MODULE-2

PROJECT
MANAGEMENT
Dr. C. Suganthi Evangeline
TITLE
 Project management: Sources of business idea - Project classifications - identifications -

formulation and design - feasibility analysis - Preparation of Project Report and presentation.

Financial analysis - concept and scope - project cost estimate - operating revenue estimate -

Ratio analysis - investment Process - B E analysis - Profit analysis - Social cost benefit

analysis- Project Appraisal methods – Project Report preparation.

DEFINITIONS
 A project is a temporary venture that exists to produce a defined outcome. Each project will

have agreed and unique objectives as well as its own project plan, budget, timescale,
deliverables and tasks. A project may also involve people from different teams within an
organization who are brought together to accomplish a specific goal.

 Project management can be defined as the discipline of applying specific processes and

principles to initiate, plan, execute and manage the way that new initiatives or changes are
implemented within an organization.
SOURCES OF BUSINESS IDEA
 A concept that can be used to make money is called business idea.

 Business ideas mainly focus on a product or service.

 Although business idea has the potential to make money but it has no commercial value.

 The primary task of a dynamic entrepreneur is the generation of an idea that is new and worth for

further use.

 Generation of a new business idea or project idea involve a lot of creativity on the part of the

entrepreneur and it mainly arises from consideration by the entrepreneur with a keen and open mind
of the following factors like

 (i)Opportunity in the market (ii)Real demand for any product or service.

IMPORTANT POINTS FOR SELECTING A
BUSINESS IDEA
(1) Utilization of the Technical and Professional Skills of the Entrepreneur
(2) Use of Local Raw Materials
(3) Products with good market demand.
(4) Solving market problems
SOURCES OF INFORMATION FOR
BUSINESS IDEAS
 The starting point in any product development is the generation of business idea/project idea.

 For this purpose an entrepreneur can refer to potential studies conducted and prepared by

different organizations like the National Council of Applied Economic Research (NCAER),
financial institutions and other promotional organisations such as Confederation of Indian
Industries (CII), etc.
(1)Area Studies: It identifies the development of a potential backward area or a district.

(2)Sub-Sectoral Studies: This study identifies the opportunities in specified sectors like food processing.

(3)Resource-based Studies: This study identifies the opportunities based on utilization of natural or industrial
resources such as forest-based industries, marine-based industries, industries using rubber as the main raw
material, etc.

(4)Import and Export: The study also identifies the possibilities of import and export.

(5)Pattern of Product Consumption: The study by different organizations identified the pattern of product
consumption of the country.

(6)Demand Forecasting: Studies also include forecasting of demands made by Industrial Chambers such as CII,
FICC1, ASSOCHAM, etc.

(7) Surveys: It also includes study relating to existing industrial establishments

 CLASSIFICATION OF

PROJECTS
Projects can be classified based on duration, quantum of investment and the risk
involved
 Classification based on duration: It can be long term, medium term and short term.
Long-term projects have a life of more than 10 years, whereas mid-term projects have
a life of 5 to 10 years. Short-term projects last only for less than 5 years.
 Classification based on investments: It is based on how much initial investment is
needed to start the project. In India, investment outlay of above Rs.20 crore is
considered high investment, whereas an investment outlay between Rs.5 crore to
Rs.20 crore is considered medium sized industry. And investment below Rs.5 crore is
considered low investment industry. Industry with initial outlay below Rs.50 lac is
considered cottage industry.
CLASSIFICATION OF
PROJECTS
 Classification based on ownership: A project can be owned by government,

public sector, corporate, cooperative, partnership firm or proprietorship firm.

 Classification based on risk: This is the most commonly used basis of project

classification. Projects are basically classified as Greenfield project, brown

field project, divestment project and modernization or replacement project.
CLASSIFICATION CRITERIA
• Schedule
• Budget
• Complexity
• Business value
• Service type
• Framework used
 CLASSIFICATION TYPES
Projects

Brownfield Modernization
Greenfield Project Divestment Project
Project Project

Concentric
Expansion Vertical Integration Diversification
Diversification
Project
Downward Conglomerate
Upward Integration Diversification
Integration
GREENFIELD AND
BROWNFIELD PROJECTS
 DIVESTMENT PROJECT
 Obsolescence of product/service: If a current product or service becomes obsolete or
nonprofitable, a firm may decide to divest from the product or Service.
 Increased level of competition: If the competition increases to such an extent that the firm
feels difficult to sustain, the product or service may be decided to be divested.
 Strategic failure: Strategic failure is another big cause for the divestment strategy.
 Increase concentration on fewer product lines: Many times, firms go for very high levels of
diversifications and find it difficult to handle so much varied lines. They may wish to
concentrate on fewer lines to perform better.
 NOKIA - DIVESTMENT
 Nokia has transformed itself many times in its 150-year
history.
 Starting in Finland in 1865 and then moving into other
industries and other countries.
 Settled on phones and networking equipment until the
1980s, when mobile technology took off.
 In 2007, the company was a dominant player in mobile
phones, with a 40% global market share thanks to
superior technology and enormous scale advantages.
 Just five years later, however, Nokia was in a severe
crisis: its market capitalization had dropped 96%. The
company was burning cash, and operating losses were
more than $2 billion in the first six months of 2012
alone.
 MODERNIZATION PROJECT
 In recent times, technology upgradation has been very rapid. Only those organizations can survive which

cope up with the ongoing technological changes.

 Firms need to upgrade their technology. Such projects upgradation of technology may need capital

investments and are called modernization projects.

 While manufacturing a food product, a company is applying steam drying method, and recently a new

technology of vacuum drying has been introduced.

 The new process improves the quality of the product, leading to better customer satisfaction, which is of

utmost importance in the food industry.

 The company has to change over to the new technology of drying. This will attract additional capital

investment and is an example of partial modernization.

 NOKIA – MODERNIZATION
 After the divestment, Nokia was a portfolio of three fairly different businesses: network infrastructure, mapping services, and

technology and patent licensing. The full extent of Nokia’s grand plan for the network infrastructure business was revealed in 2015,
when Nokia announced its intent to acquire Alcatel-Lucent.

 With this industry-shaping $16.6 billion acquisition, Nokia expanded from a mobile-network provider to a full-service network

infrastructure provider (including such services as IP routing and optical networks), and it strengthened its presence in North America.

 From the start of the turnaround through early 2017, the company turned over 99% of the employee base, 80% of the board, and all but

one member of the executive team.

 Chair of the board Risto Siilasmaa, who took over in May 2012, at the height of Nokia’s troubles, described the journey as follows: “It

has been a complete removal of engines, the cabin, and the wings of an airplane and reassembling the airplane to look very different.”
NOKIA - TRANSFORMATION
 Nokia transformed itself from a nearly bankrupt
mobile-device manufacturer to one of the
world’s leading network infrastructure and
technology players.
 Its market capitalization in July 2017 had
increased more than 500% since the low point in
July 2012.
PROJECT LIFE CYCLE
 STAGES
Although there are different project management methodologies and approaches, most projects follow these stages:

• Initiating the project – the project manager defines what the project will achieve and realize, working with the project

sponsor and stakeholders to agree deliverables.

• Planning – the project manager records all the tasks and assigns deadlines for each as well as stating the relationships

and dependencies between each activity.

• Execution – the project manager builds the project team and also collects and allocates the resources and budget

available to specific tasks.

• Monitoring – the project manager oversees the progress of project work and updates the project plans to reflect actual

performance.

• Closing – the project manager ensures the outputs delivered by the project are accepted by the business and closes down

the project team.