Fundamentals of Economics and
feasibility studies
(HU200)
Chapter (5)
Feasibility
study
Feasibility Study
Feasibility Study
?
Feasibility Study
A feasibility study, defined as:
• The study of the feasibility of creating benefit from a
given project.
Feasibility Study
A feasibility study, defined as:
• A controlled process for:
• identifying problems,
• identifying opportunities,
• determining objectives,
• describing current situations and successful outcomes,
• assessing the range of costs and benefits associated with
several alternatives for solving a problem.
Reason
s for
conduct
ing a
feasibili Man Never Plans
to Fail, He Only
ty study Fails to Plan
Reasons for conducting a feasibility study
Reasons are:
• Gives focus to the project and outline
alternatives.
• Identifies new opportunities through the
investigative process.
• Identifies reasons not to proceed.
Reasons for conducting a feasibility study
Reasons are:
• Enhances the probability of success by addressing and
mitigating factors early on that could affect the
project.
• Provides quality information for decision making.
• Helps in securing funding from lending institutions and
other monetary sources.
• Helps to attract equity investment.
The feasibility study is a critical step
in the business assessment process
A Feasibility Study (FS) should
answer 5 pivotal questions
1. Will the project/business
work or not?
2. Is it profitable or not?
3. What will it cost to fund or
start?
4. Is it worth doing?
5. Is it worth commissioning
a business plan?
Types Of Feasibility Study
?
Types Of Feasibility Study
There are six [Link] Feasibility
types of [Link] Feasibility
feasibility
[Link] & Economic
study
Feasibility
(areas that a
feasibility [Link] Feasibility
study [Link] Feasibility
examines) [Link] Feasibility
Types Of Feasibility Study
1. Market Feasibility: this assessment involves
current and potential demand of the product or idea in
the target market. Also, it contains information about
the buyers as well as the sales forecast over the first
coming (5 to 10) years
2. Technical Feasibility: this assessment focuses on
the technical resources available to the organization.
It helps organizations determine whether the technical
resources meet capacity and whether the technical
team can convert the ideas into working systems.
Types Of Feasibility Study
3. Financial & Economic Feasibility: this assessment typically
involves a cost/ benefits analysis of the project, helping
organizations determine the viability, cost, and benefits
associated with a project before financial resources are
allocated.
3. Legal Feasibility: this assessment investigates whether any
aspect of the proposed project conflicts with legal requirements
like zoning laws, data protection acts, or social media laws.
Types Of Feasibility Study
5. Operational Feasibility: this assessment involves
undertaking a study to analyze how a project plan
satisfies the requirements identified in the
requirements analysis phase of system development.
6. Scheduling Feasibility: this assessment is the most
important for project success; after all, a project will
fail if not completed on time. In scheduling feasibility,
an organization estimates how much time the project
will take to complete.
Types Of Feasibility Study
There are six [Link] Feasibility
types of [Link] Feasibility
feasibility
[Link] & Economic
study
Feasibility
(areas that a
feasibility [Link] Feasibility
study [Link] Feasibility
examines) [Link] Feasibility
Types Of Feasibility Study
1- Market Feasibility Study
Types Of Feasibility Study
1- Market Feasibility Study
• This assessment involves current and
potential demand of the product or idea in
the target market. Also, it contains
information about the buyers as well as the
sales forecast over the first coming (5 to 10)
years.
Types Of Feasibility Study
1- Market Feasibility Study
It is the process of learning the following:
• Who are my potential customers?
• What are their buying and shopping habits?
• How many of them are there?
• How much will they pay?
• Who is my competition?
• What have their challenges and successes been?
Types Of Feasibility Study
1- Market Feasibility Study
What to include
in the market
study?
Types Of Feasibility Study
1- Market Feasibility Study
1- Industry description and outlook
In short, the industry description and outlook take into
consideration:
• Definition of your industry (what do you offer)
• Size of your industry
• Rate of growth
• Potential for growth
• Trends in the industry
• Sustainability of your industry
Types Of Feasibility Study
1- Market Feasibility Study
2- Target market
• First, the market feasibility study should describe
the current market for proposed product or service.
• If you are offering something so unique that there
are few market statistics, you can either use related
industry information or even conduct your
independent study.
Types Of Feasibility Study
1- Market Feasibility Study
Target market
The target market section of your business plan should include
the following:
User persona and characteristics: demographics such as age,
income, and location. You’ll also need to dial into your
customers’ psychographics as well. You should know what their
interests and buying habits are, as well as be able to explain why
you’re in the best position to meet their needs.
Market size: How much do your potential customers spend
annually on the types of products or services you plan to offer?
How big is the potential market for your business?
Types Of Feasibility Study
1- Market Feasibility Study
3- Competitive analysis
• This is the section in which you get to dissect your
competitors, it’s a good idea to know what you’re up
against, but it also lets you spot the competition’s
weaknesses.
• What can you offer that similar businesses aren’t
offering?
Types Of Feasibility Study
1- Market Feasibility Study
Competitive analysis
The competitive analysis should contain the following
components:
• Direct competitors: What other companies are offering similar products
and services? What companies are your potential customers currently
buying from instead of you?
• Indirect competitors: If your company is creating a new product
category, perhaps you aren’t competing with similar companies, but
instead competing with alternate solutions. For example, Henry Ford
wasn’t competing so much with other car companies, but was instead
competing with other forms of transportation such as horses and
walking.
Types Of Feasibility Study
1- Market Feasibility Study
Competitive analysis
The competitive analysis should contain the following
components:
• Competitor strengths and weaknesses: What is your competition good at? Where
do they fall behind? Get imaginative to spot opportunities to excel where others
are falling short.
• Barriers to entry: What are the potential pitfalls of entering your particular market?
What’s the cost of entry—is it prohibitively high, or can anyone enter? This is where
you examine your weaknesses. Be honest, with investors and yourself. Being
unrealistic is not going to make you look good.
• The window of opportunity: Does your entry into the market rely on time-sensitive
technology? Do you need to get in early to take advantage of an emerging market?
Types Of Feasibility Study
1- Market Feasibility Study
4- Sales Projections
• Sales projections can be a challenge for any new
business owner because there is little, or no track record
to support how fast you will grow, or what products or
services will sell best.
• Sales projections should factor in how much time, and
money will be invested in the business, and the markets
you will be targeting.
Market share: When you know how much money your future customers
spend, you’ll know how much of the market you have a chance to grab. Do a
bottom-up projection where you explain how your marketing and sales
efforts will enable you to get a certain percentage of the market.
Types Of Feasibility Study
1- Market Feasibility Study
Sales Projections
Pricing and gross margin: This is where you’ll lay out
your pricing structure and discuss any discounts you plan to
offer. Your gross margin is the difference between your
costs and the sales price.
Types Of Feasibility Study
1- Market Feasibility Study
5- Regulations
• Are there any specific governmental regulations or
restrictions on your market?
• If so, you’ll need to bring them up here and discuss
how you’re going to comply with them.
• You will also need to address the cost of compliance.