Chapter Two :
Project Identification
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Contents
• Conceptual Clarification
• Sources of project ideas
• Steps in Project Identification and Selection
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Situation analysis
Stakeholders analysis
SWOT analysis
Problem analysis
Objective analysis
Alternative Tree Analysis or Project Selection
Group Exercise
Chapter objectives:
At the end this chapter, You will be
able to:
• identify feasible project ideas to
solve a certain problem or exploit
opportunities, and
• apply different tools [problem tree]
in project identification and
selection.
2.1. Project Identification-meaning
- It involves the conceiving of ideas or
intentions to set up a project.
- These ideas are then transformed into a
project.
 Project ideas are normally initiated
by a perceived need [PROBLEM or
OPPORTUNITY] in an organization
and converted in to a formal project
proposal.
Project Identification-meaning
 The major focus in this step is finding project ideas or
identifying needs or demands for projects.
 The activities carried out are generally fact-finding
survey, or review of census or available secondary
data.
Group Discussion
 What are the sources for project
ideas?
 Categorize into Macro and micro
sources
2.2. Sources of project ideas:
 The community, researchers, experts, local leaders, Policy makers,
entrepreneurs, donors, NGOs, Planners, etc.
 Government policy priorities, unusual events, external threats,
unsatisfied demands, under utilized natural resources, etc.
 The business or government development planning document
 Needs of clients
 Individual working in organizations, well informed technical
specialists
 Local leaders
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Government departments,
Other country's experiences
Various Chambers of Commerce and Industry
National Small Industries Corporation, and several other
institutions including the business press,

They regularly publish valuable data and analytical reports about the
trends of demand, supply, costs in various segments of industry and
business.
Sources of project ideas _Cont’d
 By their very nature, opportunity studies are
indicative rather than detailed and hence are
generally based on macro-parameters and rough
estimates.
 Such studies may also be carried out in one of the
following three directions:
 a given geographical area (Area studies).
 a specific sub-sector of economy or industry, like food-
processing, agriculture, or power generation (Sub-sectorial
studies).
 exploitation of renewable and non-renewable natural,
agricultural, or industrial produce like minerals, sugarcane,
flash, fish, plants, and even geothermal energy sources, etc.
(Resource-based studies).
Sources of project ideas _Cont’d
Opportunity study:
Objectives:
 REFINEMENT OF BUSINESS IDEA
 PRELIMINARY EVALUATION OF ALTERNATIVE
APPROACHES
 PRELIMINARY ASSESSMENT OF STRENGTHS AND
WEAKNESSES OF CONCEPT
Characteristics:
 SKETCHY, BASED MORE ON ROUGH AGGREGATE
 ESTIMATES THAN ON DETAILED ANALYSIS
Who identifies projects?
Various organizations, whether
local or foreign, state owned or
private, government ministries,
development banks, interest
groups, CBOs, NGOs and of
course individuals can identify
projects.
Approaches to project identification
There are two major approaches to
project identification :
(a) Top-down approach
(b) Bottom-up approach
Top-Down Approach
 Projects are identified based on demands from beyond
the community.
 This may include directives from:
 international conventions (such as Kyoto
Protocol/climate change)
 international institutions that have
determined particular priorities and thus
projects
 national policy makers identifying
projects that pertain to party manifestos
and/or national plans.
Advantages of Top-Down Approach
 It may be a rapid response to disasters like floods,
war outbreak because there is limited time and
chance to consult the beneficiaries.
 It can be effective in providing important services
like education, health, water, roads etc.
 It can contribute to wider national or international
objectives and goals
Limitations of Top-Down Approach
 Does not help in modifying strongly established
ideas and beliefs of people.
 Assumes external individuals know better than
the beneficiaries of the service.
 Communities have little say in planning process
rendering approach devoid of human resource
development.
 Community develops dependency syndrome on
outside assistance and does not exploit their own
potential.
Bottom-Up Approach
In this approach community/
beneficiaries are encouraged to
identify and plan the projects
themselves with or without
outsiders.
Advantages of Bottom-Up Approach
 Interveners accomplish more with limited resources
since people tend to safeguard what they have
provided for themselves.
 Develops people’s capacity to identify problems and
needs and to seek possible solutions to them.
 Provides opportunities of educating people.
 Helps people to work as a team and develop a “WE”
attitude - makes project progressive and sustainable.
 Resources are effectively managed; dependence
reduces, there is increased equity, initiative,
accountability.
Limitations of Bottom-Up Approach
 Not always effective for projects that require urgency to
implement
 Time-consuming and requires patience and tolerance.
 People sometimes dislike approach because they do
not want to take responsibility for action.
 The agency using this approach is never in control and
cannot guarantee the results it would want.
 The priorities of communities may not fit with
national or international priorities that seek to have a
broader impact.
Project Identification in Both approaches:
 Involves needs assessment
- collecting, processing and analyzing data on
problems/needs of communities
 Review of secondary data
- Look at books, survey reports/ research papers,
publications, media reports, internet etc.
 Collecting and analyzing primary information
• Interviews
• Community mapping
• Focus Group Discussions
• Other methods
2.3. Activities (Steps) in Project
identification and initial screening:
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Situation analysis
Stakeholders analysis
SWOT analysis
Problem analysis
Objective analysis
Alternative Tree Analysis or project selection
a) Situation analysis
 This is about describing the problem or situation to
be addressed by the project.
 This can be ‘problem based’ or ‘opportunity based’.

e.g. what are the prevalent problem situations or
‘opportunity based’, e.g. is there an opportunity to serve people
with disability? Or is there an opportunity to establish a
Cement Factory (suitable soil)
 The information source is basically a status quo report
from the strategic planning process.
 It could also be a status quo report from a
feasibility study, a pre-appraisal report.
B. Stakeholder Analysis
Stakeholder is any individual, group or
organization, community, with an interest in the
outcome of a programme/project.
Key Question
Whose problems or opportunities are we
analyzing? Who will benefit or loose-out,
and how, from a potential project
intervention?
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Stakeholder Analysis _ Cont’d
Purpose: To identify:
 Needs and interest of stakeholders
 Organizations and groups that should be encouraged
to participate in different stages of the project
 Potential risks that could put at risk programme
 Opportunities in implementing a programme
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Stakeholder Analysis-Cont’d
Execise 1
Let us list up the stakeholders for primary education
(more than 50)
Exercise 2
Let us categorize them
beneficiaries/negatively affected groups/decision makers/funding
agencies/community leaders/potential opponents/supporting group
Exercise 3
Let us set the target group
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C. SWOT Analysis-Cont’d
SWOT analysis is a tool for institutional appraisal and a
brainstorming exercise in which the representatives of
the organization participate fully.
Strengths
SWOT stands for:
Weaknesses
Opportunities
Threats
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SWOT Analysis _Cont’d
Strengths - the positive internal
attributes of the organisation
Weaknesses - the negative internal
attributes of the organisation
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SWOT Analysis-Cont’d
Opportunities - external factors which
could improve the organisation’s prospects
Threats - external factors which could
undermine the organisation’s prospects
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SWOT Analysis-Cont’d
Example: Vehicle Company M
Strength
Accumulated high technology
Motivated young staff
Global network to distribute
Cost efficiency manufacture
Opportunity
Huge market in the country
More global cooperation
Low oil price
Weakness
Slow decision making
Old fashioned style
Weaker after-care
Weaker brand images
Threat
High material price
Foreign exchange
Other competitive companies
Political interference
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D. Problem Analysis
Problems Analysis visually represents 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.
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Problem Analysis-Cont’d
Relationships of Problems?
Simply connect causes and effects by directly “Because”
EFFECT
I am not motivated to work
I am not sure what
to do in this work
I am lack of
expertise/skills
CAUSE
I am lack of
training
My salary is low
My
company
is not
getting
profit
My post
is not
high yet
I get poor respect
from the boss
My poor
communi
cation to
boss
We have
different
ways to
think
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Problem Tree
EFFECT
CAUSE
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Problem Analysis-Cont’d
Steps in Undertaking Problem Tree
1.
2.
3.
Identify problems that the project will address.
State problems in negative manner.
Group problems by similarity of concerns.
Develop the problem tree:
a)
b)
c)
Select a Core/Focal problem from the list and relate
other problems to the core/focal problem.
If the problem is a cause of the core problem the tree is
placed below the core problem
If the problem is an effect of the core problem is goes
above
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Problem Analysis-Cont’d
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E. Objective Analysis
Objective Analysis clarifies the means-ends
relationship between the desirable situation that
would be attained and the solution for attaining it.
This stage also requires an Objective Tree.
 This involves turning a problem tree into an
objectives tree
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F. Project Selection/ Analysis of alternatives.
Project Selection is a process in which specific project
strategies are selected from among the objectives and
means raised in Objectives Analysis, based upon
selection criteria.
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Project Selection _ cont’d
How to select the project
1. Divide the objective tree into different clusters of
objectives
2. Name all clusters
3. Remove impossible one to achieve
4. Set criteria to make the final selection
Needs, Priority, Gender, Environment,
Difficulty, Budget, Risks, etc,,,,
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Analysis of alternatives.
 At this stage, there is a need to assess the alternative
courses of action proposed by each objective tree in
terms of effectiveness, costs, feasibility, impact on
priority groups, risks or other criteria.
Criteria can be:
 Technical
 Financial
 Economic
 Institutional
 Social/distributional
 Environmental
Preliminary screening
 Once some project ideas have been put forward, the next step
will be to select one or more of them as a potentially viable.
 This requires a quick preliminary screening by experienced
professionals.
 At this stage, the screening criteria are vague and rough
 During this stage, the analysts should eliminate project
proposals that are:
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Technically unsound & risky
Projects that have no market for their outputs
Have inadequate supply of inputs
Very costly in relation to benefits
Assume over ambitious sales and profitability
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Mortality of new project ideas
Appraisal
 No. of ideas
Screening
Selection
Time
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Term paper I (50%)-Project Proposal development
 Identify as many project ideas as possible in one of
your group members’ organization. Note that follow
all steps involved in project cycle stage.
 Submission date: on or before one week of the final exam
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End of Chapter Two
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