Lecture in FS
Feasibility Study
A systematic inquiry on a proposed business activity that is used to determine its
viability in all areas directed towards the measurement of a profitability level.
Feasible – attainable, realistic possible
Viable – continuous feasibility, sustainability of the business
The proposed business activity should have the following characteristics:
1. It should be intended for profit.
2. It should be regularly undertaken.
3. It should be financial in character.
Viability in all areas
The project feasibility study tests the viability of a business endeavor in not only one but
all aspects. The viability should be proven in all aspects of a project.
Measurement of Profitability Level
A project feasibility study can be described as follows:
1. It serves as the framework on how a business project can easily be performed.
2. It highlights the significance of the thinking process.
3. It may also serve the requirements of existing businesses, especially on the
aspect of plant expansion, additional product lines or new business opportunities.
4. it can be credited for a favorable success experienced by a business.
5. It embraces key areas of other disciplines such as economics, marketing,
management, accounting, taxation, engineering, quantitative analysis,
mathematics, logic and reasoning and business report-writing.
6. It is undertaken primarily by profit- oriented organizations.
7. It involves a cost-benefit analysis which derived from the study should exceed
the total estimated costs.
8. It is a special type of research inquiry whose forecast relies heavily on the
documentation of historical data.
Limitations of a feasibility study
1. Valuable information greatly needed in the study may not be readily available.
2. The cost of gathering the necessary data may be very high.
3. Confidentiality of the data from the competitors.
4. Professional expertise and competency may not have been acquired.
5. It can only provide indicators of probabilities.
Framework of Feasibility Study
1. Marketing Plan
2. Technical Plan
3. Management Plan
4. Financial Plan
5. Socio-economic plan
Proposed Name of the Business
In selecting a business name, these are the important points to consider:
1. Reflect the business identity
2. Reflect the philosophical values and culture that the company espouses
3. Profess the brand identity of its product
4. appeal to the customer
A business name is primarily used on legal documents, including receipts and
contracts. A brand name identifies your line of products/services, and is used to market
and sell your products/services to the general public.
A trade name is the name you use to refer to your company. In other words, it is the
name under which you present yourself with your company to the world.
For example, Nike is a brand name that includes the iconic “swoosh” logo and the “Just
Do It” [Link] the other hand, a trade name refers to the name a company uses to
identify itself in legal and commerce transactions.
A logo by itself is a graphic element that represents the brand, while a brand is a
combination of all tangible and intangible aspects that represent the organization.
Without the brand, the logo wouldn't have a real meaning, it would be simply a graphical
element.
Before proposing trade names, first check with the DTI. In case a name is already used,
it should no longer be suggested.
Sole Proprietorship or a partnership - ends with DTI - Department of Trade and Industry
Corporations seek approval to SEC- Security and Exchange Commission
Description of the Industry
In this section, the description should clearly indicate the current programs and thrusts
of the national government from which the proposed project will benefit.
In describing the industry where the proposed business belongs, the proponent should
answer the following:
1. What is the nature of the industry?
2. What are the trends in the global market?
3. What are the developments in the programs of the national government?
4. Are there barriers in the form of higher tariffs and other customs requirements?
5. What makes the project attractive?
6. What are the bright prospects of the proposed project?
Description of the Project
This section describes the nature of a project and the product or service it will provide.
The proponents should answer the following questions:
1. What is the product or service that the business will provide?
2. Is the study the result of regional studies or consultation?
3. What is the potential of the product or service in the market?
4. Who are the major consumers of the product or service?
5. What is the primary raw material required to produce or provide the service?
Location of the Project
The following questions should be answered in this section:
1. What is the prevailing peace and order condition of the proposed business?
2. Are there primary competitors within the vicinity of the project?
3. Where are the sources of raw materials, labor and utilities?
4. What is the proximity of the location to the market?
5. Is there available transportation?
6. How far is the plant from households?
7. What is the prevailing climate, temperature, or weather condition in the area?
Highlights of major Assumptions
The setting of assumptions is regarded as a normal procedure in conducting a study.
Assumptions facilitate the conduct of a study and are required in some mathematical
and quantitative analyses.
However, assumptions, particularly in a feasibility study, do not simply arise without any
bases. They depend o any or combination of the following:
1. Past experiences of other similar businesses.
2. Trends in the local and global markets.
3. Programs of the regional and national government.
4. Regulations and issuances of monitoring agencies.
5. Economic, financial and monetary indicators.
6. Economic, business or statistical model.
The setting of assumptions is sometimes the bottleneck of a study and may become a
constraint if they are not reliable.
Assumptions are needed to answer the following questions:
1. What is the market projection in terms of demand and supply?
2. What is the expected market share of the project?
3. How much is the expected cost of the product or service?
4. What is the expected initial selling price of the product or service?
5. How many units will be produced every year?
6. What is the expected cost of the project?
7. How will the project be financed?
8. What is the expected rate of return on investment?
Assumptions are based on the historical data, researches, local or international studies.