1. C HAPTER – I F EASIBILITY S TUDY INTRODUCTION 1 Dr. BALAMURUGAN MUTHURAMAN

2. L EARNING OUTCOMES By the end of this chapter you will be able to understand Basic Concepts underlying feasibility study. The feasibility process. The concept of idea generation and factors involved in it. The difference between personal and business objectives. Market analysis and its dimensions. 2 Dr. BALAMURUGAN MUTHURAMAN

3. F EASIBILITY S TUDY A feasibility study is a tool used during a business development process to show how a business would operate under a set of assumptions. These assumptions often include such factors as the technology used (the facilities, equipment, production process, etc.), financing, (capital needs, volume, cost of goods, wages, etc.), marketing (prices, competition). It provides in-depth details about the business to determine if and how it can succeed, and serve as a valuable tool for developing a winning business plan. 3 Dr. BALAMURUGAN MUTHURAMAN

4. W HY P REPARE F EASIBILITY S TUDIES ? Feasibility studies outline the ideas on paper before implementing them. Identify errors in project design before implementation is made. Potential stumbling blocks can be identified and decisions made about whether they could be effectively addressed if the project goes forward Applying the knowledge gained from a feasibility study can significantly lower overall project costs by keeping adverse designs and planning concepts from being made A feasibility study presents and clarifies the risks and returns associated with the project 4 Dr. BALAMURUGAN MUTHURAMAN

5. T HE F EASIBILITY P ROCESS Feasibility Process begins with an idea. This idea can be for a product or service. A market analysis, which thoroughly investigates the industry, competitive economic environment and target markets, will help to decide if the idea can become a profitable business. This exercise also make an informed decision by identifying the requirements for starting a particular business, such as experience, time and legal and funding issues. 5 Dr. BALAMURUGAN MUTHURAMAN

6. T HE F EASIBILITY P ROCESS 6 Dr. BALAMURUGAN MUTHURAMAN

7. FACTORS FOR IDEA CONSIDERATION 7 Dr. BALAMURUGAN MUTHURAMAN

8. I DEA : D EFINING Y OUR B USINESS The first step is to define business idea and the opportunity envision. Include a description of the product or service, the reasons for starting the venture and the type of business plan to establish (for example, manufacturing, wholesaling, retailing, exporting/importing or service). Consider these areas when writing a working definition of your business. 8 Dr. BALAMURUGAN MUTHURAMAN

9. F ACTORS FOR I DEA CONSIDERATION Customer Viewpoint: Must adopt customers’ viewpoint because if fail to satisfy customers’ needs, business will fail. Briefly describe the products/services that will sell and how customers will use them. Ask potential customers how they would define your product or service. Their perspective can give important insight into how your product or service will actually be used. Product/ Service: Specify the line of product or service that will be offered and look for secondary opportunities. For example, are there services can provide in association with other product, or are there products that result from the service that will be provided? 9 Dr. BALAMURUGAN MUTHURAMAN

10. F ACTORS FOR I DEA CONSIDERATION... Customers: Describe customer in terms such as age, gender, income, education, occupation, marital status and lifestyle. What needs will product or services satisfy? What benefits will customers gain from using your product or service? What results will customers achieve for having purchased your product or service? Customers buy based on benefits and results, not product specifications. For example, a specification of a life insurance policy is that it is term or whole life. A benefit is that it pays a sum of money upon your death. But customer purchase life insurance for the result i.e. peace of mind that the family members will be taken care of financially 10 Dr. BALAMURUGAN MUTHURAMAN

11. P ERSONAL & B USINESS O BJECTIVES Define short and long-term business and personal goals establish the criteria for judging the feasibility of business idea. Personal Goals: List the goals that satisfy your personal needs. Why are you starting this business? What motivates you? What do you want to accomplish? Are you more interested in a lifestyle change than in monetary reward? A person starting a part-time business may have different personal goals than someone who views the business venture as a primary income source. 11 Dr. BALAMURUGAN MUTHURAMAN

12. P ERSONAL AND B USINESS O BJECTIVES... Business Objectives: Where do you want the business to be in the next few years? What are the financial objectives? State these goals in such terms as annual sales volume, market share, growth rate, personal income, etc. Integrate your personal goal and business objective. This becomes the mission statement. Do your personal and business objectives match? Is there a good fit with your business idea? If not, you may need to re-evaluate your venture. Otherwise, start the market analysis. 12 Dr. BALAMURUGAN MUTHURAMAN

13. M ARKET ANALYSIS A market analysis studies the attractiveness and the dynamics of a special markets within a special industry. It is part of the industry analysis and this in turn of the global environmental analysis. 13 Dr. BALAMURUGAN MUTHURAMAN

14. D IMENSIONS OF MARKET ANALYSIS David Aaker outlined the following dimensions of a market analysis Market size (current and future) Market growth rate Market profitability Industry cost structure Distribution channels Market trends Key success factors 14 Dr. BALAMURUGAN MUTHURAMAN