Introduction Feasibility Study

MDA they may be used in formulating a

solution in other areas.
Definition Proposed Business Activity
A project feasibility study only applies
There is no authoritative definition of to a business endeavor. A business is
the term «project feasibility study." The an organization engaged in lawful
following are possible reasons for the commercial activities such as providing
lack of a universal standard definition: products or services for monetary
consideration to realize profit.
 No institution has received To simplify, an activity should have the
government recognition for being following characteristics to qualify as a
established solely to monitor or business activity:
evaluate feasibility. 1. It should be intended for profit.
 Professional individuals or 2. It should be regularly undertaken.
consultancy offices that conduct 3. It should be financial.
feasibility studies have not
organized themselves into a Intended for Profit
unified body to seek public A foremost concern of a project
recognition, and as a result, there feasibility study is to maximize
is no prescribed authoritative business profits or improve the interest
definition of the term. of the shareholders. In a feasibility
 The exercise of preparing a study, profit refers to the excess of all
feasibility study has not gained costs and expenses over revenue.
the status of a profession. Profit must be realized through a
NATURE OF A FEASIBILITY STUDY business activity that involves the
exchange of values.
Based on the given definition of the One way of increasing profits is by
project feasibility study, the key points increasing sales. Bigger sales normally
to remember are as follows: lead to bigger profits. Another way of
1. Systematic inquiry increasing profit is by reducing or
2. Proposed business activity minimizing the cost of producing and
3. Viability in all areas selling products or services. Minimal
4. Measurement of profitability level costs normally lead to increased
revenue. Applying the appropriate
Systematic Inquiry marketing strategy in selling goods or
1. Implies that there is an edit context services also helps improve the market
step-by-step process involved in the share of the business.
conduct of the feasibility study,
procedure conducting a study must Regularly Undertaken
follow definite procedures in The element of regularity indicates
investigating a business opportunity that there is a continuing and
that needs to be addressed. progressing economic act, not a mere
2. Second, systematic means that the single disconnected act. It implies that
whole study is composed of different the act is evenly conducted throughout
phases or aspects. Each phase has the year. The characteristic of
unique characteristics that ultimately regularity in a business substantially
contribute to the attainment of the differentiates it from other endeavors
objectives of the whole study. They such as project management.
should be well-coordinated and However, regularity in business
interdependent. The findings of one operations cannot be equated with a
aspect should support other areas, or cyclical process.
Regularity denotes continuity, whereas Factors Affecting the Preparation
cyclicality implies a new beginning of a Feasibility Study
once the first cycle ends. 1. Type of Industry
Financial 2. Size of project
A business activity involves an 3. Purpose of the Study
exchange of monetary values with 4. The party preparing the study
another party. 5. Requirements of prospective
Except for the socio-economic phase, investors
all aspects of a feasibility study have a
common denominator expressed in the Parties Requiring a Feasibility
Philippine peso. Study
Studies that do not possess a financial  Prospective investors
character, for example, improving the  Management
health condition of a community and  Proponents
other related studies, do not fall under  Financial institutions
the operational definition of a project  Shareholders
feasibility study.  Government agencies

Viability in All Areas

A project feasibility study tests the WRITING A PROJECT FEASIBILITY
viability of a business endeavor in not STUDY
only one but all aspects. The viability CHAPTER 2 PROJECT SUMMARY
of an activity is the primary concern of
prospective investors. There may be NATURE AND CONCEPT
instances where a project is viable in
one aspect of the study but not in
other areas, Viability in all areas
ensures a higher chance of attracting
and convincing prospective Investors.
As a precautionary measure, a
researcher should not immediately
conclude that a project is feasible
simply because it is proven to be
viable in one area. To reiterate, viability
should be proven in all aspects of a
project.

Measurement of Profitability Level

As it has always been pointed out, a THE PROJECT SUMMARY
feasibility study is directed towards the
determination of a project's viability.  Abstract, synopsis, and overview
Viability can be expressed in different  Presents the highlights of the
terms, one of which is profitability, not study, lists its major assumptions,
only within a short period but also and summarizes the major
during the entire life of the business. findings and conclusions
Mere profitability, however, is not the  Written in simple language and
only essence of a project. It is engaging manner
important to measure the level of It is recommended, though, that the
profitability of a chosen project against project summary should have the
other possible projects. following sections:
1. proposed name of the business
 2. description of the industry 5. What makes the project
3. description of the project attractive?
4. location of the project 6. What are the bright prospects of
5. highlights of major assumptions the proposed project?
6. summary of findings and
conclusion

PROPOSED NAME OF THE BUSINESS DESCRIPTION OF THE PROJECT

1. Reflect the business identity  Includes the stage the project is

2. Reflect the philosophical values presently in and whether the
and culture project arises
3. Profess the brand identity of its  Supports the statements in the
product immediately preceding section
4. Appeal to the customers
1. What product or service will the
The following questions should be business provide?
answered: 2. Is the study a result of regional
studies or consultations?
1. How does the trade name look 3. What is the potential of the
like? product in the market?
2. Does it reflect the identity of the 4. Who is the major consumer of the
business? product or service?
3. Does it reflect the philosophical 5. What is the primary raw material
values and organizational culture required to produce the product?
it cherishes?
4. Does it reflect the types of LOCATION OF THE PROJECT
products or services it produces
or serves?  The location of the business, its
5. Will it attract customers’ head office’ plant site, and
attention? outlets. Should provide a
competitive advantage and
DESCRIPTION OF THE INDUSTRY ensure the attainment of
maximum efficiency.
 The business is aligned along
with the analysis conducted 1. What is the prevailing
 Indicates the current programs peace and order condition
and thrusts of the national in the proposed location?
government 2. Are there primary
The proponent should answer the competitors within the
following: vicinity of the project?
3. Where are the sources of
1. What is the nature of the raw materials, labor, and
industry? utilities?
2. What are the trends in the global 4. What is the proximity of
market? the location to the market?
3. What are the developments in 5. Is there available
the programs of the national transportation?
government? 6. How far is the plant from
4. Are there barriers in the form of the households?
higher tariffs and other customs 7. What is the prevailing
requirements? climate, temperature, or
 weather condition in the 3. Management
area? 4. Financial
1. Is the project feasible in terms of
HIGHLIGHTS OF MAJOR the market?
ASSUMPTIONS 2. Is the project feasible in terms of
 Usually provided with short the technical aspects?
descriptions, including their 3. Is the project feasible in terms of
quantitative basis the organizational setup?
 Do not simply arise without any 4. Is the project feasible in terms of
bases. They depend on any or a its financial operation?
combination of the following:
1. past experiences of other
similar business
2. Trends in the local and
global markets CHAPTER 3 MARKET STUDY
3. programs of the regional NATURE OF MARKET STUDY
and national governments
4. regulations and issuances  Literally, a market is where a
of monitoring agencies buyer and a seller meet.
5. economic, financial, and  In a feasibility study, a market
monetary indicators study refers to the study of the
environment, demand, supply,
Assumptions are needed to answer the and price.
following questions:  It is generally directed towards
1. What is the market projection providing a definite and
in terms of demand and straightforward answer to the
supply? question, “Are there buyers or
2. What is the expected market consumers of the product or
share of the project? service?”
3. How much is the expected OBJECTIVES OF A MARKET STUDY
cost of the product or
services? 1. EVALUATE THE TRENDS IN THE
4. What is the expected initial INDUSTRY
selling price of the product? 2. DETERMINE THE SIZE AND
5. How many units will be GROWTH OF THE TOTAL ANNUAL
produced every year? DEMAND
6. What is the expected cost of 3. EVALUATE THE ANNUAL SUPPLY
the project? SITUATION
7. How will the project be 4. IDENTIFY THE POSSIBLE ENTRY
financed? OF COMPETITORS
8. What is the expected rate of 5. DETERMINE THE POSSIBLE
return on investment? MARKET SHARE OF THE PRODUCT
OR SERVICE
SUMMARY OF FINDINGS AND 6. ESTABLISH A PRICING POLICY
CONCLUSIONS 7. DEFINE AN APPROPRIATE
 Concluding remarks and findings MARKETING PROGRAM
of the proponent based on facts. THE MAJOR AREAS OF A MARKET
Usually, a conclusion is reached STUDY
in the following areas:
1. Market study 1. ENVIRONMENTAL ANALYSIS
2. Technical 2. STUDY OF DEMAND
3. STUDY OF SUPPLY
 4. DEMAND-SUPPLY ANALYSIS  The most used tool to conduct an
5. STUDY OF THE PRICE industry analysis is the Five
6. MARKETING PROGRAM Forces Model of Conception
by Michael Porter. In this
model, the competing forces are
ENVIRONMENTAL ANALYSIS as follows:
1. THE THREAT OF NEW ENTRANTS
 It is evaluating and monitoring 2. BARGAINING POWER OF BUYERS
the movements of varying 3. BARGAINING POWER OF
environmental forces surrounding SUPPLIERS
a business firm. 4. THREAT OF SUBSTITUTE
 Its foremost objective is to PRODUCTS OR SERVICES
develop a forecast of the general 5. RIVALRY AMONG EXISTING FIRMS
environment based on the trends
of events. STUDY OF DEMAND
 It should be anchored on the
industry evaluation. In other
words, there should be a very
close link between the study of
Societal Environmental analysis demand and the industry
 The general environment that analysis.
influences the long-term activities The study of demand involves the
of a business. The different following:
societal environmental forces and
their variables are as follows: 1. Analysis of past or historical
demand
ECONOMIC- INFLUENCES THE 2. Projection of future demand
EXCHANGE OF MONEY, GOODS,
SERVICES, AND ENERGY. ANALYSIS OF PAST OR HISTORICAL
DEMAND
POLITICAL-LEGAL- DEFINES LAWS AND
REGULATIONS, ALLOCATES POWER,  Past demand is the sum of the
OUTLINES DOMESTIC AND FOREIGN total goods consumed, whether
POLICIES, AND SETS CONSTRAINTS AND locally or imported during the
LIMITATIONS. previous year/s
TECHNOLOGICAL- FOCUSED ON The total past demand is computed
PROVIDING SOLUTIONS THROUGH as follows:
SEARCH AND INVENTIONS.
Local consumption= Local
SOCIO-CULTURAL- IT TAKES INTO production - Exports + imports
CONSIDERATION THE VALUES,
PRACTICES, TRADITIONS, AND CUSTOMS  Local production - Goods
OF SOCIETY. produced or services rendered in
the local community
 Imported units - The total
Industry analysis number of units produced in the
Philippines or outside the scope
 A group of businesses that of the study that are sold in the
produce similar goods or render Philippines or the local
similar services. community covered by the study.
 It examines how to position a  Total past demand - The total
business in a specific local production and imported
environment. units of a product.
To project the future demand for a 8. Packaging
product or service, the two approaches 9. Marketing Staff
are as follows: 10. Estimated cost of marketing
 Documentation Approach -
Used to project future demand
when only the past demand data CHAPTER 4 TECHNICAL STUDY
of a product or service is  Provides the details as to how a
available. good will be produced or how the
 Statistical approach - It market will be delivered.
involves a substantial statistical  Usually written after the market
computation to support the the study has been conducted
projection. and the unsatisfied has been
determined.
STUDY OF SUPPLY In specific terms, it aims to determine
 Intends to answer the primary the following:
marketing question, “Are there 1. The manufacturing processes to
existing suppliers of the proposed be adopted
product or service?” 2. Plant the capacity and design
 It should not be limited to direct 3. The production schedule
competitors only. 4. The product composition,
Study of demand- who uses or buys the physical appearance, and
products chemical properties
5. The available suppliers of
Study of supply- who provides the machinery
products 6. Machinery specifications,
capacity, prices, and auxiliary
STUDY OF THE PRICE equipment
 IT DEALS WITH PRICING AND 7. The sources of raw materials,
ADDRESSES THE QUESTION, labor, and utilities
“HOW MUCH IS THE SELLING 8. The plant layout, including plant
PRICE OF THE PRODUCT OR location and specifications
SERVICE? 9. The specifications and
requirements of utilities
MARKETING PROGRAM 10. Provisions for waste disposal
IT SHOWS THE DIFFERENT SETS OF
COORDINATED ACTIVITIES DESIGNED TO
ACHIEVE THE MARKETING GOALS OF A The Three Major Processes in a
COMPANY. Technical Study

THE BRIEF MARKETING PROGRAM SHALL 1. SELECTION PROCESS

INCLUDE THE FOLLOWING:  A significant concept tackled
in technical study
1. Target market 2. DETERMINATION PROCESS
2. Terms of sale  It identifies or lists the
3. Channel of distribution requirements necessary to
4. Transportation arrangement manufacture the proposed
5. Estimated selling price product and the quantity to be
6. Promotion and advertising produced.
activities 3. PROJECTION PROCESS
7. Distribution network
  It focuses on the total cost of PLANT LAYOUT- refers to the

the proposed project physical
arrangement/configuration
9. MACHINERY, EQUIPMENT, AND
SPECIFIC ITEMS CONSIDERED IN A TOOLS
TECHNICAL STUDY  PRESENTS THE TYPE OF
MACHINERY, EQUIPMENT, AND
1. PRODUCT OR SERVICE RELATED AUXILIARY TOOLS
 It is what a business provides NEEDED IN PRODUCING
to consumers GOODS, INCLUDING THE
2. MANUFACTURING PROCESS ESTIMATED ACQUISITION AND
 ILLUSTRATES THE SEQUENTIAL MAINTENANCE COSTS
STEPS FOLLOWED IN THE 10. BUILDING STRUCTURES
MANUFACTURE OF A AND OTHER FACILITIES
PROPOSED PRODUCT. 11. WASTE DISPOSAL
3. PLANT CAPACITY  FOCUSES ON THE ESTIMATED
COST THAT MAY BE INCURRED
 INCLUDES THE MAXIMUM RELATIVE TO THE DISPOSAL
LEVEL OF PRODUCTION THAT OF WASTE MATTER
A MACHINE MAY ACHIEVE 12. TOTAL COST OF
DURING A PARTICULAR CAPITAL EXPENDITURES
PERIOD.
4. PRODUCTION SCHEDULE
 A MANUFACTURING PLANNING CHAPTER 5 MANAGEMENT STUDY
TOOL THAT AIMS TO
MAXIMIZE THE PRODUCTION MANAGEMENT STUDY
CAPACITY OF A PLANT
5. RAW MATERIALS  A major component of a
REQUIREMENTS project feasibility study that
6. DIRECT LABOR has sequential and procedural
REQUIREMENTS implications for the whole
 ONE IMPORTANT CONCERN process.
THAT MUST BE ADDRESSED IN  Management determines the
A FEASIBILITY STUDY IS THE human resource requirements
AVAILABILITY OF SKILLED of the project.
WORKERS  It aims to determine the most
7. UTILITIES AND OTHER appropriate type of business
OVERHEAD REQUIREMENTS organization, in terms of
1. Who are the utility providers? formation and structure, that
2. How much is the expected will effectively accomplish the
consumption for utilities? objectives of the business.
3. Are there ways to reduce utility PROCEDURAL STEPS IN
consumption? CONDUCTING A MANAGEMENT
4. What are the other types of STUDY
overhead costs that have
material effects on the 1. Selecting a business organization
manufacture of the products? 2. Designing the internal structure
8. PLANT LOCATION AND LAYOUT 3. Staffing for the internal structure
 PLANT LOCATION- Entails a 4. Computing total salaries,
detailed and careful study compensation, and fringe
benefits
5. Preparing a timetable
 COMPUTATION OF SALARIES,
COMPENSATION, AND FRINGE
SELECTING A BUSINESS BENEFITS
ORGANIZATION
The proponent should consider the
 It aims to answer the following:
fundamental question, “What
type of business organization 1. The amount legally provided in
must be formed to effectively the Labor Code
carry out the objectives of the 2. The statutory minimum wage
proposed project?” 3. The prevalent practice in the
industry
1. Sole proprietorship 4. The demand for the position
2. Partnership 5. The technical requirements of the
3. Corporation work to be performed.
Factors Affecting the Choice of Business PROJECT SCHEDULE
Organization
A planning tool used for the following:
1. Capital Requirement
2. Liability of owner/owners 1. Identifying the activities or tasks
3. Managerial skills needed during the project
4. Ease of formation implementation
5. Tax implication 2. Determining the required
6. Government intervention resources to complete tasks.
7. Nature of business 3. Describing the work to be
8. External financing accomplished within a particular
time frame.
4. Determining the date to start the
project and the expected date of
INTERNAL ORGANIZATION completion.
STRUCTURE
 It answers the question “What is
the best internal organization
structure to be adopted to
achieve the goals and objectives
of the organization?”

1. Flat structure
2. Department-focused structure
3. Product-focused structure
STAFFING REQUIREMENTS
1. Determining the appropriate
number of employees required by
the organization.
2. Recruiting employees who would
qualify for the position
3. Deploying and retaining
employees