TECHNOLOGY ENTREPRENEURSHIP

(ENT600)

UNIT 4 :
FEASIBILITY STUDY

ENT600/UNIT 4: FEASIBLITY STUDY 1

 Introduction to Feasibility Study
A feasibility study is the preliminary evaluation of a
business idea, conducted for the purpose of
determining whether the idea is viable or worth
pursuing.

Feasibility study takes the guesswork out of the business

launch and provides an entrepreneur with a more secure
notion that a business idea is feasible or viable.

Normally a feasibility study will be conducted to

determine the viability of an idea before proceeding
with the development of the business.

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 Purpose of a Feasibility Study
Provide a thorough examination of all issues and
assessment of probability of business success

Give focus to the project and outline alternatives

Narrow business alternatives

Surface new opportunities through the investigative

process

Identify reasons NOT to proceed

Provide quality information for decision making

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 Feasibile or Viable Business

A feasible or viable business idea is one where the

proposed business is expected to

generate adequate cash flow and profits

withstand the risks it will encounter

remain viable in the long term and

meet the goals of the founders

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 Composition of a Feasibility Study

A Feasibility Study is a composite of the following

evaluation or studies:

Market Feasibility Study

Organisational Feasibility Study

Technical Feasibility Study

Financial Feasibility Study

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 MARKET

TECHNICAL Determination
New Of Feasibility
Venture of Proposed
Idea ORGANISATIONAL New Idea

FINANCIAL

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A feasibility study will provide various information to the
entrepreneur such as follows:

Is there a demand for the product? Determination of market opportunities and

risks
Who else is producing a similar
product?

What is needed to make the product? Analysis of the technical feasibility of the
What are the equipment and product
technology needs for the proposed
venture?

Who will manage the business? Analysis of organizational capabilities and

personnel requirements
What managerial requirements are
needed?

What is the cost of producing the Analysis of financial feasibility and

product? resources
What is the likely profit?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 7

 MARKET FEASIBILITY STUDY

The market feasibility study is an assessment of the overall

appeal of the market for the product or service being proposed.
Aspects of market feasibility study that should be carried out
include:

Product/service
Customers
Market Demand
Competitors
Market Share

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Market Feasibility Study
 MARKET

Product/Service Market share

Competitors

Customers
Market Demand

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 Market Feasibility Study:
Product/Service
This is an assessment of the overall appeal of the
product/service being proposed

A product is defined as anything that can be offered to a

market for attention, acquisition, use, or consumption that
might satisfy a need or want (Kotler, 2008)

A service is defined as any activity or benefit that one

party can offer to another that is essentially intangible and
does not result in the ownership of anything (Kotler, 2008)

Before any product/service enters the market, it should

meet the prospective customers needs and wants.
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 Market Feasibility Study:
Customer
Customer assessment involves determining who are the
customers the business wishes to serve.

Customers refer to individuals and households, business

organizations local as well as international and
government organizations that buy products and
services for consumption.

They are the target markets for the organizations

products or services

Target market is defined as the group of customers with

needs and wants that can be satisfied by the business
through the supply of products/services.
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 Market Feasibility Study:
Customer (cont)

The target market can be segmented or broken down

based on different criteria or factors such as age, marital
status, geographical areas, lifestyle, hobby, and interest.

The purpose of market segmentation is to enable the

business to satisfy the needs and wants of the consumers
it has selected with the limited resources the business has

Subsequently, as the business progresses and has more

resources, it can broaden into other market segments
which it has not served before.

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 Market Feasibility Study: Market Demand

Market demand refers to the total potential purchase that is

expected from the target market. Normally it is expressed
in units or Ringgit.

The information on market demand is critical in determining

the viability of a proposed product or service.

Market demand can be calculated based on the following

factors:
Population of the target market
Number of houses in the target market
Competitors sales
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 Market Feasibility Study: Competitors

Competitors refer to other businesses that provide similar,

substitute or alternative products/services to the same market
segment.

In competitors analysis, the business not only has to identify

who are the major competitors but also the number of
competitors in the market.

The presence of competitors can affect immensely on the

success of the companys product/service that enters the
market.

Thus, in order to establish a market niche and compete

effectively, it is imperative for the business to identify who their
competitors are as well as their strengths and weaknesses.
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 Market Feasibility Study: Market Share

Market share refers to the portion of the market

that the business can control after taking into
consideration market demand and the
competitors position in the same market.

Normally market share is stated in the form of a

percentage of total market demand

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 TECHNICAL FEASIBILITY STUDY

A technical feasibility study is concerned with determining

whether the business has the necessary technology and
equipment to produce the intended product/service. Aspects
of technical feasibility study that should be carried out
include;

Technology and Equipment

Materials
Manpower and
Location

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 TECHNICAL

Technology
and
Equipment
Materials Location
Manpower

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Technical Feasibility Study
Technical Feasibility Study:Technology &
Equipment
In conducting technical feasibility study, the business should
identify the type of technology to be used for the proposed
business venture.

In addition, they have to know whether the technology is

accessible for their business venture.

Apart from that, the business must also identify the types of
equipment required.

The cost of technology and equipment needs to be included in

determining the feasibility of the venture.

The ability to obtain the technology and equipment will affect

the start-up timeline.
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 Technical Feasibility Study:
Materials

The business should identify the types, quantity, and

quality of raw materials required.

A list of suppliers for the raw materials needs to be

identified and contractual arrangements with the
suppliers need to be made to ensure the organization
has uninterrupted supply.

The cost of the raw materials should also be satisfactory

and within the budget

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 Technical Feasibility Study:
Manpower

The organization has to identify the technical workers

required in producing the product/service.

These technical workers need to have the appropriate

skills and qualifications in line with the requirement of the
venture.

The organization should also determine the number of

technical workers (full and part time) needed to support
the production level.

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 Technical Feasibility Study:
Location

Location refers to the place where the proposed

business or project is likely to be set up.

There are various factors the business need to

consider in selecting the appropriate location
such as being
near to the intended market or customers
near to the suppliers of raw materials
near to the major infrastructure

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Organizational Feasibility Study

Self Reading Slide No 24 No 38

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 ORGANIZATIONAL FEASIBILITY STUDY

An organizational feasibility study is concerned with

determining whether the business has the necessary and
sufficient human resource to bring a particular
product/service idea to market successfully. Aspects of
organizational feasibility study that should be carried out
include:

Organization Structure
Management Team
Compensation
Supporting Services

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 ORGANISATIONAL

Organization Supporting
Structure Services
Management Compensation
Team

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 Organizational Feasibility Study:
Organization Structure

Organization structure identifies responsibilities

for each job position and the relationship among
those positions.

Technopreneurs must form the right

organizational structure in order to facilitate the
accomplishment of the organizations goals and
missions

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 Organizational Feasibility Study:
Management Team

Management team refers to a group of individuals

responsible to bring a product/service idea to market
successfully

The organization should evaluate the prowess or ability of

its management team to satisfy itself that management
has the requisite passion and expertise to launch the
venture.

Thus, it is necessary to identify the types of positions

needed as well as the qualifications and experiences
required to fill those positions.

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 Organizational Feasibility Study:
Compensation

Compensation refers to the monetary and non-monetary

rewards in various forms of pay which include salary,
wages, sales commission, allowances, bonus, EPF and
SOCSO contributions.

The organization should determine the types of

compensation that should be rewarded to their potential
staff.

Any type of incentive such as ownership plan should also

be considered to entice potential employees.

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 Organizational Feasibility Study:
Supporting Services

Supporting services refer to the assistance and services

given by private agencies and government.

The organization should identify the appropriate types of

supporting services to launch the intended
product/service.

The availability of these services such as attorney or

professional public accountant will definitely assist in
bringing the product/service successfully to the market.

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Financial Feasibility Study
 FINANCIAL FEASIBILITY STUDY

The financial feasibility study is an assessment of

the financial aspect of the business. Information in
the financial feasibility study should include:

Start up Capital
Financial Sources
Profitability Analysis

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 FINANCIAL

Profitability analysis
Start-up Financing
Capital Sources

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 33

 Financial Feasibility Study:
Start-up Capital

The first stage in financial feasibility study is to determine

the amount of start up capital required to run the venture.

Start-up capital refers to the total cash required to start the

business which include the cost for the purchase of non
current assets, working capital, development costs and
other expenses.

Non current assets are assets that are purchased and

used as long as the business is in existence. Their life
span are more than one year. Examples of non current
assets are furniture and fittings, machineries, equipment,
renovation, etc
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 Financial Feasibility Study:
Start-up Capital (cont)
Working capital, also known as current assets refer to
business assets which have life span less than a year.
Example of current assets are cash, stocks or inventories
which include raw materials, finished goods.

Other expenses will include costs or expenses that are non

recurring or one time cost. Examples of other expenses will
include registration fees, business licenses, insurance.

It is advisable for the business to estimate the start up cost

capital required until revenues are realized at full capacity.

It is also suggested that it is better to overestimate rather than

underestimate the costs involved

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 Financial Feasibility Study:
Financing Sources
After determining the start up capital, the next stage is for the
business to identify the sources of fund to finance the start up
capital. The business has two options either to utilize internal
financing or external financing to finance the proposed venture.

Internal financing refers to the funds provided by family, friends,

partners or shareholders.

External financing refers to funds that are available from

external sources such as loans from financial institutions,
venture capital, business angels, government grants, etc.

The availability as well as accessibility to the funds will be

crucial in bringing the product/service to the market.

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 Financial Feasibility Study:
Profitability Analysis

Profitability analysis involves determining whether the

proposed venture is generating enough profit to make the
proposed venture feasible.

This analysis is of great interest not only to the business

owners but also to third parties who are involved in
financing the venture.

Usually third parties require a certain rate of return on

their investment before deciding to invest in a particular
business venture.

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 Financial Feasibility Study:
Profitability Analysis

Thus, in order to conduct a profitability analysis, the

business should prepare a 3-year financial projection
which will include the following financial statements:
o Cash flow statement
o Income Statement and
o Balance Sheet Statement

Based on these statements, various financial analyses will

be performed to determine the profitability of the
business.

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 Conclusion

The feasibility study should give us a clear idea

whether the proposed business is a sound business
idea. If so, we can proceed with the preparation of
the business blueprint.

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