1. PRODUCT/SERVICESS ASSESSMENT (FEASIBILITY STUDY)
WEEK 4
PRODUCT/SERVICESS ASSESSMENT
(FEASIBILITY STUDY)

2. TOPICS What is feasibility study The importance of feasibility study
Feasibility study component and process

3. Innovation and commercialization process
Discovery
Opportunity recognition and evaluation
(idea customer need=business concept)
Protection intellectual property
(pattern, trademark, copyright, etc)
Product development
(PROTOTYPE)
Business development
Developing the business
Launching the business
Critical decision
Critical decision
Source: Allen (2003, p. 16)

4. Feasibility analysis
Every feasibility study 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 you decide if the idea can become a profitable business.

5. Feasibility Analysis
A feasibility study is an analysis of the viability of an idea. The feasibility study focuses on helping answer the essential question of “should we proceed with the proposed project idea?”
The process of determining whether a product/services is a viable foundation for creating a successful business

6. What Is Feasibility Analysis?
Preliminary evaluation of idea to determining if it’s worth pursuing
Provides more secure notion that a business idea or proposed  project  to determine if it
is technically feasible,
is feasible within the estimated cost
will be  profitable

7. When To Conduct a Feasibility Analysis
Timing of Feasibility Analysis
After concept statement evaluation
After opportunity recognition, before business plan
Before a lot of resources are invested

9. The Importance of Feasibility Studies
List in detail all the things you need to make the product/services/business work;
Identify logistical and other related problems and solutions;
Develop marketing strategies to convince a bank or investor that your product/services for a business is worth considering as an investment; and
Serve as a solid foundation for developing your business plan.

10. Importance ….
Even if you have a great idea you still have to find a cost-effective way to market and sell your products and services.
This is especially important for store-front retail businesses where location could make or break your business.

11. Importance….
For example, most commercial space leases place restrictions on businesses that can have a dramatic impact on income. A lease may limit business hours/days, parking spaces, restrict the product or service you can offer, and in some cases, even limit the number of customers a business can receive each day.

12. Importance….
If the results show that the project is not a sound business idea, then the project should not be pursued.
Although it is difficult to accept a feasibility study that shows these results, it is much better to find this out sooner rather than later, when more time and money would have been invested and lost.

13. Four Components of Full Feasibility Analysis
Product/Service Feasibility
Industry/Market Feasibility
Organizational Feasibility
Financial Feasibility
Must pass all feasibility analyses to proceed to full business plan development

14. 1. Product/Service Feasibility Analysis Studies

15. Product or Service Feasibility Analysis
Are customers wiling to purchase our goods and services?
Can we provide the product or service to our customers at a profit?
Details how you will deliver a product or service (i.e., materials, labor, transportation, where your business will be located, technology needed, etc.).

16. Research Primary research Customer surveys and questionnaires
Focus groups
Secondary research
Trade associations and business directories
Direct mail lists
Demographic data
Census data
Forecasts
Market research
Articles
Local data
WWW
Research

17. Trials
Prototypes: an original, functional model of a new product that entrepreneurs can put into the hands of potential customers so they can see it, test it and use it
In-home trials: a research technique that involves sending researchers into customers’ homes to observe them as they use the company’s product or service

18. 1. Prepare a Concept Statement
Preliminary description that includes
Description of the product or service
Description of target market
Benefits of the product or service (value proposition)
Description of product/service differentiators
Description of how product/service sold/distributed
Description of the founder(s) of the firm
Purpose:
Have relevant others (e.g., investors, target market members, suppliers, R&D experts, etc.) provide feedback as to their perceived potential of the business based on their area(s) of expertise
Change components of the business model components prior to investing many resources into the concept

19. 2. Conduct a Concept Test
Traditionally entails showing a representation of the firm’s offering (e.g., sketch, website, computer-generated design) to prospective users in hopes of gaining feedback and insight as to their preferences, likelihood of purchase, etc.
Ideally a random, representative, sample of the target market would provide feedback about the offerings
Can show the representation and solicit feedback via survey, focus group, interviews (see next three slides)

20. Before After

21. Before After

22. Industry and Market Feasibility Analysis
To determine how attractive an industry is overall as a ‘home for a new business
To identify possible niches a small business can occupy profitably

23. 2. Industry /market feasibility study
Deals with the value proposition relative to the customer
Discuss how the business offering either:
Solves a problem/serves a need;
Makes someone’s life/business more efficient;
Makes someone’s life/business more effective
Note: The offering may address more than one of these. If it does, discuss all applicable
This step requires an understanding of the industry, competitor’s offerings, consumers’ wants/needs/trends.
To find this information, study industry and firm publications and discuss these issues with potential users
Hint: You will likely be able gather some of this information during the concept test
Be sure to address if the business concept needs to be modified to more effectively address one or more of these customer-related value propositions based on what was learned in studying the marketability of the offering(s)

24. Study the Target Customer (TC)
This is the point where
1) the profile of the target customer and/or
2) changes to the business offering should start to become solidified
Determine and study who the venture’s customers are and what their needs are
Based on your initial conceptions of who the TC are, construct a survey so you can develop a more detailed understanding of their profile (e.g., demographic data, socioeconomic data, etc.)
Assess the TC’s perceptions of the offering, their purchase intentions, and any suggestions for changes to the offering(s)
If the offering(s) need to be changed to address the TC’s needs, discuss modifications
If your initial conception of who the TC are was off, determine a more appropriate TC and assess their perceptions of the offering(s).
Where possible, use a random selection procedure to gain the most accurate and generalizable information regarding the TC and their preferences

25. OR, if you can’t do the above,
Study the likelihood and Impact of First- and/or Second-mover Advantages
Can you capture a first-mover advantage by
1) Being a technology leader (e.g., Microsoft),
2) Obtaining strategically valuable assets (e.g., favorable access to raw materials, favorable geographic locations, and/or valuable product/market positions), and/or
3) Creating customer switching costs?
OR, if you can’t do the above,
Will you suffer from a second-mover advantage?
Second-mover advantages may occur where imitators can duplicate the first movers’ patents—research shows imitators can do this for 65% of the cost of the first-mover
Example: IBM vs. Dell in personal computer retailing
If you cannot gain a first- or second-mover advantage, will that hurt you?
Is the window of opportunity open?
Are customers buying?
Are competitors making money?

26. Five Forces Model Potential Entrants Threat of new entrants
Rivalry among
existing firms
Suppliers
Bargaining
Power of
suppliers
Bargaining
Power of
buyers
Buyers
Substitutes

27. Rivalry Number of competitors is large or few (less than 5)
Competitors are not similar in size or capability
The industry is growing at a fast pace
The opportunity to sell a differentiated product or service is present

28. Suppliers
Many suppliers sell a commodity product to the companies in it
Substitute products are available for the items suppliers provide
Companies in the industry find it eas to switch from one supplier to another
The items suppliers provide account for a relatively small portion of the cost of finished products

29. Buyers Switching costs to competitors is high
Number of buyers is large
Customers demand differentiated products
Customers find it difficult to gather info on suppliers costs etc
The items account for a relatively small portion of the customers’ finished products

30. New Entrants Advantages of economic scale are not present
Capital requirements to enter are low
Cost advantages are not related to company size
Buyers are brand-loyal
Governments do not restrict entry

31. Substitute Products
Quality substitute products are not readily available
Prices of substitute products are not lower
Buyers’ cost of switching to substitute products is high

32. 3. Organizational Feasibility Analysis
Defines the legal and corporate structure of the business (may also include professional background information about the founders and what skills they can contribute to the business).

33. Organizational Feasibility Analysis
Purpose: determine if business has sufficient skills/resources to bring product/service to market successfully
Non-financial factors are what is assessed here
2 primary issues to consider:
Management prowess: must evaluate the ability of the management team to determine if the firm has or is able to recruit human resources with the required areas of expertise
Resource sufficiency: must assess adequacy of other resources necessary for successfully venture launch, development, and competition
Focus is on nonfinancial resources like:
Availability of affordable office or lab space,
Labor pool quality,
Proximity to key suppliers, customers, and similar firms (clusters)
Likelihood of strategic partnerships,
Likelihood of attaining IP

34. 4. Financial Feasibility Analysis
Capital
Requirements
Estimated
Earnings
Return on
Investment

35. Practice - Feasibility study checklist
Based on the feasibility study notes and check list prepare your product/services feasibility. No
Activity
Comply
Comments
Yes 1
Product/services feasibility study 2
Industry/market feasibility study 3
Organizational feasibility study 4
Financial feasibility study
a sample of feasibility study