Project Planning Analysis and

Management
Introduction:
Since from the economic liberalization, we have been investing large amounts of
money in projects related to industry, minerals, power, transportation, irrigation, education
etc. with a view to improve the socioeconomic conditions of the people. These projects are
designed with the aim of efficient management earning adequate returns to provide for
future development with their own resources. But experience shows that there are several
shortcomings in the ultimate success of achieving the objectives of proposed projects. It is
observed that a number of projects have taken longer time to complete than was initially
estimated, benefits from them have realised later than expected when the project was
initially approved. Therefore the project management has assumed a significance place in
planning and implementing action programmes to improve the standard of living of
maximum number of peoples.
What is Project Management?

The term Project Management conveys the simple meaning i.e. the management of
project. Therefore it is essential to the meaning of project and management separately.

Project: A project is a specific activity on which money is spent in the expectation of

returns. Hence is has a specific starting point, a specific end point and it is intended to
achieve a specific objective.
e.g. Designing and constructing a building or a house or a mall.
Designing and testing a new prototype of a product.
The launch of new product ( advertising and marketing campaign)
Implementing a new computer system (IT)
Designing and implementing a new organisational structure ( HR)

Characteristics of a Project:
1) Pre determined objective – Every project has a specific objective. The objective may be
economic development, industrial development of the region, development of a
specific industry, etc. once the objective has achieved the project is treated as ceased.
2) Project has a definite life span: A project is executed to be completed within a specific
and predetermined period of time.
3) Single Entity: There will be only one authority which is totally responsible for its
completion or attainment.
4) Advance Planning: A project requires advance planning so that it may be completed
within the resources provided and time schedule. In fact all the activities part of project are
analysed in depth and their implementation is planned in advance.
5) Team Work
6) Package of Risk and Uncertainty

Management:
In simple words Management is the art of getting work done through others. It is
about something intended to be done and mobilizing man, material, money and machines
to get it done in best possible way.

Project Management: From the above definitions we can say that “Project Management is
an organised venture for managing projects.”
“Project Management is planning , organising, directing, and controlling of company
resources for a relatively short term objectives that has been established to complete
specific goals and objectives.”
It involves scientific application of modern tools and techniques in Planning ,
Financing, Implementing, monitoring, controlling and coordinating of various activities to
produce desirable activities.
Project Management - Functions:
Projects are achieved through team of people by calling upon their respective skills and
abilities. That is the reason we need project management supportive or integrative
functions. The project management functions developed and divided into three groups.

A) General Management Functions:

1) Project Integration
2) Strategic Planning
3) Resource Allocation
B) Basic Project Management Functions:
4) Scope Management
5) Quality Management
6) Time Management
7) Cost Management
C) Integrative Project Management:
i) Risk Management
ii) Human Resource Management
iii) Contract / procurement management
iv) Communication Management
Traditional Management Vs. Project Management

Focus: Traditional Management Focuses on continuing operations and a single project life
cycle phase production. Project Management focuses on one time revolutionary
development of the product.

Applicability: Traditional Management applicable where the tasks of each organization

are generally repetitive and where very few new problems can be expected. Project
Management is applicable where the accomplishment of unique tasks by various
organizations during the limited life of the product is required.

Superior-Sub Relationship: In case of TM all important business is conducted through a

pyramiding structure of superiors and subordinates. Whereas in PM Peer to Peer,
Manager to technical experts, associate to associate etc. relationships are used to
conduct much of the salient.

Organizational Objectives: In TM organizational objectives are sought by the parent unit

consisting of an team of sub-organizations working with its environment. The objective is
unilateral. In case of PM the management of project becomes a joint venture of many
relatively independent organizations. Thus, the objective becomes multilateral.
Unity of direction: The general manager acts as the one head for a group of activities
having the same plan. Whereas the project manager manages across functional and
organizational lines to accomplish a common inter-organizational objective.

Parity of authority and responsibility: In TM it is consistent with functional management,

the integrity of superior-subordinate relationship is maintained through functional
authority and advisory staff services. In case of PM there is considerable opportunity
exists for the project manager’s responsibility to exceed his authority.

Time Duration: In case of TM it tends to perpetuate itself to provide continuing facilitative

support whereas in PM the project and hence the organization is finite in duration.
Classification of Projects:
Different authorities have classified project in various ways. Little and Mirrless divide the
projects in to two broad categories, viz. quantifiable projects and non-quantifiable
projects.
The planning commission has accepted the sectorial criterion for classification of projects.
Projects can also be classified on the basis of techno-economic characteristic. All India
Financial Institution has classified on the basis of nature of project and its life cycle.

Quantifiable and Non-quantifiable Projects: Quantifiable projects are those in which a

plausible assessment of benefits can be made. Projects concerned with industrial
development, power generation etc. are examples. Non-quantifiable projects are those
where plausible assessment of benefits is not possible to measure such as education,
health etc.

Sectorial Projects:
a) Agricultural and allied sector.
b) Irrigation and power sector.
c) Industry and Mining Sector.
d) Transport and communication.
e) Social service sector and
f) Miscellaneous sector.
Techno-Economic Projects:

Three main groups of classification can be identified as

i) Factor Intensity-oriented classification: In this case the factor intensity is used as a
basis of classification. Here the projects are classified as Capital Intensive or Labour
Intensive depending upon whether large scale investment is available in plant and
machinery or human resource is involved.

ii) Causation-oriented Classification: In this case the projects are classified as demand
based projects or raw material based projects. The non availability of certain goods ,
services and consequent demand for such goods or services or raw material of certain raw
material, skills or other inputs is the dominant reason for starting the project.

iii) Magnitude orientation classification: Where the size of investment forms the basis of
classification. Project may thus be classified as Large Scale, Medium Scale or Small Scale
projects depending upon the total project investment.
 Generation and Screening of Project Ideas
The search for promising project ideas is the first step towards establishing a
successful venture. The key to success of project lies in getting in to the right business at
right time. The idea generation requires identification of opportunities, sensitivity to
environmental changes, and a realistic assessment of what a firm can do.

Generation of Ideas:

Barring truly new ideas which are based on significant technological

breakthroughs, most of the present ideas involve combining existing field of
technology (benchmarking) or offering variants of existing products (reverse
engineering). The various sources from which the idea can be generated is customers,
competitors, employees etc.

Stimulating the flow of Ideas:

1) SWOT Analysis
2) Clear Articulation of Objectives-
Example: a) Cost Reduction b) Productivity improvement c) Increase in capacity
utilization d) Expansion in to promising fields etc.
Examples:

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3) Fostering Conducive climate to tap the creativity of employees.

Monitoring the Environment:
Basically a promising business environment enables a firm to exploit
opportunities in the environment by drawing on its competitive strengths. Hence, the
firm must systematically monitor the environment and assess its competitive abilities. The
business environment is divided in to six broad categories:

1) Economic Sector:
a) State of Economy
b) Overall Rate of Growth
c) Growth rate of primary, secondary and tertiary sectors
d) Cyclical fluctuations
e) Linkage with world economy
f) Trade surplus / trade deficit.

2) Governmental sector:
i) Industry policy
ii) Government programmes and projects.
iii) Tax Framework
iv) Subsidies, incentives, and concessions
v) Import and export policies
vi) Financing norms
vii) Lending conditions of financial institutions and commercial banks.
3) Technological Sector:
a) Emergence of new technology
b) Access to technical know-how, foreign as well as indigenous
c) Receptiveness on the part of industry.

4) Socio Demographic Factor:

i) Population trends
ii) Age shifts in population
iii) Income distribution
iv) Educational profile
v) Attitude towards consumption and investment

5) Competition Sector:
a) Number of firms in the industry
b) Degree of homogeneity and differentiation among the products
c) Entry Barriers
d) Comparison with substitute products
e) Marketing policies and practices
6) Suppliers sector:
f) Availability and cost of raw material and sub-assemblies
g) Availability of cost of energy
h) Availability of cost of money.
 Corporate Appraisal
A realistic appraisal of corporate strengths and weakness is essential
for identifying investment opportunities which can be profitably exploited.
The broad areas of corporate appraisal and the important aspects to be
considered under them are as follows:
a) Marketing and Distribution
1) Market Image
2) Product Line
3) Market Share
4) Distribution Network
5) Customer Loyalty
6) Marketing and Distribution Ccosts

b) Production and Operations

7) Condition and Capacity of Plant and Machinery
8) Availability of raw material, sub assemblies, and power
9) Degree of vertical integration
10) Location Advantage
c) Research and Development:
1) Research capabilities of the firm
2) Laboratories and testing facilities
3) Coordination between research and operations

d) Finance and accounting:

4) Financial leverage and borrowing capacity
5) Cost of Capital
6) Relation with shareholders and creditors

Tools for Identifying Investment Opportunities

A) Porter Model: Profit Potential of Industries
Michel Porter has argued that the profit potential of an industry
depends on the combined strength of the following five basic competitive
models:
1) Threat of new Entrant
2) Rivalry among existing firms
3) Pressure from substitute products
4) Bargaining power of buyers
5) Bargaining power of sellers
1) Threat of New Entrant : New Entrant add capacity, Inflate costs, push
prices down, and reduce profitability. Hence, if an industry faces the
threat of new entrants, its profit potential would be limited.

2) Rivalry between existing products: Firms in the industry compete on

the basis of price, quality, promotion, service, warranties, and so on. Generally
a firms attempt to improve its competitive position provoke retaliatory action
from others.

3) Pressure from Substitute Products: Performing the same function as

the original product, substitute products may limit the profit potential of the
industry by imposing a ceiling on the prices that can be charged by the firms in
the industry.

4) Bargaining Power of Buyers: Buyers are the competitive force. They

can bargain for price cut, ask for superior quality and better service, and
induce rivalry among competitors hence limiting profitability.
5) Bargaining Power of Suppliers – (When suppliers dominate and are
very few)
 Life Cycle Approach
Many industrial economist believe that most products evolve through a
life cycle which has four stages:
Pioneering Stage
Rapid Growth Stage
Maturity and Stabilization stage
Decline Stage

The Experience Curve

The experience curve shows how the cost per unit behaves with
respect to the accumulated volume of production. Accumulated volume of
production is the total number of units produced cumulatively from the
beginning. ( Fig. Book)
As per the exhibit, the unit cost declines by 20 percent for each doubling
of the accumulated volume. Hence, such a curve is called “80 percent curve”
Factors contribute to decline in unit cost with respect to accumulated
production
1) Learning effect – With more and more production, labor skills improve and
productivity increases, leading to lower costs.
2) Technological Improvements – Increased volume makes it possible to deploy
improved production techniques and process that lower the costs.

3) Economies of Scale – As the capacity increases, the cost per unit decreases.

Scouting for projects Ideas

Good project ideas are the key to success are elusive. So a wide variety of
sources should be tapped to identify them. Hence following are the ideas
regarding the same.
1) Analyze the performance of existing industry -
2) Examine the input and output of various industries – An analysis of the inputs
required various industries may lead to project idea.
3) Review Imports and Exports – An analysis of statistics for a period of five to
seven years is helpful in understanding the trend of imports of various goods
and potential for import substitution.
4) Study plan outlay and Government guidelines
5) Analyze Economic and social Trends
6) Study new technological developments
7) Draws clues from consumption abroad.
 Preliminary Screening of Project Ideas
1) Compatibility with promoters
2) Consistency with government priorities
3) Availability of inputs
4) Adequacy of market
5) Reasonableness of cost
6) Acceptability of risk level

Project Rating Index

Steps – 1) Identify factors relevant for projects
2) Assign weights to these factors
3) Rate the project proposal on various factors, using suitable rating scale
( typically 5 point or 7 point scale)
4) For each factor, multiply factor rating with factor rate to get factor score
5) Add all factor scores to get the overall project rating index.