• Therefore, both effects are to be assessed before sanctioning a deal
• Positive-externalities could be in the form improvement in technology and
negative-externalities could be in the form of increasing in population and
destruction of ecology
6. Taxes and Subsidies
• In a general cost benefit calculation, taxes and subsidies are considered as expenses
and income respectively
• Though in case of social-cost benefit analysis, taxes and subsidies are considered as
transfer payment.
• Generally SCBA (Social-cost benefit analysis)

Enables the government to take up new development which will

benefit everyone and not just a few

It helps in bringing about an overall development in an economy

and can help make decisions that will increase employment,

investments, saving and consumption, thus, improving the

economic activities in an economy.

CBA SCBA
UNIDO (United Nation Industrial Dev’t Organization)
approach to project SCBA

Project -SCBA
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…

Project -SCBA
UNIDO approach con’t…

Project -SCBA
Generally UNIDO methods of Project appraisal
involves five stage
 Socio culture and demographic factors

Project cultural acceptability

• Multicultural project planning is a procedure of planning that gives consideration
to all the cultures at the time the project is created. The project that includes a
variation of diverse customs, concerning growth or conduct of the followers is
referred as multicultural project.

• Organizational culture is the framework in which a project manager and team

must work. All elements of a project – from processes to leadership,
management styles, communication, risk tolerance, and project request
management – are influenced by cultural norms in your company.
• The purpose of the cultural gap tool is to raise awareness of the project
manager regarding the manifestation of cultural differences in his or her
project. It also can be used by the project management team and project
members to help them in identifying differences and dealing with them.

• Diversity means understanding that each individual is unique and also

recognizing our individual differences. The differences can be in race,
ethnicity, gender, sexual orientation, socio-economic status, age, physical
abilities, religious beliefs, political beliefs or other ideologies.
Cultural Awareness occurs in stages.

• Stage 1: People are all the same. ...

• Stage 2: Cultural differences exist, but my culture is the best. ...

• Stage 3: Other cultures are of value and I can learn from them. ...

• Stage 4: More than one cultural frame of reference exists.

Effective and better SCBA &
CBA of project should
demand the following points:
• A good project should designed with Positive mind to have positive outcome
Therefore, Keep your thought positive, they become your reality!!!Negative mind
set can destroy a person’s power

Therefore, avoiding or minimizing negative mental set-up that ties your physical potential is
the highest energy for effective and efficient project implementation
 A good Project needs intelligent use of resources
• Find the gifts inside you; Give you passion its voice; Let it fly; Let go; Set is free
• Remember that having resources may not be sufficient condition for success. So don’t abuse your natural gift!
Project needs intelligent working skill than hard works
Project requires strong determination or persistence
Project requires Strong Wholistic stamina/endurances
Project demands Self-directed learning than external agents of changes
 UNIT SEVEN
Project Management (Implementation)

1. Project Planning
Project planning is at the heart of the project life cycle, and tells
everyone involved where you’re going and how you’re going to get
there. The planning phase is when the project plans are
documented, the project deliverables and requirements are
defined, and the project schedule is created. It involves creating a
set of plans to help guide your team through the implementation
and closure phases of the project. The plans created during this
phase will help you manage time, cost, quality, changes, risk, and
related issues
The purpose of the project planning phase is to:
• Establish business requirements

• Establish cost, schedule, list of deliverables, and delivery

dates

• Establish resources plans

• Obtain management approval and proceed to the next phase

• The basic processes of project planning are:
 Scope planning – specifying the in-scope requirements for the project to facilitate creating the
work breakdown structure
 Preparation of the work breakdown structure – spelling out the breakdown of the project into
tasks and sub-tasks
 Project schedule development – listing the entire schedule of the activities and detailing their
sequence of implementation
 Resource planning – indicating who will do what work, at which time, and if any special skills
are needed to accomplish the project tasks
 Budget planning – specifying the budgeted cost to be incurred at the completion of the project
 Procurement planning – focusing on vendors outside your company and subcontracting
 Risk management – planning for possible risks and considering optional contingency plans and
mitigation strategies
 Quality planning – assessing quality criteria to be used for the project
 Communication planning – designing the communication strategy with all project stakeholders
 Project Planning; goal setting
When articulating the project objectives you should follow the SMART rule:
• Specific – get into the details. Objectives should be specific and written in clear,
concise, and under­standable terms.
• Measurable – use quantitative language. You need to know when you have
successfully completed the task.
• Acceptable – agreed with the stakeholders.
• Realistic – in terms of achievement. Objectives that are impossible to
accomplish are not realistic and not attainable. Objectives must be centred in
reality.
• Time based – deadlines not durations. Objectives should have a time frame with
an end date assigned to them.
 Steps of project planning
Step 1: Project Goals
A project is successful when it has met the needs of the stakeholders. A
stakeholder is anybody directly, or indirectly impacted by the project.
• As a first step, it is important to identify the stakeholders in your project. It is
not always easy to determine the stakeholders of a project, particularly those
impacted indirectly. Examples of stakeholders are:
• The project sponsor
• The customer who receives the deliverables
• The users of the project output
• The project manager and project team
Step 2: Project Deliverables
• Using the goals you have defined in step 1, create a list of things the project
needs to deliver to meet those goals. Specify when and how to deliver each item.
• Add the deliverables to the project plan with an estimated delivery date. You will
establish more accurate delivery dates during the scheduling phase, which is next.
Step 3: Project Schedule
• Create a list of tasks that need to be carried out for each deliverable identified in
step 2. For each task determine the following:
• The amount of effort (hours or days) required for completing the task
• The resource who will carry out the task
Step 4: Supporting Plans
• This section deals with the plans you should create as part of the planning
process. These can be included directly in the plan;
• Human Resource Plan
• Communications Plan
• Risk Management Plan
Project Risk Management Plan
• Risk management is an important part of project management. Although often
overlooked, it is important to identify as many risks to project as possible and
be prepared if something bad happens.
Common project risks are:
Time and cost estimate too optimistic
Customer review and feedback cycle too slow
Unexpected budget cuts
Unclear roles and responsibilities
No stakeholder input obtained
Not clearly understanding stakeholder needs
Stakeholders changing requirements after the project has started
Stakeholders adding new requirements after the project has started
Poor communication resulting in misunderstandings, quality problems and rework
Lack of resource commitment
 Project Organization

• A project organization is a structure that facilitates the coordination and

implementation of project activities. Its main reason is to create an environment that
fosters interactions among the team members with a minimum amount of
disruptions, overlaps and conflict.

• Project organization is a process, which provides the arrangements and decisions

about the realization and the process of the Project. Such tasks as organization of the
project process, planning of the project frameworks (costs, deadlines, personnel etc.)
should be carried out; all project requirements should be given to the Project stake
holder during this process.
Sample of Project organization
Project Direction
• Project direction goes beyond the conventional project management: it is the
management process through which all the components in a project are
aligned to the corporate objectives ensuring that a project does not develop
'outside' the company but grows to be an integral part of it.

• A project is an organized activity with a well-defined purpose, completed by a

dedicated project team within a given timeframe. In other words, a project has
a beginning and an end; the end comes when you have achieved the project's
purpose. Once you have achieved this purpose, the project is over.
Project Monitoring and Evaluation