Managing a Business/international business and entrepreneurship
Sir, i need to submit my assignment tomorrow below are the questions that i would be very obliged if u can answer
1.An entrepreneur wants to export different types of cut flowers to Japan and Korea. How will you find out the market potential for this products? What research tools you would use? Give reasons.
2.Discuss the role of ADB and World Bank during financial crisis of a nation.
1. “Project parameters namely time, cost and quality are to be planned carefully for any project. But most of the major projects were not successful. Discuss this statement with a major project.
2. “Project manager is a risk bearer”. Assign yourself as a project manager for metro rail projects in India. List out various feasibility studies to be conducted to avoid risks during the implementation of project.
If the answers dont fit in here could be mail them to me on my id. i.e.
1.An entrepreneur wants to export different types of cut flowers to Japan and Korea. How will you find out the market potential for this products? What research tools you would use? Give reasons.
Some definitions of primary sources:
1 Primary sources are original materials on which other research is based
2 They are usually the first formal appearance of results in the print or electronic literature (for example, the first publication of the results of scientific investigations is a primary source.)
3 They present information in its original form, neither interpreted nor condensed nor evaluated by other writers.
4 They are from the time period (for example, something written close to when what it is recording happened is likely to be a primary source.)
5 Primary sources present original thinking, report on discoveries, or share new information.
Some examples of primary sources:
1 scientific journal articles reporting experimental research results
2 proceedings of Meetings, Conferences and Symposia.
3 technical reports
4 dissertations or theses (may also be secondary)
6 sets of data, such as census statistics
7 works of literature (such as poems and fiction)
10 interviews, surveys and fieldwork
11 letters and correspondence
13 newspaper articles (may also be secondary)
14 government documents
15 photographs and works of art
16 original documents (such as birth certificate or trial transcripts)
17 Internet communications on email, listservs, and newsgroups
means gathering information directly from the consumers
which could involve
-using focus group [ face to face interview ]
-person to person interviews
-from the primary source.
-difficult to procure, sometimes.
-due to time/ cost factors, the amount of data gathering is restricted.
Secondary sources are less easily defined than primary sources. What some define as a secondary source, others define as a tertiary source. Nor is it always easy to distinguish primary from secondary sources. A newspaper article is a primary source if it reports events, but a secondary source if it analyses and comments on those events. In science, secondary sources are those which simplify the process of finding and evaluating the primary literature. They tend to be works which repackage, reorganize, reinterpret, summarise, index or otherwise "add value" to the new information reported in the primary literature. More generally, secondary sources
Some Definitions of Secondary Sources:
1 describe, interpret, analyze and evaluate the primary sources
2 comment on and discuss the evidence provided by primary sources
3 are works which are one or more steps removed from the event or information they refer to, being written after the fact with the benefit of hindsight.
Some examples of secondary sources:
1 bibliographies (may also be tertiary)
2 biographical works
4 dictionaries and encyclopedias (may also be tertiary)
5 dissertations or theses (more usually primary)
6 handbooks and data compilations (may also be tertiary)
8 indexing and abstracting tools used to locate primary & secondary sources (may also be tertiary)
9 journal articles, particularly in disciplines other than science (may also be primary)
10 monographs (other than fiction and autobiography)
11 newspaper and popular magazine articles (may also be primary)
12 review articles and literature reviews
13 textbooks (may also be tertiary)
14 treatises works of criticism and interpretation
means gathering information indirectly from the published source
which could involve
-using census data.
-buying published data from bureaus
-gathering data from stock exchange
-collecting information from company annual reports.
-from the secondary source.
-easy to source
-less time required.
-not so reliable.
-old data and not current.
-not current data.
Under what circumstances might the availability of secondary data make primary research unnecessary?
THE CIRCUMSTANCES INCLUDE
-data used for developing strategic planning.
-data used for developing corporate planning.
-data used for developing business planning.
-data used for developing marketing planning.
-data used for developing demand forecasting.
Estimating Market Potential Check-List
Estimating the market or market potential for a new business or business expansion is critical in determining the economic feasibility of a venture. Estimating the market potential will determine
if the market is large enough to support your businesses. This check-list will address a number of questions that need to be answered before an estimate can be calculated.
What type of customer will buy the product or service?
Where are these customers located?
How many potential customers (N) are there?
How often do they consume or use it?
What is the Competition?
What are people paying?
What is the Potential for the Market to Develop?
What is my share of the Market?
This check-list will walk you through estimating the market potential for your business and/or estimating the retail trade area market potential if you have a retail establishment by going
through these questions and providing
Estimating Market Potential
Estimating the market potential for a business is critical in evaluating its viability and provides an estimate of the maximum total sales potential for a given market. Once the estimated market potential has been calculated, it is possible to determine if the market is large enough to sustain
your proposed business or sustain an addition competitor in the marketplace. It is important to remember that the estimated market potential sets an upper boundary on the market size and can
be expressed in either units and/or sales. Unless there are no direct or indirect competitors, a business will capture a share of the total estimated market potential not all of it.
The following provide the steps and data necessary to estimate the market potential.
Key Steps in Estimating Market Potential:
1. Define your target market and market segments.
2. Define the geographic boundaries of your market.
3. Derive an average selling price.
4. Determine the average annual consumption.
Estimating the market potential for a business requires specific information on the number of
people or potential buyers, an average selling price, and an estimate of consumption or usage for
a specific period of time. Once this information has been collected, it can be plugged into the
following formula to derive the estimated market potential.
Estimating Market Potential: ; Where:
MP = market potential
N = number of possible buyers
P = average selling price
Q = average annual consumption
However, the better the information that is being plugged into the formula, the better the estimate
of the market potential. The variables in the above formula will be described in more detail as
well as more specific information on the types of information required will be provided later.
Retail market potential
If you are evaluating a retail establishment, a more refined method of calculating the retail trade
area market potential is available. The market potential for a retail establishment provided an
estimate of the maximum total sales potential for a specific retail operation in a given market. As
with the general market potential estimate, the market potential sets an upper boundary on the
market size and can be expressed in either units and/or sales. The following are the steps and
information that are needed to estimate the retail trade area market potential.
Key Steps in Estimating Market Potential:
1. Define your target market and market segments.
2. Define the geographic boundaries of your market.
3. Derive average expenditures for the category.
4. Determine the average household income for the area and state.
5. Estimate market share.
As with estimating the market potential for any business, estimating the retail trade area market
potential requires specific information on the number of people or potential buyers, an average
expenditure figure for the retail category, area and state income figures, and an estimate of
market share. Once this information has been collected, it can be plugged into the following
formula to derive the estimated retail trade area market potential.
Trade Area Analysis is a mean of evaluating the potential retail sales for a specific retail
operation can be estimated by using a standard formula:
ES= P x EXP x (ADI/MDI) x MS, where
ES = estimated sales
P = market area population
EXP = average expenditures for retail outlet category
ADI = area estimated average household disposable income
MDI = Georgia average household disposable income
MS= estimated market share
The following material will provide direction and information needed to estimate the market
potential. There are a number of factors that need to be investigated in order to derive the best
One of the most important components of estimating the market potential for a business is to
determine its target market. A target market can be thought of as the customers who are most
likely to buy from you and generally are described using demographic variables (gender, age,
education) as well as psychographic variables (lifestyle and belief system variables). In many
cases, a business may have more than one target market. Think about the automobile industry,
automobile manufactures have a number of target markets, i.e., truck buyers, luxury car buyers,
economy buyers. Your business should be able to develop specific profiles for each of your target
markets using demographic and psychographic variables.
The first method of describing your target market segments is using a set of demographic
descriptors like the following:
• Age • Marital Status • HH Income
• Gender • Race/Ethnicity • Family Life cycle
• Education • Religious Affiliation
It is important to create a profile of your target market describing them with demographic
variables like those listed above. Once you have created your demographic profile, you can
determine how many people fit your profile using various demographic data sources (see
Appendix A). It is important to note that creating a demographic profile does may not provide
specific enough information to accurately determine your market potential as it may be too
Sources of Demographic Information: Appendix A
The second profile is referred to as psychographic lifestyle and describes your target market
segment by their activities (work and leisure), interests (family, animals, environment, home, and
community), and opinions. The lifestyle profile is more important in predicting future patronage
than the demographic profile because it will determine what type of experience they are seeking.
Failure to meet these needs will result in loss of business. The following are a few psychological
• Socially conscious • Cutting-edge • Family-oriented
• Conformist • Power-wielding • Trend follower • Thrill seeker
• “Green” • Fun-loving • Fashion-forward • Sports enthusiast
Psychographic information is more difficult to obtain than demographic information. As a result,
it is less frequently used when determining a target market profile.
Sources of Lifestyle Information: Appendix B
Example: An individual would like to convert his family farm into a hunting plantation. The
farmer has done his research to determine both the demographic and psychographic profile of his
target market, avid hunters and fishermen. Combining these demographic and lifestyle
characteristics, you are able to develop a profile of one of your target markets below:
Race: White NASCAR fan
Age: 25-54 Owns a Ford Truck
Education: High school Camps and fishes
HH Income: $74,000 County Music
Marital Status: Married Boat
Home Ownership: mixed Outdoor Life TV Show
Market or Trade Area
The market area can be thought of as the geographic area where the business intends to operate,
i.e., a city block, between the rivers or the globe. Defining the market area is important because it
defines the geographic area where potential consumers live and/or work. However, not everyone
in the defined market area will be a customer. As a result, it is important to compare your target
market profile, generally described using demographics, to the population in the market area.
There are a number of ways to define a market area, some are easy and others are more difficult
and require the services of a marketing professional.
Methods of Defining Market: A market area is generally defined by geography, radius,
trade area or drive-time.
A. Geography is the simplest form of defining a market area. This method defines the
market area by using landmarks or logistical barriers to define the market area. The
following are easy-to-use geographical areas:
•City or County Boundaries
•Metropolitan Statistical Areas
•State (multi state) Boarders
2.Discuss the role of ADB and World Bank during financial crisis of a nation.
ADB and the World Bank operate within a broad, evolving, and increasingly complicated global aid architecture.
ADB was established in 1966 “to foster economic growth and co-operation in the region of Asia and the Far East ... and to contribute to the acceleration of the process of economic development of the developing member countries in the region, collectively and individually.” ). Its initial focus was on food and rural development projects but it quickly diversified its operations to include education, health, and infrastructure development. During the 1970s oil crisis, ADB began financing energy projects to increase energy security in the region. ADB financed its first equity investment in the 1980s and was a major player, together with the International Monetary Fund (IMF) and the World Bank, in responding to the Asian financial crisis in the late 1990s by supporting financial sector development and strengthening social safety nets. It was during this period that ADB made poverty reduction its key objective. Starting with 31 members in 1966, ADB now has 67 members, of which 48 are from Asia and the Pacific and 19 are from outside this region (ADB Annual Reports various issues).
The World Bank was created in 1944 to extend finance for the reconstruction of Europe
following the Second World War and subsequently to overcome obstacles facing developing countries trying to access international capital for development purposes. It now consists of five separate entities—the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Center for the Settlement of Investment Disputes (ICSID). IBRD and IDA constitute the core of the World Bank Group and provide financial and technical assistance for development in low- and middle-income countries through a suite of loans and grants across the entire range of development challenges facing poor countries—including health, education, infrastructure, agriculture, public administration, macroeconomic management, institutional development, governance, financial and private-sector development, environmental protection, and natural resource management (World Bank Annual Reports various issues).
Both the World Bank and ADB are actively involved in every low- and middle-income country in Asia and the Pacific, except North Korea and Myanmar—although in Myanmar, the two institutions have begun to assess the economic situation and provide broad policy advice. There is a similar overlap in sectoral involvement.
Coordination is therefore a key issue. At the Group of Twenty (G20) summit in Pittsburgh in September 2009, leaders called for greater coordination and a clearer division of labor between the World Bank and the regional development banks. They further stated that the World Bank and regional development banks take into account their comparative advantage, while improving coordination and efficiency, and minimizing overlap with other international financial institutions and private financial institutions (World Bank 2010).
Notwithstanding their similar objectives and overlapping responsibilities, coordination between the World Bank and ADB in Asia is not a simple matter. ADB has to coordinate country strategies with three different regional vice presidents of the World Bank (East Asia and the Pacific, South Asia, and Europe and Central Asia) as well as the country directors in each country; and coordinate sector strategies with the World Bank’s three major networks—poverty reduction and economic management, sustainable development, and human development. While procedures for coordination are elaborate and institutionalized, the quality of coordination depends on personalities in both institutions and, occasionally, the role of the country authorities.
The recent tripling of ADB’s authorized capital from $55 billion to $165 billion has significantly increased its financial strength (ADB Annual Report 2010). It is now, by far, the largest of the regional development banks and some of its financial indicators are approaching those of the World Bank. ADB’s authorized capital is some 60% of the World Bank’s, its net income in 2010 was two-thirds, and its total assets abut a third (Table 1). The chief difference between the two institutions is that ADB’s sustainable lending is significantly above its current level, while that of the World Bank is trending downward.
Table 1: ADB and the World Bank: Selected Financial Indicators
ADB World Bank b/
Lending in 2010 a/ 8.2 44.2
Disbursements in 2010 a/ 5.3 28.9
Outstanding loans a/ 43.6 129.5
Authorized capital 163.8 278.3
Outstanding debt 51.8 135.2
Total assets 100.2 312.8
Net income. 0.6 0.9
a/ To sovereign borrowers only.
b/ Excludes IFC.
Sources: ADB Annual Report (2010); World Bank Annual Report (2010).
It is more difficult to do a detailed comparison of ADB’s lending indicators with those of the World Bank’s Asian operations. Comparisons could only be made for two variables—commitments and disbursements (Figure 3).4 These show that ADB’s commitments and disbursements declined in 2010 while those of the World Bank increased. But the World Bank’s lending levels are not sustainable and are expected to decline in coming years, while ADB’s commitment levels are likely to remain at about $10 billion a year. This will make ADB the dominant multilateral development bank lender in Asia, barring any further capital increase for the World Bank in the near future (an unlikely proposition).
4. ISSUES AND OPTIONS CONFRONTING THE WORLD BANK AND ADB
Going forward, there are three issues that confront the World Bank and ADB in Asia that are more broadly symptomatic of the role of the World Bank and its relationships to all the regional development banks.
The first is the very fundamental issue of relevance. Given the declining role of official development assistance in overall capital flows to developing countries, and the diminishing role of multilateral development banks within that space, the World Bank and ADB should constantly re-evaluate the value they bring to developing countries through their operations. While there are biting critiques of aid in general, (Easterly 2006; Moyo 2009) within the international aid community, the overall assessment of the World Bank and ADB remains broadly positive.
Nevertheless, the two institutions face competition from two directions. The first is the growing importance of non-traditional donors, some of whom provide resources without the strings that come attached to World Bank and ADB lending. But the two institutions argue that their resources also come packaged with development knowledge and global experience—and this contention is backed by surveys of client countries on the effectiveness of the two institutions.
But this raises the second concern—that the development knowledge space is becoming increasingly crowded with regional and international think tanks and consultancy organizations, academic institutions with centers focused on development issues, specialized agencies, bilateral technical agencies, and organizations such as the OECD–DAC. Although the World Bank and ADB continue to enjoy unique access to policymakers in many Asian developing countries, their comparative advantage is rapidly diminishing—especially in middle-income countries which have less need for their financing (and, therefore, feel less pressure to engage in policy dialogue), and in any case can afford to access the best technical knowledge available in the world wherever it may reside. Sometimes, this knowledge may reside in the World Bank and ADB, but often it does not. Moreover, increasingly Asian policymakers and their staff are just as qualified as their World Bank or ADB counterparts, sometimes more so, and often with more hands-on experience of policy issues and policy implementation.
In Asia, the World Bank and ADB face a particularly challenging situation. The rapid growth of Asian countries has meant that many have moved from low-income to middle-income status and consequently need fewer resources from the World Bank and ADB while demanding more responsive and more sophisticated knowledge inputs. In many instances, policymakers in these countries look to examples and experience of the developed countries, not just in policy formulation but also in policy implementation. But such expertise is less likely to reside in ADB and the World Bank and more likely to be found in government departments and implementing agencies of these countries. True, ADB and the World Bank could act as conveners, matching demand for knowledge with those who have the best expertise available on the subject. But this space is highly contestable too, and other agencies—private and public—are increasingly providing these services, sometimes more efficiently than the World Bank or ADB.
The second key issue confronting both institutions is governance. This is perhaps more keenly felt in the World Bank—where there has been considerable concern that the voting structure does not represent the increasing influence of developing countries. Recent increases in the shares of developing countries, particularly the PRC, has raised the share of developing countries from 42.6% to 44.1% to 47%, still short of parity with the developed (Part I) countries. In addition, African countries were given an additional seat at the World Bank’s Executive Board to bring the total number to 25.
The reality remains, however, that the voting power in the World Bank does not truly reflect the relative importance of member countries in the global economy. To boost its legitimacy, it will need to further revise its voting shares to bring the share of developing countries closer to their contribution to the global gross domestic product (GDP). A study has shown that whether a country has a seat on IBRD’s board of directors appears to be important not just because it confers prestige but also because it increases its normal loan allocation by nearly $60 million on average (Kaja and Werker 2010). The analysis shows that this does not stem from voting rights but could result more from the informal powers that executive directors and their alternate directors exert on the institution’s staff and management. Interestingly, the same result does not hold for IDA, suggesting that less discretionary mechanisms for allocating resources could overcome such governance problems.
Interestingly, ADB seems to have fewer criticisms on account of governance—even though the economy of the largest shareholder of the institution, Japan, is now smaller than that of the PRC, which has much fewer voting rights.
Moreover, in the selection of the heads of the two institutions, the United States has come under considerable criticism for continuing to push for its nominee to become the President of the World Bank even when the United States is both the largest economy in the world and is the World Bank’s largest shareholder. Yet Japan has not been subjected to similar criticism, even though it is no longer the largest economy in Asia and yet remains the largest Asian shareholder, and the President of ADB has always been a Japanese national.6
The third challenge confronting the World Bank and ADB in Asia is their relationship with each other in operational matters and in advising their Asian clients on development policies and strategies. Some would suggest that the comparative advantage of the World Bank and ADB differ. The former has a clear comparative advantage of working on global public goods (climate change, global trade negotiations, global migration, among others). The latter has an advantage in delivering regional public goods—such as the development of the Greater Mekong Subregion, the Chiang Mai Initiative, and support for the formation of the ASEAN Economic Community.
Clearly, the two institutions can and must coordinate on all these issues, in part to reduce the cost of operations and the burdens of Asian clients, and increase their development impact. The G20 made this point in the 2009 Pittsburgh summit. To achieve better coordination, both institutions can leverage off each other, make sure their support for Asian client countries are aligned and reinforce each other, and ensure they don’t duplicate services.
In reality, however, coordination and cooperation between the two institutions masks a hidden and unrecognized subtext of competition. Where the two have coordinated, the results have been impressive—such as when they worked together with the IMF during the 1997–1998 Asian financial crisis. Indeed, in all East Asian countries, ADB and the World Bank have agreed to carve out “areas of primacy” in which one or the other institution takes the lead in crafting a country sector strategy jointly with the client government and the other institution accepts the policy framework in its future operations. But friction remains between the two institutions—especially if they take different positions on the adequacy (or lack thereof) of policy reforms sufficient to meet tranche conditions for budget support operations, or when they have differences on sector strategies. But such differences are healthy if they are acknowledged openly and there are mechanisms in place to resolve them amicably. Unfortunately, there is a tendency to mask such differences in the interest of showing a common front vis-à-vis the client and in ensuring shareholders—most of whom are the same in both institutions—see the two institutions as working closely together.
1.“Project parameters namely time, cost and quality are to be planned carefully for any project. But most of the major projects were not successful. Discuss this statement with a major project.
"Managers do things right. Leaders do the right thing
Triangle of Objectives
A Project is a set of activities which achieves a specific objective (quality) through a process of planning and executing tasks (schedule) and the effective use of resources (budget).
A project has distinctive attributes which distinguish it from ongoing work or business process workflow.
While ongoing work is cyclic and repetitive, a project has discreet objectives and is funded only for the project life cycle.
Projects have a finite life span with a clear beginning and specified scope of work, including the desired end-result deliverables, end date and budget/ resource constraints.
Projects can be analyzed into a set of tasks laid out on a timeline. A complex project may have several strands of these timelines with different teams of people coordinating their activity to achieve the required deliverables at the date due.
Projects can be visualized as having milestones which define the required major steps of achievement (or deliverables) along the path toward final project completion. Milestones are important markers of progress that indicate if a project is on time or falling behind schedule.
Project management seeks to gain control over six main variables:
time, cost, quality, scope, risk, and people.
The three basic dimensions of project success are quality (end-results), time (schedule) and cost (budget). These are the issues that project managers are held accountable for:
Quality: fitness of end deliverables for purpose or specification level
Time: target completion date and schedule of tasks
Costs: budget and resource allocation
These three basic parameters are aggregated to define the Scope of Work,
the Risk factors in any project, and the way People are engaged.
Scope of Work: totality of work to complete a project (quality, time, cost). Change in various project parameters typically occurs, but these changes must be carefully managed and must not be so great that the project is covertly redefined. Agreement on scope between sponsor and project manager establishes a boundary within which resources and budget are allocated. Scope can be precisely defined in terms of the work breakdown structure and task analysis. An unknown or changing scope is a moving boundary that constantly redefines the project and the assumptions guiding allocation of resources. When scope cannot be precisely defined, it cannot be managed, and thereby becomes a significant project risk factor.
Risk Factors: potential harm to a project (quality, time, cost) that may arise from a process or a future event. A "risk" is the probability that a threat that will act on a vulnerability to cause an adverse impact. Risk management involves minimizing threats, vulnerabilities and/or impacts.
People: human resource (knowledge, skill and motivation) for implementation of tasks; a project team assembles special and general skills as resources to get the work done (quality, time, cost).
Of all of these components, people are the fundamental key to success because they provide the means to achieve project objectives. Staffing is the most adjustable resource in being able to dynamically respond to quality, cost and timing issues & constraints. In this way, staffing also represents the greatest risk factor — no matter what other budget, resource or time risks may also exist.
The dynamic trade-offs between these values has been humorously but accurately described by a sign at an automotive repair shop:
"We can do GOOD, QUICK and CHEAP work.
You can have any two but not all three.
1. GOOD QUICK work won't be CHEAP.
2. GOOD CHEAP work won't be QUICK.
3. QUICK CHEAP work won't be GOOD."
All project objectives (and tasks) must be SMART:
Specific: expressed clearly and singularly
Measurable: ideally in quantitative terms
Acceptable: to stakeholders
Realistic: in terms of achievement
Time-bound: a timeframe is stated
The power of project management is that it provides the most reliable method to achieve a target objective, on time and within budget.
Project Management is all about vision:
Seeing the end result so clearly and unambiguously at the beginning so that the logistics of production can be planned and the tasks executed
Sharing a plan (using unambiguous visual graphics showing status) constantly among project team and sponsors, so that decisions, approvals, agreements, and forecasts are made in advance of blocks to workflow (i.e., indecision, lack of commitment, lack of approval, lack of resources and budget, misunderstanding what must occur first in the chain of events).
The fundamental management skills that a Project Manager must be able to exhibit are:
1. Quality Control: Project Plan Development, Plan Execution, Integrated Change Control ; Quality Planning, Quality Assurance, Quality Control
2. Budgetary Control: Resource Planning, Cost Estimating, Cost Budgeting, Cost Control; Procurement Planning, Solicitation Planning, Solicitation, Source Selection, Contract Administration, Contract Closeout
3. Scheduling Control: Activity Definition, Activity Sequencing, Activity Duration Estimating, Schedule Development and Schedule Control
4. Scope of Work Control: Initiation, Scope Planning, Scope Definition, Scope Verification and Scope Change Control
5. Risk Control: Risk Management Planning, Risk Identification, Qualitative Risk Analysis, Quantitative Risk Analysis, Risk Response Planning, Risk Monitoring and Control
6. Communication & Leadership: Human Resource Management, Organizational Planning, Staff Acquisition, Team Development; Project Communications Management, Communications Planning, Information Distribution, Performance Reporting, Administrative Closure
Benefits of Project Management
Project Management (PM) provides a workflow system that unites all team members in shared principles and practice — a methodology of planning, control, coordination, communication and execution that provides ground rules for proven teamwork "best practices" and discipline.
PM software provides automated tools for task definition and layout, scheduling, resource allocation, tracking, report generation, and team communication. Project reporting technology has evolved from: (1) paper-based systems which were hard and expensive to keep up to date, (2) desktop software which made tracking and report generation more cost-effective, and (3) now to online web-based systems which provide the enormous benefit of dynamic real-time status reporting.
Using the PM methodology benefits the Project Manager, workgroup members, project sponsors, and the Team as a whole.
Project Management Life Cycle
Project Management is accomplished thorough the use of processes such as initiating, planning, executing, controlling, and closing. These are the fundamental skill sets of a Project Manager. The Project Management process covers all phases within the life cycle of any project. A standard project typically has the following major phases (each with its own agenda of tasks and issues):
Initiate -- process for developing a proposal, and authorizing (including assigning the initial budget allocation for) the project
Plan -- process to define the objectives, methods, timeframe, resources, constraints, and end-deliverables (renegotiation of assignments, authority, and budget will often occur when the fully developed plan is reviewed & signed by the project sponsor)
Execute -- process of coordinating people and resources to carry out the plan
Control -- process to ensure project objectives are met by monitoring, measuring, and reporting progress
Close -- process for formalizing acceptance of the project, final documentation, and bringing about an orderly conclusion
It is important to note that many of the processes within project management are iterative in nature. This is due to the necessity for progressive elaboration of detail decisions, and re-adjustment of resources and schedule throughout the life cycle. So phases in the Project Life Cycle can and will overlap.
The value of the following map is that it identifies key milestones which distinguish each phase. This way of describing the life cycle emphasizes that planning drives execution, and that controlling is interdependent with planning and executing.
In the real world, the Project Management lifecycle phases will almost always overlap. The following graphic more accurately illustrates how the tasks of the Project Manager change over time — in that the proportion of time and energy allocated to a particular role shifts as the life cycle progresses.
Work Breakdown Structure (WBS)
A Project Requirements document is typically used at the initiation of project to communicate to the Project Manager the project mission and scope, and enable the Project Sponsors (often with a signed Executive Committee approval) to allocate a budget and officially indicate acceptance, agreement, and start date. Failure to establish budget, scope and support at the outset will invariably lead to project crisis at a later date.
The Project Manager must then translate the initial "high-level" project definition into an itemized project plan that addresses the lowest levels of implementation details. The method for accomplishing this is the "Work Breakdown Structure" (WBS). A WBS document lists task deliverables and identifies all activities required to produce the final project deliverable(s). This is a critical process (and documentation) as it forms the basis for other management processes such as resource allocation, time scheduling, cost control, and risk management. Failure to conduct WBS basically means that a project management methodology has not been undertaken.
WBS is utilized to:
Break activities into smaller tasks
Identify the phases of activities, including milestone tasks which indicate completion of each phase
Sequence the tasks
Estimate the duration of tasks
Schedule the tasks
Identify the needed resources for each task
Estimate the resource costs
The WBS results in a official Project Plan for review and approval by sponsors. The WBS will ideally use a software instrument, like Microsoft Project, to create an automated Gantt chart. In a Gantt, inter-dependencies of tasks are indicated by cascading arrows (instances where one activity cannot begin until another is completed). Project milestones (time points that indicate a completion of key tasks or phases), and deliverables (defined and tangible outcomes of the project) are also clearly identified.
most of the major projects were not successful. Discuss this statement with a major project.
The current impressive project is the swanky Terminal 2 at the Chhatrapati Shivaji International Airport, Mumbai is all set to open in September this year.
The Terminal 2, or T2 has been built with a state-of-the-art four-level terminal with an area of over 4,39,000 sq. mts.
The new terminal built by Mumbai International Airport Pvt. Ltd. (MIAL), a joint venture between the GVK led consortium (74%) and Airports Authority of India (26%), will have new taxiways and apron areas for aircraft parking designed to cater to 40 million passengers annually
time, ---extended well beyond the planned time.
cost, ---cost was overrun and lack of finance has delayed the project
scope, ---planned scope
risk, -----high risk
People-----lack of talented staff
Which delayed the project further
2.“Project manager is a risk bearer”. Assign yourself as a project manager for metro rail projects in India. List out various feasibility studies to be conducted to avoid risks during the implementation of project.
Project activities risk management model
Activity or project risks are possible events or circumstances that can threaten the planned project course. Risk analysis is the most important tool used by project managers in project risk management.
The risk management processes model includes the following key activities of risk: identification, analysis, mitigation planning, mitigation plan implementation and tracking. The risk reporting matrix is used to determine the level of risk. the risk management process in nine steps.
Analysis of available models and methods of project risk management, supported by experience of project implementation in an industrial environment, led the researchers of the Laboratory for Manufacturing Systems at the Faculty of Mechanical Engineering in Ljubljana to create a project activities risk management model, shown in
Project activities risk management model.
The starting point was a review of the reference model analysis
Comparison of the two models showed the following differences:
• In reference’s model, risk analysis of project activities is carried out in nine steps:
• step 1: establishing the context,
• step 2: preliminary risk analysis,
• step 3: detailed risk identification,
• step 4: detailed risk analysis,
• step 5: detailed risk evaluation,
• step 6: risk treatment (planning),
• step 7: prepare risk management plan,
• step 8: risk monitoring and control,
• step 9: review.
• In the proposed model, risk analysis of project activities is carried out in seven steps, on the basis of guidelines in
• step 1: preliminary analysis of project risk management,
• step 2: project risk identification,
• step 3: activity risk identification,
• step 4: qualitative and quantitative analysis of activity risks,
• step 5: planning risk management measures,
• step 6: monitoring, recording, control and feedback,
• step 7: analysis, evaluation and archiving.
Overview of differences between the treated risk analysis models
• Additionally, the proposed model incorporates the most frequently used work methods that a project team can use to carry out a particular risk analysis step.
Preliminary analysis of project activities risks
The project team holds a creativity workshop in order to identify possible project activity risks in view of strategic, organisational and project goals, and to analyse important project participants and their influence on the risks.
There are project and business risks. Business risks mainly influence the decision on whether it is possible or sensible to carry out the project, while project risks influence decisions on how to carry out a project so that its execution is most effective bearing in mind the objectives and given circumstances.
The project team uses SWOT analysis to carry out this step. SWOT analysis defines strengths, weaknesses, opportunities and threats related to project execution and its risks.
On the basis of the SWOT-analysis results, the project team and the customer can decide either that the risk-level is acceptable (so the project will be carried out), or the risk-level is too high (and the project will not be carried out).
Project risk identification
The project team can select one of the following models for the identification of project risks
• Standard model, in which risk is defined with two parameters: risk event and its influence on the course of the project.
• Simple model, in which risk is defined with one parameter that refers to the risk event and its influence.
• Cascade model, in which risk is defined with risk event consequences and influences on the course of the project.
• Ishikawa model, in which sources of project risks and their corresponding risk events are defined. On the basis of this model, the project team identifies the risk sources and events that have the most influence on project implementation.
Analysis of practical use of the listed models has shown that the Ishikawa model is the most suitable for identification of product/service project risks. The model has the following advantages:
The Ishikawa model for identification of project risks.
• Companies already know the Ishikawa model as an effective tool for total quality management (TQM).
• The model gives a clear presentation of why project risks occur.
• Separated risk events allow preventive measures.
• The model supports the cause-and-effect concept.
Identification of project activities risks
For quantitative analysis of project activities risks, the project team can use data collection and presentation techniques, e.g., risk event – incidence, whereby the findings of previously completed similar projects are used, or a project activity risk breakdown structure
The project risk breakdown structure method is the most suitable for practical use. In it, the standard WBS project structure is extended by risks identified for a particular activity. If it is not possible to identify a risk related to a particular activity, the risk is omitted.
Breakdown structure of project activity risks.
Qualitative and quantitative analysis of project activity risks
Qualitative and quantitative analysis of project activity risks is carried out by evaluating), (Risk management guide for):
• probability that a problem or risk event will occur
• consequences of a problem or risk event
• definition of risk level.
An interval scale with rates from 1 to 5 can be used to estimate the risk event incidence probability (). Another possibility is to use a scale with estimated probability values . A 1-to-5 scale is usually used in practice because of its simplicity.
Probability that a risk event will occur
Estimate of consequences of a risk event
On the basis of the estimated probability that a risk event will occur and on the basis of the estimate of its consequences, project activity risk level is calculated. In two-dimensional analysis, activity risk level is calculated as:
RL2 – activity risk level in two-dimensional analysis of project activity risk
EP – probability that a risk event will occur
EC – estimate of risk event consequences
Data on quantitative and qualitative risk analysis of a particular project activity are entered into a table of critical success factors
Table of critical success factors—two-dimensional analysis
The article deals with risks in cyclically recurring projects, so experience derived from similar past projects can be used for estimating the incidence of risk events.
An example: a company plans the activity of the customer’s confirmation of documentation or product samples. Some time is planned to accomplish this activity. However, the customer often (but not always) exceeds the planned time. In this case there is a recurring risk event.
Estimate of risk event incidence
In three-dimensional analysis, project activity risk level is calculated as:
RL3 – activity risk level in three-dimensional analysis of project activity risk
EP – probability that a risk event will occur
EC – estimate of consequences of a risk event
EI – estimate of recurring risk event incidence
Table of critical success factors—three-dimensional analysis
Planning measures and risk management
After the risk analysis is completed, activity risk is defined as low, medium or high (on the basis of a decision matrix (), (), depending on the estimate of event incidence probability and its consequences.
On the basis of pre-set risk probability limiting values, project activity risk is defined in the proposed three-dimensional risk analysis:
• If RL ≤ 24 (risk probability is up to 20%), the risk is low.
• If 25 ≤ RL ≤ 60 (risk probability is between 20 and 50%), the risk is medium.
• If RL ≥ 61 (risk probability is more than 50%), the risk is high.
If the risk is low, the project team does not specify any measures in advance.
If the risk is medium, the project team prepares preventive measures, focused on the elimination of sources of risk events occurring. If the risk event occurs nevertheless, the project team has to prepare corrective measures immediately.
If the risk is high, the project team prepares both preventive measures to prevent the risk event from occurring (elimination of risk, reduction of possibility of risk realisation, transfer of risk) and corrective measures (active management of risks), which may start processes for alleviation of risk-event consequences.
Supplemented table of critical success factors
Monitoring, recording, control and feedback
The project manager, project team, customer and operators of activities are responsible for project-risk monitoring and for the implementation of measures.
Each risk has its “owner” and his task is to identify the symptom of the occurring risk as soon as possible and to launch the planned measures on time. The sooner the risk is discovered, the smaller are its consequences.
At regular control meetings, the project manager checks the risk status and updates the risk list if necessary. The team must be aware that the risk level changes over time—in some phases one risk is more probable and in other phases other risks are more probable. For better control, it is therefore important that the risks are sorted by size and by their current relevance.
Researchers from the Laboratory for Manufacturing Systems propose several measures for reduction of project risk level:
• active risk management
• removal of risks
• decrease of the probability of a risk occurring
• alleviation of consequences by transferring risk to another organisation
• passive acceptance of risks by providing time and financial reserves.
Active risk management means that an action plan is prepared for if a risk event occurs, and usually time and financial reserves are also foreseen for solving the consequences of realised risks.
Risk can be totally avoided by eliminating or bypassing the cause of a risk occurring. This is possible by changing the project plan, whereby the whole project is changed or just one phase, duration of an activity, the way an activity is carried out, a supplier or operator. The new plan that tries to avoid risk can be defined as an alternative method for achieving key objectives and may cause higher project costs.
Another way of eliminating risk is elimination of some customer requirements that are difficult to achieve and thus represent risks (time, costs, quality). This method of risk elimination requires negotiations with the customer. In the decision-making process, it is necessary to compare risk with yield if customer requirements are fulfilled.
By placing a risk on the risk list, the possibility of the risk event occurring is automatically reduced because of subsequent systematic control. Carefully planned reduction of risk probability can be achieved by additional activities and costs; other possible actions are: using better and more expensive equipment, using better and more expensive manufacturing technology, aid from external experts or simulations made in advance.
When dealing with the reduction of risk consequences, the best solution is to transfer the risk to another organisation. Within the project partners the risk can be transferred to the customer, outsourcer or supplier. Risk transfer details (delays and additional costs) are defined in a contract. Risk bearers want to avoid additional costs and the probability of a risk occurring is thus reduced. Insurance is another way of mitigating consequences. Insurance is the most suitable when the risk is high, its probability is low, but its consequences could be catastrophic.
The more activities there are on the critical path, the more risky is the project, because delays in critical activities directly cause a delay to the whole project. In non-critical activities, time reserves may considerably reduce the risk due to delay of activities.
In practice, MS Project is often used as a tool for project management IT support, so the employees of the Laboratory for Manufacturing Systems of the Faculty of Mechanical Engineering in Ljubljana, together with our partners in companies, decided to build the presented extended project-activity-risk-management methodology into templates. Although it is possible to use a risk-analysis tool in the server version of MS Project, we believe that, from the user’s perspective, the proposed solution is simpler but very effective. This is confirmed by the use of the extended risk analysis in several industrial projects.
Analysis, evaluation and archiving
After a project has been completed, the project team (in addition to other analyses) evaluates the risk management in order to discover which expected risk events actually occurred, what were their consequences, and how efficient were the preventive and corrective measures.
All risk-management-related documents are archived; the risk knowledge base is also updated:
Cost overruns is defined as the excess of actual project costs over budgeted costs. Costs overrun may be caused by underestimation of costs at the planning stages or by the escalation of costs during implementation due to unforeseen events, changes in the scope of the project or by poor management. Costs overruns may not necessarily lead to project failure if the project can obtain sufficient funding to cover its excess costs. However, the economic viability of the project, which was assessed using the erroneously estimated costs, would be different if the risk of cost overruns was built-in the evaluation analysis.
Against this background this paper first analyzes the risk factors, which underlie costs overruns in transportation infrastructure projects. Subsequently, it proposes methods for estimating the overall risk likelihood of costs overruns, given the particular nature of the project. Subsequently, these methods are applied to a real-world database of highway transportation investments. It is shown that the use of such methods can improve the ex ante risk’s analysis of transportation infrastructure projects.
The design of the paper is as follows. In Section 2, we examine various sources of risk in transportation investment projects. Section 3 presents results, reported in the literature of costs overruns in transportation projects. In Section 4 we introduce the methods that we have developed for assessing costs overruns. These include a Distribution Fitting Model (DFM), a regression model and a Monte Carlo simulation model. Empirical application of these models is in Section 5. Section 6 presents a numerical example of the use of these methods for cost overruns assessment. Summary and conclusions are in Section 7.
2. Sources of Risk in Transportation Investment Projects
We define risk of cost overruns as the probability that a given project will experience actual costs, which exceed its projected budget by a given factor. Since the computation of probabilities of future events requires that these would be indeed random events, one might ask about the “randomness” of events in transportation infrastructure investments.
Thus, we first discuss potential causes for costs overrun risks and highlight their random nature, which in turn, provides the rationale for risk analysis of transportation projects. Based on available literature several main categories of cost overruns risk factors are identified ). These are:
Technological risk: It refers to the fact that technology planned for a given project may need to be modified or replaced by a newer one as either the costs or the benefits of the new technology outperform those of the older one. In some situations, there may be a need for the new technology due to unexpected difficulties during construction. Technologies related to burrowing often fall within this category, with substantial impact on the actual costs of a project. In general, disregarding the possibility of dishonesty in the project’s planning phase, technological risks are mainly due to unsystematic random technological complexities.
Construction risks: Large-scale transportation projects quite often are subject to unexpected construction snags, which range from bad weather, unexpected and random geo-technical events, equipment breakdowns, undelivered raw materials, unknown presence of other infrastructures (e.g., sewage lines) or unexpected soil problems. All of these imply construction delays, which in turn, affect the costs of projects.
General economic and financial risks: Unexpected changes in real interest rates, or in exchange rates or in unemployment rates may have considerable impacts on the actual costs of a project. Rising interest rates will affect the debt service cost component of a capital project. Shortages of skilled labor, which often characterize periods of rapid economic growth, are likely to have consequential impacts on labor costs.
Regulatory risks: These risk types stem from unexpected changes in regulation of externalities, for example, changes in emission and other environmental standards, which might take place during project implementation.
Organizational and project management risks: Often unpredictably, projects lose critical staff during the time of construction. In addition, projects may suffer from poor management, which may also yield to external pressure from interest groups to change the project’s scope. As a result, delays appear along with rising costs.
Political risks: Political risk refers to unforeseen circumstances where a new government fails to keep commitments made by a previous one, or due to a budget crisis, it fails to provide already promised capital. Foreign investors in some developing countries may face unfriendly local governments or the risk of potential expropriation. Since large transportation projects often require approval and financial support from local and federal governments, conflicts between and within governments may cause project’s delays, thus additional costs.
Contractual or legal risks: Contract and legal risks arise from inappropriate division of responsibility among contractors. During the project’s planning and implementation periods, issues related to securing the rights of way, payments and other legal disputes
might appear unexpectedly. Issues of contract enforceability and post contractual disagreements may also cause project suspensions and delays with substantial effects on costs.
This categorization serves to show the wide range of risk factors, which underlie costs overruns as well as their random nature. Thus, in what follows we treat costs overruns as a random variable for which we will fit a probability distribution models.
How prevalent is the use of quantitative risk analysis methods in actual project planning and management? A survey by Akintoye (1997), has shown that both contractors and project managers mainly rely on their intuition and subjective judgment to manage risks. About half of the managers surveyed claimed to be familiar with sensitivity analysis, yet few actually have used this technique in practice. By and large, contractors and managers expressed doubts on the usefulness and practicality of quantitative risk analysis techniques.
Similarly, Shapira (1994) found that managers are quite uninterested in using probabilistic techniques to assess project’s outcomes. He also found that under unique, non-repeated decision conditions, managers tend to neglect statistical analysis all too easily. Shapira reasons that this is due to managers’ confidence in their ability to control risk, though as experience shows this kind of behavior many times have led to actual costs significantly exceeds planned budget and at times, to project’s total failure.