Project Management and Appraisal
Ans -1 Definition
Project appraisal is the structured process of assessing the viability of a project or proposal. It involves calculating the feasibility of the project before committing resources to it. It is a tool that company’s use for choosing the best project that would help them to attain their goal. Project appraisal often involves making comparison between various options and this done by making use of any decision technique or economic appraisal technique.
Project appraisal is a tool which is also used by companies to review the projects completed by it. This is done to know the effect of each project on the company. This means that the project appraisal is done to know, how much the company has invested on the project and in return how much it is gaining from it.
Some of the methods of project appraisal are as follows:
1. Economic Analysis:
Under economic analysis, the project aspects highlighted include requirements for raw material, level of capacity utilization, anticipated sales, anticipated expenses and the probable profits. It is said that a business should have always a volume of profit clearly in view which will govern other economic variables like sales, purchases, expenses and alike.
It will have to be calculated how much sales would be necessary to earn the targeted profit. Undoubtedly, demand for the product will be estimated for anticipating sales volume. Therefore, demand for the product needs to be carefully spelled out as it is, to a great extent, deciding factor of feasibility of the project concern.
In addition to above, the location of the enterprise decided after considering a gamut of points also needs to be mentioned in the project. The Government policies in this regard should be taken into consideration. The Government offers specific incentives and concessions for setting up industries in notified backward areas. Therefore, it has to be ascertained whether the proposed enterprise comes under this category or not and whether the Government has already decided any specific location for this kind of enterprise.
2. Financial Analysis:
Finance is one of the most important pre-requisites to establish an enterprise. It is finance only that facilitates an entrepreneur to bring together the labour of one, machine of another and raw material of yet another to combine them to produce goods.
In order to adjudge the financial viability of the project, the following aspects need to be carefully analysed:
1. Assessment of the financial requirements both – fixed capital and working capital need to be properly made. You might be knowing that fixed capital normally called ‘fixed assets’ are those tangible and material facilities which purchased once are used again and again. Land and buildings, plants and machinery, and equipment’s are the familiar examples of fixed assets/fixed capital. The requirement for fixed assets/capital will vary from enterprise to enterprise depending upon the type of operation, scale of operation and time when the investment is made. But, while assessing the fixed capital requirements, all items relating to the asset like the cost of the asset, architect and engineer’s fees, electrification and installation charges (which normally come to 10 per cent of the value of machinery), depreciation, pre-operation expenses of trial runs, etc., should be duly taken into consideration. Similarly, if any expense is to be incurred in remodeling, repair and additions of buildings should also be highlighted in the project report.
2. In accounting, working capital means excess of current assets over current liabilities. Generally, 2: 1 is considered as the optimum current ratio. Current assets refer to those assets which can be converted into cash within a period of one week. Current liabilities refer to those obligations which can be payable within a period of one week. In short, working capital is that amount of funds which is needed in day today’s business operations. In other words, it is like circulating money changing from cash to inventories and from inventories to receivables and again converted into cash.
3. Market Analysis:
Before the production actually starts, the entrepreneur needs to anticipate the possible market for the product. He/she has to anticipate who will be the possible customers for his product and where and when his product will be sold. There is a trite saying in this regard: “The manufacturer of an iron nails must know who will buy his iron nails.”
This is because production has no value for the producer unless it is sold. It is said that if the proof of pudding lies in eating, the proof of all production lies in marketing/ consumptio. In fact, the potential of the market constitutes the determinant of probable rewards from entrepreneurial career.
Thus, knowing the anticipated market for the product to be produced becomes an important element in every business plan. The various methods used to anticipate the potential market, what is named in ‘Managerial Economics’ as ‘demand forecasting’, range from the naive to sophisticated ones.
4. Technical Feasibility:
While making project appraisal, the technical feasibility of the project also needs to be taken into consideration. In the simplest sense, technical feasibility implies to mean the adequacy of the proposed plant and equipment to produce the product within the prescribed norms. As regards know-how, it denotes the availability or otherwise of a fund of knowledge to run the proposed plants and machinery.
It should be ensured whether that know-how is available with the entrepreneur or is to be procured from elsewhere. In the latter case, arrangement made to procure it should be clearly checked up. If project requires any collaboration, then, the terms and conditions of the collaboration should also be spelt out comprehensively and carefully.
In case of foreign technical collaboration, one needs to be aware of the legal provisions in force from time to time specifying the list of products for which only such collaboration is allowed under specific terms and conditions. The entrepreneur, therefore, contemplating for foreign collaboration should check these legal provisions with reference to their projects.
While assessing the technical feasibility of the project, the following inputs covered in the project should also be taken into consideration:
(i) Availability of land and site.
(ii) Availability of other inputs like water, power, transport, communication facilities.
(iii) Availability of servicing facilities like machine shops, electric repair shop, etc.
(iv) Coping-with anti-pollution law.
(v) Availability of work force as per required skill and arrangements proposed for training-in-plant and outside.
(vi) Availability of required raw material as per quantity and quality.
5. Management Competence:
Management ability or competence plays an important role in making an enterprise a success or otherwise. Strictly speaking, in the absence of managerial competence, the projects which are otherwise feasible may fail.
On the contrary, even a poor project may become a successful one with good managerial ability. Hence, while doing project appraisal, the managerial competence or talent of the promoter should be taken into consideration.
Research studies report that most of the enterprises fall sick because of lack of managerial competence or mismanagement. This is more so in case of small-scale enterprises where the proprietor is all in all, i.e., owner as well as manager. Due to his one-man show, he may be jack of all but master of none.
Ans 2 The Main Objectives Need and Importance of Market Analysis.
Every human activity has purpose behind and marketing research as a deliberate intellectual activity has certain objectives. Distinguished scholars or modern marketing experts such as P.D. Converse, Esmond Pears, E.S. Moulton, P.E. Green and D. S. Tull and others have outlined good many objectives in their own way.
Based on these, there can be six clear-cut objectives of marketing research:
1. To Know the Buyers:
Marketing is to do with people, product and process of transfer. Each firm is eager to know about all those persons who are willing to pay for the firm’s products or services. This knowledge pertains to buyer variables such as number of buyer’s frequency of buying regional location social category and so on. Useful information may emerge if above based basic data are made available.
Thus, the data may indicate that in some areas sales are highly concentrated while in some sporadic and widespread. If such useful information is made available for several years, growth rate can be found out; variance can be traced and enquired into so that market potential is made known.
2. To Measure the Impact of Promotional Efforts:
In modern days of changing marketing conditions, it is quite likely that a company may follow different strategies to promote a product of a service. Promotion-mix or the communication-mix today is consisting of three major elements, namely, advertising, personal selling and sales-promotion.
Each element has sub elements. It is quite possible that some promotional strategies are strikingly appealing and some are total flop.
Though some are successful, the overall analysis gives unexpected poor results. Research in these areas of promotion mix effectiveness will enable the researcher to gauge the strength and weakness of the mix components so that it can be suitably changed to better the results.
It reduces to a very great extent in detecting the point of satisfaction and contribution of a medium or a vehicle in a medium. In effect, it helps in cutting the dead-weight to restore the sound health.
3. To Know Consumer Response:
Any consumer oriented company cannot remain contended if it ‘somehow’ makes it possible to reach the target sales. It is more keen on knowing consumer response for its efforts of delivering the products.
Study of consumer response can also be known market-product testing. An alert company monitors the consumer reactions to the product so released in the market.
In other words, the company is eager to know consumer opinion about the degree of satisfaction or dissatisfaction that the product has generated or caused. Such clues pave the way for product improvement in terms of quality, design, size, colour, appearance, packing, packaging materials, distribution methods and so on. Thus, market product testing helps in sound product planning and improved product development to meet the much desired consumer needs.
4. To Know Market Costs and Profits:
There has been a hue and cry all over the world that marketing costs have escalated to such an extent that optimisation of profit has become a big problem. Marketing cost is an input employed by a company to execute its marketing programme and is used as a standard measure of performance.
Research relating to total marketing costs and their break-up helps in appraising and indicating these marketing policies and procedures whose cost is not commensurate with the results.
It makes marketing management cost conscious Research has the objective of cost control and reduction so that the consumers are given reduction in prices and a rise in profit to the marketers.
Cost analysis leads to profit analysis that gives profit performance by regions, products, and customers. These findings of cost behaviour impel certain changes of adjustments in promotion, pricing and distribution.
5. To Master the External Forces:
The firm’s policies and strategies undergo change as warranted by the internal controllable factors and external uncontrollable forces. Each company needs reliable information about competitor’s moves, the company’s share in the market, and developments in foreign markets, governmental policies, technological changes, ecological variations, consumer incomes, consumer spending, new products substitutes and the like.
These are the forces that keep on changing themselves and making the firms to change accordingly. Research in these areas is a must to survive and survive successfully. Research makes firm adaptive as it gets innovative.
6. To Design and Implement Marketing Control:
Marketing control is the final or terminal job in the marketing management. It is the task of monitoring and feeding back the marketing performance and its measurement and evaluation against the planned performance standards so as to identify deviations, correct them as they occur and provide input for plan revision.
Marketing planning or sales forecasting leads to development of marketing control process. Plans have no meaning unless they are materialized. Control decides whether the actual efforts are in tune with planned course.
Ans1Difference between PERT and CPM :
Ans 2
Ans 4Sources of project financing will depend on the structuring of the project (which is heavily impacted by project risks). There are many financial products in the market to pay for construction costs. The cost (interest rates and fees) of each financial product will depend on the type of asset and risk profile.
Private Debt
Debt that is raised by investment banks
Cheaper cost of capital than equity financing since debt holders will be repaid first
Public Debt
Debt that is raised by the government under advisement of an investment bank or advisor
Cheapest cost of capital since it is a government sponsored program used to spur infrastructure development
Equity Financing
Equity that is raised by a developer or private equity fund
Highest cost of capital since equity is repaid last and rates of return must reflect the riskiness of investment
Ans 5Objectives of a Feasibility Study
A feasibility study projects the success or failure of a potential business idea. The usefulness of the study depends on the strength of the assumptions you use to create it. If the feasibility study shows a likely failure, you can save your money for a better opportunity instead of wasting it developing projects that never had a chance for success.
Market Research
Before launching a new product or service, run a feasibility study on the size and demographics of the market to determine its potential. Analyze existing competitors to see if your company will be able to break into the market. Saturated markets are not always bad. Having several established competitors indicates that there is money to be made in that industry. However, your feasibility study may reveal that your company does not have the resources to compete, so you narrow your focus to a smaller niche market instead. In this case, the feasibility study stopped you from making a costly mistake and crippling your product before it became established.
Cash Flow
Estimate the costs of running your day-to-day operations. Add in the budget from any planned expansions to find the total amount of funding you need to stay afloat. Cash flow feasibility studies are often requested by lenders or investors to evaluate the risk level of the business. If your company is just starting out, your feasibility study should predict the amount of time until the company breaks even. Consider possible negative outcomes to determine the effect on your timeline, such as a decline in the current customer base.
Income Projections
Feasibility studies can be used to determine whether a proposed project will be profitable. Use conservative estimates unless you have significant evidence the project will exceed them. Look at industry growth to make sure your estimates are reasonable for the current market conditions. Consider all costs involved in the project, including labor, capital expenditures and raw materials needed for production.
Expansion Possibilities
Expanding facilities, mergers and acquisitions, adding a new product line or entering new markets are also good reasons to conduct a feasibility study. Consider cultural issues if you are expanding into a different country. An advertising campaign that is perfectly innocent in one country could be considered offensive when translated to a foreign language. Include logistical issues such as physical space, construction costs and hiring additional staff. Assess the legal and financial considerations of the project, such as zoning laws and license requirements.
Ans 1 The tools are required in identifying the investment opportunities
Generation & Screening of Project Idea. ...
Generation and screening of project. ...
Generation and Screening of Project Ideas. ...
Generation of Project Ideas. ...
Project identification & screening. ...
Idea secreaning project. ...
Utsav Mahendra : Generation and screening of project ideas. ...
Pj Screening and selection of Pjs.
Ans 2 Project management is the use of specific knowledge, skills, tools and techniques to deliver something of value to people. The development of software for an improved business process, the construction of a building, the relief effort after a natural disaster, the expansion of sales into a new geographic market—these are all examples of projects.
Ans 3 project risk analysis
Risk analysis is the process that figures out how likely risk will arise in a project. It studies the uncertainty of potential risks and how they would impact the project in terms of schedule, quality and costs if in fact, they were to show up. Two ways to analyze risk are quantitative and qualitative. But it’s important to know that risk analysis is not an exact science, so it’s important to track risks throughout the project life cycle.
Ans 4 The social cost benefit analysis is a tool for evaluating the value of money, particularly of public investments in many economies. It aids in decision making with respect to the various aspects of a project and the design programmes of closely interrelated project. Social cost benefit analysis has become important among economists and consultants in recent years.
Ans 5 A Risk Taxonomy is the (typically hierarchical) categorization of risk types. A common approach is to adopt a tree structure, whereby risks higher in the hierarchy are decomposed into more specific (granular) manifestations. A risk taxonomy is defined always from the view point of a concrete agent (e.g representing the management of an organization) that aims to manage risks (the effect of uncertainty on the organizational objectives).
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