ENTREPRENEURSHIP

LECTURE #4 & 5
FEASIBILITY STUDY

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 AREAS TO COVER
1. The importance of a Feasibility Study
2. The Feasibility Study Procedure
3. Elements of a Feasibility Study
4. Business Models
5. Conducting a feasibility Study

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WHAT IS A FEASIBILITY STUDY
 An in-depth analysis of situational factors
faced by a prospective business entity, the
success of which will depend on an
appropriate plan of action in order to deal
with those factors.

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WHAT IS A FEASIBILITY STUDY
 The Study enables the entrepreneur to
minimize the level of risk or uncertainty in the
prospective business, thus ensuring that the
business will succeed as a going concern.

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 THE IMPORTANCE OF THE
FEASIBILITY STUDY
 A feasibility study will:
1. help you to decide whether or not there
is a real need for your product or service

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 THE IMPORTANCE OF THE
FEASIBILITY STUDY
The results of the study will answer the
following questions:
1. Are people in general interested in the
product/service that the business will offer?

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 THE IMPORTANCE OF THE
FEASIBILITY STUDY
1. Which set/group(s) of persons will be most
interested in buying your product/service?

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 THE IMPORTANCE OF THE
FEASIBILITY STUDY
 A feasibility study will:
1. identify your competitors and your
potential market share
THE IMPORTANCE OF THE FEASIBILITY STUDY

 A feasibility study will:

1. force you to look at the various
aspects of running a business.

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 THE IMPORTANCE OF THE FEASIBILITY STUDY
 A feasibility study will:
1. Determine whether any large companies or
organizations will agree to carry the product or
use the service once it is available.
 THE IMPORTANCE OF THE FEASIBILITY STUDY

 A feasibility study will:

4. Help determine whether it is possible to earn
a living from the business.

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 THE IMPORTANCE OF THE
FEASIBILITY STUDY
 A feasibility study will:
4. Help you understand the
production schedule needed
to satisfy market needs.

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THE IMPORTANCE OF THE FEASIBILITY STUDY

 A feasibility study will:

4. Will identify similar product/services which
are already on the market.

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THE IMPORTANCE OF THE FEASIBILITY STUDY
 A feasibility study will:
4. Show the price people prepared to pay for
your product/service.

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THE IMPORTANCE OF THE FEASIBILITY STUDY

4. A feasibility study will:

5. Show how much advertising and promotion
will you need to launch your
product/service on the market.

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RESEARCHING THE
VENTURE’S FEASIBILITY
 Once you have thought of a business idea,
you must answer the following questions
through conducting of a feasibility study.
1. Why should I start this business?

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RESEARCHING THE
VENTURE’S FEASIBILITY
1. Is this a good business idea or is this merely
an interesting hobby?

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 RESEARCHING THE
VENTURE’S FEASIBILITY
1. Is the market ready for this type of
product/service?
 THE FEASIBILITY STUDY
PROCEDURE
 The search for information on the
potentials of a prospective business
should not be abandoned because it
appears to be overwhelming, neither
should it be neglected by sheer
oversight.
 The study should be carried out on a
timely and objective basis, with
appropriate skills or expertise.
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 THE FEASIBILITY STUDY PROCEDURE

The approach to the Feasibility Study

involves:
1. The Goal: What you wish to find out?
 Is the business idea a viable one?
 What plan of action, or strategy will be
required to make it work?

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 4 ELEMENTS OF THE
FEASIBILITY STUDY
1. Market Feasibility

2. Technical Feasibility

3. Operational Feasibility

4. Financial Feasibility
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 ELEMENTS OF THE
FEASIBILITY STUDY
1. Market Feasibility

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Market Feasibility
Analysis of the market in terms of:
A. Size
B. Composition

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Market Feasibility
Analysis of the market in terms of:
C. Taste
D. Attitudes
E. Preferences

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Market Feasibility
Analysis of the market in terms of:
F. Demand
G. Consumer income

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Market Feasibility
 Look at factors that influences
market response, i.e.-
2. The Product or Service

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Market Feasibility
 Look at factors that influences
market response, viz:-
A. Price

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Market Feasibility
 Look at factors that influences
market response, viz:-
B. Promotional efforts

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Market Feasibility
 Look at factors that influences
market response, viz:-
C. Product quality

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Market Feasibility
 Look at factors that influences
market response, viz:-
D. Distribution outlets

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 3. Competitor Analysis
A. Who are the new venture’s current competitors?
B. What resources do they control?
C. What are their strengths and weaknesses?
D. How will they respond to the new venture’s decision
to enter the industry?

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 Competitor Analysis
E. How can the new venture respond?
F. Who else might be able to observe and exploit the
same opportunity?
G. Are there ways to co-opt potential or actual
competitors by forming alliances?

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Strategies that Capture Opportunities
4. Michael Porter Competitive Strategies

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Strategies that Capture
Opportunities
 Peter Drucker’s Generic Competitive
Strategies
 Seek an advantage in cost or competition.
 Cost-Advantage Strategy and Options
 Requires the firm to be the lowest-cost

producer.

 Marketing-Advantage Strategy
 Emphasizing the uniqueness of the firm’s
product or service
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 Laying the Foundation to
Competitive Advantage
 Competitive Advantage
 To establish competitive advantage, the owner
needs to understand the nature of the environment
within which he or she will be operating.
 A benefit that exists when a firm has a product or
service that is seen by its target market as better
than those of competitors.

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 Competitive Advantage
Unique Service
Price/Value
Features

Competitive
Advantage

Notable Product
Accessibility
Attributes

Customer
Service

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Technical Feasibility
Technical Feasibility
 Allows for an analysis of the skills and
abilities that will be required to carry
out the business
Technical Feasibility
 Special equipment, machinery, and
technical know-how.

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Technical Feasibility
 Sources by which the equipment will be
obtained.

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Operational Feasibility

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 Operational Feasibility
 Special consideration should be given to
how the business will operate i.e. the
prospects for:
 securing supplies

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 Operational Feasibility
 Sourcing adequate staff

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 Operational Feasibility
 Ensuring that quality and cost control
will be maintained.

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Financial Feasibility

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Financial Feasibility
 An analysis of the financial needs of the
business and how the needs will be
met.
 Options for obtaining financing include
attracting equity contributors, and securing
loans.

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Financial Feasibility
 The analysis should consider targeted return
on investment and expected levels of
profitability.

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Sources of Funds

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 Sources of Funds
Personal Savings
Friends and Relatives
Other Individual Investors
Business Suppliers

Asset-Based Lenders

Commercial Banks
Equity Debt
Government-Sponsored Programs
Community-Based Financial Institutions
Large Corporations
Venture Capital Firms
Sale of Stock

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 Business Models
 The business model adopted for a given business
effectively determines its feasibility
 The business model is developed and chosen in

response to feedback from research conducted

 Digicel employed a different business model from

that used by Cable and Wireless and reaped

greater success.

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 The Business Model Canvas
 The Business Model Canvas developed by Alexander
Osterwalder, is a strategic management and
entrepreneurial tool which can be used to assess and
develop/evolve a the business model for a given business
 It has nine basic building blocks which must be assessed

and validated (tested and adjusted) to ensure a viable

business model
 The Business Model Canvas allows you to describe,

design, challenge, invent, and pivot your business model.

http://www.businessmodelgeneration.com/canvas

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 The Business Model Canvas
Building Blocks/Elements
1. Value Propositions
 The different products/service bundles which the company
intends to deliver to its customers

2. Customer Segments
 The different customer groups which the company intends
to serve

3. Customer Relationships
 Specifies the type of relationship that needs to be created
with customers to delight and retain them.

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 The Business Model Canvas
Building Blocks/Elements
4. Channels

4. The different ways in which the company intends to deliver

its value proposition to its customer segments

5. Revenue Streams
 Identifies the various ways which the company can earn
income form its assets and operations.

6. Key Activities
 The main activities which the company needs to carry out
in the creation and delivery of its value proposition

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 The Business Model Canvas
Building Blocks/Elements
7. Key resources
 The resources that are necessary to create value for the
customer

8. Key Partners
 Partners (strategic alliances) which the company can use to
support the creation/delivery of its value proposition

9. Cost structure
 Identifies the main items and processes which contributes
to overhead and operational cost

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The Business Model Canvas

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The Completed Business Model Canvas

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What Is a Small Business?
 Criteria for Defining Smallness in Business
 Financing supplied by one person or small
group
 Localized business operations (except

marketing)
 Business’ size small relative to larger

competitors
 Fewer than 100 employees

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THE BUSINESS IDEA
METHODS FOR GENERATING IDEAS
 Look at trends in the economy

 Look at the needs of the community

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THE BUSINESS IDEA
METHODS FOR GENERATING IDEAS
 Look at changes which are causing people

difficulty
 Listen to the comments of people

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THE BUSINESS IDEA
METHODS FOR GENERATING IDEAS
 Read the newspapers and listen to the radio

and watch the TV

 Look at how people spend their time, their

fashion, eating habits, etc.

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 METHODS FOR
GENERATING IDEAS
 Focus Groups

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 METHODS FOR
GENERATING IDEAS
 Brainstorming

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 METHODS FOR
GENERATING IDEAS
 Problem Inventory Analysis

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 METHODS FOR
GENERATING IDEAS
 Reverse Brainstorming

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 METHODS FOR
GENERATING IDEAS
 Gordon Method
 Checklist Method
 Free Association
 Collective Notebook Method

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 THE FEASIBILITY STUDY
PROCEDURE
2. The Methods: How will the study be carried out?
 These methods allow for both primary and
secondary data.
1. Primary Data: Those obtained first hand, according
to the researcher’s own design

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 THE FEASIBILITY STUDY
PROCEDURE
1. Secondary Data: Those previously obtained
that may be accessed for use in a present study.

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 Primary Data
 Methods for obtaining primary data:
1. Observation: looking at the natural flow of
activities
2. Experiment: a controlled method of testing
cause and effect
3. Survey: test of knowledge, beliefs,
preferences, by interviewing a sample
representative
4. Focus groups: interactive chat with a small
group of representatives.

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 Secondary Data
 Sources of Secondary Data
1. Government publications
2. Periodicals, books, magazines
3. Commercial data such as previous
research
4. Company reports, brochures,
handboks.

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 QUESTIONNAIRE DESIGN
 Much attention should be given to the
designing of a questionnaire or related
interview tool.
 The questionnaire consist of a set of
questions presented to the respondents
 It should be carefully developed and
tested prior to it being administered.

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 QUESTIONNAIRE DESIGN
 Careful attention should be given to the
questions in terms of
 Forms
 Wording, and
 Sequencing.
 Irrelevant questions should not be
included and important ones should not
be omitted.

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 QUESTIONNAIRE DESIGN
 The are two main forms of questions:
1. CLOSED-ENDED
 Questions accompanied by pre-specified
responses for which the respondents may
choose one or more responses.
2. OPENED-ENDED
 Questions that allow respondents to give
a response in their own words.

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 THE RESULTS
 How will you respond to the findings?
 What actions will you take?

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 THE RESULTS

 Use Statistical Methods

to tabulate your findings,
viz:

 Pie Charts
 Simple Multiple Bar Graphs
 Pictograms
 Tables
 Line graphs
 bar charts

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 THE RESULTS
 The findings must be analyzed based
on the goals of the study.
 The analysis
1. allows for appropriate conclusions to be
drawn.
2. provides the framework for specific
recommendations.

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 CONDUCTING A MARKET
RESEARCH- THE ELEMENTS
1. Target Population
2. Selection of Sample
3. Objectives
4. Methodology
5. Findings
6. Analysis
7. Conclusions & Recommendations
8. Appendices.
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