Unit 5: Project planning and analysis
Project
A project is a temporary, one-time activity undertaken to create a unique product, service, or result.
It has a specific objective, defined timeline, fixed budget, limited resources, and expected outcomes.
Characteristics of a Project
- Specific Objectives – clear goals
- Unique Output – not routine operations
- Fixed Duration – start and end
- Sequence of Activities – planned steps
- Resource Constraints – money, manpower, machines
- Risk and Uncertainty – outcomes uncertain
- Interdependence of Tasks
Examples
- Building a factory
- Launching a new product
- Developing a software
- Opening a new store
- Setting up a solar plant
Project Planning and Analysis
Project Planning and Analysis refers to the process of preparing, evaluating, selecting, and scheduling a project to ensure its technical, commercial, and financial viability.
Objectives
- Identify best project opportunity
- Assess feasibility (market, technical, financial, legal)
- Estimate cost, revenues, and profitability
- Minimize risk
- Ensure efficient resource utilization
- Support decision-making for investors and managers
Project Life Cycle (PLC)
Every project passes through a set of stages called the Project Life Cycle.
Stages of Project Life Cycle
1. Project Identification
- Idea generation
- Need/opportunity recognition
- Preliminary screening
2. Project Formulation
Detailed examination of the idea:
- Technical analysis
- Market and demand assessment
- Financial evaluation
- Environmental & legal feasibility
3. Project Appraisal
Critical evaluation by management/lenders:
- Economic viability
- Risk assessment
- Funding approval
4. Project Implementation
Execution phase including:
- Procurement
- Construction/installation
- Hiring labour
- Plant setup
- Trial operations
5. Project Operation
- Production begins
- Monitoring of performance
- Continuous improvement
6. Project Termination / Evaluation
- Post-completion audit
- Review of actual vs planned outcomes
- Learning for future projects
Generation and Screening of Project Ideas
A. Generation of Ideas
Ideas come from many sources:
- Customer needs and complaints
- Government policies and schemes
- Market research & surveys
- Competitor analysis
- New technologies
- R&D activities
- Export/import data
- Trade fairs, exhibitions
- Brainstorming sessions
B. Screening of Project Ideas
Screening eliminates non-feasible ideas and selects the most promising ones.
Screening Criteria
- Market demand
- Technical feasibility
- Profitability potential
- Resource availability
- Legal and environmental compliance
- Cost and risk level
- Alignment with company goals
Tools used:
- Scoring models
- SWOT analysis
- Feasibility checklists
Analysis of Market and Demand
Market & demand analysis helps determine whether the project has customers and future growth potential.
Components of Market Analysis
1. Market Description
- Size of the market
- Growth rate
- Trends in customer preferences
2. Customer Analysis
- Who will buy the product?
- What are their needs?
- What is their willingness to pay?
3. Competitor Analysis
- Number of competitors
- Market share
- Pricing strategy
- Strengths & weaknesses
4. Market Segmentation
Customers can be divided by:
- Age, gender (demographic)
- Income level
- Location (geographical)
- Behaviour (usage, loyalty)
5. Demand Forecasting
Forecasting future demand using:
- Trend analysis
- Market surveys
- Statistical methods
- Expert opinion
- Time-series models
6. Marketing Mix Strategy (4Ps)
- Product
- Price
- Place
- Promotion
Technical Analysis
Technical analysis evaluates whether the project can be technically executed.
Objectives
- Decide technology and production process
- Identify plant capacity
- Choose equipment and machinery
- Evaluate location & site
- Estimate raw material and labour needs
- Study environmental impact
- Decide layout of plant
Components
- Technology selection (modern, conventional, imported, automated)
- Process flow and equipment
- Plant capacity & scalability
- Location & site choice (transport, labour, utilities)
- Raw material availability
- Manpower requirement
- Project scheduling (PERT/CPM charts)
- Environmental & safety standards
Financial Analysis
Financial analysis determines whether the project is profitable and financially feasible.
Key Components
1. Cost Estimation
- Fixed capital (land, building, machinery)
- Working capital (inventory, receivables, cash)
- Pre-operating expenses
- Contingencies
2. Means of Finance
- Equity
- Debentures
- Term loans
- Venture capital
- Grants/subsidies
- Retained earnings
3. Projected Financial Statements
- Projected income statement
- Cash flow statement
- Balance sheet
4. Profitability Analysis
- Net Present Value (NPV)
- Internal Rate of Return (IRR)
- Payback Period
- Profitability Index
- Break-even Analysis
5. Ratio Analysis
- ROI (Return on Investment)
- ROE (Return on Equity)
- DSCR (Debt-Service Coverage Ratio)
- Current Ratio
- Debt-Equity Ratio
6. Risk Analysis
- Sensitivity analysis
- Scenario analysis
- Risk mitigation strategies
Summary Table
| Topic | Key Points |
|---|---|
| Project | Temporary, unique output, specific goals, time & cost constraints |
| Project Life Cycle | Identification → Formulation → Appraisal → Implementation → Operation → Evaluation |
| Idea Generation | Sources: customers, tech, policies, research |
| Idea Screening | Evaluate feasibility, alignment, profitability |
| Market & Demand Analysis | Market size, customer study, competition, forecasting |
| Technical Analysis | Technology, process, capacity, location, raw materials |
| Financial Analysis | Costing, financing, projections, NPV, IRR, payback |