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Lecture 3

The document discusses the importance of conducting a feasibility study before embarking on any project. It notes that a feasibility study aims to uncover the strengths and weaknesses of a business or proposed venture by considering opportunities, resources and likelihood of success. A feasibility study report includes descriptions of products/services, historical background, operational details, financial data, accounting statements, legal/tax requirements and management/marketing policies. Determining the technical, financial and social viability of a project through a feasibility study is important to assess whether it can achieve expected returns and sustain itself long-term.

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asmshihab
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37 views

Lecture 3

The document discusses the importance of conducting a feasibility study before embarking on any project. It notes that a feasibility study aims to uncover the strengths and weaknesses of a business or proposed venture by considering opportunities, resources and likelihood of success. A feasibility study report includes descriptions of products/services, historical background, operational details, financial data, accounting statements, legal/tax requirements and management/marketing policies. Determining the technical, financial and social viability of a project through a feasibility study is important to assess whether it can achieve expected returns and sustain itself long-term.

Uploaded by

asmshihab
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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The search for project ideas is the first step

towards establishing a successful venture


Right business at right time.
Identification of opportunity requires:
Imagination
Sensitivity to environmental changes
Realistic assessment of what firm can do.
How it generates?
What is the source?
Ideas involve combining existing field of
technology or offering variants of present
product.
It is not formal. It may come from any level.
However need to stimulate flow of ideas:

SWOT Analysis

Clear articulation of objectives
Cost reduction
Productivity improvement
Increase in capacity installation
Improvement in contribution margin
Expansion into promising field.

Fostering a conductive climate

Business environment composed of
Economic Sector
Governmental Sector
Technological Sector
Socio-demographic sector
Competition sector
Supplier sector

State of the economy
Overall growth rate
Linkage with world economy
Trade surplus/deficit
Balance of payment situation

Industrial Policy
Govt. program and projects
Tax framework
Subsidies, incentives and concessions
Import and export policy
Lending conditions of financial institutions
and commercial banks

Availability of technology
Level of available technology
Proveness of technology
Emergence of new technology
Obsolescence of technology

Population
Age shifts in population
Income distribution
Educational profile
Employment of women

Number of companies in the industry and
their market share
Degree of homogeneity and differentiation
among products
Entry barriers
Comparison with substitutes in terms of
quality, price, appeal and functional
performance
Market policies and practices

Availability and cost of
1. Raw materials
2. Energy
3. money

A realistic appraisal of corporate strength and
weakness is essential for identifying
investment opportunities:
Marketing and distribution
Production and operation
Research and Development
Corporate Resources and Personnel
Financing and accounting

Porter model
Life cycle approach
Experience Curve

Michael Porter has argued that profit potential
of an industry depends on the combined
strength of the following five basic
competitive forces
Threat of new entrants
Rivalry among existing firms
Pressure from substitute products
Bargaining power of buyers
Bargaining power of sellers

Pioneering stage
Rapid growth stage
Maturity and stabilization stage
Decline stage

Learning effects
Technological improvement
Economy of scale

Compatibility with promoter
Consistency with government priorities
Availability of inputs
Adequacy of market
Reasonableness of cost
Acceptability of risk level

Identify factors relevant for project rating

Assign weights to these factors

Rate the project proposal on various factors

For each factor, multiply the factor rating with
the factor weight to get the factor score

Add all factors to get the project rating index

Feasibility is a study that aims at uncovering
the strengths and weaknesses of an existing
business or a proposed business venture.
It takes into consideration the opportunities
offered by the environment, its resources,
and the subsequent success of the venture.

In a feasibility study report, the followings are
needed to be included.

The description of the product or service,
Its (product/service) historical background,
Operational details,
financial data,
accounting statements,
legal and tax requirements,
,and its policies on management and marketing
research.

Viability is the study or an investigation of the
existing business or proposed ventures
sustainability.

How long a business will last is determined by
its viability
It involves dealing with strategies on how to
make the business grow and last.

Business growth is an important aspect of
viability.


Preparation for economic, production and
service projects is considered the most
important step for their success.

Perfect planning for these projects shall
guarantee their success and effectiveness, in
addition to achieving the expected financial
profit from such projects.

Feasibility study should be made before
embarking on any project.
Future is uncertain What is going to happen
tomorrow?

Future implementable projects

Each project involves an investment
Everybody wants the return.
The investor wants a return on his investment
The lender wants the money back

Financial viability
Technical viability
Social viability


Called techno-economic viability

Feasibility study is a study of socio-techno-
economic viability of the project
A preliminary study
A pre-feasibility study
A feasibility study

A feasibility study may be carried out on various
types of project e.g.. industrial project,
construction project or a social project.

The basic aim is to assess the viability of the
project but the dimensions examined vary on the
type of project being examined.




Marketing
Technical
Financial
Economic
Ecological and
legal

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