Module 3 Edited

8/6/2019 Module 3 Edited

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PROJECT MANAGEMENT

MODULE 3


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TYPES OF ORGANIZATIONAL

PROJECTS Green Field Project

Brown Field Projects

Expansion Project

Integration Project

Diversification Project

Modernization/ Replacement Project

Divestment Project


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Capital Allocation

If we analyze the size and scale of most of the organization,

it seems to be large and widely spread.

And the requirement of the investment is immense.

But the availability of the capital is limited and a company

cannot invest this into each and every project. So they need

to be selective and decide judiciously and strategically.

And thus we require the techniques of capital budgeting to

implant.


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CAPITAL BUDGETING

Stage 1

Promising growth opportunitiesidentified through StrategicPlanning Techniques

Stage 2

Individual Investment Proposal

are Analyzed & Evaluated


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STRATEGIC PLANNING

Strategy is well defined as the determination of the

basic long term goals and objectives of an enterprise,

and the adoption of courses of action and the allocation

of resources necessary for carrying out those goals.

Strategic planning is an organization's process of

defining its strategy, or direction, and making decisions

on allocating its resources to pursue this strategy,

including its capital and people.


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STRATEGIC PLANNING

TECHNIQUES PORTFOLIO STRATEGIES

BCG Matrix

GEs Stoplight Matrix

SPACE


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SBUs

A business unit within the overall corporate identity

which is distinguishable from other business because it

serves a defined external market where management can

conduct strategic planning in relation to products and

markets.

A SBU can be one or more company division, a product

line within a division, or sometimes a single product or a

brand.


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CHARACTERISTICS OF SBUs

It is a Single Business

It can be placed independently of other Businesses.

It has a distinct mission

It has its own Competition

It has a Responsible Manager

It controls certain Resources

It can be benefitted from Strategic Planning


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HULs SBUs Personal wash

Lux. Lifebuoy, Liril , Hamam, Breeze, Dove, Pears and Rexona

Laundry

Surf Excel, Rin and Wheel

Foods

Kissan, Annapurna, Knorr

Ice-cream

Kwality Wall's

Tea

Brooke bond, Lipton

Coffee

Brooke bond, Bru


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BCG GROWTH SHARE MATRIX

HIGH

LOW

HIGH LOW


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GE Mc KINSEY MATRIX In consulting engagements with General Electric in the 1970s,

McKinsey & Company developed a nine-cell portfolio matrix as atool for screening GE's large portfolio of strategic business units(SBU).

This business screen became known as the GE-McKinsey Matrix.

The GE McKinsey matrix is similar to the BCG matrix in that itmaps strategic business units on a grid of the industry and theSBU's position in the industry.

The GE matrix however, attempts to improve upon the BCGmatrix in the following two ways:

The GE matrix generalizes the axes as IndustryAttractiveness" and Business Unit Strength" whereas the BCGmatrix uses the market growth rate as a proxy for industryattractiveness and relative market share as a prow for thestrength of the business unit.

The GE matrix has nine cells vs. four cells in the BCG matrix


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I. Companys Competitive Advantage

Market shareProduct quality

Product life cycle

Customer loyalty

Capacity utilization

Technological know how

Vertical integration

New product introduction


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II. Companys Financial Strength

Return on investment ROILeverage

Liquidity

Capital requirements

Cash flows

Exit from markets

Economies of scale


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III. Industry Strength

Growth potentialProfit potential

Capacity intensity

Ease of entry into the market

Financial stability

Resource utilization

Technological know how


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IV. Environmental Stabilty

InflationEconomic condition

Demand variability

Price range of competing products


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Application of SAPCE

It involves following stepsI. Numerically assign values to firms

factor which having a bearing on thefour dimensions.

The scale for factors relating toCompanys financial strength andIndustry strength may be from 0 to 7.

With 0 reflecting the most unfavorable assessmentand 7 most favorable assessment.

The scale for factors relating toCompanys Competitive advantage andEnvironmental stability may be from -7to 0.

With -7 reflecting the most unfavorable assessmentand 0 most favorable assessment.


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Application of SAPCE

II. Average the values assigned to thefactors to get numerical value for eachdimension.

III. Plot the scores for the FourDimensions on the Axes of theSPACE chart.

IV. Connect the scores so plotted to get a

Four-Sided Polygon, reflecting thesize and the direction of assessment.


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FS

ES

CA IS


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FS

ES

CA IS


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FS

ES

CA IS


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FS

ES

CA IS


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SPACE & GenericStrategies


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FS

ES

CA ISAGGRESIVE

COMPETITIVEDEFENSIVE

CONSERVATIVE

COST

LEADERSHIP

Concentric Diversification

Concentration

Vertical

Integration

Concentric

Merger

Conglomerate

Merger

Turnaround

Status Quo

Conglomerate

Diversification

Diversification

FOCUS

Divestment

Liquidation

Retrenchment


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MARKET GROWTH RATE

Market growth axis, correlates with the product life

cycle pattern, and predicts the cash requirement a

business needs relative to the growth of that market.

A fast growing market is generally considered

attractive and pulls a lot of organizations resources in

an effort to increase gains.

Industry ales this ear - Industry ales last ear

Industry ales last ear


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RELATIVE MARKET SHARE Here we analyze the business unit by comparing it against its

competitors.

This is linked with the experience curve phenomenon that

when a business conducts its operations overtime, it developsnew ways in performing those task better which results in

lowering the operation cost.

Thus the company have a cost advantage over its competitorsand enjoys a high relative market share.

S Sales this ear

Leading ompetitors Sales this ear

Documents

Module 3 Edited