MAR-205 PROJECT

MANAGEMENT AND PLANNING

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INTRODUCTION AND RESOURCE ALLOCATION FRAMEWORK

- Introduction to Project; nature of planning projects‐Project Life‐ cycle, Capital

expenditure, Phases of capital budgeting, Levels of decision making, Facets of project
Analysis, Feasibility Study, Objective of capital budgeting. Key issues of Resource Allocation,
Elementary investment strategies, Strategic position and action Evaluation (SPACE),
Interface between strategic planning and capital budgeting.

PROJECT GENERATION AND ANALYSIS –

Generation of ideas, Monitoring the environment, Corporate appraisal, Project Rating Index, Finance,
cost recovery, standards, operational maintenance, institutional arrangement, design viability, density
and cost, public participation , Situational Analysis, Collection of secondary information, Conduct of
market survey, Characterization of market survey, Demand forecasting, Market planning etc.
INTRODUCTION AND RESOURCE ALLOCATION FRAMEWORK

Introduction to Project;

A project is a major one-time undertaking dedicated to some well-defined objectives and involving considerable personnel
and equipment. It is usually initiated either by some need of the organization or by a customer request. The time and the
resource estimations provide the duration and resource requirements for each activity as well as temporal constraints
between activities that are connected by precedence relationships.

nature of planning projects:

The project planning helps in streamline the process of the Project. Planning helps in the smooth running of the Project
as every aspect of the project is taken into consideration, and the required solution is also provided in the project
planning phase. The actual work on the project happens in this phase

PROJECT LIFE‐ CYCLE, CONSIDEIDERING AN EXAMPLE OF CONSTRUCTION INDUSTRY.

THE PROJECT LIFE CYCLE IS AS FOLLOWS
1. Project Initiation And Conception
Like with all things, the first step to the construction life cycle is merely to begin. This may sound simple, but it is usually far from it. It is
easy to come into a project with an idea. Translating that idea into actionable items requires a dedicated project team – the project will
require input from each side.
Time is also of the essence. If there is a project idea in mind, it is best to immediately uncover the details rather than later set the stage for
a successful project. If you are not sure when and where to begin, a feasibility test allows you to examine the project’s scope and goals
and determine how realistic the project itself is.
2. Project Planning And Definition

Once the team or the feasibility test determines whether a project is worth undertaking, then the second step is the project's actual
planning. In this phase, the project should be developed alongside its objectives and goals.
The planning stage may be the most critical, as it sets the foundation of the entire project. At this point in the project, your team will
be tasked to define the project itself, identify timelines and uncover the project's scope from beginning to end.
The planning stage is where the budget is estimated, outlined and approved. A project team must dedicate the right time to the
budget plan. It is often the most time-consuming phase in the entire project but ultimately establishes whether a project will succeed
or fail

3. Project Execution And Launch

Now is time for the most exciting phase of the construction life cycle – the project implementation. At this stage, all of the project
planning and scoping is put to the test. Organizations and project teams need to ensure that their teams are on the same page, as
any slight mistake in this phase can be damaging down the road.
Progress reports along the way will allow organizations to keep tabs on each part of the project, allowing project leads to make
necessary adjustments along the way.

4. Project Performance

Once the project has begun in earnest comes the project performance and monitoring stage. In this stage, the project's performance
is measured to ensure that it is running on schedule and within budget.
This phase requires daily supervision and a dedicated team of project and construction managers to track progress. Their job is to
ensure that initial plans are up to snuff and to make any ongoing adjustments as needed. Information is vital in this stage, and it is up
to the project leaders to maintain project alignment.

5. Project Close

To wrap up the construction project life cycle is the closing or completion phase.
This is the phase the project has led to, where project leaders must be ready to offer deliverables to their clients or present a
completed construction project. Project leaders take on even greater responsibility during this stage, as they must finalize each
aspect of the construction process, from scheduling to budget to final touches on the building or construction site itself.
Once the final inspections have been made, and the project leader has approved the close, the project must be approved by the client
or site owner. Once the client accepts, the project concludes.

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CAPITAL EXPENDITURES

Theses are long-term investments, meaning the assets purchased have a useful life of one
year or more. Types of capital expenditures can include purchases of property,
equipment, land, computers, furniture, and software.

Capital budgeting has the following five broad phases:

•Market analysis,
•Technical analysis,
•Financial analysis,
•Economic analysis,
•Ecological analysis.

1.Market Analysis:
A market Analysis studied the attractiveness and the dynamics of a special market within a
special industry. It is part of the industry analysis and thus in turn of the global environmental
analysis. It is concerned with two questions –
•What would be the aggregate demand of the proposed product/service in the future?
•What would be the market share of the project under appraisal?
To answer the above questions, the market analyst requires a wide variety of information
and appropriate method
.
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2.Technical analysis:
The technical analysis of a project idea includes designing the various processes, installing
equipment, specifying material, and prototype testing, the project manager has to be careful in
finalizing the technical aspects of the project as the decision is irreversible and the investments
involved may be high. The Project manager has to select the technology required in consultation
with technical experts and consultants.
3.Financial analysis:
Financial analysis is the process of evaluating businesses, Projects, budgets and other finance-
related entities to determine their suitability for investment. Typically, financial analysis is used to
analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in. When
looking at a specific company, the financial analyst will often focus on the income statement,
balance sheet, and cash flow statement. In addition, one key area of financial analysis involves
extrapolating the company’s past performance into an estimate of the company’s future
performance.

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4.Economic analysis:
Economic analysis is a process for evaluating the merits of a particular project or course of
action in a systematic and rigorous way. Social cost-benefit analysis refers to cases where the
project has a broad impact on society and, as such, is usually carried out by the government.
While the cost and benefits may relate to goods and services that have a simple and
transparent measure in a convenient unit (e.g. their price in money), this is frequently not so,
especially in the social case. It should, therefore, be emphasized that the costs and benefits
considered by (social) ‘cost-benefit’ analysis are not limited to easily quantifiable changes in
material goods. but should be construed in their widest sense, measuring changes in individual
‘utility’ and total ‘social welfare’ (though economists frequently express those measures in
money-metric terms). In its essence cost-beneath analysis is extremely, indeed trivially, simple;
evaluate costs and benefits B for the project under consideration and proceed with it if, and only
if, benefits match or exceed the costs.
5.Ecological analysis:
Environmental concern has assumed a great deal of significance and rightly so. An ecological
analysis should be done particularly for major projects which have the significant ecological
implication.

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 The management decisions are classified into three levels or categories:

1. Strategic Production Planning:

Strategic planning involves deciding and developing strategic plans to achieve strategic objectives
(or goals). Top management typically develops the strategic plans. These decisions or plans are
normally long term decisions, which are having implications for the next five years and above. Lot
of risk and uncertainty is involved in long term or strategic level planning. Strategic planning needs
a through scanning and analysis of external environment to seek information.

The strategic operations planning decisions include:

1. Technology decisions: Choice of appropriate technology, equipment’s, process choice and degree
of automation.
2. Capacity decisions: Amount, timing and type.

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Facilities decisions: Size, location and specialisations

4. Vertical integration:

Direction, extent and balance

The strategic level production planning is concerned with decisions, which are having implications
for the next five to ten years. These decisions are critical to the success and better performance of the
organization. These decisions influence the competitive positions of the organisation and help to
position the operations strategy of the organisation.

3. Operational Level Production Planning:

The operational planning decisions are taken at the bottom level of management and these are
routine decisions. These plans are prepared to establish actions necessary for achieving
operational goals. These cover shorter time frame i.e. within a year. No or very less uncertainty in
these plans and information needed is internal. They are stated in definite quantitative terms
and can be spelt out in terms of time and targets. 
The lower level management develops operational plans and the planning horizon is (maximum)
one year. These plans establish actions that are necessary to achieve operational goals. These
plans are deterministic in the sense that uncertainty is very low. The plans are expressed in terms
of actions, which can be quantified.

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 FACETS OF PROJECT ANALYSIS

Market analysis

• Market analysis is associated primarily with two questions:

• What would be the collective demand of the planned product / service in future?
• What would be the market share of the project under evaluation?
•To answer the above questions, the market analyst needs a broad variety of information and
suitable forecasting methods. The kinds of data required are:
• Consumption trends in the past and the present expenditure level
• Past and present supply situation
• Production potential and constraints
• Imports and exports
• Formation of competition
• Cost structure
• Flexibility of demand
• Consumer manners and conduct, intentions, motivations, attitudes, preference, and needs.
• Allocation channels and marketing guidelines in use
• Administrative, technical, and legal constrictions.

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•Technical analysis
• Examination of the technical and engineering characteristics of a project needs to be done repeatedly when a project is made. Technical analysis seek out
to decide whether the fundamentals for the successful commissioning of the project has been considered and reasonably good options have been made with
respect to location, size, process etc. The important questions raised in technical analysis are the following
• Whether preliminary tests and studies have been done?
• Whether the availability of raw materials, power, and other inputs has been recognized?
• Whether the production method opted is suitable?
• Whether the equipment and machines chosen are suitable?
• Whether the supplementary equipment's and auxiliary engineering works have been given for?
• Whether provision has been made for handling of effluents?
• Whether the planned layout of the site, building, and plant is sound?
• Whether work schedules have been reasonably drawn up?
• Whether the technology planned to be employed is suitable from the social plant of view?
•Financial analysis
• Financial analysis tries to ascertain whether the planned project will be financially feasible in the sense of being able to meet the saddle of servicing debt
and whether the planned project will convince the return expectations of those who provide the capital. The feature that have to be looked into while
conditioning financial appraisal are the following:
• Investment pay out and cost of project
• Means of financing
• Cost of capital
• Projected profitability
• Break-even point
• Cash flow of the project
• Investment worth while ness judged in terms of a variety of standards of merit
• Projected financial position
• Level of risk
•Economic analysis
• Economic analysis is also referred to as social cost benefit analysis and is concerned with evaluating a project from the larger social point of view. In such a
judgement the focus is on the social costs and benefits of a project which may usually be different from its economic costs and benefits. The questions
sought to be answered in social benefit analysis are the following
• What are the direct economic benefits and costs of the project measured in terms of efficiency prices and not in terms of market prices?
• What would be the impact of the project on the allocation of income in the society?
• What would be the outcome of the project on the level of savings and investment in the society?
• What would be the involvement of the project towards the achievement of certain merit wants like self-sufficiency, employment, and social order?

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•Ecological analysis
• In recent years, environmental concerns have assumed a great deal of importance – and rightly so. Ecological analysis should be done
particularly for major projects which have significant ecological inference like plants and irrigation schemes, and environmental – polluting
industries like bulk drugs, chemicals and leather processing. The key questions raised in ecological analysis are the following
• What is the likely harm caused by the project to the environment?
• What is the cost of reinstatement measures needed to make sure that the damage to the environment is contained with in acceptable
limits?

CAPITAL BUDGETING: Capital budgeting is a process of evaluating investments and huge expenses in order to obtain the best returns on investment. An
organization is often faced with the challenges of selecting between two projects/investments or the buy vs. replace decision. Ideally, an organization
would like to invest in all profitable projects but due to the limitation on the availability of capital an organization has to choose between different
projects/investments. Capital budgeting as a concept affects our daily lives. Let’s look at an exampleYour mobile phone has stopped working! Now, you
have two choices: Either buy a new one or get the same mobile repaired. Here, you may conclude that the cost of repairing the mobile increases the life
of the phone. However, there could be a possibility that the cost to buy a new cell phone would be lesser than its repair costs. So, you decide to replace
your cell phone and you proceed to look at different phones that fit your budget.

FEATURES OF CAPITAL BUDGETING: 1) It involves high risk 2) Large profits are estimated 3) Long time period between the initial investments and
estimated returns

OBJECTIVES OF CAPITAL BUDGETING: Capital expenditures are huge and have a long-term effect. Therefore, while performing a capital budgeting
analysis an organization must keep the following objectives in mind: 1. Selecting profitable projects: An organization comes across various profitable
projects frequently. But due to capital restrictions, an organization needs to select the right mix of profitable projects that will increase its shareholders’
wealth. 2. Capital expenditure control: Selecting the most profitable investment is the main objective of capital budgeting. However, controlling capital
costs is also an important objective. Forecasting capital expenditure requirements and budgeting for it, and ensuring no investment opportunities are
lost is the crux of budgeting. 3. Finding the right sources for funds: Determining the quantum of funds and the sources for procuring them is another
important objective of capital budgeting. Finding the balance between the cost of borrowing and returns on investment is an important goal of Capital
Budgeting.

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FEASIBILITY STUDY IN PROJECT MANAGEMENT
It determines whether the project is likely to succeed in the first place. It is typically conducted before any initial steps are taken with a
project, including planning. ... Project managers can use the feasibility study to understand the project parameters, business goals and risk
factors at play.

DIFFICULTIES IN RESOURCE ALLOCATION

There are several difficulties in resource allocation. The following are some of the identified problems.
 
i) Scarcity of resources
 Financial, physical, and human resources are hard to find. Firms will usually face difficulties in procuring finance. Even if fiancé is
available, the cost of capital is a constraint. Those firms that enjoy investor confidence and high credit worthiness possess a competitive
advantage as it increases their resource-generation capability. Physical resources would consist of assets, such as, lard machinery, and
equipment. In a developing country like India, many capital goods have to be imported. The government may no longer impose many
conditions but it does place a burden on the firm’s finances and this places a restriction on firms wishing to procure physical resources.
Human resources are seemingly in abundance in India but the problem arises due to the non-availability of skills that are specially required.
Information technology and computer professionals, advertising personnel, and telecom, power and insurance experts are scarce in India.
This places severe restrictions on firms wishing to attract and retain personnel. In sum, the availability resources is a very real problem.
 
ii) Restrictions on generating resources
In the usual budgeting process these are several restrictions for generating resources due to the SBU concept especially for new divisions and
departments.
 
iii) Overstatement of needs
Over statement of needs is another frequent problem in a bottom-up approach to resource allocation. The budgeting and corporate planning
departments may have to face the ire of those executives who do not get resources according to their expectations. Such negative reactions
may hamper the process of strategic planning itself. 

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5 Types of Investment Strategies
•Value Investing. An investment strategy made popular by Warren Buffet, the principle behind
value investing is simple: buy stocks that are cheaper than they should be. ...
•Income Investing. ...
•Growth Investing. ...
•Small Cap Investing. ...
•Socially Responsible Investing.

SPACE is an acronym of Strategic Position and ACtion Evaluation. The analysis allows to create
an idea of the appropriate business strategy for the enterprise. The analysis assesses the internal
and external environment and allows to design an appropriate strategy.
Using the  Strategic Position and Action Evaluation Matrix
method we find the strategic position/posture of an
organisation. We have analyzed four dimensions in this
method; two contribute to the internal dimensions and the
other two to external dimensions. The internal dimension
includes competitive advantage and the financial strength
which are the major factors to determine the strategic
position of any organization. The external dimension
includes the industry strength and the environmental
stability which is used to identify the strategic position in
the industry. By evaluating these four dimensions, we result
in four different strategic postures namely;
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1.Aggressive Posture indicating that the company can fully exploit available  opportunities and enhance its market share. As the company has
high financial strength,  high industry strength, enjoys competitive advantage and belongs to an attractive  industry and operates in a relatively
stable environmental conditions. This posture is a kin  to Michael Porter’s generic strategy of overall cost leadership.

2.Competitive Posture indicating limited financial strength, medium competitive  advantage in an attractive industry and operating in a
relatively volatile or unstable  environment, necessitating the company to maintain and enhance competitive  advantage by
improving/differentiating product; widening the product line, improving  marketing effectiveness and mobilizing, augmenting financial
resources. This posture is  considered to be quite similar to Michael Porter’s generic strategy of product  differentiation.

3.Conservative Posture indicating a company having limited competitive advantage, in a  not so attractive industry but enjoying financial
strength and operating in a relatively  stable environment. Such a company should endeavor to cut down non-performing  product, control
costs, improve productivity, introduce new products and enhance sales  by profitable market expansion. This posture can be compared with 
Michael Porter’s  generic strategy of focus.

4.Defensive Posture indicates a company that lacks both competitive advantage and  financial strength and belongs to a not-so-attractive
industry and operates in an unstable  environment. All the four dimensions are weak and works against the company. It is  advisable for a such
a company to initiate measures like discontinue  nonviable  products,  tightly control costs and monitor cash flows strictly, cutting
down/reducing capacity and  postponing or limiting investments.

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Strategic planning, budgeting and forecasting

Most of the companies use strategic planning, budgeting and forecasting to evaluate their current situation and to get a better view on the future of
the company. Our experience reveals that many companies only spend 50% of their time on the effective analysis of data and the other 50% on
data collection1. Especially the use of spreadsheets may lead to problems like inconsistencies and a lack of flexibility. And still, 69% of the
companies use spreadsheets for their planning, budgeting and forecasting2.
We would like to deal with two main questions in this article: what are the differences between strategic planning, budgeting and forecasting? And
how can a professional tool help you in achieving efficiency in these processes?

The main differences

Strategic planning
Strategic planning has the purpose to define the direction and expectations of a company, which are based on the vision of the stakeholders. An
activity plan is established for a timeline of three to five years: what are the main objectives and where does the company want to be within 3 to 5
years? Strategic planning is a process of continuous reflection.
Budgeting
The establishment of the budget happens in many cases on a yearly basis and is based on data from different sources and levels. The resources are
being divided and the company defines how the general plan and the objectives can be achieved per period. The presentation of a budget is mostly
financial (balance sheet, P&L, cash flow…).
Forecasting
When doing forecasting, various data is being used to predict the financial outcomes of the company for the coming months or years. The
executives make use of realistic historical data to establish new projections, which are then integrated in the budget. Timing can be per year or per
semester.
How can technology help you in structuring these processes?
A dedicated tool can help you to structure your processes and spend significant less time and resources to your budgeting and planning. A couple
of the advantages are:
•Improved data management: a professional tool allows you to use a centralized database and to obtain an automatic import and processing of the
data.
•Flexibility for the users: they can manage multiple versions, take immediate decisions (rolling horizon decision making) and align their decisions
with the long term strategy of the company.
•Workflow optimization: by more cross functional collaboration and the multiple possibilities of interactions between the users.

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 PROJECT GENERATION AND ANALYSIS –

1. Generation of ideas,
2. Monitoring the environment,
3. Corporate appraisal,
4. Project rating index
5. Finance
6. Cost recovery,
7. Standards
8. Operational maintenance
9. Institutional arrangement,
10.Design viability,
11. Density and cost
12., Public participation
13., situational analysis,
14.Collection of secondary information
15., Conduct of market survey,
16. Characterization of market survey,
17.Demand forecasting,
18. Market planning etc.

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1. GENERATION OF IDEAS

Most of the project ideas involve combining existing fields of technology or offering alternatives of present products or services. The typical route
may be described as follows:
• A person with specialized technical knowledge or marketing expertise feels that he can offer a product or service which can cater to a presently
unmet need.
• He can serve a market where demand exceeds supply or effectively compete with similar product or services because of certain favourable
features like better quality or lower prices.
• His ideas are endorsed by his associates who encourage him and even show willingness to collaborate with him on the proposal.
• Finally he receives support from financial institutions and banks that approve his project and show readiness to finance it. Stimulating the flow
of ideas: 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 a conscious, purposeful
and systematic effort by an organization to identify opportunities that can be profitably exploited by it. Periodic SWOT analysis facilitates the
generation of ideas.
• Clear articulation of objectives -The operational objectives of an organisation may be one or more of the following:
• Cost reduction
• Productivity improvement
• Increase in capacity utilization
• Improvement in contribution margin A clear articulation and prioritization of objectives helps in channelizing the efforts of employees and
stimulate them to think more imaginatively
Fostering a conducive climate: To tap the creativity of people and to harness their entrepreneurial urges, a conducive organizational climate has to
be fostered. Ex: motivating employees through awards, incentives, promotions to think and work more creatively

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2. MONITORING THE ENVIRONMENT

Basically a promising investment idea enables a firm (or entrepreneur) 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. For purposes of monitoring, the business
environment may be divided into six broad sectors. The key sectors of the environment are as follows:
1. Economic sector: a. State of economy b. Overall rate of growth c. Growth rate of primary, secondary and tertiary sectors d. Cyclical fluctuations
2. Inflation rate a. Linkage with the world economy b. Trade surplus / deficits c. Balance of payment situation
3. Government sector a. Industrial policy b. Government programmes and projects c. Tax frame work d. Subsidies, incentives, and concessions e.
Import and export policies f. Financing norms g. Lending condition of financial institutions and commercial banks
4. Technological sector a. Emergence of new technologies b. Access to technical know-how, foreign as well as indigenous c. Receptiveness on the part
of industry
5. Socio-demographic sector a. population trends b. Age shifts in population c. Income distribution d. educational profile e. Employment of women f.
Attitudes toward consumption and investment g. Competition sector h. Number of firms in the industry and the market share of the top few(four or
five) i. Degree of homogeneity and differentiation among products j. Entry barriers k. Comparison with substitutes in terms of quality, price, appeal,
and functional performance l. Marketing policies and practices
6. Supplier sector - a. Availability and cost of raw materials and sub-assemblies b. Availability and cost of energy c. Availability and cost of money

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3. 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 follows: 1. Marketing and Distribution a.
Market image b. Product line c. Market share d. Distribution share e. Customer loyalty f. Marketing and distribution costs 2. Production and
Operations a. Condition and capacity of plant and machinery b. Availability of raw materials, sub-assemblies and power c. Degree of vertical
integration d. Locational advantage e. Cost structure 3. Research and development a. Research capabilities of the firm b. Track record of new
product developments c. Laboratories and testing facilities d. Coordination between research and operations 4. Corporate Resources and Personnel
a. Corporate image b. Clout with governmental and regulatory agencies c. Dynamism of top management d. Competence and commitment of
employees e. State of industrial relations 5. Finance and Accounting a. Financial leverage and borrowing capacity b. Cost of capital c. Tax situation d.
Relations with shareholders and creditors e. Accounting and control system f. Cash flows and liquidity 4. Scouting for Project Ideas Good project
ideas – the key to success – are indefinable. So a wide variety of sources should be tapped to identify them. Analyze the Performance of Existing
Industries:- 1. It is essential to study the existing industries in terms of their profitability and capacity utilization. 2. This analysis of profitability and
break – even level of various industries indicates promising investment opportunities which are profitable and relatively risk free. 3. A study of
capacity utilization of various industries provides information about the potential for further information. Examine the Inputs and Outputs of
Various Industries 1. An analysis of the inputs required for various industries may throw up project ideas. 2. Existing opportunities for procuring
materials or supplies including transportation costs are to be considered. 3. Several firms produce internally some components / parts which can be
supplied at a lower cost by a single manufacturer. 4. Similarly, a study of the outputs of the existing industries may reveal opportunities for adding
value through further processing of main outputs, by – products, as well as waste products. Remember that one person’s trash can be another
person’s treasure.

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PROJECT RATING INDEX DEFINITION:

The Project Rating Index (PDRI) is a methodology used by capital projects to measure the degree of scope definition, identify gaps, and take
appropriate actions to reduce risk during front end planning. PDRI is used at multiple stages in the front end planning process. The steps involved
in project rating index are as follows.  Identify the factors relevant for project rating.  Assign rates to these factors.  Rate the project proposal
on various factors, using a suitable rating scale. Ex: 5 point or 7 point scale.  For each factor multiply the factor rating with the factor weight to
get the factor score.  Add all the factor scores to get the overall project rating index.

MARKET AND DEMAND ANALYSIS:

A project manager should carefully study the market potential for a given project idea. Conducting market survey, collecting primary and
secondary data, studying the characteristics of the market are some of the activities to test the market environment and see if the idea is
feasible full stop demand analysis of a product includes the study of consumption patterns, income and price elasticity of demand, nature of
competition, availability and prices of substitute and complementary products. The activities of a project manager in conducting a market and
demand analysis include: • Situational analysis and objective specification • Collection of secondary data • Market survey • Market description •
Demand forecasting • Market planning
MARKET SURVEY

Sometimes information collected from secondary sources may not be enough to understand the market conditions completely. Hence, information of
obtained from secondary sources should be supplemented by primary data, which is problem specific. Market survey is a useful method of obtaining
the primary data. Market survey is a technique that is aimed at gathering all possible information by conducting interviews. The project manager
chooses a convenient sample ok, as it is not possible to study the entire population in the market. He conducts personal interviews with stakeholders of
the project either directly or by phone to gather the information. An opinion survey, attitude surveys, information surveys, future invention surveys
helps the project manager to understand what the customer wants. The project manager considered the entire market population for the project like
manufacturing intermediate goods and investment goods, where the project customers are limited in number. These surveys are called census survey.
The results obtained from this survey are more reliable then the sample survey, but conducting the survey is more expensive. Market survey is useful in
determining the total market demand coma demand growth rate in difficult segments of the market, understanding the inner motives of the customer
and measuring the unsatisfied needs of the customers. Since it is not possible to interview the entire population of the market, sample survey is a good
method to to assess the market characteristics.

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DEMAND FORECASTING :

The project manager forecast the demand for a particular product or service using information obtained from secondary sources, market survey
and market description. Statistical techniques like trend projections are useful in forecasting the demand for a particular product. These methods
extrapolate past trends into the future to forecast future demand, revenues or sales. Apart from statistical methods, the project manager forecast
future demand using techniques like chain ratio technique, consumption level technique, end use technique, leading indicator technique and
econometric technique. These techniques study the cause and effect relationship of several variables on demand of the product. Chain ratio
technique This is a simple technique that applies a series of factors to forecast the demand for a particular product or service. For example, a
farm manufacturer office bags for men.

The farm estimates the aggregate demand of the office bags for men in the following manner by using the chain ratio technique. • Population of
males in the country : 55 crore
• Population of educated males in the population :0.68
• So, population of educated male : 37.4 crore
• Proportion of employees in the educated male : 0.42
• Population of male employees : 15.7 crore
• Proportion of male employees who will purchase an office bag : 0.61
• So, potential sale of office bags: 9.58 crore The method seems simple to use, but the applicability of this method mainly depends on the
accuracy of the ratio used full stop project manager should carefully estimate these ratio to estimate demand for a particular product or service.
Uncertainties in demand forecasting The statistical techniques and causal method explained above are prone to errors because of the many
uncertainties involved. The major sources of uncertainties are: • Techniques of forecasting • Past and present market data • Environmental
change Techniques of forecasting Forecasts obtained by using statistical techniques are prone to error as they take into account only quantitative
factors and ignore qualitative factors. Also, as some factors are non-quantifiable, the outcome of these techniques is not accurate. Similarly,
certain unrealistic assumption may lead to the change in the estimate of future demand. For example, the consumption coefficients used in end-
use method may be unrealistic assumptions. Past and present market data Past and present market data are very useful in forcasting the demand
for a product. But the data may not be completely reliable if some unusual events had occurred at the time when the data are collected. Then,
this data can’t be considered for forcasting because of the influence of these unusual factors. Environmental changes The changes in business
environment like technological shifts, changes in the government policies , discovery of new raw materials, international trade developments,
vagaries of monsoons influence projects in several ways. Market planning The four P’s of marketing – product, price, place and promotion should
be well designed to achieve the expected level of market penetration. When dealing with services, the market planning should be include the
process, people and physical evidence. For example, planning a thermal power station project should include determining its production capacity,
likely cash inflows, place of construction and transportation and sales programs. For service projects like medical camps, the planning requires to
find out the numbers of the people involved, the structure and schedule of the project.
SUNDER DEEP COLLEGE OF ARCHITECTURE
SUBMITTED BY : RHYTHM,ARUNA,PARIT & GAURAV