Project Initiation and Resource Allocation

Project Initiation and Resource Allocation

Project Initiation & Resource Allocation

1.     Resource Allocation

1.1.   Corporate Level

1.2.   Business Unit Level

1.2.1. Identify Investment Opportunities

1.2.1.1. Analysis of the environment

A. PEST Model

a) Political / Legal Factors

· Stability of the government

· Labour laws

· Tax Laws

· Environmental Protection Laws

· Monopolies Legislations

b) Economic Factors

· Interest Rates

· Business Cycles

· Trends in GNP

· Money Supply

· Inflation

· Unemployment

· Disposable Income Levels

· Exchange rates

· Fuel costs and its availability

c) Socio-Cultural Factors

· Changes in life style

· Attitude towards work and leisure time and changes in them

· Prevalence of consumerism

· Population demographics

· Income distribution

· Social mobility

· Levels of education

d) Technological Factors

· New discoveries and development

· Levels of govt. spending and research

· Seed of technology transfer

· Rates of obsolescence

B. Michael Porter’s Five Force Model

a) Threat of Entry (Entry Barriers)

· Economies of scale, which give advantage to larger players

· Minimum capital required to set up profitable ventures

· Access to channels of distribution

· Cost advantage to one or more players due to possession of proprietary technology

· Expected retaliation from existing firms

· Legislation governing entry into market

· Level of differentiation of the product

b) Bargaining Power of Buyers

· Buyers are few & volumes are high

· Alternative source of supply is available

· Material cost makes up a substantial part of total cost

· Backward integration by the buyers is not difficult

c) Bargaining Power of Suppliers

· The suppliers are few

· Alternative sources of supply are not available

· Switching form one supplier to other is difficult or expensive

· Suppliers have a strong brand image

· Forward integration by the suppler is not difficult

d) Threat to Substitutes

· Whether the substitute product provides higher value than the product of the firm

· Ease or difficulty for the consumer in switching from the product of the firm to the substitute product

e) Extent of Competitive Rivalry

· Competitive rivalry is high in an industry where threat of entry is high, both buyers and suppliers exercise tight control and substitute product abound

· The relative sizes of the players: If all the players are of equal size competition will be high

· Stagnation for a long time

· High fixed cost leading to a scramble to sell the break even quantity

· High exit barriers

1.2.1.2. Analysis of the strategic capabilities

A. Resource Audit

B. Value Chain Analysis

a) Primary Activities

· Inbound Logistics

· Operations

· Outbound logistics

· Marketing and Sales

· Service

b) Support activities

· Procurement

· Technology development

· Human Resource Management

· Infrastructure

C. Resource Utilization

D. Comparative analysis

a) Historical Analysis: Study the changes in resources base and its   deployment in the past

b) Industry Performance: Comparing performance of the firm with the industry as a whole

c) Best Practice: Comparison with the best practice outside the industry in which the firm operates

E. Resource Balance

F. Portfolio Analysis

G. Analysis of Balance of Skills

H. Flexibility Analysis

1.2.2. Strategic abilities to take up opportunities