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Feasibility Studies

Technical Feasibility Market Feasibility Financial Feasibility

Why new ventures fail? Need for comprehensive feasibility study


Inadequate market knowledge Faulty product performance Ineffective marketing and sales effort Inadequate awareness of competitor's reaction Rapid product obsolescence Poor timing of starting the venture Undercapitalization, unforeseen operating expenses, excessive investments & related financial difficulties

Technical Feasibility
A] Identification of critical technical specification comprising:

the functional design of the product adaptability to new customer demand durability reliability of performance safety reasonable utility(acceptable level of obsolescence) standardization (elimination of unnecessary variety)

Technical Feasibility
B] Examination of product-quality-cost relationship: trade-off between technical excellence and associated cost Entrepreneur should avoid unnecessary gold plating when the market situation doesnt justify it.

Technical Feasibility
C] Product testing: engineering studies relating to machinery, tools, instruments, work flow etc product development through blueprint, models, prototypes product testing through lab & field testing

Market Feasibility
A] Identifying the market potential:estimation of current demand projection of future market trends identify specific end users, major market segments, potential volume of purchasers within each market segment. Ex:- A potential manufacturer of helmets may find out the annual production of two wheelers percentage of helmets and proportion of demand already met.

Market Feasibility
B] Estimating cost-volume relationship:The price levels must reflect the value of the product The Cost-Volume Analysis would facilitate the determination of appropriate economy of scales i.e. optimum size of enterprise which has lowest average per unit cost of production & distribution. Helps ascertain how various price levels may affect the total sales volume

Market Feasibility
C] Sources of Market Info:Relevant data for market analysis can be gathered from=>Primary Sources (Interview, Questionnaire) or Secondary Sources (Govt. Agencies, Chamber of Commerce, Trade Association etc) Data relating to general economic trends-housing activity, consumer spending, inventories Pricing data-price for same, complementary, substitute products, discount structure Channels of distribution-wholesale & retail Demand pattern, seasonal variation Competitors

Market Feasibility
D] Market Testing: Displaying the product at trade fairs Test marketing to analyse the receptivity of product Sample sales

Use:
Likely sales volume & profitability Sales volume at different price levels Soundness of chosen market strategy Unknown weakness that need attention

Financial Feasibility
A] Determination of total financial requirement:Initial Expenses Fixed Investments Operational Expenditure Contingency Provision must be made for cost escalation, appropriate sales forecast should also be made. Projection could be weekly or monthly.

Financial Feasibility
B] Financial Resources & Other Costs:Short-term Resources-payable in 1 year Term LoansIntermediate term loans- available for 1-3 years(even 5) Long term loans- banks, equity capital & reinvestment of earnings C] Cash Flow Analysis D] Anticipated Return on Investment

Assessment of personnel requirement & organizational capabilities


Ascertaining the anticipated workflow & the various activities Grouping the activities into set of tasks that individuals can handle effectively Categorization of various tasks to form the basis of structure of the organization Determination of inter-relationship between different position & designing of organizational hierarchy

Other Feasibility Studies

Analysis of Competition
1. 2. direct competition from similar products indirect competition from substitutes