Starting a New Business - Example

Running Head: PROJECT MANAGEMENT Project Management [ Writer’s name] [Institution’s name] Project Management Introduction This report consists of a project of starting anew business a publishing press named ABC has been selected for this purpose. This analysis is based on a number of specific tasks. The project group was of twenty eight people. This extremely difficult and complex work was supposed to be planned on the project bases. This work is not in any way based on the strategic management in the company in question. However, it is based on the project behind it. This paper will describe how the entire project was organized was and what methods were utilized. Description and Rationale 1.1 Assignment Goal As it was already mentioned the goals are not oriented on any analysis or strategy proposals in the company ABC but on the process which should lead to successful srating of this new business and proposals in this company. Our ultimate goal is therefore the success of the whole group. 1.2 Applied Theory The basic theory used for the assignment is theory of the Project Management. In this case it is based on the best practices collected by Project Management Institute (PMI). PMI, with more than 150,000 members in over 150 countries, is the world's foremost advocate for the project management profession. PMI sets industry standards, conducts research and provides education, certification and professional exchange opportunities designed to strengthen and further establish the profession (Futterer 2011). The best practices are described in the document called Project Management Body of Knowledge (PMBOK). 1.3 steps and general process Feasibility study Project Initiation Project Planning Control phase Execution phase Feasibility study Cost benefit analysis cost-benefit analysis has become an increasingly popular, if contentious, decisional tool . At a high level of generality, it advocates a particular methodology for gathering, sorting, and analyzing information about the effects that administrative or regulatory decisions have on social welfare. Because private actors are assumed to engage in some sort of CBA when conducting market transactions, most academic literature about CBA focuses on governmental — not private — decision-making. Assumptions for this analysis are as follows: Assuming no recommendations are implemented, the operating revenue will grow at 3% per annum—since this is a technology based industry and fast changing, a 3% growth rate is conservative. Assuming the recommendations are implemented, the first year operating revenue will increase due to reduced costs—the growth rate for ABC will now be 5% due to capturing more share of the market. The life span of the recommended business and IS strategy is 5 years—this accounts for the rapid changing technological developments that render most IS obsolete within a short time frame. Initial costs and benefits are measured in NT dollars. Discount rate is assumed to be 7%. In order to measure the total benefits of the recommended strategy, the present value of operating profit cash flows was first determined without Acer adopting the recommendations (PV of $92,319,366,606.06 in NT$). Next the present value of operating profit cash flows assuming ABC did adopt the recommendations was calculated and was found to be $131,853,847,303.61 in NT$. The difference between these two was the additional benefit that could be realised, provided ABC adopts the recommendations. Next the PV of all the costs that would be incurred as a part of the recommendations was calculated—the difference between the additional earnings and the total costs incurred would be the net total benefit of adopting the recommendations. Based on the cost benefit analysis undertaken, we see that ABC can realise a total net benefit of $39,532,427,824.47 in NT$, which is approximately $1.2 billion in US dollars over the 5 year life span of the project. Hence it is clear that these recommendations are well suited for ABC in the long-term. 2. Project Initiation Project Initiation phase was started on January 9th. During the lesson we received an order from the Project Sponsor, we discussed about the background and the scope of the project, built the organization of the project, established the way of communication, identify some risk areas and defined quality criteria. All those aspects were collected in the document called the Project Charter. The draft of the document was sent to all project team members and the project sponsor. Because there were not any comments, the document was approved. 3. Project Planning Project planning phase started immediately after the Initiation phase, on January 10th. During the planning phase we went through all processes and identified if we need the process and if yes, we used it. The planning phase finished one week later when we distributed Kick-Off announcement with scope, deliverables, activities and time specification, on January 17th. 3.1 Scope Planning The scope planning contains two core processes, Scope Planning and Scope Definition (Stanley 2006 p 23). The result of the scope planning is a Scope Statement and a Work Breakdown Structure (WBS is given under ). The Scope Statement defines what is in the scope of the project and what is out of the scope: In the scope of the project is to select proper concept of the strategic management for the company, analyze current situation of the company, identify all SBUs (Strategic Business Unit), and suggest a corporate strategy, strategies for all identified Strategic Business Units and functional strategies according to needs. Out of the scope of the project is to make research or collect data from the market, customers or competitors. Whole work will be based only on information provided by the customer or on existing information resources. The Work Breakdown Structure serves to split the main deliverables into smaller, better manageable parts. In this case there are two levels of deliverables (Turner 1993). Because it is not so clear how many Strategic Business Units will be identified in the corporate strategy in this phase, there are deliverables only for one Strategic Business Unit. In case of more Strategic Business Units, appropriate deliverables will be added. 3.2 Time Planning All deliverables and milestones were identified in Work Breakdown Structure. Because whole project will have two main phases, where during the first one the draft of every deliverable will be created, presented to the customer and to the sponsor, and during the second one finalized, there will be two main activities for each deliverable. Create the draft of deliverable and finalize it. According to Turner (1995) because some deliverables depend on the others, it is very important to define relationships and dependencies. From the diagram we can identify all dependencies. According to (Grant 2007) finally from all this information a time schedule can be created and milestones can be chalked out for the project. The best way is Gantt diagram (see appendix). 3.3 Cost Planning The cost planning contains three core processes, Resource Planning, Cost Estimating and Cost Budgeting. The result of the cost planning is Cost Estimates and Project Budget (Scott 2005 p12). In this case cost planning will be used only as example how to do it, because the result of the project serves only to education purposes. The first thing we have to define, to be able to prepare estimates and budget, is cost structure. In consulting project like this we can have three main cost areas: Labour cost - based on hourly rate. The rate is usually negotiated with the customer, but the starting point is according to a price list. For our calculation we can use the price lists used by big consulting companies like PWC, Deloitte, McKensey, etc. (Partner 320 EUR/hour, senior manager 280 EUR/hour, manager 220 EUR/hour, senior consultant 175 EUR/hour, consultant 120 EUR/hour, analyst 85 EUR/hour). Appropriate profit is included. Administration cost - based on percentage of the labour cost. Usually it is not possible to specify it more detailed. Again in case of big consulting companies it is approximately 3% of the labour cost. Travelling cost - based on travelling expenses usually specified by the law (150 CZK/day), hotel cost (2000 CZK/night) and mileage (570 CZK/km). The cost of the project is very high, even after discount 30% (usually used by big consulting companies in Czech). The reason is that the labour cost is based on duration and not on real time effort. But at this moment we are not able to specify it. The travelling cost is based on consideration that each team member will have to do two one day business trips to discuss with the customer and present the result. Because the customer is located in Brno and team members are located around Czech Republic, we can say that average mileage is 250 km. For the budget we have to have at the first time cost centre structure. Because the project is done by fellowship of independent people, the team will keep only one cost centre. Otherwise we have to create special cost centre for each team member and it is too bureaucratic. The cost centre will have three main categories, identical to the cost calculation. The limit for each category will be lower by 40%, to be able to be profitable with 30% discount given to the customer. Costed time reduction strategy ABC Company has to speed up it’s project activities regarding starting a new business. Compressing or crashing the project schedule means that the project needs to speed up (Wit & Meyer 2004). The time which is needed to complete a project is set by a critical path, so the business question must set up a critical path of it’s major activities, in order to compress the project. The company will have first try to determine the optimal project time by determining the normal completion time. In order to do this, they must first determine the time for each critical path activity and the shortest time in which that activity can be completed. This is known as crash time. After this, the direct cost of both the time is originally takes to do a task and crash time will be calculated (Cleland 2006). The company will have to shorten the lowest cost per unit of time of the critical path activates. This will help them to clearly understand their critical path activities and thus they will be bale to chalk out a graph of the entire project cost versus the project time. The all three kind of costs, total, direct and indirect can be calculated. The optimal point is the time taken which will most probably result in the least cost (Grant 2007). The graph below shows how the graph will look like. Project Cost versus Duration The company will have to pay close attention to the critical path, so that the critical path remains of importance even after the time of a certain activity is reduced. The company should try not to enter any new critical paths after this calculation. The least important activates which are not mentioned on the critical path can be completed later on. For this it is not necessary to extend the time period of the project. Time-Cost Model Assumptions The company will also have to make a few assumptions before starting the project: They w ill have to make sure that the normal cost for an activity is lower when compared to the crash cost. The time and cost of the activity have to have a linear relationship. They also have to make sure that they all the resources necessary for reducing the time of the activities. The company will have to make sure that all the above assumptions are taken acre of. As they are all an important part the project management. Without time management and cost reduction a project can not be successfully managed. Activity id Slope Maximum Crash time DIRECT COSTS Normal Crash A B C D E F G $20 40 30 25 30 30 0 1 2 1 4 2 1 0 Time Cost Time Cost 3 6 10 11 8 5 6 $50 80 60 50 100 40 70 2 4 9 7 6 4 6 $70 160 90 150 160 70 70 Project duration Direct +indirect = Total Costs Costs Costs 25 24 23 22 21 450 400 850 470 350 820 495 400 795 525 250 775 610 200 810 3.4 Risk planning In case of our project, the project coordinators (PC) are responsible for all aspects of the risk management. The identification, interpretation and scoring of the potential risks is done from two points of view. The first one represents a level of consequence (1 - very low ... 5 - very high) and the second one represents probability that it will happen (1 - very low ... 5 - very high). Then the risk value is multiplication of those two values. List of all identified potential risks is listed, and sorted according to risk value; every potential risk has a suggestion of action to avoid it. The potential risk may be that the project is that the deadline is to close and the project may not be finished on time. Another risk is that they project group may be too small and inexperienced to handle such a complicated project. 3.5 Communication plan Communalisation Tool Purpose Time Responsible Project plan To articulate project background, scope, roles, responsibilities, membership, deliverables, schedule, staffing, communication, and close-out At the start of the project. Project manager Milestones schedule To communicate a work breakdown structure of tasks needed to accomplish the project purpose. Includes planned start and stop dates At the beginning of the project and at each milestone revision. Revisions to major milestones are made in the master project plan The Project Manager ensures the milestone schedule is posted on the project portal and filed. Meeting To communicate a purpose, topics and deliverables to participants.    Agendas will identify the meeting chair and scribe responsible for recording the minutes. Project Manager Telephone, email & internet To provide a centralized point from which to manage preliminary planning questions and answers and on which questions and answers will be available to customers As the customer fills in each form Project Manager Deliverables Successful evaluation of data by kick-off time Project manger Kick off 17 January Entire team Type of Communication Communication Schedule Typical Communication Mechanism Who Initiates Recipient Status Report every Friday team meeting Project Manager Project Team Schedule and Effort Tracking Report weekly email Project Manager Program Manager Project Review monthly face to face Project Manager Project Team Risk Mitigation Status as mitigation actions are completed email responsible team member Project Manager Requirement Changes as changes are approved email and change control tool CCB Chair affected Project Participants Supplier Management Review at project life cycle gates videoconference Program Manager Project Manager, Program Manager, Subcontract Manager Internal communication plan 3.6 Quality Planning The team will identify their own system to evaluate the quality of the deliverables on one side, along with the project management procedure on another side. In case of deliverables we can make use of the present system of assessment in which every delivery of the project will be completed as an assignment. The group will have to use four levels to evaluate the assignment, A, B, C and D. A will stand for the best moreover the value is more then 70%; classification B will be considered as middle level furthermore it’s value is between 60% and 70%; and classification C is considered as the lowest and value is between 50% and 60%. Suppose the value is lower then 50%, then is can be considered that the product was not of an suitable quality, suppose if the classification is D and the then the entire product as to be remade. The accountable person for each delivery is its inventor (Stephen & Cole 2007 p45). Steps in team superior performance The actions that are the responsibility of the project team that contribute to success are:         Personnel selection, appropriateness, experience levels and timeliness.         Development of a project ethos and appropriate structure, use informal structures.         Open up relationships between: the team and client, the parent organisation and the public.         Obtain sufficient authority to allow actions to be effective.         Develop realistic plans, targets and contingencies         Select appropriate tools and recognise their role.         Keep changes under control         Ensure job security where possible for project personnel at project completion. Control phase The monitoring and controlling phase of the new business should include all the important processes, which are usually required for a business in the execution phase of it’s project (Kotnour 2000). This is an essential part of the project, as all the potential problems which may occur or are present in the project may be indentified at the right time. If these problems are not monitored and controlled before the execution of the project, they may cause the project to fail (Pinto & Kharbanda, 1996). The most important advantage of this phase is that it helps in identifying variances during the development of the project. Monitoring and controlling phase will consist of the following: * monitoring the progress and other activities going on in the project; * observing the project variables while keeping in mind the project management plan and set the standard regarding project performance; * give recommendations so that the risk and other issues occurring in the project can be resolved. * supporting the factors that may possibly encourage change control so that just the approved changes are applied; The monitoring and control phase will also have to include feedback by the management between its phases, so that they may be bale to implement remedial or corrective actions so that the entire project can be carried out according to the given plan. If any changes are included in the given project, the feasibility of the project will be assed again. It is essential not to forget the main goals and aims of the project in question. However changes should be introduced at this point of the project as they may accumulate, and pollute the project. This will have an effect on the estimated result of the project. 4. Execution phase In the execution phase the proposed project according to the time table is applied practically to the organization (Wit & Meyer 2004). Special attention will have to be given regarding the update of the project to the top management, investors and other concerned parties. Issues regarding procurement and contract administration, how the quality shall be managed, and carefully evaluating the risks involved in the project will have to also be communicated to them. Although the course of action regarding control and a lot of the above mentioned issues are already motioned in Project Control Phase, it is nevertheless essential for the Project Manager be completely aware of the issues when the project will be executed (Turner 1995). Feedback from the members of the team and meeting on daily basis with team members will help to ensure the success of the project This phase of the project will ensure the company that the activities they have chalked out, for the starting of a new business will be carried out in an effective manner. whilst making sure that the measurements of the project plans, specifications, as well as the project’s feasibility will continuously be carried out, analyzed and full filled all through the project lifecycle. If the company does not follow a proper project execution process then team would carry out projects by means of their own best practices, understanding, and techniques; and in this manner the project’s controls may be in danger. Thus, effecting it’s success. It is vital for the company’s project team and manager to carefully fulfil all the requirements of planning phase, as execution relies a great deal on the plans developed in the Planning Phase. There is a lot to do in this phase thus, it would be impractical to makes changes, or confront new risks issues at this point in the project. Changes at this point could lead to major chances of failure. During this phase the Project Manager will have to support and monitor the execution of other important parts of the plan, such as the Communications Plan, the Risk Plan and Procurement Plan. In order to do this the manager will have to keep in close interaction with the stakeholders, top management and other team members. Recommendation As ABC will start to grow across boundaries into newer continents, it will also kept identifying low cost manufacturing facilities for its global requirements; such as India, China etc. However, ABC’s ideal plan to start this new business can only be successful if they follow the wide scale implementation of the project plan in all SBUs. They will also have to keep in mind that their human resource will the key to the success of their business. An extremely critical point in the project plan could be a mess up in the execution phase. Consequently, if any changes or risks are overlooked then it could lead to a costly outcome (Scott 2005). Moreover, they should not try to relocating any SBUs during any phase of the project. It could present them with quite a few challenges, primarily in terms of restructuring the entire plan. Secondly, eliminating any step of the project at a particular phase at existing SBUs and changing them to design new SBUs will require constant restructuring of the entire plan. This will not be considered as something favourable by the upper management and stakeholders (Stephen & Cole 2004). One of our key recommendations to deal with these problems is for ABC to carefully monitor the project team and their progress. Since ABC’s project’s core competencies does lie in developing or starting a new business, it is imperative that ABC starts implementing policies regarding the project . It has to make sure that the members understand what the success of the project means. Moreover, the team members can be asked to comply with the specific and discretionary requirements set by ABC ‘S project manager with regular trails and audits. In order for the success of this project it may even be essential for ABC to form strategic alliances with either one or several businesses existing in regions of their SBUs. This could help them in find out what could lead to their success, what improvements they need to make. Moreover they may be able to understand the position of the market they are entering. The biggest advantage with this strategy is that ABC can focus their resources, both human & technological in implementing the strategies which propels its growth in the business. ABC would be able to retain it’s pace in the project while at eth same time concentrating on its core competencies. Subsequently, ABC would be able to manage cost of their entire project at SBUs in a methodical way along with substantial reduction of time as well as cost. Thus, they will have a dual benefit. Ultimately, ABCs objective of successfully completing their plan of starting a new business would also be fulfilled, and the team members would take full ownership of the project. In summary, this recommendation would help the project reduce it’s cost and allows more strategic alliance to take precedence. For the success of the project it is recommended that ERP be Implemented. It may be discussed that, the technology and ‘know how’ transfer from one SBU to another could lead to rising cost. Often, systems at one location could not be replicated since they are at new locations prompting additional capital expenditures on upgrades and trainings (Stanley 2000). However it may be recommended that, the labour and operational cost will be shared over with outsourcing vendors, however ABC will need to optimise its IT hardware and IT infrastructure for cost effective operations at SBUs. Our recommendation to address this problem is for ABC to come up with policies that differentiate phases based on their strategic plans of the project. These phases can be segregated into the phases mentioned in the above analysis part of the paper. Conclusion The entire project will be carefully carried out the diagrams and tables in the project plan give a clear understanding of the entire project and all it’s milestones. The project will definitely be a success above given discussion is implemented. The Work breakdown structure will give a more clear understanding of the entire project, as well as the steps to be followed. References Cleland, David. (2006). Global Project Management Handbook: Planning, Organizing and Controlling International Projects. 2nd edition. Mc-Graw Hill Professional Publishing. Futterer Shawn( 2011). Preparing For The PMP Certification Exam. Retrieved from http://ezinearticles.com/?Preparing-For-The-PMP-Certification-Exam&id=303095 on 30 January 2011 Kotnour, T. (2000). Organizational learning practices in the project management environment, International Journal of Quality & Reliability Management, Vol.17, Nos. 4/5, p393-406. Pinto, J.K. & Kharbanda, O.M. (1996). How To Fail In Project Management (Without Really Trying), Business Horizons, July-August, p45-53. Scott Berkun (2005); The Art of Project Management (Theory in Practice O'Reilly Media, Inc, USA; Second edition p 12 Stanley E. Portny (2000); Project Management for Dummies, John Wiley & Sons p 23 Stephen Barker & Cole Rob (2007) Brilliant Project Management: What the Best Project Managers Know, Say and Do Prentice Hall p 45 Turner JR.  (1995).  The Commercial Project Manager.  London: McGraw Hill.  Turner JR.  (1993). The Handbook of Project-Based Management.  London: McGraw-Hill.  Wit, B. de and Meyer, R.. (2004). Strategy, Process, Content, Context. 3rd ed.. Thomson Learning. London. Grant, P.M. (2007). Contemporary Strategy Analysis. 6th Edition. Blackwell Publishing: Oxford. Read More