Project Cycle and Market Analysis
Project Cycle
1 – Pre-Investment
* Identification of the idea * Preliminary studies * Prefeasibility study * Feasibility study * Market and organizational analysis
2 – Investment
* Purchase of machinery and equipment * Construction of the project
3 – Commissioning
* Operating and profit-making
Pre-Investment Stage
- Project description indicating how to obtain the objective
- Description of material, human, and physical resources
- Estimation of the amount of investment required
Preliminary Study
* First review of technical feasibility and economic and financial viability * Determines if the project is achievable
Pre-Feasibility Study
- Market study and resource analysis
- Location analysis based on variables such as product type, geographic location of the consumer, and raw material location
- Costing analysis based on the results of the previous studies
Feasibility Study
- Project description and area in which it will be conducted
- Analysis of demand for goods and services of the project
- Determination of the size and location of the production capacity that is required to install
- Definition of technical aspects of the project, especially in construction, plans, plant layout, and selection of equipment
Investment
* Calculation of resources needed for the project and their distribution in time * Two types of investment: * Fixed investment: machinery, tools, land, etc. * Working capital: the amount of money required to maintain the functioning of the project
Project Environment
Macro Environment
* Political * Economic * Legal * Technological * Social * Cultural
Microenvironment
* Suppliers * Customers * Consumers * Organizations
Internal Environment
* Structure of the company * Quality and capacity of staff * Financial structure * Human resources
Variable Economic Factors
* Inflation rates * Interest rates * Willingness to credit * Billing prices * Unemployment rate * Tax rates
Legal and Political Factors
* Tax laws * Patent laws * Environmental law * Energy policy * Minimum wage, etc.
Social and Cultural Factors
* Birth rates * Life expectancy * Educational level * Income per capita * Pollution control
Technological Factors
* Taking into account major changes that are taking place in technology products and services
Market Concept
* Geographic area in which goods or services of any nature are traded * The market has four elements: * Demand * Supply * Price * Legal factor
Demand
* Quantity of a good that consumers are willing to buy * Depends on the price
Supply
* Quantity of a good that producers are willing to offer * Depends on the price at which it is sold, production costs, climate, technology, taxation
Price
* Economic value of a good * Varies by supply and demand
Legal Factor
* Legal and juridical framework within which the market operates * Includes variables like paying taxes, salaries, patents, health, etc.
Market Structures
Monopoly
* A single producer and many consumers * The producer determines the selling price of the product
Oligopoly
* Union of producers that set prices (e.g., pharmacies)
Monopsony
* There is only one buyer and several producers (e.g., Metanex)
Cartel
* Union of two or more producers that set prices and share the administration of enterprises
Competitive Market
* Many producers and many consumers
Stages of Market Research
- Historical analysis of the market
- Analysis of the current market
- Analysis of the projected market
Project Market
* It is necessary to find all the agents that have or will have some degree of influence over all decisions made by the company * The actors involved are: * Service provider market * Competitor market * Supplier market * Consumer market * External market
Supplier Market
* Companies that provide materials, equipment, labor, and financial supplies * To choose a supplier, consider the following: * Identity and location of the suppliers * Prices and conditions of sale * Transport system
Competitor Market
* Companies similar to the project that commercialize similar products and have the same target customer
Dealer Market
* Not all projects use a distribution network
Consumer Market
* Requires much time for consideration given to the amount of specific studies by consumer needs
External Market
* There are variables in the competitive market, distributor, and consumer * Analyze external market to identify: * Obstacles to entering the country * Political risk of the country * Trade agreements * Transportation and communication
Production Costs of a Project
Cost Estimate
* Revenues and project costs with anticipated load * Prepared using information obtained in the study of the market, mainly in the provider analysis * Conducted according to the quantity of resources necessary for the operation of the project
Classification of Costs
According to Variability
* Variable costs * Fixed costs * Semi-fixed costs
According to the Area of the Company
* Selling costs * Administration costs * Production costs
According to the Time Period Calculated
* Historical costs * Actual costs * Standard costs
According to Their Relation to the Volume of Production
* Direct costs * Indirect costs * Overhead costs
Fixed Costs
* Must be included when starting operations * Remain constant regardless of the level of production
Variable Costs
* Raw material * Labor * Materials * Sales commissions