JIGJIGA UNIVERSITY
SCHOOL OF GRADUATE STUDIES
COLLEGE OF BUSINESS AND ECONOMICS
MBA
INSTRUCTOR
Minyahil A. (Assistant Professor)
Contact Address:
minyahil04@[Link]
Saturday 20 January 2024 08:15 AM
CHAPTER 3 PROJECT IDENTIFICATION
• 3.1. Project Idea – meaning
• 3.2. Sources of Project Ideas
• 3.2.1. Macro sources
• 3.2.2. Micro sources
CHAPTER 3 PROJECT IDENTIFICATION
• Project identification is the process of searching for and
subsequently finding potential projects.
Chandra (2002:43) writes that:
– The search for promising project ideas is the first step
towards establishing a successful venture.
– The objective is to identify investment opportunities,
which are feasible and promising and merit further
examination and appraisal.
3.1. WHO IDENTIFIES PROJECTS? HOW?
• The responsibility of identifying investment opportunities (or project ideas) rests with various individuals
and institutions in the society.
– Small producers organizations/producers’ unions;
– Large scale individual private sector producers;
– Product marketing organizations;
– Private sector companies (local/multinational);
– State owned enterprises and organizations;
– Government ministries, authorities, agencies, and commissions;
– Local and International Development banks and agencies;
– Aid agencies and self-aid associations;
– Local governments and state, regional, and sub-regional authorities;
– Local political and pressure groups such as opposition parties;
– Local and/or international NGOs;
– Credit institutions and cooperatives, etc.
How Project Ideas Come About?
• Observation of existing opportunities and problems is the major one. Other mechanisms
include:
– Polices review and opportunity studies made by central government ministries;
– Sectoral strategies and sub-sectoral programs of technical ministries (like health,
agriculture, tourism, education, industry, etc);
– Surveys conducted by local governments and regional organizations;
– Review of past projects;
– Private sector, cooperatives, and state enterprise plans;
– Investment identification missions by development banks and agencies;
– Brainstorming (unsystematic discussions);
– Need analysis (existence of unsatisfied demand);
– Need to tackle unexpected or undesirable events (drought, earthquake, flood, natural
catastrophes, and other similar hazards).
3.2. MACRO AND MICRO SOURCES
• Projects are expected to contribute towards the attainment of specified development objectives.
– Project identifications endeavors should be seen as an integral part of the macro-planning exercise.
– Project identifications need to be carried out within national, regional, and sectoral development framework
and existing policies including pricing, taxation, and subsidy.
• Sectoral information and strategies often are important sources of project ideas.
• Project ideas often are not derived from national and/or sectoral plans in practice - may originate
from several sources.
• Project ideas generally should aim at overcoming constraints on national development efforts or
meeting unsatisfied needs/demand.
• Prevailing constraints, needs, and demands should be interpreted broadly to include, for
instance, foreign exchange constraints that might indicate the need to undertake
projects for export promotion and/or import substitution.
3.2.1. MACRO SOURCES
• Major Macro Sources:
– Federal/Central or Regional Governments
– Bilateral and Multilateral Agreements
– International Development Agencies
• Government is the major source of project ideas in developing countries.
Reasons:
– Has the necessary resources for undertaking opportunity studies (conduct
survey, studies, and reviews);
– Better access to data and information;
– Familiar with the development objectives, priorities, and strategies.
MACRO SOURCES ……. CONT’D
• Other Macro Sources:
– National policies, strategies, and priorities articulated by government from time to
time.
– National, sectoral, sub-sectoral, or regional plans and strategies (supplemented by
special opportunity studies).
– General surveys, resource potential surveys, regional studies, master plan and
statistical publications, which indicate directly or indirectly investment
opportunities.
– Constraints on the development process due to shortage of essential infrastructure
facilities, problems in the balance of payment, etc.
– Government decisions to correct social and regional inequalities or to satisfy basic
needs of the people through development projects.
3.2.2. MICRO SOURCES
– Private and Public Enterprises;
– Local Groups or Organizations;
– Consumer Groups and Associations;
– Financial Institutions/Credit Associations;
– Cooperatives, Farmers’ Unions, etc;
– New Technology Suppliers, and even individuals.
MICRO SOURCES ….. CONT’D
• Techniques (or mechanisms) adopted:
– Analyze the performance of existing industries;
– Examine the inputs and outputs of various industries;
– Review imports and exports;
– Look at the suggestions of financial institutions and development agencies;
– Investigate local materials and resources;
– Analyze economic and social trends;
– Study new technological developments;
– Draw clues from consumptions abroad;
– Explore the possibility of reviving sick units;
– Attend trade-fairs (trade promotions or bazaars), etc.
3.3. PROCESS OF IDEA GENERATION
•
Surveying, reviewing, and analyzing existing policies, resource
endowments, and socio-economic variables
– Natural Resources: review of the natural resource endowments
of the country.
– Human Resource: review of educational standards and facilities.
–Socio-Economic Variables: review of various socioeconomic
factors (includes: housing facilities & standards, utilities
services, health and nutrition services, and income
distribution).
PROCESS OF IDEA ……. CONT’D
• FIELD SURVEY AND INTERVIEW
– Asking people regarding their needs/problems.
– Asking the public unit closest to the people about their
problems/needs (what the community needs).
• Participating in Deliberations, Discussions, and Trainings
– Participating in various discussion forums and deliberations in seminars,
workshops, and conferences (local and/or international) levels.
• Brainstorming
– Group of people suggesting different ideas (not formal).
PROCESS OF IDEA ……. CONT’D
• Observing and Analyzing Prevailing Situation
– Observation & examination of current DD & SS;
– Examination of past as well as future
consumption/production trends for goods and services;
– Observing possibilities for improvement of goods and
services (both in terms of quality & quantity);
– Observing opportunities & threats in the invention & introduction of
new technologies, etc.
3.4. SCREENING POTENTIALLY PROMISING IDEAS
• Screening Criteria:
– Compatibility with the promoter
– Consistency with government priorities
– Availability of inputs
– Adequacy of market
– Reasonableness of costs
– Acceptability of risk level
• Eliminate (screen out) project proposals that:
– Are technically unsound and risky
– Have no market for their outputs
– Have inadequate supply of inputs
– Are very costly in relation to the expected benefits
– Assume an overambitious sales and profitability target
PRELIMINARY SCREENING....
1. Compatibility with the promoter
compatible with the interest, personality
and resources of the entrepreneur
01/20/2024 [Link] Yohannes
PRELIMINARY SCREENING....
2. Consistency with government priority
Consistency with national goals and priorities?
Environmental effects contrary to governmental regulations?
Foreign exchange requirement can be easily accommodated?
Difficulty in obtaining license?
01/20/2024 [Link] Yohannes
PRELIMINARY SCREENING....
3. Availability of inputs
Capital requirement within manageable limits?
Technical know-how required obtainable?
Raw materials available domestically at a reasonable
price? Import possibility?
Power supply obtainable from external sources?
01/20/2024 [Link] Yohannes
PRELIMINARY SCREENING....
4. Adequacy of market
Total present domestic market
Competitors and their market share
Export markets
Quality-price profile of the product vis-à-vis competitive products
Sales and distribution system
Projected increase in consumption
Barriers to entry of new units
Economic, social, and demographic trends favorable to increased
consumption
Patent protection
01/20/2024 [Link] Yohannes
PRELIMINARY SCREENING....
5. Reasonableness of cost
Cost of material inputs
Labor costs
Factory overhead
General administrative expenses
Selling and distribution costs
Service costs
Economies of scale
01/20/2024 [Link] Yohannes
PRELIMINARY SCREENING....
6. Acceptability of risk level
susceptibility to business cycles
Technological changes
Competition from substitutes and from imports
Governmental control over price and distribution
01/20/2024 [Link] Yohannes
Planning Tools (identification of problems)
• Stakeholders Analysis
• SWOT Analysis
• Problem Analysis
• Objective Analysis
01/20/2024 [Link] Yohannes
a) Stakeholders analysis
• The main goal of stakeholders analysis is to
identify, assess and develop an
idea/opportunity with a view to perceived
needs and how well it fits into the
organization's programs and strategies.
01/20/2024 [Link] Yohannes
What is a Stakeholder?
• Stakeholder is any individuals, group or organization,
community, with an interest in the outcome of a
program/project.
• Stakeholder’s could be targeted groups/ beneficiaries,
negatively affected groups, decision makers, funding
agencies, implementing agencies, community leaders,
potential opponents and supporting groups, etc.
01/20/2024 [Link] Yohannes
Purpose of stakeholders analysis:
• To identify those groups who, directly or indirectly, will
affect or be affected by a project.
• To determine, through consultation, the issues, concerns
and information needs of different stakeholders.
• To estimate the probable impact which various
stakeholders will have on the project.
• To identify measures to enhance stakeholder support for
the sustainable development objectives of the project.
01/20/2024 [Link] Yohannes
Stakeholder Analysis promotes the three necessary conditions
for the effective implementation of a project:
• Awareness/ Commitment: that stakeholders understand and
believe in the objectives and implementation strategy of the
project.
• Capability: that stakeholders believe they can cope with and
benefit from the changes which the project is intended to bring.
• Inclusion: that stakeholders feel they are valued, consulted and
part of the change process which the project represents.
01/20/2024 [Link] Yohannes
BLOCKER SPONSOR
Influence on the project
(Persuade) (Engage)
STAKEHOLDERS
IMPACT
ANALYSIS
NEUTRAL ADVOCATE
(Inform) (Involve)
Influenced by the project
INTEREST
[Link] Yohannes 28
01/20/2024 [Link] Yohannes
01/20/2024 [Link] Yohannes
b) SWOT Analysis
SWOT analysis is a tool for institutional appraisal and a
brainstorming exercise in which the representatives of
the organization participate fully.
Purpose:
•To assess the performance and capacity of the
participating units, divisions of organization.
•Each participating unit has to undertake SWOT analysis.
01/20/2024 [Link] Yohannes
SWOT stands for:
• Strengths - the positive internal attributes of the
organisation.
• Weaknesses - the negative internal attributes of the
organisation.
• Opportunities - external factors which could improve
the organisation’s prospects.
• Threats - external factors which could undermine the
organisation’s prospects.
01/20/2024 [Link] Yohannes
c) Problem Analysis
• Begins with identifying a core problem. A problem- is
an obstacle, impediment, difficulty or challenge, gap or
any situation that needs solution.
• Problems Analysis visually shows the causes and
effects of existing problems in the project area, in the
form of a Problem Tree. It clarifies the relationships
among the identified problems.
01/20/2024 [Link] Yohannes
Problem Tree Analysis
Purpose:
to identify major problems and their main
causal relationships.
Output:
a graphical arrangement of problems differentiated
according to ‘causes’ and ‘effects’
01/20/2024 [Link] Yohannes
Steps in Undertaking Problem Tree
1. Identify a “core” or central problem
2. List all the problems related to or stemming
from the core problem
3. Determine which related problems are causes
and which are effects of the core problem
4. Arrange the problems in a cause-effect
heirarchy around the core problem
01/20/2024 [Link] Yohannes
PROBLEM ANALYSIS
Who Questions Response
Because of irregularly
Farmers why are yields falling? supply of irrigation water
Ministry Of Water why is irrigation water irregularly Because of fuel shortage
Resources supplied ?
Ministry Of
Energy Because of limited foreign
why are there fuel shortage? exchange
why is there insufficient foreign Because crop export are
Treasury
exchange for fuel purchase? falling?
Ministry Of
why crop export are falling? Because yield are falling
Agriculture
Which is the problem to focus on?
[Link] Yohannes 36
01/20/2024 [Link] Yohannes
d) Objective Tree Analysis
• An objective tree is a technique for identifying the
objectives that will be achieved as a result of solving the
problems cited in the problem tree.
• The objectives are also displayed as a series of means
and ends relationships.
• The ‘negative situations’ of the problem tree are
converted into solutions, expressed as ‘positive
situations’.
01/20/2024 [Link] Yohannes
Analysis of Objectives
• Transforming the problem tree into an objectives tree
by restating the problems as objectives.
• Problem statement converted in to positive statements
• Check the means-ends relationships to ensure validity
and completeness of the hierarchy (cause-effect
relationships are turned into means-ends linkages)
01/20/2024 [Link] Yohannes
01/20/2024 [Link] Yohannes
Thank You