1 entrepreneurial skills lecture #3 & 4 feasibility study
TRANSCRIPT
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ENTREPRENEURIAL SKILLS
LECTURE #3 & 4FEASIBILITY STUDY
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AREAS TO COVER
1. The importance of a Feasibility Study
2. The Feasibility Study Procedure
3. Elements of a Feasibility Study
4. Conducting a feasibility Study
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WHAT IS A FEASIBILITY STUDY
An in-depth analysis of situational factors faced by a prospective business entity, the success of which will depend on an appropriate plan of action in order to deal with those factors.
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WHAT IS A FEASIBILITY STUDY The Study enables the entrepreneur to
minimize the level of risk or uncertainty in the prospective business, thus ensuring that the business will succeed as a going concern.
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A feasibility study will:1. help you to decide whether or not
there is a real need for your product or service
THE IMPORTANCE OF THE FEASIBILITY STUDY
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A feasibility study will:1. identify your segment of the
market
THE IMPORTANCE OF THE FEASIBILITY STUDY
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A feasibility study will:1. force you to look at the different
aspects of running a business.
THE IMPORTANCE OF THE FEASIBILITY STUDY
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THE IMPORTANCE OF THE FEASIBILITY STUDY
The results of the study will answer the following questions:
1. Are people in general interested in the product/service that the business will offer?
THE IMPORTANCE OF THE FEASIBILITY STUDY
1. Have any large companies or organizations agreed to carry the product or use the service once it is available?
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THE IMPORTANCE OF THE FEASIBILITY STUDY
1. Which people will be most interested in buying your product/service?
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4. Is it possible to earn a living from the business?
THE IMPORTANCE OF THE FEASIBILITY STUDY
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4. What sort of production schedule is needed to satisfy market needs?
THE IMPORTANCE OF THE FEASIBILITY STUDY
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4. What similar product/services are already on the market?
THE IMPORTANCE OF THE FEASIBILITY STUDY
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4. How much are people prepared to pay for your product/service?
THE IMPORTANCE OF THE FEASIBILITY STUDY
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4. How much advertising and promotion will you need to launch your product/service on the market?
THE IMPORTANCE OF THE FEASIBILITY STUDY
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RESEARCHING THE VENTURE’S FEASIBILITY Once you have thought of a business
idea, you must answer the following questions through conducting of a feasibility study.
1. Why should I start this business?
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RESEARCHING THE VENTURE’S FEASIBILITY
1. Is this a good business idea or is this merely an interesting hobby?
RESEARCHING THE VENTURE’S FEASIBILITY
1. Is the market ready for this type of product/service?
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THE FEASIBILITY STUDY PROCEDURE
The quest for information on the potentials of a prospective business should not be hindered by it being overwhelming or by sheer oversight.
The study should be carried out on a timely and objective basis, with appropriate skills or expertise.
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The approach to the Feasibility Study involves:
1. The Goal: What you wish to find out?
Is the business idea a viable one? What plan of action, or strategy will
be required to make it work?
THE FEASIBILITY STUDY PROCEDURE
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ELEMENTS OF THE FEASIBILITY STUDY
1. Market Feasibility
2. Technical Feasibility
3. Operational Feasibility
4. Financial Feasibility
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ELEMENTS OF THE FEASIBILITY STUDY
1. Market Feasibility
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Market Feasibility
Analysis of the market in terms of:1. Size2. Composition
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Market Feasibility
Analysis of the market in terms of:1. Taste2. Attitudes3. Preferences
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Market Feasibility
Analysis of the market in terms of:1. Demand7. Consumer income
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Market Feasibility
Look at factors that influences market response, viz:- The Product or Service
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Market Feasibility
Look at factors that influences market response, viz:- Price
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Market Feasibility
Look at factors that influences market response, viz:- Promotional efforts
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Market Feasibility
Look at factors that influences market response, viz:- Product quality
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Market Feasibility
Look at factors that influences market response, viz:- Distribution outlets
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Competitor Analysis
Who are the new venture’s current competitors?
What resources do they control? What are their strengths and weaknesses? How will they respond to the new venture’s
decision to enter the industry?
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Competitor Analysis
How can the new venture respond? Who else might be able to observe and exploit
the same opportunity? Are there ways to co-opt potential or actual
competitors by forming alliances?
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Strategies that Capture Opportunities
Peter Drucker’s Generic Competitive Strategies
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Strategies that Capture Opportunities Peter Drucker’s Generic Competitive Strategies Seek an advantage in cost or competition.
Cost-Advantage Strategy and Options Requires the firm to be the lowest-cost producer.
Marketing-Advantage Strategy Emphasizing the uniqueness of the firm’s product or service
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Laying the Foundation to Competitive Advantage
Competitive Advantage To establish competitive advantage, the owner needs to understand the nature of the environment within which he or she will be operating.
A benefit that exists when a firm has a product or service that is seen by its target market as better than those of competitors.
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Competitive Advantage
Unique ServiceFeatures
Notable ProductAttributes
CustomerService
Accessibility
CompetitiveCompetitiveAdvantageAdvantage
Price/Value
Technical Feasibility
Technical Feasibility Allows for an analysis of the skills
and abilities that will be required to carry out the business
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Technical Feasibility Special equipment, machinery, and
technical know-how.
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Technical Feasibility Sources by which the equipment
will be obtained.
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Operational Feasibility
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Operational Feasibility
Special consideration should be given to how the business will operate i.e. the prospects for: securing supplies
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Operational Feasibility
Sourcing adequate staff
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Operational Feasibility
Ensuring that quality and cost control will be maintained.
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Financial Feasibility
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Financial Feasibility
An analysis of the financial needs of the business and how the needs will be met. Options for obtaining financing
include attracting equity contributors, and securing loans.
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Financial Feasibility
The analysis should consider targeted return on investment and expected levels of profitability.
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Sources of Funds
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DebtEquity
Personal Savings
Other Individual Investors
Business Suppliers
Asset-Based Lenders
Commercial Banks
Government-Sponsored Programs
Community-Based Financial Institutions
Large Corporations
Venture Capital Firms
Sale of Stock
Friends and Relatives
Sources of Funds
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What Is a Small Business?Criteria for Defining Smallness in BusinessFinancing supplied by one person or small group
Localized business operations (except marketing)
Business’ size small relative to larger competitors
Fewer than 100 employees
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THE BUSINESS IDEAMETHODS FOR GENERATING IDEAS Look at trends in the economy Look at the needs of the community
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THE BUSINESS IDEAMETHODS FOR GENERATING IDEAS Look at changes which are causing
people difficulty Listen to the comments of people
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THE BUSINESS IDEA
METHODS FOR GENERATING IDEAS Read the newspapers and listen to the
radio and watch the TV Look at how people spend their time,
their fashion, eating habits, etc.
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METHODS FOR GENERATING IDEAS
Focus Groups
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METHODS FOR GENERATING IDEAS
Brainstorming
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METHODS FOR GENERATING IDEAS
Problem Inventory Analysis
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METHODS FOR GENERATING IDEAS
Reverse Brainstorming
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METHODS FOR GENERATING IDEAS
Gordon Method Checklist Method Free Association Collective Notebook Method
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2. The Methods: How will the study be carried out?
These methods allow for both primary and secondary data.
1. Primary Data: Those obtained first hand, according to the researcher’s own design
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1. Secondary Data: Those previously obtained that may be accessed for use in a present study.
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Primary Data Methods for obtaining primary data:1. Observation: looking at the natural
flow of activities2. Experiment: a controlled method of
testing cause and effect3. Survey: test of knowledge, beliefs,
preferences, by interviewing a sample representative
4. Focus groups: interactive chat with a small group of representatives.
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Secondary Data Sources of Secondary Data1. Government publications2. Periodicals, books, magazines3. Commercial data such as
previous research4. Company reports, brochures,
handboks.
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QUESTIONNAIRE DESIGN Much attention should be given to
the designing of a questionnaire or related interview tool.
The questionnaire consist of a set of questions presented to the respondents
It should be carefully developed and tested prior to it being administered.
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Careful attention should be given to the questions in terms of Forms Wording, and Sequencing.
Irrelevant questions should not be included and important ones should not be omitted.
QUESTIONNAIRE DESIGN
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The are two main forms of questions:1. CLOSED-ENDED
Questions accompanied by pre-specified responses for which the respondents may choose one or more responses.
2. OPENED-ENDED Questions that allow respondents to give
a response in their own words.
QUESTIONNAIRE DESIGN
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THE RESULTS How will you respond to the
findings? What actions will you take?
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THE RESULTS
Use Statistical Methods to tabulate your findings, viz:
Pie Charts Simple Multiple Bar
Graphs Pictograms Tables Line graphs bar charts
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The findings must be analyzed based on the goals of the study.
The analysis1. allows for appropriate conclusions
to be drawn.2. provides the framework for specific
recommendations.
THE RESULTS
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CONDUCTING A MARKET RESEARCH- THE
ELEMENTS
1. Target Population2. Selection of Sample3. Objectives4. Methodology5. Findings6. Analysis7. Conclusions & Recommendations8. Appendices.