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TECHNOLOGICAL INNOVATION
MANAGEMENT AND
ENTREPRENEURSHIP 18ES51
Modules – 5 Notes

PREPARED BY
S MANJUNATHA CHARI
Assistant Professor, Dept. of ECE, Sai Vidya Institute of Technology.

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TECHNOLOGICAL INNOVATION MANAGEMENT AND ENTREPRENEURSHIP 18ES51

Module – 5
Unit-1 Business model
Business model- Meaning, Business Plan – Meaning, Scope and Need; Financial,
Marketing, Human Resource and Production/Service Plan; Business plan Formats;
Project report preparation and presentation; Why some Business Plan fails?
Business Model – Meaning
 A business model is a company's core strategy for profitably
doing business.
 Models generally include information like products or services
the business plans to sell, target markets, and any anticipated
expenses.
 The two levels of a business model are pricing and costs.
 When evaluating a business model as an investor, ask whether the
idea makes sense and whether the numbers add up.
 For instance, direct sales, franchising, advertising-based, and
brick-and-mortar stores are all examples of traditional business
models.
Business plans
 A business plan is a roadmap and blueprint of the project.
 A business plan is a written document that describes in detail how
a business is going to achieve its goals.
 The business plan describes the unique qualifications that the
management team brings to the effort, explains the resources
required for success, and provides a forecast of results over a
reasonable time horizon.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 1

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Business Plan – Scope and needs

The reasons for preparing a business plan are given below:
 Entrepreneurs reap benefits from the planning activity itself.
 A business plan is used to get finance from banks or to get equity
funding from angel investors or venture capitalists.
 It can also be used to attract business partners and key employees
or to make business alliances.
 If the business plan is prepared within a large organization, then
it enables the board of directors to make capital investment
decisions.
 The act of writing the plan will force the entrepreneur and his
team to think through all the key elements of the business.
 The plan provides a basis for measuring actual performance
against expected performance.
 The plan’s financial projections can be used as a budget. Actual
results that fall short of planned results will prompt the
entrepreneur to investigate and take corrective action.
 The plan acts as a vehicle for communicating to others what the
business is trying to accomplish.
Financial Plan
 The financial plan is a critical section of the business plan as it
translates all the other parts of the business into anticipated
financial results.
 The financial plan section is the section that determines whether
or not your business idea is viable,
 key component in determining whether or not your business plan
is going to be able to attract any investment in your business idea.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 2

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 The financial plan section of the business plan consists of an

analysis of financial statements such as the income statement, the
cash flow projection, projected balance sheet, break-even charts,
cost of the project, sources, and uses of funds.
Marketing Plan
 The term “market” is often used to describe the various elements
of the total business environment.
 The marketing plan is written after conducting a market analysis.
 It provides information on assessing the market’s size and
growth, defining the target market, and articulating the value
proposition.
 The marketing is the activity most associated with success or
failure.
 A company that is not able to connect with its customers will fail
even if it offers attractive products or services.
 A sound and realistic marketing plan is the best guarantee that a
solid customer connection will be made.
 The plan should be clear about all aspects of marketing, including
price, position, promotion, place, and customer value proposition.
 The marketing plan provides strategies to sell the company’s
product or service.
 The marketing plan should be a dynamic plan used to monitor the
progress of the business.
Human resource plan
 Human resource planning (HRP) is the continuous process of
systematic planning ahead to achieve optimum use of an
organization's most valuable asset—quality employees.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 3

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 Human resource planning ensures the best fit between employees

and jobs while avoiding manpower shortages or surpluses.
 There are four key steps to the HRP process. They include
analyzing present labor supply, forecasting labor demand,
balancing projected labor demand with supply, and supporting
organizational goals.
 Having a good HRP strategy in place can mean productivity and
profitability for a company.
 Challenges of Human Resource Planning
 Find and attract skilled employees.
 Select, train, and reward the best candidates.
 Cope with absences and deal with conflicts.
 Promote employees or let some of them go.
Production/Service Plan
 This is the part of your business plan where you will describe the
specific products or services you’re going to offer.
 It fully explains the concept for your business, along with all
aspects of purchasing, manufacturing, packaging, and
distribution.
 Your product and services section should include:
 A description of the products or services you are offering or
plan to offer
 How your products and services will be priced
 A comparison of the products or services your competitors
offer in relation to yours

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 4

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 Sales literature you plan to use, including information about

your marketing materials and the role your website will play
in your sales efforts
 A paragraph or so on how orders from your customers will
be processed or fulfilled
 Any needs you have in order to create or deliver your
products, such as up-to-date computer equipment
 Any intellectual property, such as trademarks, or legal
issues you need to address Future products or services you
plan to offer.
Why do some business plans fail?
 Failure to address the customer’s problems and needs:
 The business plan should address the customer’s
problems/needs/wants.
 The entrepreneur should document customer pain points
before preparing the plan.
 Customer needs can be identified from direct experience,
letters from customers, or from market research.
 Unrealistic goals set by the promoters:
 Setting goals requires the entrepreneur to be well informed
about the type of business and the business environment.
 The goals set by the entrepreneur are based on data and the
business plan is no good if it does not include a lot of data
 The goals set by the entrepreneur should be Specific,
Measurable, Achievable, Realistic, and Time-bound
(SMART).

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 5

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 The financial and market projections should be realistic,

logical, and reasonable.
 Lack of commitment to the business by the promoters:
 The promoters must make a total commitment to the
business in order to be able to meet the demands of a new
venture.
 Investors will not be interested in a venture that does not
have committed promoters.
 Investors also expect the promoter to make a significant
commitment to the business.
 It is also required to have complete focus on the business
especially if it is a new venture and promoters should not be
over enthusiastic in trying to do all things at once.
 Lack of experience of the promoters:
 A lack of experience will result in failure unless the
entrepreneur can either attain the necessary knowledge or
team up with others who already have experience in this
area.
 Lack of professionalism:
 The business plan should be brief, clear, and nicely
organized. It should highlight those points that can attract
investors. The assumptions made in preparing the business
plan should be realistic.
Project selection
 Project selection and preliminary activities involve the following:
 Product or service selection.
 Location selection.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 6

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 Project feasibility study.

 Business plan preparation.
 Preparation of a project profile.
Prepare Project Report
 The project report is an important document and should be
prepared carefully.
 Banks and other financial institutions decide whether a loan
should be granted, and if granted, the amount that should be
sanctioned on the basis of this report.

Fig: Formalities for Setting Up a Business Enterprise

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 7

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 The project report is generally prepared to cover the following

broad segments:
 General information: The following information should be
provided.
 Name of the unit and address.
 Name of product/service.
 Constitution of the unit.
 Name of the promoter.
 Educational qualification.
 Experience.
 Details of the project: The following information should be
provided.
 Product/service details.
 Details of machinery.
 Details of raw material.
 Utility.
 Manpower requirement.
 SWOT analysis.
 Market survey: The market survey report should be
enclosed.
 Cost of project: The following details should be provided.
 Fixed cost: Land/building, machinery, office equipment,
miscellaneous items.
 Working capital: Stock in raw material, semi-finished
goods, finished goods, bills receivable, working expenses.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 8

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 Total investment: Fixed capital, working capital,

preliminary and preoperative expenses, interest during
implementation, contingency.
 Means of finance: Term loan, working capital loan, own
investment (with incentives).
 Profitability: Revenue, production cost, depreciation,
administrative expenses, interest, maintenance, sales and
advertisement, profit, annual income before tax, taxes, net
profit.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 9

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Module – 5
Unit – 2 Financing and How to start a Business?
Financial opportunity identification; Banking sources; Nonbanking
Institutions and Agencies; Venture Capital – Meaning and Role in
Entrepreneurship; Government Schemes for funding business; Pre launch,
Launch and Post launch requirements; Procedure for getting License and
Registration; Challenges and Difficulties in Starting an Enterprise

Project Financing
 Funds can be raised from a variety of sources for financing a
project.
 The two broad sources of finance available to a firm are equity
financing and debt financing.
 The key factors in determining the debt–equity ratio for a project
are the cost, nature of assets, business risk, norms of lenders,
control considerations, and market conditions.
 Equity and debt come in a variety of forms and are raised in
different ways
 Equity Financing
 This is a shareholder’s fund and it may be in the form of
equity capital, preference, internal accrual venture capital,
and angel investing.
 Equity financing means exchanging partial ownership in a
firm for funding.
 Equity shareholders enjoy the rewards as well as bear the
risk of ownership.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 10

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 Their liability, unlike the liability of the owner in a

proprietary firm and the partners in a partnership concern,
is limited to their capital contributions.
 The rights of equity shareholders consist of the right to
residual income; the right to control; the pre-emptive right
to purchase additional equity shares issued by the firm; and
the residual claim over assets in the event of liquidation.
 Debt financing
 When a company borrows money to be paid back at a future
date with interest it is known as debt financing.
 It could be in the form of a secured as well as an unsecured
loan.
 A firm takes up a loan to either finance a working capital or
an acquisition.
 Debt means the amount of money which needs to be repaid
back and financing means providing funds to be used in
business activities.
 An important feature in debt financing is the fact that you
are not losing ownership in the company.
 Debt financing is a time-bound activity where the borrower
needs to repay the loan along with interest at the end of the
agreed period.
 Preference Capital
 This represents a hybrid form of financing.
 It has some characteristics of equity and some attributes
of debentures.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 11

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 It is a special class of a company’s shares, on which

dividends are paid before the dividends on ordinary shares,
and whose holders are repaid before others if the company
goes bankrupt.
Venture Capital (VC)
 It is finance invested by professionals, called venture capitalists,
in startups with growth potential.
 A venture capitalist provides guidance to the company and is a
business partner sharing both risk and rewards.
 Venture capital is an important source of equity for start-up
companies.
 Venture capital injects equity finance with a solid capital base for
future growth.
 Venture capital firms provide equity for business and expect 20
to 40 per cent equity stake in a company and high returns on their
investments within three to five years.
 Venture capital firms in India invest the shareholders’ money in
start-ups.
 The Indian Venture Capital and Private Equity Association
(IVCA) is the national-level organization for venture capital firms
in India.
 The organization promotes and encourages the venture capital
industry in the country and encourages members to invest in high-
growth companies.
 A few well-known venture capital firms in India are Sequoia
Capital India, Ventureast, Intel Capital, Helion Venture Partners,
DFL India, Nexus India Capital, IndoUS Ventures, DG India

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 12

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Ventures, Kleiner Perkins, Norwest Venture Partners, Canaan

Partners, and Inventus Capital Partners.

Stages of Venture Capital Financing

 Five-step process as follows:
 Deal organization.
 Screening.
 Evaluation or due diligence.
 Deal structuring.
 Post-investment activity and exit.
 The requirements of funds vary with the life cycle stage of the
enterprise.
 Depending upon the stage they finance, venture capitalists are
called angel investors, venture capitalists, or private equity
suppliers/investors.
 The venture capital investment process is different from normal
project financing.
 Tyebjee and Bruno identified six stages of venture capital
financing
 The seed money stage: A small sum of money required to
prove a concept or develop a product.
 Start-up: Financing of firms that are less than one-year-
old. The funds are primarily meant for marketing and
product development.
 First-round financing: Additional money needed to begin
sales and manufacturing after the start-up funds are
exhausted.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 13

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 Second-round financing: Funds required for working

capital for a firm that is selling its product but still losing
money.
 Third-round financing: Financing of a firm that has
broken even and is planning an expansion. This is also
called mezzanine financing.
 Fourth-round financing: Financing of a firm that is
expected to go public within six months. This is also called
bridge financing.
Institutions Supporting Business Enterprises
 Many enterprises start small and many entrepreneurs in MSME
need an institutional support system for guidance, support, and
mentoring at different stages of business development.
 Most of the enterprises need support at the pre-start up, start-up,
development, and growth phase.
 An entrepreneur should be aware of governmental and non-
governmental support systems available for his enterprise.
 The various institutions supporting entrepreneurial activities in
India:
 Central-level institutions
 State-level institutions
 Other institutions
 Central-level institutions:
 Central-level institutions for supporting entrepreneurial activities
are set up by the Central Government.
 National Board for Micro, Small, and Medium Enterprises
(NBMSME);

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 14

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 Khadi and Village Industries Commission (KVIC);

 Coir Board;
 Micro Small Medium Enterprises Development
Organisation (MSME–DO);
 National Small Industries Corporation (NSIC);
 National Science and Technology Entrepreneurship
Development Board (NSTEDB);
 National Productivity Council (NPC);
 Entrepreneurship Development Institutes (EDI);
 National Research Development Corporation of India
(NRDCI); and
 National Entrepreneurship Development Institutes.
 State-level institutions:
 The state-level institutions for supporting entrepreneurial
activities are set up by the various state governments in
India.
 These are: State Directorate of Industries;
 District Industries Centers (DIC);
 State Financial Corporations (SFC);
 State Industrial Development Corporation (SIDC);
 State Industrial Area Development Board (SIADB)
 Other institutions:
 Apart from central and state-level institutions, there are
various other institutions supporting entrepreneurial
activities in India.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 15

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 National Bank for Agriculture and Rural Development

(NABARD);
 Housing and Urban Development Corporation (HUDCO);
 Technical Consultancy Organizations (TCOs);
 Small Industries Development Bank of India (SIDBI),
 Export Promotion Council (EPC);
 Industry Associations;
 Non-Governmental Organizations (NGOs);
 Business Incubators.

Fig: Institutional Support for Enterprises

Challenges and difficulties MSME sector

 The main problems faced by the MSME sector are
 Lack of availability of adequate and timely credit:
 Despite their dominant number, high growth potential, and
importance in job creation, MSME face difficulty in

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 16

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obtaining adequate and timely equity capital on competitive

terms.
 The major reason for this problem is the high risk perception
among the banks with regard to this sector and the high
transaction costs for loan appraisal.
 The level of non-performing assets is also very high in this
segment.
 Banks are reluctant to provide credit to MSME.
 As MSME find it difficult to furnish collaterals, they have
to pay higher interest rates.
 These companies face obstacles in raising funds for their
expansion and meeting their working capital needs.

 Inadequate infrastructural facilities:

 MSME may be located in industrial estates, urban areas, or
in an unorganized way in rural areas.
 The infrastructural facilities, including power, water, and
roads, in such areas are often poor and unreliable, which can
lead to problems like difficulties in reaching the target
markets in an efficient and profitable manner.
 Poor physical infrastructure hurts the productivity and
competitiveness of Indian MSME imports.
 Technological backwardness and lack of product innovation:
 To be competitive in the present global environment, it is
critical to use the latest technology and invest in research
and development (R&D) for product innovation.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 17

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 The knowledge gap of MSME will increase with the digital

divide and rapid changes in technology.
 Due to their small scale of operation, MSME have limited
access to R&D and cannot invest much in acquiring modern
technologies.
 This is a major hindrance in scaling up their operations.
 Lack of access to market:
 MSME often do not have adequate resources to link to
diverse markets beyond their immediate vicinity.
 The limited access to larger markets in terms of market
linkages, transport, and information exchange seriously
undermines the demand for their products.
 This is a limitation and a constraint to profitability and
growth.
 Marketing efforts are required to increase demand for the
products/services of MSME.
 In the absence of large marketing budgets, most MSME
cannot opt for television and media advertisements.
 Difficulty in finding and retaining human resources:
 Although India has the advantage of a large pool of human
resources.
 MSME continue to face a deficit in manpower with the
right skill set for specific areas like manufacturing, service,
and marketing.
 The human resource problem is further exacerbated by the
low retention rate as MSME.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 18

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 Generally unable to match large enterprises in terms of

work environment and remuneration.
 MSME usually do not attract many experienced and
talented workers due to their various limitations.
 They are left to hire young professionals, with little or no
work experience, and need to provide on-the-job training.
 These employees take a fair amount of time to become
productive.
 Once trained, many of them leave for better opportunities in
bigger enterprises.
 Therefore, MSME typically become a training ground and
stop-gap arrangement for employees.
 Impact of WTO compliance and regulatory systems:
 MSME are adversely impacted by complicated mechanisms
of adapting to technical standards, approvals, and permits
which imply additional costs.
 MSME are vulnerable to the impact of WTO regulations as
they are now in direct competition with companies in
Southeast Asian countries and China, which can
manufacture goods at a lower cost.
 MSME will face greater competition from imports.
 Large companies in India have the option of procuring from
overseas suppliers and this may put Indian MSME in a
disadvantageous position.
 Tighter patent laws also put MSME at a disadvantage.
 Indian MSME are unable to implement anti-dumping
measures and counter other unfair practices such as moves
by competitors to patent traditional Indian products.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 19

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 It has been observed that MSME in China, Malaysia,

Thailand, Vietnam, and Korea dump several products in
Indian markets.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 20

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Module – 5
Unit – 3 Project Design and Network Analysis

Introduction, Importance of Network Analysis, Origin of PERT and CPM,

Network, Network Techniques, Need for Network Techniques, Steps in PERT,
CPM, Advantages, Limitations and Differences
Introduction:
 A quality management tool that charts the flow of activity between
separate tasks. It graphically displays interdependent relationships
between groups, steps, and tasks as they impact a project.
 Bubbles, boxes and arrows are used to depict these activities and
the links between them. This is also known as flowchart, project
work or process map.

Importance of Network analysis

Some of the important points are,
 The whole project should be considered with reference to the
sequence of activities and events.
 The whole project may be put on one network while different
segments of the project may be detailed out in separate network for
final integration in the overall network.
 This would require events to be thought in different streams of
operations and their relationship.
 The time estimates may be made taking into view two discrete
aspects: one project in which previous experience does not exist at all
and other time estimates would have to be based on previous
experience of similar types of operations in different other projects.
 Cost estimates would depend on the project time estimates and the
changes in prices of different factors of production.
 The physical progress of projects, individuality and simultaneity of
events, jobs and application of correctives in proper time.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 21

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Origin of PERT and CPM

 PERT: Programme Evaluation and Review Technique.
 CPM: Critical Path Method.
 PERT and CPM are network techniques which are logical extension
of old grant bar chart.
 CPM was developed by Du Pont and the emphasis was on the trade-
off between the cost of project and its overall completion time(e,g,
for certain activities it may be possible to decrease their completion
times by spending more money- how does this affect the overall
completion time of the project.)
 PERT was developed by US Navy for the planning and control of the
Polaris missile Programme and the emphasis was on completing the
program in shortest possible time. In addition, PERT had the ability
to cope with uncertain activity completion times.
 CPM is essentially on the activities themselves, the costs associated
with completion of each activity and optimum plan for the project as
a whole.

Network
 A network comprises a set of exponents connected with each other
in a sequential relationship with each step till the completion of
project.
 Network analysis is a system which plans both large and small
projects by analyzing the project activities. Project are broken down
into simple activities, which are then arranged in a logical sequence.
 The network diagram consists of
 Project design
 Analysis of project activities
 Scheduling project activities
 Time costs worked out
 Co-coordinating the activities

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 22

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Network techniques
 In a project, there may be two categories of jobs or activities- which
can be taken up concurrently and which can be taken up only after
completing some other activities- either completely or partially.
 In a bar chart, some of the bars may run parallel or overlap each other
time-wise while some may run serially.
 The scheduling of construction and identification of potential causes
of delay from an important part of a project appraisal.
 Timing and sequencing of various activities involved in project
implementation are reviewed, keeping in view the conditions
regarding the availability of construction materials, labour,
procurement and delivery periods of plant and machinery, erection
and commission, start-up and trial-runs, training of staff etc.
 The implementation schedule also taken into account seasonal and
other variations in working conditions which might interfere with the
implementation of the project. Several techniques of project
scheduling and control such as Bar charts, Programme Evaluation
and Review Techniques(PERT), Critical Path Method(CPM) etc. are
used.

Need for Network Techniques

 Network analysis helps in designing, planning, coordinating,
controlling and decision-making in order to accomplish the project
economically in the minimum available time with the limited
available resources. The network techniques were developed from
Milestone Chart and Bar chart. They had following disadvantages:
 A bar chart becomes too cumbersome while dealing with big and
complex projects when the activities are to be considered in detail
and their interaction.
 Which a bar chart does not point out priority as regards resources
(i.e, men, money, material and machinery).
 The effects of changes in schedule cannot be evaluated with help
of a bar chart.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 23

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 A bar neither satisfactorily tells the time at which the activities begin
and end nor does it indicate tolerances in activity timings.
 PERT is one of the management techniques which is considerably
more useful to some managers to others.
 PERT is concerned with two concepts:
 Events: An event is a specific accomplishment that occurs at a
recognizable point of time and not call for either the need of time
or resources.
 Activities: An activity is the work required to complete a specific
event.

Steps in PERT
 Establishment of objectives: there will be major objectives to be
accomplished, linked by supporting objectives. When these are
identified, they must be linked together so as to enable to planner to
see the project in its true perspective and also see the relationships
between and among all the steps.
 Is to schedule work breakdown in great detail.
 Both technical and managerial persons should begin to work together.
 Each person who participates in the application of PERT to the control
of the project should have some basic familiarity with the general
nature of work and with the ultimate objective desired.
Steps in PERT analysis:
1. Development of project network
2. Time estimation
3. Determination of critical path, event slacks and activity floats.
4. Development of project schedule.
5. Calculation of viability duration and the probability of completion in
a given time.
In order to arrive at the most reliable estimate of time, three estimate
are usually employed:
 The optimistic time: it is the shortest time possible if everything
goes perfectly well with no complications, the chance of this
optimum actually occurring might be one in a hundred.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 24

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TECHNOLOGICAL INNOVATION MANAGEMENT AND ENTREPRENEURSHIP 18ES51

 The pessimistic time: it is the longest time conceivable, it includes

time for unusual delays and thus the chance of its happening might
be only one in hundred.
 The most likely time: it would be the best estimate of what
normally would occur.
Advantages of PERT
a) This technique gives the management the ability to plan the best
possible use of resources to achieve a given goal within the overall
time and cost estimations.
b) It helps management to handle the uncertainties involved in
programmes where no standard time data of the Taylor-Gantt variety
are available.
c) It presses for the right action, at the right point and at that right time
in the organization.
Limitations of PERT
a) The basic difficulty comes in the way of time estimates for the
completion of activities because are of non-repetitive type.
b) This technique does not consider resources required at various stages
of the project.
c) Use of this technique for active control of a project requires frequent
updating and revising the PERT calculations and this proves quite a
costly affair.
CPM
CPM was developed in 1956 at E.I Dupont Nemours & Co, USA, in
connection with the periodic overhauling and maintenance of a
chemical plant.
CPM has two time-cost estimates for each activity but does not
incorporate any statically analysis in determining such time estimates.
CPM operates on the assumptions that there is a precise known time
that each activity in the project will take.
Advantages of CPM
1) It helps in ascertaining the time schedule
2) With its aid, control by the management is made easy.
3) It makes better and detailed planning possible.

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 25

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4) It provides a standard method for communicating project plans,

schedules, time and cost performance.
5) It identifies the most critical elements and thus more attention can be
paid to these activities.
Limitations of CPM
1) CPM fails to incorporate statistical analysis in determining the time
estimates.
2) It operates on the assumption that there is a precise known time that
each activity in the project will take but this may not be true in actual
life.
3) It is difficult to use CPM as a controlling device for the simple reason
that one must repeat the entire evaluation of the project each time
when changes are introduced into the network.

Differences between PERT and CPM

[Link]. PERT CPM

1 It is event oriented approach It is an activity oriented approach

2 It allows uncertainty It does not allow uncertainty

3 It is probabilistic model It is deterministic model

4 It is time based It is cost based

5 It averages time It does not have time

6 It has three estimates of time It has single estimate of time

7 It is suitable when high It is suitable where reasonable

precision is required precision required

S Manjunatha chari, Assistant Professor, Dept. of ECE, SVIT 26

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