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Feasibility Study - Module 1

The document provides an introduction to feasibility studies, including defining feasibility studies, identifying their importance and components. It discusses the difference between feasibility studies, business plans, and project proposals. It also outlines factors affecting business survival and common reasons for business failure.

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josephblancedeguzman
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221 views6 pages

Feasibility Study - Module 1

The document provides an introduction to feasibility studies, including defining feasibility studies, identifying their importance and components. It discusses the difference between feasibility studies, business plans, and project proposals. It also outlines factors affecting business survival and common reasons for business failure.

Uploaded by

josephblancedeguzman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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INTRODUCTION TO FEASIBILITY STUDY

LEARNING OBJECTIVES

At the end of this module, it is expected that you should be


able to:

• Define feasibility study


• Comprehend the nature of a feasibility study
• Identify the importance for preparing a feasibility study
• Determine the usefulness and limitations of the feasibility study
• Identify the difference between feasibility study, business plan and project
proposal
• Identify the different components of Feasibility Study

7 COMMON REASONS WHY

MANY SMALL BUSINESSES FAIL


1. You as a business owner have a different mindset when you
set up the business.
2. The business lacks sound business plan.
3. Stakeholders have limited understanding about cash flow.
4. Business owners lack experience and/or incompetent to
manage it.
5. Business owner has made poor choice of business location.
6. Business proceeds with aggressive expansion without due
diligence
7. Business fails to adopt technology accordingly.

FACTORS AFFECTING BUSINESS SURVIVAL

INTERNAL
Entrepreneurial Characteristics
 leadership qualities
 persistence
 attitudes towards risk

Organizational Configuration
 Resources and culture
 Organizational culture typically is defined
as a complex set of values, beliefs,
assumptions, and symbols that define
the way in which a firm conducts its
Business

EXTERNAL
Micro-Environmental Variables
 the task or immediate environment may either be conducive or non-
conducive to a business.
 industry growth—high or slow
Macro-Environmental Variables
Socioeconomic, political, technological and socio-demographic make-up that
can work for or against an enterprise.

The wide search for factors that can explain business success or failure has
led to the inclusion of strategic management as having a significant impact on
business survival the ultimate goal of strategy research is to understand how
it is possible that firms operating in similar environments and under
competitive conditions keep on yielding different strategic rents strategic
management involves the set of decisions and actions that leads to the
creation and implementation of strategies that will achieve the objectives of
the organization to arrive at a set of strategies that will allow businesses to
compete effectively, thereby allowing it to generate enough profits for its
continued existence.

Definition of Feasibility Study

-The word ‘feasibility’ means the degree or state of being easily,


conveniently, or reasonably done. If something is ‘feasible,’ it means that
we can do it, make it, or achieve it an evaluation and analysis of a project
or system that somebody has proposed. The study tries to determine
whether the project is technically and financially feasible. measure of how
practical or beneficial the progress of a particular project will benefit an
individual, firm, company or organization. Analysis of the possibility of
proposed plan or method that covers all the essential parts of the project,
the market, management, technical, legal, financial and even
socioeconomic aspect to ascertain the possibility of completing the project
successfully.

-systematic inquiry proposed business activity viability in all areas


measurement of profitability level

Purposes of a Feasibility Study

1. Enhance the sustainability of a particular business currently undertaken;


2. Facilitate easily the evaluation of a project’s success in all areas covered by
the study
3. Seek the infusion of additional fresh working capital from a financial
institution
4. Determine the recovery period of a capital investment or expected return on
investment
5. Serve as measuring instrument in evaluating actual project against what
the study reveals
6. Reduce, if it cannot be totally avoided, the expected business difficulty that
maybe experienced during actual implementation; and
7. Meet and satisfy the requirements set by the investors of the proposed
business project
Limitations of a Feasibility Study

1. Valuable information needed in the study is not readily available.


2. The cost of gathering data, formulation of conclusions, and drafting of
recommendations is very high.
3. The competitor may have available data related to their operations but they
may hesitate to share such information because of confidentiality in the area
of taxation, production process, marketing, and other aspects of the business.
4. The proponent conducting the study is not well experienced in the field of
specialization and may lack skills and expertise in all or some areas of the
study.
5. A feasibility study though conducted by a competent individual and with
reliable data available, still remains forecast and nobody can prove the
availability of the forecast.

Feasibility study, Business plan, and Project proposal

Feasibility Study- an exploratory and evaluation tool

Business plan-“blueprint” in the operation of a business

Project proposal - seeking funding support from funding or lending institutions.

WHAT IS THE DIFFERENCE BETWEEN A FEASIBILITY STUDY AND A


BUSINESS PLAN?

A feasibility study is not a business plan. Rather, it provides an assessment of


the viability of the business under consideration

The business plan focuses on what steps are required to be completed if it is


decided to go ahead with the proposed business launch. The feasibility study,
however, identifies and analyzes several product or service alternatives and
recommends the best business model.

COMPONENTS OF FEASIBILITY STUDY

Market Feasibility - identifies whether the product or service is viable within


the competitive environment of the industry or marketplace.

Organization/Management

Feasibility – describes the structure of the organization of the business and


the justification for such a structure.
Production/ Technical Feasibility - discusses in detail the product (quality,
chemical composition, materials used, etc.), the process and technology for
its production, the raw materials used, etc.

Financial Feasibility - determines the amount of money required in the


realization of the project: the
sources of financing and the cost involved.
IDEA ASSESSMENT

Criteria for a business idea

 The idea must meet or create a customer need


 Provide a competitive advantage
 Allow for appropriate time to market
 Provide a reasonable return to investors
 Provides an opportunity to create economic value for the business.

Sources of Business Idea

 From existing products or services


-Change in size, shape, color, and contents

Examples: Lots’ a Pizza, Bibingkinitan, Eng Bee Tin

 From the process


-Ideas from the process of production and distribution

Example: fried siopao, 7-11, re-packaging, ambulant vending by


Julies Bakeshop

 From individuals/personalities
-Individual examines his/her hobbies, interests, hobbies,
skills, dream and his/her travel.

Examples: handicraft, customized products (t-shirt printing, etc)


specialty stores.

SWOT Analysis

A strategic planning method used to evaluate the Strengths, Weaknesses,


Opportunities and Threats that prevail at a particular time, for a project or
business venture.

INTERNAL

Strengths: attributes of the organization that is helpful to achieving the


objective.

Weaknesses: attributes of the organization that is harmful to achieving the


objective.

EXTERNAL

Opportunities: external conditions those are helpful to achieving the


objective.
Threats: external conditions which could do damage to the business's
performance or work against achieving the objective.

Opportunity Screening

Screening – “shorten your list of choices through screening process.”

Micro-Screening (personal Level Screening)

Personal preference
Market demand
Education/training
Technology
Work experience
Availability of labor/skills
Business contacts/networks
Availability
Family supportof raw materials
Financial or capital requirement
Profitability
Government support
Be as specific as possible. Avoid any gray areas or generalities.

• Describe factors in terms of the competition: as superior, better


than, equal to or worse than your competition.
• Be as realistic as possible regarding your strengths and weaknesses.
• Always be Objective
• Keep the SWOT analysis as simple as possible, but include all
relevant issues.

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