Chapter 8 Feasibility

8/9/2019 Chapter 8 Feasibility

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Entrepreneurshipand Management, RVCE

1

IDENTIFICATION OF BUSINESS

OPPORTUNITIES

Objectives:

To understand the importance of Business Identification

To understand and appreciate market analysis, technicalanalysis, financial analysis and economic analysis

To apply these principles for a proposed Business

Opportunity


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Identification of Business Opportunities

Introduction:

Opportunity to be your boss, to provide a product orservice, to implement your ideas

Two types of entrepreneurs

Know exactly what they

Want to do

Not very clear to

Begin with

Looking for an opportunity or

Resources

May have developed skills for

chosen field.

Familiar with industry customs

practices

In the process of concretizing

a business ideaRequire training


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Introduction:

Motivation is it adequate to keep you going for the

next one or two years?

Viability global vs. local

Basic market research factor which is the key

Testing in the market Moving forward depends on this

Expert consultation Concretizing the whole idea

Look out for competition Be aware of this



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4

Green business: focuses more on prevention of pollution

Biotechnology: industrial use of organisms

Events management: Arranging Weddings to Beauty contests

IT Enabled services: BPO, now KPO, knowledge driven

Food Processing: Fruits, vegetables storing, processing,

transport

Mineral water, courier, Insurance, Telecom, Herbal products,

Tourism, Vermiculture, Plastics etc.

Some typical business opportunities:



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Researching learning more about your industry andabout the resources available

Market assessment Is there a market? Where it is? How

much you can tap?

Profitability Assessment How much does it cost?

Lengthy red ink period following start-up, can you afford

to fail?

Financing assessment Fixed and working Capital

Legal assessment What are the legal liabilities in the

business?

Feasibility:



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Market Feasibility

The analysis requires two important questions to be

answered

What would be the demand of the proposed product or

service in the future?

What would be the market share?

Analyst should use wide variety of information and

forecasting tools

Consumption trends in past, present consumption level Past and present supply position

Production alternatives, constraints

Imports and exports


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Structure of competition

Elasticity of demand

Consumer behavior, intentions, motivations, attitudespreferences

Distribution channels, marketing policies

Administrative, technical and legal constraints

Market Feasibility


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8

Opinion Polling Method

Life Cycle Segmentation Analysis

Demand Estimation

Under Opinion Method there are four different techniques

Complete enumeration survey

Sample survey

Sales experience method Vicarious method


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Complete enumeration survey

All probable customers are approached and the

demands are estimated

Gets you first hand and unbiased information

Tedious, costly and cumbersome

All prospects will not be cooperative


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Sample Survey

Only some representative consumers (sample) are

approached

It is less tedious, less cumbersome compared toearlier method

Care should be taken to identify true representative

sample


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Sales experience Method

Sample Market is surveyed

Results are projected to the universe

Selection of sample market is critical

For e.g., Bombay will be different from say Agra


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Vicarious Method

Not direct contact, through dealers who will have a

feel of their customers

Dealers opinion is then projected

Suffers from likely bias on the part of dealers

These are the techniques under Opinion Polling Method

Let us look into Life cycle analysis


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Life Cycle Segmentation Analysis

Introduction of the product

Growth

Maturity

Saturation

Decline

Considering the five stages, the sales at different stages may

be estimated


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Other aspects of market analysis

Planning the process of marketing the product

Organization of the marketing process

Corrective action whenever results deviate

Demand, market share etc are out of control whereas

marketing strategy, marketing process are largely under

control


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Technical Feasibility

Have the preliminary tests and studies been done?

Has the availability of raw materials, power etc been

established?

Is the scale of operation or capacity optimal?

Are the machineries and equipments chosen appropriate?

Has provision made for effluent treatment made?

Is the proposed layout, building and plant sound?

Is technology current, efficient?


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Technical Feasibility

Technical collaborations made if any

Availability of technical and engineering services

The extent to which diversification and expansion proposals

will result in fuller utilization of capacity and economies of

scale

Availability of work force as per required skill andarrangements for training-in-plant and outside


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Financial Feasibility

Investment outlay and cost of the project

Fixed Capital and working capital

Means of financing

Projected profitability

Cash flows

Investment worthiness

Level of risk


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Financial Feasibility

Cost of production

Return on investment

Projected profitability

Effective controls

Budgeting

Pricing


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Economic / Social Feasibility

Judging a project from social point of view

Focus on social costs and benefits

Monetary cost and monetary benefits vs.

social cost and benefit has to be carefully

made


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Entrepreneurshipand Management, RVCE20


What are the direct economic benefits and costs of the

project measured in terms of shadow ( Efficiency) prices

and not in terms of market prices?

What would be the impact of the project on the distribution

of income in the society?

What would be the impact of the project on the level of

savings and investment in society?

Contributions to self-sufficiency, employment and order in

society?

Following questions are to be raised and answered


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What is the likely damage caused to the environment?

What is the costs involved in containing this damage?

Following questions are to be raised and answered


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Case Studies

1. Determining the Market Demand for a Health Club

Reference 1, Page - 447

2. Market FeasibilityReference 1, Page - 448


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References

Poornima Charantimath Entrepreneurship Development

Small Business Enterprises, 2006, Pearson Education

S S Khanna Entrepreneurial Development, 3rd

Ed, 2001,S Chand & Co

Vasant Desai Dynamics of Entrepreneurial Development

and Management, 4th Ed, 2007

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Chapter 8 Feasibility