Project Identification

Project Identification
Project identification is the process of brainstorming, analyzing, and
selecting a project to initiate as a preliminary step before the first
phase of the project life cycle begins. In many cases, the individual
responsible for identifying and pursuing a new project is also
responsible for creating the project proposal. This proposal
generally contains a final goal, cost and time estimates, and a list
of tasks and activities that are contained within the project.
 Project identification is the process of analyzing and assessing
project ideas and selecting one to initiate on behalf of your
organization.
 The project identification process is often split into multiple,
smaller stages for easier and more efficient completion.
 Project identification takes on different forms and varies
depending on the industry, the organization, and the project
manager in charge.
 Project Identification?
Project identification is the first step in setting up an enterprise.
Identification of a suitable project is very crucial decision as
the ultimate success of an entrepreneur depends upon the
right selection of the right project. Project identification is
concerned with the collection of data, compilation and
analysis of economic data for the eventual purpose of locating
possible opportunities for investment and development. So
project identification is finding out business opportunities
which are feasible and promising.
 Types of Opportunities
(A) Additive opportunities are those opportunities which make it able
to the decision maker to better utilize the existing resources
without involving a change in any character of business.

(B) Complementary opportunities involve the introduction of new

ideas and as such lead to changes in the existing structure up to
some extent.

(C) Break through opportunities involve a fundamental change both in

the nature and character of business. So in the case of additive
opportunities least amount of risk is involved as it involves least
amount of changes in the existing state of affairs. But the element
of risk is more in the other two types i.e. complementary and
breaks through opportunities, as they involve changes in existing
structure as well as nature and character of business.
 Goals of Project Identification?
 Understand Problems And Identify Root Causes
 Ensure Projects Align With Organizational Values
 Allocate And Coordinate Resources
 Determine Organizational Goals For The Future
 Sources of Project Ideas
 Study The Performance Of Existing Industries
 Export/Import Agencies
 Availability Of Raw Material And Skilled Labour
 Government Policies And Rules Regulations
 Study Of Economic, Social And Price Trends
 Trade Fairs
 New Technological Developments
 Possibility Of Revival Of Sick Units
 Draw Clues From Consumption Abroad
 Identified Unfilled Psychological Needs
 Various Government And Non-government Sources
 Sources of Project Ideas
 Study the performance of existing industries: A study of existing
industries provides information about the opportunities available
in that field. An analysis of the profitability and break-even point
of different industries will offer sufficient information about the
financial position of different industrial sector. So
entrepreneur can easily find out the capacity utilization and
profitability and future demand of those industries.
 Export/Import agencies: Export /Import agencies‟ statistical data
also provide information about the trends of export/Import of
various goods. Five to seven years study of data is helpful in
drawing a conclusion. If study shows higher proportion of import
of a particular product and shows increasing trend of that
product then it means import substitution can be produced.
If study shows increasing trend in an export of product then it
indicates high export potential for that product.
 Sources of Project Ideas
 Availability of Raw material and skilled labour: Availability of raw
material and skilled labour at competitive prices required for
various industries may throw up project ideas.
 Government policies and rules regulations: In any
country government plays a very important role. Government
plans of expenditure in different sectors provide useful
information about possible investment opportunities. The
department of industrial development
and government of India, publishes guidelines on industries which
is an important source of information to identify the scope for
new investments.
 Study of economic, social and price trends: A study of the price,
economic and social trends of the economy is also very helpful in
projecting the demand for various goods and services. Greater the
demand of the product, greater is the scope of its expansion.
 Sources of Project Ideas
 Trade fairs: for the purpose of knowing about new products
and developments, National and International trade fairs are
the important source for the entrepreneurs to
identify latest projects.
 New Technological developments: The main cause of
commercial exploitation is setting up research laboratories that
are engaged in identifying new products or processes which in
turn provide avenues for doing so.
 Possibility of revival of sick units: There are number of
industrial units in India which has been recognized as sick
industrial units. If internal factors involved behind the sickness/
weakness of industrial units and that unit still have the capacity
to become a financially sound then a capable entrepreneur can
take over that sick unit, survive it and convert
into financially sound unit with their entrepreneurial skills.
 Sources of Project Ideas
 Draw clues from consumption abroad: entrepreneur may identify the
project which are new to domestic market but extensively
used abroad, if he is ready to take higher risk. Entertainment parks,
fast food restaurants, big malls are few examples coming under this
category.
 Identified unfilled psychological needs: For some of well established
branded products, there may be unsatisfied psychological needs. New
products of a branded group being introduced and accepted by
consumers show that unfilled psychological needs to the customers.
 Various government and non-government sources: Various
publications of Government, research organization, consultancy
organizations, banks, export import promotion councils, and
international agencies contain data which may indicate prospective
ventures. An analysis of balance sheet and working results of existed
companies will be useful in knowing the industrial sectors that are
performing well.
 Stages/Steps of project identification
• Environmental scanning
• Generation of ideas
• SWOT Analysis
• Preliminary evaluation
• Corporate appraisal
• Profit potential of different projects
• Project selection
• Project objectives
 Need of project identification:
(a) Identified projects become the accelerator agents of
economic development.
(b) These initiate the development of basic infrastructure and
environment.
(c) They have long term beneficial consequences.
(d) Projects provide guidelines for future pattern of activities and
services to be undertaken by an enterprise.
(e) In the course of time, identified projects bring necessary
changes in the society.
(f) Project commitments are normally not revised.
(g) Projects also lead to socio-cultural development of the
people.
 Process of Project Identification:
Inputs
Outputs
Social Costs And Benefits
Location
Counselling Services

Inputs: In the process of identification of suitable project, first

of all SWOT analysis are to be done in respect of the resources
available at the disposal of entrepreneur. The various input
resources refer to raw materials, energy, manpower,
finance and organizational structure.
 Process of Project Identification:
Outputs: The study of output characteristics helps in determining as
to what the project will generate in the form of goods and
services, employment, revenues etc. The quantity and quality of
all these outputs should be clearly analysed before the proposed
project is undertaken.
Social costs and benefits: Every project has an impact on the society.
So it is essential to evaluate carefully the sacrifice which the
society will be required to make and the benefits that will accrue
to the society if the proposed projects are undertaken.
Location: It is also essential to take into account the tentative choice
of the location where the project proposed to be set up. In case of
medium and large scale projects, the location is normally decided
on the basis of project requirements. The selection of the project
should be made in the basis of promoter‟s background and
inclination.
 Process of Project Identification:
Counseling services: For selecting a suitable project, different
sources like government agencies i.e Entrepreneurship
development centers, Small industries service institute,
Technical consultancy organizations. Credit and financial
institutions, Non government agencies i.e Chamber of
Commerce and industry, Inter-institutional groups, Technical
consultancy organizations and International collaborations are
providing very useful counseling services to the
entrepreneurs.
 Corporate Appraisal
A corporate appraisal is a measurement of the readiness of that
corporation's internal culture to deal with external
environments and change. Specifically, a corporate appraisal
is when marketing strategists analyze aspects of the
corporation that have a direct effect on corporate-wide
strategy.
Corporate appraisal of project should be conducted in order to
make sure the availability of raw material, equipment, selling
and distribution costs and customer behavior in relation to
that project.
It is the process through which managers analyze the various
factors of their oranization to evaluate their relative
strengths and weaknesses so as to meet the opportunities
and threats of the environment
Corporate Appraisal
 Process of Corporate Appraisal
 Identification of Key Factors
 Identification of strategic importance of factors
 Assessing the strengths & weaknesses of key factors
 Preparing “ Strategic Advantage Profile”
 Relating Strategic advantages to strategy
 Strategic Factors in Corporate Appraisal
• Marketing and Distribution
– Market Image
– Product line
– Market share
– Distribution share
– Customer loyalty
– Marketing and distribution costs
• Production and Operations
– Condition and capacity of plant and machinery
– Availability of raw materials, sub-assemblies and power
– Degree of vertical integration
– Locational advantage
– Cost structure
 Strategic Factors in Corporate Appraisal

• 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
– Clout with governmental and regulatory agencies
– Dynamism of top management
– Competence and commitment of employees
– State of industrial relations
 Strategic Factors in Corporate Appraisal

• Finance and Accounting

– Financial leverage and borrowing capacity
– Cost of capital
– Tax situation
– Relations with shareholders and creditors
– Accounting and control system
– Cash flows and liquidity