PROJECT

IDENTIFICATION
1 -By CA(Dr.) Leena Gadkari
CONTENTS
 Introduction and Steps
 Selection of Product

 Identification of Market

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INTRODUCTION
 Project identification is the initial phase of the project
development cycle.
 It is concerned with collection, compilation and analysis of
economic data for the eventual purpose of locating possible
opportunities for investments and with the development of such
opportunities.
 It begins with the conceiving of ideas or intentions to set up a
project.
 These ideas are then transformed into a project.
 Clear project identification allows you to answers questions like:
a) How do the projects come about?
b) Where do projects come from?
c) Why are projects where they are? 3
PROJECT IDENTIFICATION
 To be able to start studying a project, its specifications need to
be defined.
 At this point, the project is defined through a number of
conceptual, well - documented steps:
 Needs assessment : gap between current situation and an ‘ideal
type’ desired situation.
 Generating and assessing solution options: connection high
priority needs to potential solutions and assessing them.
 Project identification, objective and scope:

1. Defining a proper objective is key to a successful proceeding

of the project.
2. Project scope describes the limits that apply to the project and
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is also vital in this phase.
IMPORTANCE OF PROJECT IDENTIFICATION
 They became the catalytic agents of economic development.
 They initiate the process of development in terms of
employment and income generation.
 They have beneficial consequences which are long term in
nature.
 Projects provide the framework of the future pattern of
activities and services of the enterprise.
 Projects usually involve substantial financial outlays.

 They also initiate development of basic infrastructure and

environment.
 Project commitments cannot be easily reversed.

 Project identification brings the necessary changes in

society in course of time. 5

 Project accelerate the process of socio-cultural development

PRE - FEASIBILITY STUDY
 Determines potential for financial feasibility.
 The pre-feasibility study consists of the following
steps:
 Determine total costs incurred during the project life
cycle: investments, maintenance, operation etc.;
 Estimate the results of the project in terms of expected
usage and the incoming cash flow potential;
 Create an income statement showing trends in project
results and cash flow throughout the project life cycle;
 Assess the Net Present Value (NPV) of all future cash
flows
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SOCIAL COST - BENEFIT
(CBA)ANALYSIS
 In case of Public Projects, a social economic CBA
answers the question whether a public investment in a
project is justified taken all economic costs and benefits
for society into account from a welfare economic point
of view.

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MAPPING OF FINANCING SOURCES
 Financing includes the way in which the
required Investment is paid for.
 Funding includes one - off or annual
sources of income which can be used to
pay for the annual costs of operations and
maintenance as well as debt service
(interest and dividend).
 The possible financing sources for the
project need to be explored. 8
MAPPING OF FINANCING SOURCES
 Various financing sources of national and
international financial Institutions might be
available for co-financing the project.
 The evaluation of alternative funding options
will include the following steps:
 Identification of sources of finance

 Analysis of project eligibility for alternative

sources of finance
 Structure the financial input of alternative
funding 9
PUBLIC AFFORDABILITY ANALYSIS
 In addition to the pre - feasibility study and the socio –
economic cost - benefit analysis, the affordability of the project
to the public budget is also relevant to the decision making
process.
 To assess affordability, the following steps are relevant:

 Determine preliminary costs and revenues (based on the pre-

feasibility study).
 Calculate the anticipated budgetary impact of the project.

 Decide whether or not the project has the potential to be

affordable

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DOCUMENTATION
The previous stages are combined in a
document called the pre-feasibility
report.
The pre-feasibility report as a whole
develops an outline business case for the
project.
It includes, but is not confined to, the
aforementioned financial pre-feasibility
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study.
 SELECTION OF PRODUCT
 Demand-Supply gap: There must be existing demand for the
selected product. The existing demand will depend on the
quantum of the unsatisfied market demand which will emerge
as business opportunity.
 Funds availability and mobility: Adequate availability and
mobility of funds is needed to develop, produce, promote,
sell and distribute the product selected.
 Availability of and Access to Raw Materials: Different
products require different raw materials. The quality and
quantity of the raw materials needed and their availability at
right time is therefore a critical factor.

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SELECTION OF PRODUCT(CONTD.)
 Technical Aspects: There is need to know the technical
implications of the selected product on the existing
production line, available technology and even the
labour force.
 Marketability of Product: The product must be
marketable. Potential for demand for the product plays a
key role in this.
 Profitability of Product: The product that has the
highest profit potential/profit margin is often selected.
However, a product may be selected on the basis of its
ability to utilize idle capacity or complement the sale of
the existing products.

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 SELECTION OF PRODUCT(CONTD.)
 Availability of Appropriate Human Resource: Qualified and
skilled personnel should be available to handle the production and
marketing of the product. This will also help to keep the cost of
production at the minimum by reducing wastages.
 Government Policies: This is quite often an uncontrollable factor.
The government policies can significantly influence the selection
of product. For e.g. a package of incentives from government for a
product with 100% local input contents can change the direction of
the business’s R & D and hence the product selected.
 Government objectives: The contributions of the product to the
realization of the company’s short and long range objectives must
be considered before selection. For instance, the company goal
maybe the achievement of sale growth, sales stability or
enhancement of the company’s social value.

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IDENTIFICATION OF MARKET

 While choosing a project idea, it is

necessary to ascertain certain factors such
as:
 the extent of the marketability of the
product to be manufactured
 Its general use
 Industries which use it
 Its end use and buyers
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IDENTIFICATION OF MARKET
• It is necessary to study the demand and
supply of the product for last few years to
estimate its future demand based on past
trend.
• As per the requirements, the study should be
carried out for:
 The whole country
 For the specific state/region

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IDENTIFICATION OF MARKET
• To know the demand and supply of the product, it
is necessary to consider factors such as :
 Anticipated changes in fashions

 Anticipated changes in technology

 Anticipated changes in income levels of consumers

 Potentiality of that product

 Capacity of the existing units manufacturing that

product
 The capacity of the units that have already been
granted license but are in the process of being
established
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IDENTIFICATION OF MARKET
 Many units function as ancillaries of main industries.

 In such a case, it is necessary to consider factors such as :

 The area/location

 Dependability of the unit on the parent unit

 Potential for reasonable profit

 Potential for future growth

 Experience of other ancillary units

 Possibility of problems in obtaining payments

 Possibility of problems in obtaining knowhow

 Alternate uses of the assets in case the ancillary

arrangement does not yield anticipate benefits.
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IDENTIFICATION OF MARKET
 When you are setting up a general purpose workshop or
a service industry, it is necessary to have idea about
factor such as :
 The industrial environment
 The type of job orders you may obtain and whether they
will be repeated
 Who are the local competitors
 Whether there are any large projects/ establishments
which promise potential for assured orders, whether your
unit will have specialization in a particular type of work
which will give an edge over competitors
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IDENTIFICATION OF MARKET
 Incase of an import substitute product it is
necessary to know:
 General policy to encourage indigenous
production
 Government’s import policy

 Present demand

 The price of imported item in comparison with

your price
 Quality differences etc
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 IDENTIFICATION OF MARKET
 It is difficult to arrive at a precise forecast for demand and
supply of a particular product
 This is so specially since sometimes reliable and up to
date information is difficult to obtain on the basis of the
available data
 However, in order to decide on future prospects of the
item proposed to be selected capacity utilisation of the
existing units can be used as broad indicator
 Under utilisation of the existing capacity could be taken as
a signal for little or no scope for setting up a new unit.

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CASE STUDY
A small but technologically advanced firm has
developed an improved refrigerator that offers
several advantages including energy saving.
 These advantages are over and above the
conventional refrigerator.
 The Chief Executive of the firm needs information
about where and how to market the new refrigerator.
 The objectives of market and demand analysis in this
case would consider various questions.

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CASE STUDY (CONTD.)
 Questions:

 Who are the buyers of refrigerators?

 What is the total current demand for refrigerators ?

 What is the pattern of sales from point of view of

consumer segment?
 What is the pattern of sales as per geographical
locations?
 What is the break up of demand for refrigerators of
various sizes?
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CASE STUDY (CONTD.)
 What price will the customer be willing to pay for
the improved refrigerators?
 How can potential customers be convinced about
the superiority of the new refrigerators ?What price
and warranty will ensure its acceptance?
 What channels of distribution are most suited for
the refrigerators?
 What trade margins will induce the distributors to
carry it?
 What are the prospects of immediate sales?

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 PRODUCT PATTERN
 The demand survey projects an estimate of potential
sales and the raw materials survey confirms if adequate
material will be available to support the project.
 These two data and a consideration of economy of scale
should be sufficient to select the plant capacity.
 A final decision in this regard can be made only after
the financial resources required and the available
alternative technologies are also evaluated.

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PRODUCT PATTERN
 In case of a process plant the selected process would
also determine the various co-products and by –
products that are possible.
 In such cases the quantities of all such products
have to be established.
 In some cases by utilising the by products a further
set of products can be obtained. The total spectrum
of products-co-products and by products represents
what is known as product pattern.
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SECONDARY DATA ABOUT THE PRODUCT AND
MARKET

 Secondary information provides the base and starting

point for the market and demand analysis.
 Even if it is available economically and readily, the
market analyst must carefully examine its reliability,
accuracy and relevance.
 The secondary data can be obtained through

 Internal Sources - These are within the organization

 External Sources - These are outside the organization

 It indicates what is known and provides base for

gathering primary information required for further
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analysis.
INTERNAL SOURCES OF DATA
 This data may be obtained with less time, effort and money
than the external secondary data. They may be more pertinent
to the situation at hand since they are from within the
organization. The internal sources are:
 Accounting resources- This gives so much information
which can be used by the marketing researcher. They give
information about internal factors.
 Sales Force Report- It gives information about the sale of a
product. The information provided is of outside the
organization.
 Internal Experts- These are people who are heading the
various departments. They can give an idea of how a
particular thing is working
 Miscellaneous Reports- These are what information you are 28

getting from operational reports.

EXTERNAL SOURCES
 External Sources are sources which are outside
the company in a larger environment.
 Collection of external data is more difficult
because the data have much greater variety and
the sources are much more numerous.
 External data can be divided into following
classes:
 Government Publications

 Non Government Publications

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GOVERNMENT PUBLICATIONS
 Registrar General of India- It is an office which generate
demographic data. It includes details of gender, age,
occupation etc.
 Central Statistical Organization- This organization
publishes the national accounts statistics. It contains estimates
of national income for several years, growth rate, and rate of
major economic activities. Annual survey of Industries is also
published by the CSO. It gives information about the total
number of workers employed, production units, material used
and value added by the manufacturer.
 Director General of Commercial Intelligence-It gives
information about foreign trade i.e. import and export. These
figures are provided region-wise and country-wise.

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GOVERNMENT PUBLICATIONS
 Ministry of Commerce and Industries- This ministry through
the office of economic advisor provides information on
wholesale price index. These indices may be related to a
number of sectors like food, fuel, power, food grains etc. It also
generates All India Consumer Price Index numbers for
industrial workers, urban, non manual employees and cultural
labourers.
 Planning Commission- It provides the basic statistics of Indian
Economy.
 Reserve Bank of India- This provides information on Banking
Savings and investment. RBI also prepares currency and
finance reports.
 Labour Bureau- It provides information on skilled, unskilled,
white collared jobs etc. 31
GOVERNMENT PUBLICATIONS
 National Sample Survey- This is done by the
Ministry of Planning and it provides social,
economic, demographic, industrial and agricultural
statistics.
 Department of Economic Affairs- It conducts
economic survey and it also generates information
on income, consumption, expenditure, investment,
savings and foreign trade.
 State Statistical Abstract- This gives information
on various types of activities related to the state like
- commercial activities, education, occupation etc.
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NON GOVERNMENT PUBLICATIONS
 These includes publications of various industrial and
trade associations, such as:
 Various chambers of commerce

 The Bombay Stock Exchange (it publishes a directory

containing financial accounts, key profitability and other
relevant matter)
 Various Associations of Press Media.

 Export Promotion Council.

 Confederation of Indian Industries ( CII )

 Small Industries Development Board of India

 Different Mills like - Woolen mills, Textile mills etc

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SYNDICATE SERVICES
 These services are provided by certain organizations
which collect and tabulate the marketing information
on a regular basis for a number of clients who are the
subscribers to these services.
 So the services are designed in such a way that the
information suits the subscriber.
 These services are useful in television viewing,
movement of consumer goods etc.
 These syndicate services provide information data
from both household as well as institution.

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SYNDICATE SERVICES
 In collecting data from household they use three
approaches
 Survey- They conduct surveys regarding - lifestyle,
sociographic, general topics.
 Mail Diary Panel- It may be related to 2 fields -
Purchase and Media.
 Electronic Scanner Services- These are used to generate
data on volume.
 They collect data for Institutions from Whole sellers,
Retailers, and Industrial Firms
 Various syndicate services are Operations Research
Group (ORG) and The Indian Marketing Research
Bureau (IMRB). 35
INTERNATIONAL ORGANISATIONS
 The International Labour Organization
(ILO)- It publishes data on the total and
active population, employment,
unemployment, wages and consumer prices
 The Organization for Economic Co-
operation and development (OECD)- It
publishes data on foreign trade, industry,
food, transport, and science and technology.
 The International Monetary Fund (IMF)-
It publishes reports on national and
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international foreign exchange regulations.
CHARACTERISTICS OF THE MARKET
 The market for the product/service can be described in
terms of the following:
 Effective demand in the past and present
 Breakdown of demand
 Price
 Methods of distribution and sales promotion
 Consumers
 Supply and competition
 Government Policy

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Thank You 38