FYBCOM Sem 1 Commerce Chapter 6 Notes | Project Planning | Mumbai University

FYBCOM Sem 1 Commerce Chapter 6 Notes
(Project Planning)

1) What is business planning? Explain the steps in business planning.

Answer : Business planning is a process that involves the creation of a mission or goal for a company as well as defining the strategies that will be used to meet those goals or mission. The process of business planning can be very broad, encompassing each aspect of the operation, or be focused on particular functions within the overall corporate structure.

i) A Business plan is a document that is designed to serve as an overview of how a company will operate and grow its business. A typical business plan contains an executive summary, product or services description, the makeup of the company’s management team, market and competition breakdown, marketing and sales strategy and financial planning and forecasting.

ii) STEPS IN BUSINESS PLANNING PROCESS : The following are the important steps in business planning process.

1) Analysis of Internal Environment :
In this stage the entrepreneur must analyse the internal environment prevailing in his firm. He must analyse the quality of manpower, machines, etc. He must also analyse management and labour relations, working conditions, management policies and practices, etc. Such analysis indicates strengths and weaknesses of the organization.

2) Analyse the external environment :
The next stage in business planning process is analyse the external environment. In include analysis of government policies, competitors’ strategies, customer preferences etc. Such analysis indicates opportunities and threats to the firm. Therefore the entrepreneur must analyse the external environment.

3) Set Corporate Objectives :
The entrepreneur must set corporate objective in line with mission and vision of the organization. The objectives may be short term, medium term and long term i.e. one year, 3 to 5 year and more than five year respectively. The objectives must be specific, realistic, measurable, attainable, and time bound.

4) Formulate Strategy :
The entrepreneur and his management team must formulate strategies. A strategy is a long term plan to achieve long term objectives. The corporate strategies are framed by the top management, the divisional heads, the departmental heads and lower level managers.

5) Analysis of Strategies & Plans :
The management must analyse the strategies and plans. Cost benefit analysis must be conducted of each and every strategy on plan. Costs can be analysed in terms of production, distribution, and administration expenses. Benefits can be analysed in terms profits, market share, sales, goodwill, etc.

6) Selection of best Strategy :
The information from the research will lead to formation of the strategy you choose for your business. Revisit the strategy you created even before your research and dig deeper into decisions on appropriate marketing. Operations, and hiring for the first five years of the company’s life. The entrepreneur must select the best strategy or plan.

7) Implementation :
The entrepreneur must make suitable arrangement to implement the strategy. Implementation of strategy involves organising and allocation of resources to various activities. Directing and motivating the subordinates to perform effectively.

8) Review :
Revisit the entire plan to look for any ideas or wording that is confusing, redundant or irrelevant to the points you are making within the plan. There must be periodic review of performance. The review is required to find out whether the organization is on the right track to achieve objectives. If required necessary modifications may be made in the strategy.

2) Discuss the importance of project planning.

Answer : Project planning is a process of designing a project in an orderly manner. It means determining the route or the manner in which the project is to be executed. The systematic execution of a project is just not possible without accurate project planning. Project planning starts with the discovery of a business opportunity and comes to an end with the completion of all details required for execution.

i) Project planning is the result of detailed investigation various aspects i.e. technical, managerial, marketing and financial of the proposed business activity. Project planning is essential in the case of new project as it gives basic data required for the scrutiny of the proposed project and also for the execution of the project. It brings safety to the project and inures orderly completion.

ii) IMPORTANCE OF PROJECT PLANNING : Project planning provides the blue print for starting and managing the project. Following are the importance of project planning.

1) Time management :
It estimates the time required for a project to finish through the time management plan. It is essential to complete the project within specified time in order to achieve the predetermined objectives. Project planning specifies the time required for each and every activity right from establishing the enterprise to undertaking production activity.

2) Achievement of strategic goals :
Every successful project delivers your future organization and helps it to accomplish its strategic goals. It organizations must flourish and keep up with competitive, its members must be effective at project management. Appropriate, careful planning will ensure that projects will not over run deadlines and pile on unexpected costs. Such a situation would only endanger the anticipated corporate benefits of the Organisation.

3) Innovation :
Project planning may encourage creativity or innovation. For example, if the project planning targets are highly challenging, the employees of the company need to come up with innovative ideas to face the challenges and achieve the target.

4) Identifies Risk :
It identifies possible risks during the course of the project and makes preparations in case those risks may happen through the risk management plan. It is always better to have an insight about the possible financial, social, physical etc. risk involved in promoting and developing the project.

5) Better coordination :
It coordinates multiple resources within time and cost restraints almost accurately. For any production activity to be commenced various factors of production are required. Project planning brings clarity in acquiring and utilization of finds thereby ensuring proper coordination.

6) Specifies Quality :
It gives a clear detail on the standards of the projects and what should be expected from the project through quality management plan. People working down the hierarchy become aware of the standard that is expected about the product and their performance.

3) Explain the importance of project report.

Answer : A project report is a written document containing complete information about the proposed project in summary form. It serves as the base for feasibility studies and actual execution of the project. It is generally prepared by the company’s own technical experts and professionals, or by outside experts or consultants like Consulting Engineer, Management Consultants, and Chartered Accountants.

i) A project report is very useful to know in detail the technical, marketing and other issues relating to the proposed business proposal. It is useful while submitting proposal for government license and permission.

ii) IMPORTANCE OF PROJECT REPORT : Following are the importance of project report.

1) Facilitates feasibility study :
Project report is useful as a base for feasibility study of proposed project. It helps the entrepreneur to evaluate the soundness of the project on technical and on commercial lines. Every project is subject to risk. The entrepreneur will conduct cost benefit analysis of the project. Only if the project is feasible, then only the entrepreneur may decide to venture in the proposed project.

2) Useful for securing bank loan :
Project report is useful for taking bank loan for the execution of the project. It is useful for obtaining loans and advances from banks and financial institutions. Banks would provide loans only after careful analysis of the project report.

3) Securing Government permission :
Project report is useful while submitting the proposal for government permission, licence, etc. Project report is also required to be submitted to the government authorities for obtaining government licence, permission and various government clearances.

4) Acts as a controlling device :
Project report is useful as a controlling device. It is useful for monitoring the project while under execution. It acts as a controlling device to check the project progress and the project expenditure. Corrective measures can be taken if there are any deviations between planned expenditure and actual expenditure of the project.

5) Facilitates investment decisions :
Project report is useful to the promoter to take investment decisions as regards the project to be executed. It is also useful for the investors who provide capital to the proposed project by subscribing to the shares and debentures. The investors may analyse the project report to decide whether or not to invest in such a proposed project.

6) Facilitates Suppliers :
Project report is useful to the suppliers of raw material on credit, technical supports and workshop etc. The suppliers of equipment on credit or on hire-purchase basis may also require project report to understand the soundness of the project. They may provide the equipment on rent / credit only when the project has potential in generating funds to repay the credit amount.

4) Discuss the various types / areas of feasibility study.

Answer : Feasibility study of a project refers to finding out the practical utility or the future prospects of a project. It is an impartial and a scientific study of the project before its final selection. Feasibility study is undertaken by experts. It may also be undertaken
independently by banks or financial institutions.

i) TYPES / AREAS OF FEASIBILITY STUDY : Following are the important types / areas of feasibility study.

1) Technical feasibility study :
Technical feasibility relates to the technical aspects of the project. Location, size, layout and technology are the important aspects which are considered in the technical feasibility study. Certain basic requirements of the project such as water supply, fuel, transport, waste disposal are also considered while conducting technical feasibility study. Location is an important consideration, because project fails when located at an inconvenient place. It is also possible to alter or improve the project from such technical feasibility study.

2) Economic / Market feasibility study :
Economic feasibility study relates to the market and marketing of proposed product. This feasibility study begins with an estimate of market demand which should be as accurate as possible. Over-estimation of demand results in over-investment and low return on the investment made. The success and profit of a project largely depend on the market available for the product both at present and in future. The market potential is extremely complicated due to rival producers, market competition and substitutes available.

3) Commercial / Financial feasibility study :
Commercial feasibility study relates to the financial aspects of the project. This study is concerned with capital cost estimates, working capital needs, sales revenue, earning estimates, cash-flow studies and availability of funds for the execution of the project. Financing agencies like banks and financial institutions are interested in the profitability of the project as recovery of loan given is directly related to profitability of the project.

4) Legal Feasibility Study :
Legal feasibility study not necessarily last, but all projects must face legal scrutiny. When an organization has either internal or external legal counsel, such reviews are typically standard. However, a project may face legal issues after completion.

5) Managerial Feasibility Study :
Managerial feasibility study needs to be studies while preparing the technological and economic feasibility study. It is advisable to ensure that all ingredients of efficient management are taken into consideration in the proposed project. The managerial personnel at all levels need careful consideration in this study. The success and profitability of the project partly depend on managerial competence.

5) What is a feasibility study? Explain its importance?

Answer : Feasibility study of a project refers to finding out the practical utility or the future prospects of a project. It is an impartial and a scientific study of the project before its final selection. Even the government agency may conduct feasibility study before granting licence, permission or financial assistance to a new project. Such a study is necessary and useful especially in case of large projects which need huge financial investment. The basic purpose of feasibility study is to find out whether the project is technically, economically, financially and managerially sound.

i) IMPORTANCE OF FEASIBILITY STUDY : Following are the importance / advantages of feasibility study.

1) Facilitates selection of best project :
The sponsors may have two or three project in hand. They may undertake feasibility study of all the three and compare their feasibility reports. They can easily select the best project or the most promising project and execute the same on priority basis.

2) Suggests future prospects :
Feasibility study is a complete check-up of the proposed project. It tells clearly its worth, its future success and its practicability and future prospects. This is beneficial to the sponsors of the project. The sponsors know the possible success or failure of the proposed project well in advance.

3) Avoids wastages :
Feasibility study is an effective way to safeguard against wastage of further investment resource. Wastage of resources on unsound defective project is avoided due to timely feasibility study.

4) Ensure Safety :
Feasibility study gives more safety and security to the sponsors of the project. It provides the stakeholders with evidence that the project will be viable. Therefore, it helps in securing funding from lending institutions and other investors.

5) Provide information :
Feasibility study provide necessary information for decision making relating to the operations of the proposed project and other activities in the organization.

6) Cost of business plan reduce :
The research and information of the feasibility study will support the business planning stage and reduce the research time. Hence, the cost of the business plan will also be reduced.

6) Write short notes:

a) Feasibility study.
Answer : Feasibility study of a project refers to finding out the practical utility or the future prospects of a project. It is an impartial and a scientific study of the project before its final selection. Feasibility study is undertaken by experts. It may also be undertaken
independently by banks or financial institutions.

i) Even the government agency may conduct feasibility study before granting licence, permission or financial assistance to a new project. Such a study is necessary and useful especially in case of large projects which need huge financial investment.

ii) Such a study is necessary and useful especially in case of large projects which need huge financial investment. The basic purpose of feasibility study is to find out whether the project is technically, economically, financially and managerially sound.

b) Steps in business planning process.
Answer : Business planning is a process that involves the creation of a mission or goal for a company as well as defining the strategies that will be used to meet those goals or mission. The process of business planning can be very broad, encompassing each aspect of the operation, or be focused on particular functions within the overall corporate structure. The following are the important steps in business planning process.

• Analysis of Internal Environment :
  The entrepreneur must analyze the internal environment of their firm, including manpower, machinery, management, and working conditions, to identify strengths and weaknesses.
• Analyse the external environment :
  They must also analyze the external environment, including government policies, competitors’ strategies, and customer preferences, to identify opportunities and threats.
• Set Corporate Objectives :
  The entrepreneur sets corporate objectives, which should be specific, realistic, measurable, and time-bound.
• Formulate Strategy :
  They formulate a long-term strategy, which is then analyzed by top management, divisional heads, departmental heads, and lower-level managers.
• Analysis of Strategies & Plans :
  The strategy is then selected based on research and considerations such as marketing, operations, and hiring.
• Selection of best Strategy :
  The entrepreneur must then implement the strategy, organizing and allocating resources to various activities.
• Implementation :
  The entrepreneur must effectively implement their strategy by organizing and allocating resources to various activities, and directing and motivating subordinates to perform effectively.
• Review :
  A periodic review of performance is necessary to ensure the organization is on the right track to achieve objectives.

c) Project report.
Answer : A project report is very useful to know in detail the technical, marketing and other issues relating to the proposed business proposal. It is useful while submitting proposal for government license and permission. A project report is a written document containing complete information about the proposed project in summary form. It serves as the base for feasibility studies and actual execution of the project.

i) It can be prepared in a standard form or as per specific needs of the clients it should be drafted with proper care. It must be self-explanatory for which tables, charts, engineering maps and drawing etc. can be attached to the report. Bank and other financial institutions insist on such project report along with the loan application for the project. Many banks have their printed project report forms.

ii) Many banks have their printed project report forms. The concerned party has to supply information in this form and attach the completed form to the loan application. Financial institutions need project report because the lending institution certainly desires to study the soundness of the proposed project before granting a loan. The financial institution appoints experts staff for the scrutiny of project reports.

d) Project planning.
Answer : Project planning is a process of designing a project in an orderly manner. It means determining the route or the manner in which the project is to be executed. The systematic execution of a project is just not possible without accurate project planning. Project planning starts with the discovery of a business opportunity and comes to an end with the completion of all details required for execution.

i) Project planning is the result of detailed investigation various aspects i.e. technical, managerial, marketing and financial of the proposed business activity. Project planning is essential in the case of new project as it gives basic data required for the scrutiny of the proposed project and also for the execution of the project. It brings safety to the project and inures orderly completion.

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