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Q.1 a. Discuss the resources required to implement a project.

Project Constraints

The primary purpose of a project is to deliver a product and/or service to a customer within a specified time, cost,

detailed scope and performance requirements, as contracted with the customer.

The below table represents the constraints that characterise a project.

Project Constraints Characteristics

Constraints

Characteristics

S(Scope) Magnitude or size of the project.

P(Performance) Functional requirement and Technical

requirements (Quality requirements

are included).

C(Cost) Total cost incurred for the project.

T(Time) Time specified to complete the project.

Resource Total resource available for the project.

The relationship between these four constraints is given by:

C = f (P,T,S, R)

This implies that Cost is a function of Performance, Time and Scope.

An overview of Cost, Performance, Time and Scope, are given below:

Cost: The total project cost is the sum of total costs of all the resources required to complete the activitiesof the project.

Performance: The process of defining performance requirements of a project is a major part of projectdefinition.

Time: The time of completion for a project is generally specified by the client. The cost of a project isinversely related to the specified time.

Scope: Scope refers to the end product or the deliverables required from the projectResources

The most important step in arriving at the relationship between the four constraints is to make an accurate

assessment of the resources required,

and the project costs. Resources required can be classified under four categories:

Manpower Material Tools and Plants Infrastructure

Work

Work is the total of all the tasks that needs to be performed to deliver the project on time. It is correlated to the

size of the scope of the deliverable products.

Every resource has a cost associated with it and the sum of these costs forms a part of the total project cost.

Q.1.b Illustrate the functions of a project manager

Project Manager

A project manager is a person who facilitates smooth workflow of the project that is delivered to the clients timely.

They are responsible for planning, execution and closure of a project. A project manager possesses a combination

of skills as well as the ability to make assumptions and resolve any personnel conflicts.

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The project manager ensures that necessary resources are available for the progress of the project work. Thus, a

project manager is a critical resource in the project team and is responsible for taking timely decisions so that

project risks are managed well and uncertainties are reduced

Functions of a Project manager are as follows:

It is important that a hierarchy is maintained in the organisation to report any project related issues to thetop management such as status of the work, suggestions, or any other factors. However, it is important

that the issues are reported systematically and in order. The following steps illustrates the role of variousmembers associated with the team Also, in some projects, where deploying manpower could be a

problem, one person could execute more than one of the roles mentioned below:

Project Expeditor: Responsible for monitoring and reporting the status of the project to the seniormanagement. However, this role has no authority. A project expeditor acts only as a communication

coordinator and does not possess the rights to enforce any decisions.

Project Coordinator: The role is similar to that of a project expeditor. However, the project coordinatorhas some limited authority to make decisions.

Programme Manager: The programme manager is also called as the change manager. The programmemanager ensures that the delivery of projects benefits the business of the organisation. The programme

manager has command of all the managers and leaders responsible for monitoring the project.

Project Manager: Manages individual projects assigned. The project manager has project leaders asreporting employees.

Project Leader: Responsible for managing the different stages of the project. A project leader can reporteither to a project manager or to a programme manager or to both.

Key Qualities and Skills of a Project Manager

1. Leadership ability2. Ability to steer team growth3. Ability to take decisions4. Ability to manage the finances of the project5. Commitment6. Excellent communication skills7. Good interpersonal skills (Individual Skills)8. Technical Skills9. Problem solving skills10. Time management skills11. Agency responsibilities12. Understanding the nature of the project13. Conforming project feasibility14. Defining and setting the project scope15. Setting goals16. Assigning roles and responsibilities

Q.2.List the project management processes involved in the planning process group .

Planning Process Group

Planning is a major process group as it involves the process of doing something that has not been done before and

forms the basis for carrying out the subsequent processes. Hence planning contains more processes than other

process groups.

The planning process group and its constituent processes and interactions are used to plan and manage a

successful project for the organisation.

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The above figure shows the effort spent in planning through the project life cycle. All the planning processes

involved in a project, form part of the planning process group. Moreover, the planning processes may be repeated

before the completion of planning. For example, if the initial completion date of the project is not acceptable,

project resources, cost or even scope may be redefined in order to reach an acceptable completion date. Planning

is not specific, that is, two different teams can generate very different plans for the same project.

The project management processes involved in the planning process group are:

Scope planning: This process creates a project scope management plan that documents how the project scope will

be defined, verified and controlled.

Scope definition: This process develops a detailed project scope statement for future project decisions.

Create Work Breakdown Structure (WBS): This process divides the major project deliverables and project work

into smaller, more manageable components. The scope statement is the input to this process. Creating the Work

Breakdown Structure (WBS)3 improves the accuracy of cost, time and resource estimations. The success or failure

of a project is largely determined by the degree of clarity in the scope statement, based on which the WBS is

generated.

Activity definition Activity sequencing Activity resource estimating Activity duration estimatingSchedule development Cost estimating Cost budgeting Quality planning Human resource planning Communications planning

Q3. Describe the approaches that are used to screen projects

Screening of Projects

When an organization evaluates a large number of projects regularly, preliminary screening is performed using a

project rating index. Table 1 shows a sample project rating index which is filled in, to evaluate the project. Project

rating index involves the following steps:

1. Identify factors relevant for project rating.

2. Assign weights to these factors depending on their perceived relative importance.

3. Rate the project proposal on various factors, by the use of a suitable rating scale (5-pont scale, 7 point scale, or 9

point scale).

4. Multiply each factor, rating with the factor weight to get the factor score.5. Get the overall project rating index by adding all the factors.

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6. Compare the project rating index with a predetermined hurdle value to judge whether the project is prima-facie

feasible or not

Table1 : PROJECT RATING INDEX

Factor Factor Weight Rating

(on a 5 scale)

Factor Score

Reasonableness

of Cost

0.35 5 1.75

Technical Know-

how

0.2 3 0.6

Dependence on

Companys

strength

0.3 4 1.2

Change in

Consumers

preferences

0.15 3 0.45

Total weight = 1.0 Project score = 4

The maximum possible score for a project is 5, and if the hurdle value is set as 3, the project passes the initial

screening. Sometimes it may be difficult to give weights and ratings to the factors. This happens when there is a

number of variables involved that affect the measure of each factor that a project or strategy would yield. In such a

case, the priority matrix is worked out by comparing whether project A is better than project B (designated by 1 for

project A and 0 for project B it is called a binary digit approach or a paired comparison). The same is done by

pairing various projects. As an example, the final matrix for projects A, B, C, D is depicted in table 2

Table 2: Example of a Priority Matrix

Project A B C D Total RankA x 1 0 1 2 1

B 0 x 1 1 2 2

C 1 0 X 0 1 4

D 0 0 1 X 1 3

Using the rating in the matrix shown in table 6.6, the following is concluded:

Project A is superior to Project B, inferior to Project C, and superior to Project D. Project B is superior to Project C, superior to Project D. Project C is inferior to Project D.

The row with the highest total is the first choice and the row with the lowest total is the last choice. If two rows

show the same total, project choice is based on the rank.

Net Present Value (NPV) as Project Selection Criterion

NPV is the present value of the future revenues after deducting future costs. This is a very popular and valid

method for selecting a project from the financial viewpoint. Some factors that companies use to enhance NPV are:

Government policy. For example, special tax benefits and exemptions for an industry or a location. Economies of scale: In manufacturing, unit cost is substantially reduced by adopting high production

volume. For example, petroleum refining, steel production, and mining.

Product differentiation: This is achieved by innovative product features, high quality products, customisedservice and so on.

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Technology superiority: DRL outperformed its competitors in the drug-manufacturing industry because of

their technology based on research and development.

Q4. What are the various factors to be considered while acquiring a project team

Characteristics of Project Team Members

A project manager is responsible for managing the various tasks and processes to meet the project delivery in thedefined time. The various responsibilities of a project manger include

Planning: The project manager is responsible for defining the goals and objectives of the organisation. Theproject manager then communicates with the other members of the team regarding the objectives set

and the tasks that has to be accomplished.

Organising: Organising is an essential responsibility of the project manager. It ensures that the resourcesthat are required to for smooth working of the project are well secured and organised. Thus, the

organisation should be structured in such a way that the members of the team are motivated to perform

their work.

Controlling: The project manager should be able to monitor and control the process to keep track of thestatus of the work. It ensures that the progress, schedule, procedures and cost of the project are well

monitor.

The success of the project is based on the efficiency of the team. However, the success of the project requires good

monitoring skills, leadership skills, project planning skills.

The project is said to be well programmed if it allows ability to meet the needs of the customers.

The accountability of delivering the product with the expected quality relies on all the members of the team with

the following constraints described in the table below are taken into consideration:

Table :Quality Constrains

The successful completion of the project is not the sole responsibility of the project manager alone. However, it

requires that the members participating in the team also play an effective role in meeting the success of the

project delivery.

The various characteristics of the team members of the project include:

Clear understanding of the objectives of the project. Self understanding of the roles and responsibilities of the project. Result orientation performance. Exhibit high degree of co-operation and trust.

The most important aspect in the process of managing the project includes delegation. Delegation facilitates the

team to achieve the objectives of the project. It ensures that the members of the project achieve the outcome that

is expected to carry out with the tasks that have been allocated, successfully.

The members of the team should have enough workspace to make small decisions on their own, to take ownership

of their work that motivates self progress in meeting the deadlines of the project. This helps the team members toplan various methods and procedures to follow on their own.

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Q5. a. Explain the steps that the project manager has to take to manage people.

A project manager should possess good people management skills which include having the discipline and the

general management skills to make sure that people adhere to the standard processes and procedures.

Leadership skills should be established to get the team to follow the project managers direction. Leadership is all

about conveying a vision and getting the team to accept it and strive to get there with the project manager.

Reasonably establishing, challenging and expecting from people, and holding them responsible for meeting theexpectations involves providing good performance feedback to the team members. The project manager should

have the team building skills so that people can work well together and feel motivated to work hard for the sake of

the project and their team members. The bigger the team and longer the project, the more vital it is to have a good

team-building skills. A proactive verbal and written communication skill includes good and active listening skills.

The project manager is held responsible for the success of the project. He will have to try and resolve teams poor

morale and also find ways to overcome the missing deadlines. The project managers will be held responsible if the

team members do not understand what they have to do.

Q.5b. Describe the strategy planning tool of Ansoff matrix.

Ansoff Matrix

The Ansoff matrix (originator Igor Ansoff in 1957) presents the product and market choices available to an

organisation. The Ansoff matrix is used to aid decision-making concerned with market expansion and

diversification.

Markets may be defined as customers, products, or items sold to the customers. It considers two factors:

Newness of the product to the company. Experience of the company with the intended market.

The below table shows the four corporate strategies using an ANSOFF Matrix.

ANSOFF Matrix (Source: Corporate Strategy by Igor Ansoff)

OLD Product

OLD Market-Market Penetration

NEW Product

Related Diversification-OLD Market

(Product Development)

OLD Product

NEW Market-Expansion

(Market Development)

NEW Product

Unrelated Diversification-NEW Market

The explanations for the four strategies mentioned in the quadrants of Table are in the below table.

Strategy Explanation

Market Penetration Requires an increase of existing market

share in existing markets.

Market Expansion Requires identification of new customer

for existing products.

Product Expansion customers Requires development of new products

for existing customers (Related

diversification).

Diversification Markets Requires production of new products

for new markets (Unrelated

diversification).

Based on management of time availability, skill of personnel, and fund mobilisation capacity the company decides

to adopt one or more of the four strategies. The fourth strategy provides high growth potentials but requires

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careful planning and analysis prior to taking any decision. If the firm decides to expand in all four areas, some of its

businesses could end up being badly managed.

The limitation of Ansoff matrix is that the matrix tells us one part of the strategy story, but it is imperative to look

at other strategic models like Strength Weakness Opportunity and Threat (SWOT) analysis in order to view how the

strategy changes in the future.

Q6. Write notes on the various discounting and non-discounting techniques applied in financial

analysis of projects

We can broadly divide the financial viability criteria in two categories as under:

Discounting criteria: These criteria consider the time value of money. The discounting rate to be used forthis computation is popularly accepted as the cost of capital in percentage (k).

Non-discounting criteria: These criteria do not consider the time value of money i.e, is the future yearscash flows are considered on the same footing as the investment or cash flows in the initial year or years.

Discounting Criteria

Net Present Value (NPV)

NPV is the present algebraic value of all future cash flows discounted at k. The formula for NPV is:

The project is accepted if NPV is positive and rejected if NPV is negative. Point of indifference if NPV = 0

Modified NPV (NPVn)

The assumption in the NPV method above is that the cash flows are reinvested at a rate of return equal to k i.e.

cost of capital. In case the reinvestment rate is r, if the Terminal Value (TV) of the cash inflows of the project has

to be computed, then TV has to be reduced to its present value and the NPV will be equal to the present value of

TV minus the present investment (assuming the entire investment is made in year 0).

Internal Rate of Return (IRR)

The IRR is the discount rate (k) at which NPV=0.

IRR is also known as yield on investment, marginal efficiency of capital, marginal productivity of capital etc.

Modified IRR (IRRn)

The IRR method shown above is based on the assumption that the cash inflows of the project are reinvested at the

same IRR rate. If the reinvestment rate (r) is different, then the modified IRR i.e., IRRn is to be computed aftercalculating TV as explained in the NPVn method above.

Benefit-Cost Ratio (BCR)

BCR is also known as Profitability Index (PI). This is the ratio of the present value of future cash benefits to the

initial investment. The present value of future cash benefits is computed using the same as the time-value of

money technique used in the NPV method. The NPV method computes the difference between the Present Value

(PV) of the future cash benefits and the initial investment, whereas the BCR method calculates the ratio of future

cash benefits to the initial cash flow.

Net benefit cost ratio (NBCR)

The formula for NBCR is :

NBCR=BCR-1

It measures the ratio of the net benefit of the project rather than the gross benefit. It is advantageous when capital

rationing is used.

The project is accepted if NBCR is positive, rejected if NBCR is negative and at point of indifference if NBCR = 0.

Discounted Payback Period

In this method, the present values of future cash flows are calculated and added. The number of years for which

this total becomes equal to the initial investment is considered as the payback period. This can include a fraction of

the year. If the discounted payback period is less than the standard, the project is accepted and if it is more than

the standard, the project is rejected.

Non-discounting Criteria

Payback Period

Here, the future annual cash flows are algebraically added without considering the time-value of money. If the

annual cash inflows are equal, then,

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PaybackPeriod(Years)= Cost of Project/ Annual cash inflow from project

Criteria for project selection are the same as that mentioned under discounted payback period.

Average Rate of Return (ARR)

ARR is also called Accounting Rate of Return. It is given by the formula:

ARR(as%) = (Average Annual Profit/Initial Investment)* 100

A project with a higher rate of ARR is preferred.