DSE 1: PROJECT APPRAISAL, FINANCING
AND CONTROL
Credits:4
Faculty:
Neha Gosain
Email: nehagosain@[Link]
Unit 1: Introduction to Projects and Their Appraisal
Project Definition Session 1
Project Identification Session 1
Project Life Cycle Session 1
Project Stakeholder Analysis
Feasibility study
Types of Project Appraisal: Market and Demand Analysis Session 2
• Technical Appraisal
• Financial Appraisal
• Economic Appraisal
• Managerial Appraisal
• Social Appraisal
Session 2
Business Idea Generation – ECI
Entrepreneurial Creative Ideation – The spirit of the entrepreneur
which is responsible for selecting a creative idea that the entrepreneur
believes strongly about. Eg. – touchscreen adoption by Steve Jobs in
2007. FIGURE ON THE NEXT SLIDE
• Causes of idea failure..
1. weakness in product design
2. unrealistic demand estimation
3. Inadequate sales and distribution
Types of appraisal
Market analysis
• Analysis of the market in terms of its attractiveness for a given
business idea
• Is there sufficient demand for the product/service to provide it on a
profitable basis?
• Identification of a market: where to sell?
• Quantification of the market : profitability forecast
Steps of market feasibility analysis
1. Define the objective of market analysis
2. Demand and supply analysis
3. Market gap identification
4. Estimating the market size
5. Situational analysis/ formal market study
6. Industry structure and managing competition
7. Forecasting growth
8. Sales and marketing plan
1. Define the objective of market analysis
• Some objectives can be ….. Eg,
• Marketing strategy
• Distribution channels
• Pricing
2. Demand and supply analysis –
• for price determination (D- Change in income, taste and pref, price of related goods / S - Tech,
resources, weather conditions, taxes) any increase in these factors leads to a rightward shift, any
decrease in these factors lead to a leftward shift
3. Market gap identification
• of existing demand not fulfilled by competitors or the demand and supply gap
4. Estimating the market size
• exact size of the gap
• Measured from supply side Sm=G+(M-X); G= present production; M= imports X= Exports
• Measured from demand side Dm = PQN; N= total no. of customers; Q= quantity purchased; P= average price
• Market Size = Present company sales + sales of competitors
5. Situational analysis/ formal market study
• Informal in nature
• Conduct a SWOT analysis for the project – when there is shortage of time
• Formal market study
• Secondary data sources – govt./semi-govt. publications CSO/RBI, international publications IMF/WTO/WHO, trade associations
FICCI/CII/ASSOCHAM, newspapers, journals, research institutes
• Primary data sources – mail questionnaire, interview, focus group, observation etc
6. Industry structure and managing competition
• Industry can be growing, maturing, declining
• Things to consider before entering the market :
Geography- regional, national, global
Concentration – economies of scale
Fragmentation – customer stickiness
Many small players/ few large ones
Cost of entry-exit
Regulated/ subsidized/overtaxed
Customer needs and expectations. Eg. Apple is able to gauge the market pulse
Marketing Mix – product, place, price, promotion
7. Forecasting growth
• Plotting historical demand/sales/cost against time – trend line provides an idea of the direction in
which market forces are moving
• Steady pattern/ volatile pattern – graph?
• Secular (trend): Long-term increase or decrease in the dependent variable as time passes eg- a glance at the sales of a popular
soft drink is likely to reveal an increasing trend
• Seasonal: peaks and troughs appear at regular intervals during the year; occur at the same time each cycle (e.g.- For a soft drink
manufacturer, while the yearly sales may be on the increase, the sales are likely to be high every summer and low every winter); not
necessarily related to seasons (e.g.- sales on Saturday are higher for restaurant business)
• cyclical: The peaks and troughs occur on an irregular basis; caused by business cycles(prosperity, recession, depression, recovery);
movements are of longer duration than a year (e.g. - The sales of a company may be high because the level of economic activity may
be high)
• Techniques of demand forecasting
1. judgement forecast
2. Survey forecast – consumers, salesforce, executives, experts; for a new product
3. Time series forecast – uses historical data; assumes past will continue
4. Correlation – statistical technique; scatter plots
8. Sales and marketing plan
• Market segmentation – from demand (fulfill needs) and supply (beat competitors) side
Digital Marketing
• Markets are moving online Amazon, Myntra
• So is marketing via emails, social media
• Low cost as compared to traditional adverts
• Wider reach
• Results can be tracked real time
Appendix
A. types of time series
Secular pattern: positive upward;
negative downward
Seasonal pattern
Cyclical pattern
Homework – session 2
• Subscribe to the Financial Express newsletter, Finshots
• Read about any start-up/project/business failure. And reasons
• Find examples of industries where exit cost is high
Q. Apple case – Market Analysis
Study the case and perform market analysis based on
• Target market
• Market share in target market
• SWOT analysis
• Industry structure and competition
• Demand forecast in the target market
