Transcript
Feasibility StudyMBA Program
Faculty of Business StudiesUniversity of Dhaka
Group Details
StellarName of Members ID No.
Promit Debnath 18103
Bikash Chandra Paul 18115
Md. Kaikobad Hossain 18120
Anjan Kumar Das 18124
Pobittro Saha 18133
Project Cycle
Pre-investment Phase
Investment Phase
Operation Phase
Pre-investment Phase
Opportunity Study
Pre-feasibility Study
Feasibility Study
Appraisal Report
Pre-investment Phase
Opportunity Study
Pre-feasibility Study
Feasibility Study
Appraisal Report
• Screening innovative ideas
• Reviewing country importing items
• Assessing local community needs
• Projecting future demand on
certain product or service
• Examining current diversified
industrial trends
• Reviewing available skill &
workforce
• Expert research
Pre-investment Phase
Opportunity Study
Pre-feasibility Study
Feasibility Study
Appraisal Report
• Describing the product or service
• Describing the market supply & demand
• Describing production methodology
• Describing initial inputs and infrastructure
supporting services
• Location
• Estimate capital & operating cost
• Estimate revenue
Feasibility Study
A feasibility study is defined as an evaluation or analysis of the potential impact of a proposed project or program. It is conducted to assist decision makers in determining whether or not to implement a particular project or program.
Feasibility Study (Cont.)
Feasibility Study
Based on extensive research
Contain wide-ranging of dataShould have clear
supporting evidence
Feasibility Study V/S Business Plan
An investigating function
Outlines and analyzes several alternatives
Conducted before business plan
Excuses for NOT Doing Feasibility Study
• We know it’s feasible. An existing business is already doing it.• Feasibility studies are just a way for consultants to
make money• The market analysis has already been done by other
same business• Feasibility studies are a waste of time. We need to
buy the building, tie up the site and start the business.
Reasons to Do Feasibility Study• Gives focus to the project and outline alternatives.• Narrows business alternatives• Identifies new opportunities through the investigative
process.• Identifies reasons not to proceed.• Enhances the probability of success by addressing and
mitigating factors early on that could affect the project. • Provides quality information for decision making.• Provides documentation that the business venture was
thoroughly investigated.• Helps in securing funding from lending institutions and
other monetary sources.• Helps to attract equity investment.
Dimensions of Business Viability
Market Viability
Technical Viability
Business Model Viability
Management Model Viability
Economic & Financial Model Viability
Exit Strategy Viability
Market Viability
Opportunity
Target Customer
Competitors
Market Environment
Technical Viability
Capacity Resources
Manufacturing Process
Business Model Viability
Uniqueness of Model
Competitor’s Ability to Duplicate
Ability to Create Value
Ability to Create Wealth
Management Model Viability
Application of knowledge & skills Training
Employee management & recruitment
Management of intellectual property
Management of risk Ability to delegate to the staff
Economic & Financial Viability
Startup cost Working capital Operating cost
Raw material cost Overall return on investment
Overall profitability
Break Even PointSustainability of market versus
projected revenue
Ability to generate economic value
Exit Strategy Viability
Create wealth from exit strategy
Ability to define exit strategy
Identify potential buyer
or strategies
Schedule exit strategy
Issues to be Considered
Market Feasibility
Technical Feasibility
Resource Feasibility
Cultural Feasibility
Operational feasibility' Legal Feasibility
Schedule Feasibility
Economic Feasibility
Market Feasibility
•Industry description.•Industry competitiveness.•Market potential•Access to market outlets.•Sales projection
Market assessment is
needed to identify the opportunities in the market. If no opportunities exist, there may be no reason to proceed further.
Technical Feasibility
•Determine facility needs.•Suitability of production technology.•Availability & suitable of site.•Raw materials.•Other inputs.
Product methodology need to be determined. It
involves which technology will be
needed for production, how it
will be operated and the experience of the
firm in using the technology.
Resource Feasibility
• Required time for completion
• Effect on normal business operation
• Amount of resources
The time required for the project and
resources needed to be determined here.
Contingency & mitigation plans
should also be stated here so that if the
project does over run the company is ready for this eventuality.
Cultural Feasibility
•Impact on the local & general culture•Environmental factors need to be considered•Impact of enterprise's own culture
Culture has great effect on
business. So local culture as well as corporate culture need to be taken
into consideration here.
Operational Feasibility
•Compatibility of current work practices & procedures with new system required by the project.•Effect of social factors such as how the organizational changes will affect the working lives of those affected by the new system
Focuses on the degree to which the proposed development projects fits in with the existing business environment
and objectives with regard to development
schedule, delivery date, corporate culture
& existing business process
Legal Feasibility
• Legal Implication• Ethical Issues• Authorization• Political Issues• Environmental Issues
Whether the project
conflicts with legal
requirement is need to be checked.
Schedule Feasibility
• Project timetable• Project deadline
A project will fail if it takes too long to
be completed before it is useful. Typically
this means estimating how long the system will take to develop, & if it
can be completed in a given time period using some methods like payback period.
Economic Feasibility
•Availability of required resources•Determine the benefits & savings•Compare the benefits with cost
The purpose of the economic feasibility
assessment is to determine the positive
economic benefits to the organization that the proposed system will provide. It includes quantification and
identification of all the benefits expected. This
assessment typically involves a cost/ benefits
analysis.
Parts of Feasibility Report
Cover Sheet Executive Summery Table of Content
1. Introduction2. Product or Service3. Technology4. Market Environment5. Competition6. Industry
7. Business Model8. Marketing & Sales
Strategy9. Production Requirement10. Management & Personnel
Requirement11. Intellectual Property12. Regulations Issues13. Critical Risk Factors
Parts of Feasibility Report
Financial Projections1. Balance Sheet Projections2. Income Statement Projections3. Cash Flow Projections4. Break-Even Projections5. Capital Requirement & Strategy
Findings & Recommendations Conclusion
Executive Summery
Executive summery is the summarized outcome of the feasibility report. It is a separate and standalone document. It helps the interested parties to understand the entire report and decision making. Few things to remember:It should be presented immediately after the content
section.It should not exceed more than one page.
1. Introduction
Introduction includes the basic concept of the study. It also includes the background of the study as well. Few things to remember:Introduction should be brief and clear.Introduction should reflect the insight reasons of
the study.
2. Product or Service
This section of the feasibility report describes the entire product(s) or service(s) details of the company. It also gives a brief idea about:Product mix (if any)Usefulness of product or serviceKey components or raw materials and its
availabilityImplementation planUpgrade or expand the product line
3. Technology
Technical knowledge of the feasibility study includes several issues such as:It provides details information about the product or
service.Describe additional or ongoing research or
development needs.
4. Market Environment
•Details about target market•Emphasis on costumers’ benefit
Target Market
•Target industry, key players•Market size, targeted market shareB2B Market
•Demographic factors•Psychological and behavioral factorsB2C Market
5. Competition
Market competition is a vital issue of starting new business if the competitors exist. Few things to remember:Details about competitorsList of barriers to entryDescribe uniqueness of product(s)Copyright issuesCompetitors reactions
6. Industry
A feasibility study should clearly define and describe the industry in which the enterprise operates. It also includes the following issues:Industry sizeIndustry growth rateIndustry segmentIndustry supply and demandIndustry forces that drives the market
7. Business Model
Proposed enterprise’s business model is presented in this part which includes:How the business will generate revenue.Will there be recurring revenue?Describe the model fully so that it will support the
financial projection.
8. Marketing & Sales Strategy
Basic marketing and sales strategy should be presented in here. It may describe any strategic partnership the enterprise has or is planning to form. This section also includes:Distribution strategyProjected profit margin or markupPricing strategy and justificationPayment terms for customersOther issues (e.g. warranties, marketing budget)
9. Production Requirement
This section describes the various issues regarding the production of product or service. It may include:How and where the company will manufacture and
at what cost?What physical premises are required?Will space be owned or leased? At what cost?How complex the manufacturing process is?
Describe equipment needed and cost.
9. Production Requirement (Cont.)
In some cases, the enterprise may outsource the production or other materials. Few things to remember:Describe supply sources and availabilityOutline the relevant contract termsDetails about quality control
10. Management & Personnel
To run the enterprise, it must need a management and some personnel to control the management issues. This section also includes:Managers’ names, tittles, responsibilities, background,
experiences, skills, cost etc.Sketch personnel requirement
11. Intellectual Property
Patent
Copyright
Trademark
11. Intellectual Property (Cont.)
In case of licensing agreement, enterprise should disclose the name of the licensor, key terms and give termination or renewal date.
If the concept of the business is scientific, intellectual property extremely important.
Sometimes business planning associated with intellectual property must occur prior to a business concept being developed and validated.
12. Regulations Issues
In this part, enterprise should outline the non-economic forces that might affect the prospect of the enterprise. It includes several issues such as:Key government regulationsEnvironmental problems and associated cost (if any)Political stability (if any)
13. Critical Risk Factors
In this part, enterprise has to identify the critical risk factors of the business by:SWOT AnalysisPorters Five ForcesPEST Analysis
N.B: Make sure how the enterprise will mitigate those associated risks!
Financial Projections
Balance Sheet Projections
Income Statement Projections
Cash Flow Projections
Break-Even Projections
Capital Requirement & Strategy
Capital Requirement & Strategy
In this step, enterprise has to answer several questions such as:How much funding (equity) will the firm need & when?What projected revenue or assets does the proposed
business have to secure the financing?What sources will provide the funding, i.e. investors,
lending institutions etc.?What ratio of debt to equity financing will occur?When will investors begin to see a return? What is the
expected return on investment (ROI)?
Findings & Recommendations
Findings and recommendations part of the feasibility study should be honest, short and direct. It is important to note that final recommendations should be based on the dimensions of the feasibility study separately. Few things are important in here such as:Likelihood of successProjected return of investment How the risk will be mitigatedArgument based on strong evidence for justification
Conclusion
The conclusion of the report should highlight the contribution of the business to the larger society. Such issues as employment opportunities, provision of inputs for industrial development, export potentials, and revenue to be generated will be addressed by this aspect.
Helping Hands
You cannot prepare a perfect feasibility report without the help of other parties. Those helping hands includes:• Business Enterprise Center• Accountant• Solicitor• Banks• Business advisers or consultants• Trade associations• Potential suppliers• Competitors• Libraries and Online entrepreneurship recourses
Monitoring the StudyHiring a consultant does not negate the responsibility for insuring that the feasibility study is conducted properly. You need to be engaged in the project and the evaluation process, understand the issues involved, question the basic assumptions used in the study and challenge the conclusions of the study. Few things to remember:Represent the project committee’s needs and interests
to the consultantReview and clarify what is needed from the consultantMonitor the work of the consultantProvide periodic reports to the project committee
How to Accept or Reject the Study?At the end of the study, the authorized party will submit the draft or final report. It is not uncommon for the project committee to reject the draft of the report and ask for further clarification and analysis. So, it is important to determine if it is accurate, relevant and complete. Few things are important to consider such as:Understandable and easy to readAddresses all of the relevant issues and questionsLists and discusses all of the underlying assumptions of the
project analysislogically consistent within sections and among sectionsThoroughly researched using good research techniquesContains all of the relevant information
References
• Thomson, Alan (2005), Business Feasibility Study Outline, Appendix 1, PP: 185-198
• Wikipedia, (2016), Feasibility study, [online] Available at: https://en.wikipedia.org/wiki/Feasibility_study [Accessed 18 Apr, 2016]
• Hofstrand, Don & Holz-Clause, Mary (November, 2009), When to Do and How to Use a Feasibility Study
• Hofstrand, Don & & Holz-Clause, Mary (October, 2009), What is a Feasibility Study?
• Matson, James (October 2000), Cooperative Feasibility Study Guide, United States Department of Agriculture, RBS Service Report 58
• W. Behrens, P. M. Hawranek (1995), Manual for the Preparation of Industrial Feasibility Study, United Nations Industrial Development Organization
Suggested Questions!
1. Why Feasibility Study is important before starting new business?
2. How to do the Feasibility Study?3. Describe the dimensions of Feasibility Study?4. Is there any differences between Business Plan and
Feasibility Study? Explain.5. What are the factors that influences the exit strategy
viability?6. Explain B2B and B2C market with real market
examples.
Suggested Questions! (Cont.)
7. Differentiate between Patent, Copyright and Trademark. Explain with examples.
8. Is it necessary to monitor the Feasibility Study? Give your arguments.
9. “Feasibility Study is a waste of time & money. It’s not necessary to do it. Let’s start the business first and see what will happen!”- Do you agree or not? Explain your arguments.
10. How the risks related to the project will be determined and reported on Feasibility Study?
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