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8/3/2019 Project Appraisal Analysis1
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To understand the fundamentals of Analysis
in Project Appraisal.
Consists of three key components: Market and Demand Analysis
Technical Analysis
Financial Estimates and Projections
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To estimate the potential size of the market
for the proposed product/service.
To get an idea about the market share that islikely to be captured.
Two Broad Issues: L
ikely aggregate demand for theproduct/service? Market share of the proposed project?
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Orderly and systematic manner
The key steps in this analysis are:
Situational Analysis and specification ofobjective
Collection ofSecondary information
Conduct of market survey Characterization of the market Demand forecasting
Market planning
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Project Analyst may Informally talk to:
Customers
Competitors Middlemen
Others in the industry
Preferences and purchasing power of thecustomers Actions and strategies of competitors
Practices of the middlemen
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To conduct a Formal study, it is necessary to
spell out its objectives clearly and
comprehensively. An effective approach is to structure them in
the form of relevant Questions.
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Is information that has been gathered in someother context and is already available.
Provides the starting point for the market and
demand analysis. General sources ofSecondary Information in
India are: Census of India
NationalS
ampleS
urvey Reports Plan Reports Statistical Abstract of the Indian Union India Year Book And many more..
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The market survey can either be:
Census Survey
SampleSurveyCensus Survey- The entire population is
covered.SampleSurvey- A sample of the population is
contacted or observed for relevantinformation.
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Steps in Sample Survey are:
Define the target population
Select the sampling scheme and sample size Develop the questionnaire
Recruit and train the field investigators Obtain information from the sample of
respondents Scrutinize the Information gathered
Analyse and Interpret the information
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Limitations of a market researcher:
Heterogeneity of the country
Multiplicity of languages Design of questionnaire
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The market for the product/service may 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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Effective demand in the past and present:
The starting point is apparent Consumption
which is: Production + Imports Exports Changes in
stock level.
In a competitive market apparent
consumption and effective demand areequal.
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Breakdown of demand:
Market demand may be broken down into
demand for different segments of market. Nature of Product
Consumer Groups Geographical Division
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Price:
Different types of prices are
Manufacturers price Landed price for imported goods
Average wholesale price Average retail price
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Methods of Distribution and sales promotion:
May vary with the nature of the product.
Supply and competition: The sources of supply may be foreign or
domestic. Competition from the substitutes and
near-substitutes should be specified.
Government policy.
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QUALITATIVEMETHODS:
Rely essentially on the judgment of the
jury/experts to translate qualitativeinformation to quantitative estimates.
Types of QualitativeMethods are:1. Jury of executiveMethod.2. DelphiMethod
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TIMESERIES PROJECTIONMETHODS:
These methods generate forecasts on the
basis of an analysis of the historical timeseries.
The important methods are:1. Trend projectionMethod.2. Exponential smoothingMethod.3. Moving averageMethod.
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CAUSALMETHODS: They seek to develop forecasts on the basis
of cause-effect relationships. The important methods are:1. Chain ratio method.2. Consumption level method.
3. End use method.4. Bass diffusion method.5. Leading indicator method.6. Econometric method.
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Demand forecasts are subject to error arising
from three principal sources:
Data about past and present market. Methods of forecasting.
Environmental change.
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Marketing plan has the following
components:
Current marketing situation. Opportunity and issue analysis.
Objectives. Marketing strategy.
Action programme.
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CurrentMarketing Situation:
Deals with the different dimensions and facts
of the current situation. It examines the following:1. MarketSituation.2. CompetitiveSituation.3. DistributionSituation.4. Macro-environment.
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Opportunity and Issue Analysis:
This primarily deals with SWOT analysis
S=Strength W=Weakness
O=Opportunity T=Threat
Objectives: They have to be clear-cut, specific and
achievable.
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Marketing Strategy:
The marketing Strategy covers the following:
1. Target segment.2. Positioning.3. Product line.4. Price.5. Distribution.6. Sales promotion.7. Advertising.
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Action Programme:
Action Programmes operationalise the strategy.
This primarily deals with the implementation ofthe plan developed from the information
gathered.
To enable the product to reach a desired level of
market penetration, a suitable marketing plan,covering pricing, distribution, promotion, and
service needs to be developed.
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Technical analysis: The broad purpose of technical analysisis
1. To ensure the project is technically feasible2. To facilitate the most optimal formulation of the project in
terms of technology,size,location
Manufacturing process/Technology: For manufacturing aproduct/service, often two or more alternative technologiesavailable.
Example: Cement can be either by the dry process or the wet process. Choice of technology: Plant capacity Principal inputs(the quality of determines whether the
wet or dry process should be used for cement) Investment outlay and production cost Use by other units Product mix
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Appropriateness of technology
Materials inputs and utilities: An important aspect oftechnical analysis is concerned with defining the materials
and utilities reqd. Material inputs and utilities may be classified into four broad
categories:
Raw materials Processed industrial materials and components
Auxilliary materials and factory supplies
Utilities
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Utilities: A broad assessment of utilities
(power,water,steam,fuel) may be made at the
time of input study though a detailedassessment can be made only after
formulated the project w.r.t location,technology and plant capacity.
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ProductMix
PRODUCTMIX: Example: A toilet soap manufacturing unit may,by variation
in raw material ,packaging and sales promotion. Plant capacity:( referred to as production capacity) plant
capacity may be defined two ways: Feasible normal capacity (FMC) Nominal maximum capacity(NMC) Focus on feasible normal capacity Several factors have a bearing on the capacity decision. Technological requirement
Input constraints Investment cost Market capacity Resources firm
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This follows an assessment of demand, size andinput requirements.
It is influenced by a variety of considerations: Proximity to raw materials and markets. Availability of infrastructure. Labour situation. Government policies. Other factors like:1. Climatic conditions.2. General living conditions.3. Proximity to ancillary units.4. Ease in coping with pollution.
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The following procedure is followed:
Estimate the likely levels of production over
time. Define the various machining and other
operations. Calculate the machine hours required for
each type of operation. Select machineries and equipments required
for each function.
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The equipments are classified in to:
Plant equipments.
Mechanical equipments. Electrical equipments.
Instruments. Controls.
Internal transportation system. And others
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May be divided in to three categories:
Site preparation and development.
Buildings and structures. Outdoor works.
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The key issues that need to be considered in
this respect are:
Types of effluents and emissions generated? Needs to be done for proper disposal of
effluents and treatment of emissions? Ability to secure all environmental clearances
and comply with all statutory requirements?
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The important charts and layouts drawingsare as follows:
General functional layout. Material flow diagram. Production line diagrams. Transport layout.
Utility consumption layout. Communication layout. Organisational layout. Plant layout.
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The following information is required: List all possible activities from project planning
to commencement of production. The sequence in which all the activities have tobe performed. The time required for performing various
activities. The resources required for performing various
activities. The implications of putting more resources or
less resources than are normally required.
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There are alternative ways of transforming an
idea into a concrete project.
There are alternatives may differ in one ormore of the following aspects:
Nature of project. Production process.
Product quality. Scale of operation and time phasing.
Location.
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THANK YOU