INDFEAS LT1 REVIEWER PDF - Project Identification, Cycle, & Feasibility

Phases of the Project Cycle Scope and Nature PROJECT/PROJECT IDENTIFICATION 1.​ Project Identification: Process of seeking out possible Scope: What is a PROJECT?...

Phases of the Project Cycle Scope and Nature PROJECT/PROJECT IDENTIFICATION 1.​ Project Identification: Process of seeking out possible Scope: What is a PROJECT? investment projects. 2.​ Project Preparation: Preliminary assessment through initial ​ Pre-operating, Management, Marketing, Project Definition: designs, alternative technical processes, and initial financial Production/Technical, Financial, and Socio-Economic and market calculations. feasibility. ​ Project is defined as a scheme or part of a scheme: 3.​ Project Appraisal: Comprehensive review of technical, ○​ For investing resources market, financial, managerial, and economic aspects to Nature: ○​ Which can be evaluated as an independent unit ensure viability. 4.​ Documentation: Translating appraisal findings into formal ​ Must be practical and consider future inflationary trends. Reasons for Defining a Project: records. ​ Data inputs should be carefully studied. 5.​ Project Supervision: Follow-up and management of the ​ To determine the scope of the project. project through implementation, construction, and operation Project Cost Estimate ​ To determine the required investments/sources of funding to ensure execution as planned. and implementation period. Project Cost: ​ To analyze and evaluate its investment merits. Functions in the Project Cycle ​ Approximate investment requirements from inception to Project Concept of Evaluating Long-Term Investments ​ Market/Commercial commercial operations. ​ Technical PROJECT IDENTIFICATION AND PROMOTION ​ Financial Factors Affecting Project Feasibility Cost: ​ Economic PROJECT COST ​ Managerial ​ Size ​ Nature ​ Estimates Why Identify a Project? ​ Depth ​ Timetable ​ Availability of data ​ Drawdown schedule ​ Scarcity of resources (capital, labor, raw materials, land, etc.). ​ Length of the project ​ Financial package ​ Optimization of resource use based on investment objectives. Items Included in Project Cost Estimate: PROJECT BENEFITS Eleven (11) Guides to Identify Project Opportunities: ​ Pre-operating and Organizational Expenses ​ Market/Commercial ​ Land 1.​ Study Imports/Exports ​ Technical ​ Site Preparation and Improvements 2.​ Investigate Local Materials and Resources ​ Managerial ​ Buildings and Other Structures 3.​ Study Available Skills ​ Financial ​ Machinery and Equipment 4.​ Monitor Economic Indicators ​ Marine Insurance and Freight 5.​ Make Industry Studies ECONOMIC ANALYSIS ​ Bank Charges and Other Local Expenses 6.​ Originate or Apply Technology ​ Custom Duties and Taxes 7.​ Examine Inter-Industry Relationships ​ Compare Project Cost and Benefits: ​ Installation Costs 8.​ Evaluate Development Plans ○​ Financial ​ Spare Parts 9.​ Review Old Projects ○​ Economic ​ Start-up and Trial Run 10.​Observe Experience Elsewhere ​ Process Acquisition/Patents/Licenses 11.​Use Standard Industry Classification Lists Project Cycle ​ Technical Assistance ​ Other Fixed Assets Importance of Feasibility Studies ​ Financial Charges During Construction or Pre-operating Project cycle is a series of activities or steps that a project takes from conceptualization to operation. Period ​ Provides investors with viability and all vital information for ​ Working Capital decision-making. ​ Provision for Contingencies ​ Financial institutions require feasibility studies for large loan applications. Pre-Operating and Organizational Expenses: Process Acquisition/Patents/Licenses: Feasibility Study Outline: ​ Includes costs from project inception until start of operations. ​ Based on contracts with suppliers. 1.​ Introduction: ​ Examples: Initial investigations, legal fees, technical analysis, ​ Some licenses are based on a percentage of sales or profits. ○​ Product/Project Description feasibility studies, and incorporation papers. ○​ Industry Assessment Technical Assistance: 2.​ Market Feasibility: Land: ○​ Competitors’ Profile ​ May include costs for experts, travel expenses, and on-site ○​ Target Market ​ Cost includes notarial and registration fees. support. ○​ Demand and Supply Analysis ​ Sources: Market rate, purchase contracts, and offers. ○​ Pricing Strategy Other Fixed Assets: ○​ Distribution System Site Preparation and Improvements: ○​ Promotion and Marketing Plan ​ Includes vehicles, furniture, and other industry-specific 3.​ Technical Feasibility: ​ Includes land surveys, drainage, site clearing, excavation, needs. ○​ Plant Location grading, roads, fencing, landscaping, and fire protection. ○​ Manufacturing/Operations Process Financial Charges During Construction or Pre-Operating Period: ○​ Capacity Requirements Buildings and Other Structures: ○​ Plant Layout and Design ​ Interest on loans and financial fees. 4.​ Management Feasibility: ​ Includes process buildings, administrative offices, ○​ Ownership warehouses, laboratories, maintenance shops, and auxiliary Working Capital: ○​ Organization Structure areas like power generation and pollution control facilities. ○​ Personnel Requirements ​ Fund for raw materials, work-in-progress, finished goods, 5.​ Financial Feasibility: Machinery and Equipment: accounts receivables, and operating cash. ○​ Capital Requirements ○​ Sources of Capital ​ Covers main and auxiliary equipment. Provision for Contingencies: ○​ Financial Projections (Balance Sheet, Income ​ Basis for costing: Supplier quotations, past experience, Statement, Cash Flow) machinery dealers, and estimates. ​ Covers accidental events, estimation errors, and unforeseen ○​ Financial Analysis changes. 6.​ Socio-Economic Feasibility: Marine Insurance and Freight: ○​ Social Costs and Benefits Rapid Cost Estimate Methods: ○​ Economic Analysis ​ Covers inland and ocean freight, handling expenses, and 7.​ Conclusion and Recommendation insurance. ​ Unit Price ​ Six-tenths Factor Customs Duties and Taxes: ​ Capacity Adjustment by Exponential Method ​ Applicable unless exempted by government incentives. Project Timetable: Bank Charges and Other Local Expenses: ​ Lists project activities from conceptualization to operations. ​ Errors in estimation can cause delays and cost overruns. ​ Includes fees for opening letters of credit and local delivery costs. Funds Drawdown Schedule: Installation Costs and Spare Parts: ​ Specifies when funds should be withdrawn for activities. ​ Helps in planning financial charges during the pre-operating ​ Foundation, plumbing, electrical support, and spare parts for period. machinery. Start-up and Trial Run: ​ Costs incurred during test runs. MARKETING FEASIBILITY ​ Includes planning, organizing, directing, and controlling Market Definition decisions related to product lines, pricing, promotion, and RECAP EXERCISE servicing. ​ Clearly defines the nature, uses, potential users, geographic ​ Ensures proper physical distribution and profitable flow of influence, and characteristics of products/services. 1.​ At what context can a project be different from other goods from production to consumers. ​ Serves as a basis for investigating product demand and organizational activities? supply. 2.​ Name the five phases of a project cycle and provide brief CHALLENGES IN MARKETING explanation of each. MARKETING STRATEGY 3.​ What could be a good basis to select a project idea for ​ How to monitor and respond to changes in a dynamic business endeavor? marketing environment? ​ Involves selecting and describing target markets and ​ How to manage the necessary transformations? developing a marketing mix to create satisfying exchanges. Introduction to Market, Market Forecasting Tools, Industry of ​ How to grow the organization for long-term sustainability? Project Analysis TARGET MARKET STRATEGY Tools for Marketing - 4 Ps of Marketing ​ All feasibility studies should assess how things work, identify ​ Identifying and selecting the most attractive market potential problems, and evaluate viability. 1.​ Product segments. ​ Feasibility studies are conducted on ideas, campaigns, ○​ Can be a tangible good or an intangible service products, processes, and entire businesses. fulfilling a consumer need. Three Basic Questions for Marketing Planning ​ These are assessment tools, not just reports to sell a ○​ Key elements: variety, quality, design, features, brand business to investors. name, packaging, sizes, services, warranties, and 1.​ Where are we today? (Situation analysis, external/internal ​ They must analyze both pros and cons and consider various returns. issues, evaluation of opportunities and gaps) business scenarios. 2.​ Price 2.​ Where do we want to go? (Objective setting, strategy ○​ Pricing impacts profit margins, supply, demand, and planning, target market selection) MARKET FEASIBILITY marketing strategy. 3.​ How do we get there? (Program formulation, marketing mix, ○​ Includes list price, discounts, allowances, payment implementation, performance monitoring, and control) ​ The lifeblood of every project feasibility study. method, and credit terms. ​ Profitability is crucial, but demand is the most basic issue. 3.​ Promotion Overview of Marketing Feasibility ​ Without demand, there is no point in discussing profitability or ○​ Includes advertising, public relations, social media other feasibility factors. marketing, email marketing, sales promotions, and ​ Marketing Planning direct marketing. ​ Industry Analysis Assessment EXPECTED RESULT 4.​ Place ​ Supply-Demand Analysis ○​ Ensuring the right product is available at the right ​ Target Market Analysis 1.​ The size, nature, and growth of total demand for the product. place and time. ​ Supply Analysis 2.​ The description and price of the product to be sold. ○​ Factors: channels, coverage, assortments, locations, ​ Demand Analysis 3.​ The supply situation and the nature of competition. inventory, and transport. ​ Survey 4.​ The different factors affecting the market of the product. ​ Product Concept Development 5.​ The appropriate marketing program for the product. How to do Marketing Feasibility? MARKETING FEASIBILITY SURVEY Marketing Definition 1.​ Industry Description 2.​ Industry Competitiveness ​ Conducted to understand client needs and perceptions. ​ Marketing is the process of planning and executing 3.​ Market Potential ​ Steps: conception, pricing, promotion, and distribution of ideas, 4.​ Access to Market Outlets 1.​ Define the general information needed. goods, and services to create exchanges that satisfy 5.​ Sales Projection 2.​ Identify the target population. individual and organizational objectives. 3.​ Design appropriate survey questions. ​ Involves market research, product development, design, and Objectives of Marketing Feasibility 4.​ Ensure sample size is statistically significant. testing before manufacturing. 5.​ Choose proper sampling methods (random sampling, ​ Focuses on consumer needs, educating them about product ​ Determine the extent to which project-generated stratified sampling, etc.). features, persuading them to buy, and enhancing their goods/services are needed. 6.​ Analyze collected data for actionable insights. satisfaction. ​ Design appropriate marketing strategies to ensure market acceptance. ​ Analyze demand-supply gaps for effective planning. Demand Analysis Why do Some Marketing Plans fail? ​ Estimation of market demand through: ​ Lack of a real plan ○​ Identifying demand determinants (population, income, ​ Poor situation analysis prices, substitution options, consumer preferences, ​ Lack of stakeholder involvement government policies, etc.). ​ Unrealistic goals ○​ Evaluating past and present demand trends. ​ Inadequate communication and execution ○​ Forecasting future demand using statistical methods. ​ Unanticipated market changes Supply Analysis Group Exercise (Progress Report 1) ​ Sources of supply: ​ Finalize: ○​ Local production 1.​ Brand name choices ○​ Imports 2.​ Description of uses and target markets ○​ Product substitutes 3.​ General plan for obtaining demand and supply data ​ Supply projections follow similar methodologies to demand projections. Feasibility Study Outline Pricing Considerations 1.​ Introduction ○​ Product/Project Description ​ Legal pricing laws ○​ Industry Assessment ​ Consumer behavior 2.​ Market Feasibility ​ Competitor pricing policies ○​ Competitor Analysis (4Ps: Product, Price, Place, ​ Seasonal demand variations Promotion) ​ Profit targets ○​ Target Market Selection ○​ Demand and Supply Analysis Distribution System ○​ Pricing Strategy ○​ Distribution System ​ Path from production to consumers: ○​ Promotional Strategies ○​ National distributors ○​ Evaluation of Marketing Feasibility ○​ Regional/provincial distributors ○​ Municipal wholesalers ○​ Retailers Promotions ​ Marketing efforts include: ○​ Advertising ○​ Public relations ○​ Discounts and special offers ○​ Trade fairs and exhibitions ○​ Packaging design Marketing Plan ​ Guides future marketing efforts for a specific time period (usually one year). ​ Includes: ○​ Clear objectives and strategies ○​ Assessment of threats and opportunities ○​ Comparison of planned vs. actual performance