Feasibility Studies

FEASIBILITY STUDIESAditya Dalal – 001Abhilash Agrawal - 002Siddhant Jain – 021Bhushan Ostwal - 036Shrikant Parsewar – 037Vipul Topare - 056

IS THIS FOX PLAYING TRICKS ON YOU?

HE IS NOT ALONE…

CAN YOU SEE WHAT HAUNTING THIS FOX?

CONTENTS•Introduction•Overview of the study•Elements of feasibility analysis•Feasibility report•Types of feasibilities•Tangible and intangible benefits•Conclusion

INTRODUCTION• Feasibility analysis/studies is used to access strengths and weaknesses of proposed project and present direction of activities which will improve the project and achieve desired results.

• It is an evaluation and analysis of the potential of the proposed project which is based on extensive investigation and research to give full comfort to the decisions makers.

BEFORE YOU BEGIN WE SHOULD THINK ABOUT THE FOLLOWING QUESTIONS

What defined market am I trying to reach?

What specific companies/organizations are servicing this market? Are they successful? Something similar? What is their market share?

Is the market saturated or wide open?

QUESTIONS CONTINUED.. What is the size of the market?

Is it growing? Is it stable, volatile, trendy?

How can you reach this market? How are competitors currently reaching the market?

What do customers expect from this type of product or service?

QUESTIONS CONTINUED.. What are the business models of competitors? What core competencies must the product or service have? What are “customers” willing to pay for this service or product? What is your competitive advantage?

FEASIBILITY STUDY is an analysis of the viability of an idea.

focuses on helping answer the essential question… “should we proceed with the proposed project idea?”

All activities of the study are directed toward helping answer this question.

A FEASIBILITY STUDY• Is a preliminary study undertaken before the real work of a project starts to ascertain the likelihood of the project's success.

• Is an analysis of all possible solutions to a problem and a recommendation on the best solution to use.

•Involves evaluating how the solution will fit into the corporation.• Can decide whether an order processing be carried out by a new system more efficiently than the previous one.

•Could be used to test a new working system, which could be used because:

WHY FEASIBILITY STUDY? Feasibility studies address things like where and how the business will operate.

They provide in-depth details about the business to determine if and how it can succeed, and

serve as a valuable tool for developing a winning business plan. Feasibility studies can be used in many ways but primarily focus on proposed business ventures.

Anybody with a business idea should conduct a feasibility study.. to determine the viability of their idea before proceeding with the development of a business.

DETERMINING EARLY THAT A BUSINESS IDEA WILL NOT WORK SAVES Time Money Heartache

A FEASIBLE 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 and • meet the goals of the founders.

AN OVERVIEW OF THE STUDY Appraisal of existing systems and manual processes Troubleshooting Process re-engineering Risk analysis and assessment Risk management Cost benefit analysis Impact analysis Integration of existing and new systems Resources requirements planning and timings Implementation strategy Infrastructure assessment and requirements Dependencies and requirements Support requirements and logistical analysis

THE ELEMENTS OF FEASIBILITY ANALYSIS FOR A PROJECT SHOULD BE COVERIN THE FOLLOWING :

1. Need Analysis2. Process Work3. Engineering and Design4. Cost Estimate5. Financial Analysis6. Project Impacts7. Conclusions and Recommendations

A FEASIBILITY REPORT SHOULD HAVE THE FOLLOWING STRUCTURE:

1. Executive Summary:

It provides a quick overview of the man points of the assessment, helping to form a picture of the proposal along with the recommendations.

It should be concise and include the major findings covered in the main body of the report

2. Need Analysis:

Need Analysis information provide a context to the business proportion.

It analyzes the justification of the idea, with a study of the possible alternatives.

It links the business idea to the current circumstances and helps to inform evaluation of the business idea.

3. Engineering: Description of the technical aspects of the business idea, including any changes needed to be made to existing processes or the need to add items to existing range of products and services.

4. Cost Estimate:The involves estimating project cost to a suitable level of accuracy. Levels of around -5% to +15% are common at this level of a project plan.

Estimates of capital investment, recurring and nonrecurring costs must be there.

Sensitivity analysis can be carried out on the estimated cost values to see how sensitive the project plan is to the estimated cost values.

5. Financial Analysis:

This involves an analysis of the cast flow profile of the project The analysis should consider rates of return, inflation, sources of capital, payback periods, breakeven point, residual values, and sensitivity.

This is a critical analysis since it determines whether or not and when funds will be available to the project.

6. Project Impacts:

This portion of the feasibility study provides an assessment of the impact of the proposed project Environmental, social, cultural, political, and economic impacts may be some

of the factors that will determine how a project is perceived by the public.

7. CONCLUSIONS AND RECOMMENDATIONS:

The feasibility study should end with the overall outcome pf the project This may indicate an endorsement or disapproval of the project. Recommendations on what should be done should be included in this section of the feasibility report.

A feasibilty study is a management-oriented activity. After a feasibility study, management makes a “go/no-go” decision. It helps examine the problem in the context of broader business strategy.

TYPES OF FEASIBILITY

6. Cultural feasibility7. Social feasibility8. Safety feasibility9. Political feasibility10. Environmental feasibility11. Market feasibility

1. Technical feasibility2. Economic feasibility3. Schedule feasibility4. Managerial feasibility5. Financial feasibility

TECHNICAL FEASIBILITY1. Reviews the engineering feasibility of the project including

structural and civil aspects2. Assesses the details of how one deliver a project or services ex. Materials, labour, transportation, location of the project and technology needed etc.3. When projects are in third world countries, technology transfer

between geographical areas and cultural needs to be analysed to understand overall loss or gain.

4. To get approval from concerned institution for license.5. Example of calculating material requirements List the material need to produce a service From where will get those materialsVolumes of discounts will be available as business grows

ECONOMIC FEASIBILITY1. Analysis of the project’s costs and

revenues in an effort to determine whether or not it is logical and possible to complete

2. Cost-benefit analysis is important. It is systematic approach to estimating the strengths and weaknesses of alternatives that satisfy transactions, functional requirements for business.

3. Provide the best approach for adoption and practice in terms of labor, time and cost savings etc

4. The tangible and intangible aspects of the project should be translated into economic terms to facilitate a consistent basis for evaluation.

5. Even project is non-profitable economic feasibility is critical

SCHEDULE FEASIBILITY1. How long will it take to get the technical expertise? may need to hire new skilled expertsOr retrain existing systems staffWhether hiring or retraining, it will impact the schedule

2. Assess the schedule riskGiven our expertise, are the project deadlines reasonable? If there are specific deadlines, are they mandatory or desirable? if they are not mandatory, the analyst can propose several alternative schedules.What if the project overruns?

3. Schedule feasibility includes: Project estimation Gantt and PERT charts CPM ( critical path method )

FINANCIAL FEASIBILITY1. Financial feasibility should be

distinguished from economic feasibility and usually done during project planning process

2. It indicates under certain assumptions how the project will work in terms of technology, market conditions and financial aspects.

3. It involves the capability of the project organisation to raise appropriate fund needed to implement the proposed project.

4. Project proponents choose to have investors, or other sources of funds for their project. In these cases, the feasibility, soundness, application of project funds can be obstacle.

5. Review of implications of land purchases, leases and other estates in land are included in this study.

CULTURAL FEASIBILITY Cultural feasibility deals with the compatibility of the proposed project with the cultural environment of the project.

In labor intensive projects , planned functions must be integrated with local cultural practices and beliefs .

Ex-religious beliefs may influence what an individual is willing to or not to do.

SOCIAL FEASIBILITY Addresses influences of project on social system in project environment.

It determines weather the proposed project will be satisfactory for the people or not.

Ex-projects which require labor man power will not work in high class educated society.

SAFETY FEASIBILITY important aspect Considered in Project Planning  

Safety feasibility refers to an analysis of whether the project is capable of being implemented and operated safely ,with minimal adverse effect on environment.

Ex-If a factory due its high level of pollution going to affect surroundings , its agreement can be canceled .

POLITICAL FEASIBILITYReferred - “Politically Correct Proj."   Political considerations often dictate

direction for a proposed project.

Political feasibility analysis requires an evaluation of compatibility of project goals with the prevailing goals of the political system.

Political feasibility is a measure of how well a solution to a policy problem, will be accepted by a set of decision makers and the general public.

ENVIRONMENTAL FEASIBILITY Environmental feasibility refers to a previous site analysis as far

as physical and environmental factors like location, flora, fauna, climate, grounds and geology.

Action must be taken to address any &

all environmental concerns raised or anticipated.

ex-Mega Dams issues (Aswan Dam , Egypt)

Water logging - soil salinity increased –deterioration of crops .

MARKET FEASIBILITY Different than economic feasibility .

Market needs analysis to view: a) Potential Impacts of Market Demand B) Competitive Activities c) “Divertible" Mkt Share -Available

TANGIBLE AND INTANGIBLE BENEFITS Tangible benefits for which money may be reasonably quantify and measure

Intangible benefits that may be quantified in units other than money or may be identified and described subjectively

TANGIBLE BENEFITS Fewer processing errors Increased throughput Decreased response time Elimination of job steps Increased sales Reduced credit losses Reduced expenses

INTANGIBLE BENEFITS Improved customer goodwill Improved employee morale Better service to community Better decision making