Define the term ‘Project’. Discuss the process of generating and screening the project ideas

Ans Projects have a major role to play in the economic development of a country.Since the introduction of planning in our economy, we have been investing large amount of money in projects related to industry, minerals, power, transportation, irrigation, education etc. with a view to improve the socio-economic conditions of the people.These projects are designed with the aim of efficient management, earning adequate return 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 the proposed project. The term project has a wider meaning. A project is accomplished by performing a set of activities. For example, construction of a house is a project. The construction of a house consists of many activities like digging of foundation pits, construction of foundation, construction of walls, construction of roof, fixing of doors and windows, fixing of sanitary fitting, wiring etc. Another aspect of project is the non-routine nature of activities. Each project is unique in the sense that the activities of a project are unique and non routine. A project consumes resources. The resources required for completing a project are men, material, money and time. Thus, we can define a project as an organized programme of pre determined group of activities that are non-routine in nature and that must be completed using the available resources within the given time limit. Let us now consider some definitions of ‘project’. Newman et. al define that “a project typically has a distinct mission that it is designed to achieve and a clear

termination point the achievement of the mission”.

Gillinger defines “project” as the whole complex of activities involved in using resources to gain benefits. Project management institute, USA defined project as “a system involving the co-ordination of a number of separate department entities throughout organization, in a way it must be completed with prescribed schedules and time constraints”.

 Identification of a new project is a complex problem. Project selection process starts with the generation of project ideas. In order to select the most promising project, the entrepreneur needs to generate a few ideas about the possible project one can undertake. The project ideas as a process of identification of a project begins with an analytical survey of the economy (also known as pre-investment surveys). The surveys and studies will give us ideas. The process of project selection consists of following stages :

􀂾 Idea generation

􀂾 Environment appraisal.

􀂾 Corporate appraisal

􀂾 Scouting for project ideas.

􀂾 Preliminary screening.

􀂾 Project rating index

􀂾 Sources of positive Net Present Value.

􀂾 Entrepreneur qualities.

Idea Generation :- Project selection process starts with the generation of a project idea. Ideas are based on technological breakthroughs and most of the project ideas are variants of present products or services. To stimulate the flow of ideas, the following are helpful:

SWOT Analysis :- SWOT is an acronym for strengths, weaknesses, opportunities and

threats. SWOT analysis represents conscious, deliberate and systematic effort by an

organisation to identify opportunities that can be profitably exploited by it. Periodic

SWOT analysis facilitates the generation of ideas.

Operational objectives of a firm may be one or more of the following.

• Cost reduction.

• Productivity improvement.

• Increase in capacity utilisation.

• Improvement in contribution margin.

Fostering a conducive climate :- To tap the creativity of people and to harness their entrepreneurial skills, a conducive organisation climate has to be fostered. Two conspicuous examples of organisation which have been exceptionally successful in tapping the creativity of employees are the Bell Telephone Laboratory and the 3M Corporation. While the former has succeeded in harnessing creativity by providing an

unconstrained environment, the latter has effectively nurtured the entrepreneurial skills

of its employees as sources of idea generation. The project ideas can be generated from various internal and external sources. These are :-

• Knowledge of market, products, and services.

• Knowledge of potential customer choice.

• Emerging trends in demand for particular product.

• Scope for producing substitute product.

• Market survey & research.

• Going through Professional magazines.

• Making visits to trade and exhibitions.

• Government guidelines & policy.

• Ideas given by the experienced person.

• Ideas by own experience.

• SWOT analysis.

Environment appraisal :- An entrepreneur or a firm systematically appraise the environment and assess its competitive abilities. For the purposes of monitoring, the

business environment may be divided into six broad sectors .

The key elements of the environment are as follow :

Economic Sector

• State of the economy

• Overall rate of growth

• Cyclical fluctuations

• Inflation rate

• Growth rate of primary, secondary and territory sector

• Growth rate of world economy

• Trade surplus and deficits

• Balance of Payment

Government Sector

• Industrial policy

• Government programmes and projects

• Tax structure

• EXIM policy

• Financing norms

• Subsidies incentives and concessions

• Monetary policy

Technological Sector

• Emergence of new technologies

• Access to technical know-how, foreign as well as indigenous

Socio-demographic Sector

• Population trends

• Age shifts in population

• Income distribution

• Educational profile

• Employment of women

• Attitudes toward consumption and investment

Competition Sector

• Number of firms in the industry and the market share of the top few

• Degree of homogeneity and differentiation among the products

• Entry barrier

• Comparison with substitutes in term of quality and price

• Marketing polices and practices

Supplier Sector

• Availability and cost of raw material

• Availability and cost of energy

• Availability and cost of capital

 Business Environment

Corporate Appraisal :- A realistic appraisal of corporate strengths and weaknesses 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 follow :

Marketing and Distribution

• Market Image

• Product Line

• Product Mix

• Distribution Channels

• Customer loyalty

• Marketing & distribution costs

Production and Operations

• Condition and capacity of plant and machinery

• Availability of raw material and power

• Degree of vertical integration

• Locational advantage

• Cost structure

Research and Development

• Research capabilities of the firm

• Track record of new product developments

• Laboratories and testing facilities

• Coordination between research and operations

Corporate Resources and Personnel

• Corporate image

• Dynamism of top management

• Relation with government and regulatory agencies

• State of industry relations

Finance and Accounting

• Financial leverage and borrowing capacity

• Cost of capital

• Tax structure

• Relation with share holders and creditors

• Accounting & control system

• Cash flow and liquidity.