copy of final feasibility study

8/4/2019 Copy of Final Feasibility Study

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FEASIBILITY STUDY


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What is Feasibility Analysis?

To determine whether a business idea is

viable/ is worth pursuing or proceeding with?before spending a lot of resources on them.

If a business idea is deemed unworkable, it

should be dropped or rethought.

A feasibility study is a management-oriented

activity. After a feasibility study:management makes a go/no-go decision.


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What is a feasible business venture?

A feasible business venture is one where the

business -

will generate adequate cash-flow and profits

withstand the risks it will encounter

remain viable in the long-term

meet the goals of the founders

The venture can be a new start-up business, thepurchase of an existing business, an expansion of

current business operations or a new enterprise for

an existing business


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Components of Feasibility Analysis

Product/Service Feasibility Analysis

Industry/Market Feasibility Analysis

Organizational Feasibility Analysis Technical Feasibility Analysis

Economic Feasibility Analysis

Financial Feasibility Analysis


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Preparing a Concept Statement

Before a company undertakes a feasibility analysis, a

concept statement should be developed.

A concept statement is a one page description of a business,

that is distributed by a startup entrepreneur to people who

are asked to provide feedback on the potential of the

business idea.

The feedback will hopefully provide the entrepreneur

a sense of the viability of the business idea; and

suggestions for how the idea can be strengthened or tweaked

before proceeding further.


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Preparing a Concept Statement

Information to Include

A description of the product or service being offered

(What)

The intended target market (Who) The benefits of the product or service (Why)

A description of how the product will be positioned relative

to similar ones in the market

A description of how the product or service will be sold anddistributed (How)

Information about the founder or founders of the firm


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Product/Service Feasibility Analysis

Is an assessment of the overall appeal of the product or

service being proposed.

The idea is that before a prospective firm rushes a product

or service into development, it should be confident that the

product or service is what its prospective customers want.

The two components of a product/service feasibility

analysis are:

Concept testing

Usability testing


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Concept Testing

A concept test involves showing a representation of the

product or service to prospective users to gauge their

interest, desirability, and purchase intent.

A concept test is different from a concept statement. A

concept test is limited to testing the feasibility of a

specific product or service idea. A concept statement is

a preliminary evaluation of an entire business idea.


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Purposes of conducting a concept test

Purpose How it is accomplished

Validate the underlyingpremises of a product or

service idea

By asking prospects what they think (via phoneinterviews, personal interviews, and focus groups and

simply by watching people perform relevant tasks) & aresearch to know about their behaviors & attitudes.

Help develop an ideaA firm may show a product idea to a prospective

customer, get feedback, and tweak the idea. Then, inan iterative manner, theyll show the idea to more

potential customers, get feedback and tweak the idea

some more, and so on.

Estimate the potentialmarket share the

product or servicemight command

Some type of buying intention question appears inalmost every concept test (like definitely would buy,probably would buy, not sure, probably would not

buy & definitely would not buy). The total no ofpeople falling in first two category will suggest an

optimistic estimate of market share.


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User/ Usability Test/ Beta tests/ Field Trials

Is the method by which users of a product are asked to use

the prototype (mock-up) of the product in order to measure

the products ease-of-use and the users perception of the

experience.

While it is temping to rush a new product or service to market,

conducting a usability test is a good investment of an

entrepreneurs or firms resources. Many products that consumers

find frustrating to work with have been brought to market too

quickly.


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Forms of usability testing

(this is not an exhaustive list)

Form of usability test Explanation

Basic prototypeSome entrepreneurs, with limited budgets, develop a

fairly basic prototype and ask friends and colleagues to

use the product, then complete an evaluation form orgive feedback.

Elaborate usabilitytest

Better funded companies have more elaborateusability tests. For eg, in usability-testing lab

participants can be asked to work with softwareprograms that are being developed, while loggers

record usability problems.

Hybrid tests

There are a number of hybrid tests, that provide a

entrepreneur a sense of a potential usability problemwith a product or service. An example follow-me-

home testing methodology.


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Gives better understanding of what customer wants.

Helps getting the product right the first time.

Avoiding any obvious flaws in product or service design.

Using time & capital more efficiently. A bets community emerges- the firms or individuals that

participate in the FA often become a companys first

customers/ adopters.

Helps estimating the potential market share. Helps gaining insight into additional product & service

offerings.

Benefits of Conducting a

Product/ Service Feasibility Analysis


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Industry/Market Feasibility Analysis

Is an assessment of the overall appeal of the market for the

product or service being proposed. There are three primary

issues that should be considered:

Industry Attractiveness

Market timeliness

Identification of a niche market.


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Characteristics of an attractive Industry

Is Large (demand & sales)

Is Growing (Growth being more important than size)

Is important to the customer- (must have)

Is fairly young rather than older/mature- (PLC)

Has high Operating margins

Industry Competitiveness- Less/ Is not crowded Explore the opportunity and potential for a differentiated/ branded

product".

Explore barriers/ease of entry

Determine concentration & competitiveness of input suppliers and

product/service buyers. Identify price competitiveness of product/service.

The nature of the industry/ market (stable or going through rapid change and

restructuring).

These criteria are an ideal list, the extent to which a new business satisfy these

criteria should be taken seriously.


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Market Timeliness Considerations

Nature of product/service

introduction

Improvement onsomething alreadyavailable in themarketplace

Breakthrough newproduct or service,which shouldestablish a newmarket segment

Major Considerations

Is the window of opportunity open orclosed?

Is industry consolidating? (good time tolaunch a new firm as, handful of bigfirms takeover the majority of business)

Should we try to capture a first-moveradvantage?

Or go for second mover advantage?


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First mover Advantage

Brand recognition & market power

Eg. Palm, Yahoo, Nokia

Disadvantage

High R&D costs

Quick copied by competitor or comes out with a slightly

better version

Second mover Advantage

Studying all the mistakes done by the first mover

Contd.


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Identification of a Niche Market

A niche market is a place within a larger market

segment that represents a narrower group of customers

with similar interests.

For a new firm, selling to a niche market makes sense,

reasons:

It allows a firm to establish itself within an industry without

head on competition against major competitors.

It allows a firm to focus on serving a specialized market very

well instead of trying to be everything to everybody in a broadmarket, which is nearly impossible for a new entrant.


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Organizational Feasibility Analysis

Organizational Feasibility

Is whether the business has sufficient skills and resources

to bring a particular product or service idea to market

successfully. There are two primary issues to consider in

this area:

Management prowess

Resource sufficiency

Ensure an efficient Business structure: Outline the

governance, lines of authority and decision making

structure, Recruitment (policy & procedures), Training

programmes, Compensation package


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Management Prowess

A firm should candidly evaluate the prowess, or ability, of itsmanagement team. The most important factors to beconsidered are:

Passion- (Fire in the belly).

Experience & expertise academic qualification, pastexperience & performance.

Understanding of the markets in which the firm willparticipate.

Extent of social and professional networks.


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Resource Sufficiency

An assessment of whether an entrepreneur has sufficient

resources to launch the proposed venture.

The focus here should be on nonfinancial resources in that

financial feasibility is considered separately.

To test resource sufficiency, a firm should list the 6 to 12

most critical nonfinancial resources that will be needed to

move the business idea forward successfully. (If critical

resources are not available in certain areas, it may be impractical toproceed with the business idea).


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List Nonfinancial resourcescritical to the successful launch of a new business

Availability of a strategic & affordable location/ space

Likelihood of local and state government support of the business

Quality of the labor pool available

Willingness of high quality employees to join the firm

Proximity to key suppliers and customers

Likelihood of establishing favorable strategic partnerships.

Proximity to similar firms for the purpose of sharing knowledge Identify availability of consultants and service providers with the skills

needed to realize the project, including legal, accounting, industry

experts, etc.

Possibility of obtaining intellectual property protection in key areas


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Manufacturing Process/ technology Material/ Input analysis

Plant capacity

Location / site

Machineries and equipments

Structures and civil works

Environmental aspects

Project charts and layouts

Project implementation schedule

Need for considering alternatives

Technical Feasibility


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The choice of technology- is influenced by a varietyof considerations: What kinds of technology will we need?- state-of-the-art technology/

but most prefer to use mature and proven technology/ current

technology

Is the required technology available in house or is locally available?

If not available can it be acquired?

Will it be compatible with other systems?

Plant capacity

Principal inputs Investment outlay and production cost

Product mix

Latest developments

Ease of absorption

MANUFACTURING PROCESS/TECHNOLOGY


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Appropriateness of Technology - refers to those methods of

production which are suitable to local economic, social, and

cultural conditions. Technology should be evaluated in

terms of the following questions:

Whether the technology utilizes local raw materials?

Whether the technology utilises local man power?

Whether the goods and services produced cater to the basic needs?

Whether the technology protects ecological balance?

Whether the technology is harmonious with social and culturalconditions?

MANUFACTURING PROCESS/TECHNOLOGY


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Material inputs and utilities maybe classified into Raw materials;Processed materials and components; Auxiliary materials and factory supplieslike chemicals, additives, Packaging materials, paint, varnishes; and Utilities

like Power, water, steam, fuel, etc

The following questions should be raised while conducting the

inputs study: What quantities are required?

What are the sources of supply?

What would be the potential availability?

What are the likely shortages/ bottlenecks?

What measures may be taken to augment supplies?

What are their current & prospective costs?

Material Input Analysis


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Refers to the volume or number of units that can bemanufactured during a given period. Technological requirement : Based upon industry; there is some

minimum capacity of the Plant.

Input Constraints: Power Supply, Raw Material

Investment Cost: Investment cost per unit decreases as the capacity of

the plant increases.

Market Conditions: Depends upon demand supply and economy of the

country.

Resources of the firm: Both managerial & financial limitation

Government policy: location is influenced by certain governmental

restrictions and inducements. Inducements consisting of subsidies,

confessional finance, sales tax loans, man power subsidy, income tax

benefits, lower promoter contribution etc are there for establishing

industries in backward areas.

Plant Capacity/ Production Capacity


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Factors to be considered:

Proximity to Raw Materials: esp in resource-based project like a cement plant should

be located close to the source of limestone; to iron ore in the case of steel plant; close to aport if use of imported RM.

Proximity to Markets: esp if perishable, bulky, heavy, fragile product. Also if large marketgeographically spread.

Cost of land and cost of site preparation & development.

Natural & Climatic factors Facilities: industrial estates:

Availability of power- cost, uninterrupted supply?

Transportation (well connected by land, air, sea),

Water supply- quantity, quality, stability of supply

Communications. Labour Situation: esp In labour intensive projects. The key factors to be

considered are:

Availability of labour, skilled, semi skilled and unskilled

Labour productivity/ skills

Prevailing labour rates

State of industrial relations judged in terms of the absenteeism, frequency and severity of

Location and site


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Factors to be considered:

Specifications

Reliability of performance

Quotation from suppliers

Purchase/ Lease

Terms of payment? Support/ back-up services- Availability of power to set up an

electricity intensive plant

Spare part availability

Difficulty in transporting heavy equipment to a remote location.

Workers may not be able to operate

Procurement of plant

Machinery & equipment


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A project may cause environment pollution in various

ways : it may throw gaseous emissions; it may

produce liquid and solid discharges;

What are the types of effluents and emissions generated?

What needs to be done for proper disposal of effluentsand treatment of emissions?

Waste disposal?

Use of by-products.

Will the project be able to secure all environmentalclearances and comply with all statutory requirements?

Environmental Aspects


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General Functional Layout

Material Flow Diagram

Production Line Diagrams

Transport Layout

Utility Consumption Layout

Communication Layout

Organizational Layout

Plant Layout

Project Charts & Layouts


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For preparing the project implementation schedule

the following information is required:

List of all possible activities from project planning to

commencement of production

The sequence in which various activities have to be

performed.

The time required for performing the various activities.

The resources normally required for performing the

various activities.

The implications of putting more resources or less

resources than are normally required.

Schedule for project implementation

copy of final feasibility study

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