MODULE 3

PROJECT STUDY

INTRODUCTION

A business project whether a new venture or an expansion of an existing one is

undertaken in order to produce and sell products or service for profit at an attractive
rate of return to the investors. To accomplish the same will require enough planning
and implementation. More and more firms, entrepreneurs, and other investors resort to
the project feasibility study as a tool for planning the project and will serve as a guide
in its implementation.

COURSE LEARNING OUTCOMES

At the end of the module, students are able to make a project study which will cover
the basic aspects of management, marketing, production, finance, and all other
factors that will affect its operation. The project study if prepared to a certain level will
have a good chance of making profit if implemented.

A. MANAGEMENT
The management aspect is aimed at designing the form of ownership (for new ventures)
although in most cases is already predetermined, as well as the internal structure for managing the
project. The management study should present the form of ownership, the organizational structure
from the top management to the worker to indicate duties and responsibilities as well as the
interrelationship of the units or departments, and the personnel policies like selection, training and
compensation.

B. MARKETING
The market study is aimed at determining and analyzing the demand and supply for the
product/service in the past and making projections of demand and supply in the future. Ascertaining its
competitive position in the industry, and designing the marketing program for the product/service.

C. PRODUCTION
The production aspect describes the technology that will be used in making the product. It
includes product specification (mechanical, chemical, and physical properties), description of
equipment and raw materials to be used and the process involved. It also includes a study on the plant
location, layout and other facilities vital to the operation.
For service, a description of the types of service to be rendered, the equipment, supplies,
facilities and manpower are required to render the service efficiently.

D. FINANCING
The financial aspect is meant to determine the cost of the project and cash requirement and
the source of financing the project. Financial projections are made over a period of at least 5 years.
Financial analysis is presented showing returns on investment, return on equity, break even sales and
price sensitivity test.

E. MARKET FEASIBILITY
Market is where and to whom a product is sold. A description of who the buyers of the product
are and where they are located are the starting considerations as this determines the size of the
market. Size of the market is usually expressed by the number of households in a particular area, the
population under certain age groups, the number of persons in a particular income bracket, the
number of buyers in a particular area and so on. Once the market size is determined, the demand and
supply situation is analyzed.
The market feasibility should be able to present enough data to show the size and
characteristics of the market, the demand of the product, the supply availability and the competitive
situation.

F. DEMAND and SUPPLY ANALYSES

The demand analysis is meant to determine the pattern of consumption for the characteristics
of the market in the immediate past in order to determine what is likely to happen to the consumption
pattern in the near future. Implicit in the demand analysis is the analysis of consumption custom
idiosyncrasies (peculiarity) and buyer buying habits.
The supply situation for the product in a particular market is likewise assessed as to source and
the quantity and quality availability. Past and future supply trends and a study of factors affecting
these demands are first presented.
Once the demand and supply situation is ascertained, an analysis is made to determine
whether there is a gap between demand and supply. If the product demand is more than the supply,
entry of the new venture or expansion of an existing one is favorable. Otherwise, it is not advisable to
go on with the project.

G. COMPETITION
Aside from the demand and supply situation, the competitive situation must also be analyzed.
Although the demand and supply situation may be favorable, entry to the market may be very
competitive. Competition in the market is analyzed in terms of the number of competitors, the
prevailing prices, quality of the product, other services that accompany the sales of the product, the
promotion given to the product, the channels of distribution and the terms and conditions given to
effect sales and ultimate buyers of the product.

H. TECHNICAL FEASIBILITY
The technical feasibility study starts with the description of the qualities of the product, the
material with which it is made and the chemical composition (if applicable). Once the characteristics
have been specified, the process involved in making the product is described. This is done
systematically by presenting the process flow chart which shows the sequence of the process and
indicates the types and capacities of machines and equipment selected, the number of operators and
auxiliary personnel, types and quantities of raw materials, supplies and components to be used.

[Pick the date] Page 2

 Based on the process flow chart, the rated capacity per shift is determined. Once the
production process is establishes, a more detailed study of the production factors is presented.
The technical study should be able to collect enough data to establish whether or not the
requirements cab be fulfilled with regards to manufacturing know-how, equipment and materials, and
the facilities and other utilities. The technical study also serves as a basis for evaluating the economic
feasibility particularly with regard to cost covering the profit earning capacity.

I. FINANCIAL FEASIBILITY
The financial feasibility study determines the amount of money required in the realization of
the project. It likewise presents appropriate sources of financing and cost involved. A good financial
feasibility study should be able to present the funds needed for the pre-operating expenses, fixed
assets, and working capital; sources and cost of financing; projected financial statements; and financial
analysis. The financial return as shown in the study will ultimately determine whether or not the
project is feasible.

J. CONTRIBUTION TO THE PHILIPPINE ECONOMY

Some project studies may be required by the financing institution to present contribution of the
said undertaking to the Philippine economy in terms of dollars savings from importations, and/or
employment generation, contribution to growth of related industries and other benefits.

K. LIMITATIONS OF THE PROJECT STUDY

The preparation of the study requires one to make a lot of assumptions, upon which
projections are based. An error in the assumption or change in environmental situation will result in
erroneous outcomes.

L. CONCLUSION
A project feasibility study does not assure that the figures presented will exactly be the same
when implemented. Nevertheless, it promises a systematic approach towards planning the project
considering its limited resources. It helps convert an idea into a plan of action. It shows whether a
dream for a business venture will remain a dream or become a reality.

PROJECT STUDY

General Format

The following is the format of a project study:

I. INTRODUCTION
This portion discusses the background and rationale why the project is being undertaken.

[Pick the date] Page 3

II. SUMMARY OF THE PROJECT STUDY
A. Name of Firm
B. Location of Head Office Factory
C. Brief description of the project
1. Brief history of the business (if already existing) and/or Nature or Kind of
Industry
2. Highlights of the findings in each phase of the project study.

III. PROPONENT, MANAGEMENT AND PERSONNEL

A. Proponent: Refers to owners, projects originators, promoters, and founders. In many,
these roles are represented by just one person (as in the case od a sole proprietorship)
but this may not necessarily hold true to other forms of ownership like a corporation
where the owners (stockholders) are not necessarily the founders or promoters.
B. Management: Officers of the business and their qualification, and the supporting
professional firms (if any) during the pre-operating period and during the operating
period.
C. Personnel or Workforce: During the pre-operating period and during the operating
period.
D. Project Time-Table (Optional) through GANTT chart or PERT-CPM: This section
maybe placed after the production study before the final study or after the financial
study.

IV. MARKET FEASIBILITY

A. Market description: A brief description of the market to describe the buyers and users
of the product and the areas of dispersion.
B. Demand: Consumption in the past 5 – 10 years, major users of the product, and
projected consumption for the next 5 years.
C. Supply: Supply for the past 5-10 years broken down as to source whether imported or
locally produced. For imports, specify form in which goods are imported, price and
brand. For locally produced goods, indicate firms producing them, their production
capabilities, brands, and market share. Also, factors affecting trends in the past and
future supply.
D. Competitive position: Selling prices which will include a price study indicating the
past import and domestic prices, the high and low prices within the year and the
effect of seasonality; Competitiveness of the quality of the product; Methods of
transportation and existing rate; Channels of distribution; General trade practices
which is a description of the existing marketing practices of competitors.
[Pick the date] Page 4
 E. Proposed Marketing Program: Description of proposed product/service
characteristics for (a) tangible products like sample, size, Color, etc., quality of
service, (b) packaging (when applicable); Description of the proposed market target
like geographical location, age, gender, income bracket, educational attainment,
religious affiliation, or a combination thereof; Proposed Prices; Proposed channel of
distribution; and proposed promotional activities.
F. Projected Sales: Expected annual sales volume for the next 5 years considering the
supply and demand situation, the competitive position, and the marketing program.

V. PRODUCTION (Product or Service)

A. Product specification includes physical, mechanical and chemical properties (for
tangible products) and description of the kind and quality of services (for service
industries like restaurants, hotels, banks, etc.)
B. Production Process: Description of the process showing detailed flow chart
indicating material, equipment and energy requirement at each step, and the normal
duration of the process.
C. Plant Size and Production Schedule: Rated annual and daily capacity per shift,
operating days per year, indicating factors used in determining capacity.
D. Machine and Equipment: Machinery and equipment layout, indicating floor plan,
specifications of the machinery and equipment required indicating rated capacity and
list of machinery and equipment to be purchased.
E. Plant Location: Location map showing plant location.
F. Plant Layout: description op plant layout drawn to scale.
G. Building and Facilities: Types of building and costs of construction, floor area
involve, and land improvement such as roads, drainage, etc., and their respective
costs.
H. Raw Materials: Description and specifications relating to their physical, mechanical,
and chemical properties, current and prospective costs of raw materials, and
availability of supply and prospective sources.
I. Utilities: Electricity, fuel, water, steam and supplies indicating the uses, quantity
required, availability, tentative sources and costs.
J. Water Disposal: Description and quantity of water to be disposed of, description of
the water disposal method, clearance from proper authorities or compliance with
legal requirements and costs.

[Pick the date] Page 5

VI. FINANCIAL FEASIBILITY
A. For Existing Projects
1. Audited financial statement (balance sheets, income statements, cash flow) for
the past 3 years to reflect the aging receivables, schedule of fixed assets showing
capitalized cost, estimated useful life and depreciation method used; schedule of
liabilities, tax assessments and other pending claims or litigation against the
applicant, if any; financial trends and ratio analysis; and elements or production,
selling and administrative financial expenses.
2. Financial projections for the next 5 years (income statement, cash flow,
balance sheets)
3. Supporting schedules to the financial projections, stating assumptions used as
collection period of sales, inventory levels, payment period of purchases and
expenses, and elements of production cost-selling, administrative and financial
expenses.
B. For New Projects
1. Total project cost (fixed and working capital)
2. Initial capital requirement
3. Pre-operating cash flows relative to the project timetable.
4. Financial projections for the 5years of operations to include balance sheets
5. Supporting schedules to the financial projections to include collection period on
sales, inventory levels, payment period for purchases and expanses,
elements of production cost , selling, administrative and financial
expenses, and financial analysis showing return on investment, return on
equity, break-even volume and price analysis.

VII. CONTRIBUTION TO THE PHILIPPINE ECONOMY

A. Contribution to government revenues
B. Net annual amount of dollars earned or saved
C. Contribution to the growth of related industries
D. Contribution to the Philippine household
E. Other benefits

[Pick the date] Page 6

 Learning Activity: (Assignment)

Make a Project Study. Follow the General Format.

________________________________________________________________________________

REFERENCES:
Fajardo, Feliciano R. ENTREPRENEURSHIP, Manila, National Bookstore, 2008

Henderson, Vernon J. PRINCIPLES OF ECONOMICS, Heath and Company, 2008

Lauron, Maria Theresa N. ECONOMICS, Manila, Ibon Foundation, Inc., 2009

Medina, Roberto G. PRINCIPLES OF ECONOMICS, Rex Bookstore Inc., 2013

Zaida, Sonia LIVING ECONOMICS, 2nd ed., All National Publishing Co.,
Inc. Philippines, 2002

[Pick the date] Page 7