Feasibility and Business Planning 1 Understand the process and value of conducting a feasibility analysis for your business Key Terms: Industry Target

Feasibility and Business PlanningFeasibility and Business Planning

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Understand the process and value of conducting a feasibility analysis for your business

Key Terms:• Industry• Target customers• Competitive grid• Prototype• Business model• Value chain

Section 5.1 Feasibility Analysis: Testing an Opportunity

5.1


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Developing a Business Concept

You now have developed your business concept.

What next???

business concept a clear and concise description of a business opportunity; it contains four elements: the product or service, the customer, the benefit, and the distribution



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Testing the Concept in the Market

An entrepreneur can use a feasibility analysis in order to decide if there is enough demand for a product or service.

feasibility analysis the process that tests a business concept; it allows the entrepreneur to decide whether a new business concept has potential


Should I proceed with

this business?


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Testing the Industry

The broadest level of feasibility analysis looks at the industry in which the business will operate.

industry a group of businesses with a common interest


Factors to consider:

• stability of the industry• market trends• patterns of change• major players (competition)


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Testing Product or Service Requirements

To consider all the requirements of a product or service, you may opt to create a prototype.

prototype a working model used by entrepreneurs to determine what it takes to develop their products or services



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A business can analyze its:

Strengths Weaknesses

Opportunities Threats in the marketplace using a process called a SWOT analysis.

This procedure helps because it:

• prepares a company for competition or a changing marketplace.

• provides guidance and direction for future business strategies.

SWOT analysis

An assessment of a company’s strengths and weaknesses and the opportunities and threats that surround it; SWOT: strengths, weaknesses, opportunities, threats.


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Internal Strengths and Weaknesses

Strengths and weaknesses are internal factors that affect a business operation. The analysis centers around three Cs:

•Company

•Customers

•Competition


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Internal Strengths and Weaknesses

When evaluating itself, a company must analyze these areas:

•Company staff

•Financial situation

•Production capabilities

• Company


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Talking to Customers

The most important part of the feasibility analysis is testing customers to measure interest and identify the target customers.

Companies study customer buying patterns using surveys or conducting interviews with people in their target markets.

target customers people most likely to buy a business’s products and services


• Customers


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A company may find that it has certain strengths and weaknesses when compared to its competitors. Questions that help a business to analyze its competitive position are:

• What market share does the company have?

• What advantages does the company have over its competitors?

• CompetitionStudying the Competition


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Studying the Competition

An easy way to evaluate the competition is to create a competitive grid.

competitive grid a tool for organizing important information about a business venture’s competition


Competitor Customer Benefits Distribution Strengths Weakness


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Competition

Companies need to know what their competitors are doing at all times. Changes in other companies’ financial situations affect the marketplace, and conducting a SWOT analysis helps a business react and adjust to these shifts.


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External Opportunities and Threats

Businesses must always look for opportunities to create competitive advantage if they are to succeed in the marketplace.

Marketing Essentials Chapter 2, Section 2.1


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Environmental Scan

Often, a business will conduct an environmental scan to methodically examine four main areas of the marketplace. The acronym PEST refers to each of the four factors evaluated in the scan:

•Political

•Economic

•Socio-cultural

•Technological

environmental scan

An analysis of outside influences that may have an impact on an organization.


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Political

Political issues center around government involvement in business operations, such as:

•Laws

• Regulations

Global companies need to know the political structure and regulations of each foreign country in which they conduct business.


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Economic Businesses are always interested in the economy because if it is healthy, people will be more likely to invest in products and markets. If the economy is in recession, companies need to be more cautious in their decisions.

The economy is affected by factors such as:

• Unemployment rate

• Inflation

• Retail sales figures

•Productivity

• Consumer confidence


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Socio-Cultural

A socio-cultural analysis is based on customers and potential customers. It focuses on their:

• Attitudes

• Lifestyles

• Opinions

And also considers:

• Age

• Income

• Occupation

• Education level

• Marital status


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Technological

Changing technology may be a threat for one industry, but an opportunity for others. Companies develop completely new products or capitalize on new developments by making products to support them.


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Looking at Start-Up Resources

A strong business model is important to investors.

business model a description of how entrepreneurs plan to make money with their business concepts


Factors to consider:• Purchase or lease of equipment, furnishings, and a facility• Buying starting inventory• Paying employees• Product development• Carry company expenses until you have enough sales to generate a positive cash flow


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Analyzing the Value Chain

Value chain – the distribution channel through which your product or service flows from the producer to the customer

The value chain can include manufacturers, distributors and retailers.


Entrepreneurs can create a competitive advantage by looking for ways to make the value chain more efficient.

The goal is to deliver maximum value at the least possible cost.

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Feasibility and Business Planning 1 Understand the process and value of conducting a feasibility analysis for your business Key Terms: Industry Target