Feasibility Study – An Essential Aspect of Project Planning

Published on 04 Aug, 2017

Every organization evaluating a new business opportunity needs to do an in-depth assessment before taking the plunge. The process, a feasibility study, not just helps the organization in deciding whether or not to proceed with the idea but also helps in aligning objectives with the external environment to create a winning strategy. The study also enables key stakeholders such as financial investors and senior management to take an informed decision.

What is a feasibility study?
Feasibility studies help organizations in taking a “go” or “no-go” decision on a potential new business opportunity under consideration. The study answers the following questions:

  • Is the project feasible?
  • Does the organization have all the necessary resources (people, technology, etc.) for the project to be successful?
  • Will the project generate the expected return on investment?
  • What are the critical factors and risks that will impact the project’s progress?

A feasibility study is required if the business wants to:

  • Venture into a new segment
  • Explore a new business avenue arising from a currently unmet need in the market
  • Expand in an existing market where demand exceeds supply
  • Develop a product with a competitive advantage

The feasibility study report is essential in the project initiation or funding stage. It showcases the viability of the proposed venture to potential investors – be it banks or financial investors. A report prepared and vetted by consultants/industry experts helps in building an independent view.

Types of feasibility studies
A feasibility study is an extensive process which takes into account all critical elements of a business. A typical feasibility study report usually comprises:

  • Market Feasibility – This section entails an assessment of the external environment, i.e., market size (total addressable market, serviceable available market and serviceable obtainable market) & growth outlook, competitive landscape, customer requirements and satisfaction analysis, potential gaps in the market, and risks & mitigation strategies for the proposed project.
  • Technical Feasibility – The technical aspects of the project are assessed, and relevant technology/machinery and supporting resources that would best fit for the proposed project are suggested. In addition, the right equipment vendors, technical partners and project managers are concluded upon.
  • Financial Feasibility – This covers evaluation of total CAPEX (pre-opening expenses, fixed assets and working capital requirements) as well as OPEX requirements. Based on these, financials are projected and project profitability (IRR, payback period, sensitivity analysis, etc.) is analyzed.

In other words, these studies focus on evaluating the 7 Ps of Marketing Mix: Product, Price, Place, Promotion, Packaging, Positioning, and People. Based on this, the best combination that can make the business a winner can be decided.

A standard feasibility report
A feasibility study is a detailed report, typically prepared around the following modules, each of which addresses a different set of questions:

  • Executive Summary
  • Description of Product/Service
    • Which product/service is being launched and what are its USPs/competitive advantages?
  • Market Feasibility
    • What is the size of the market and how is it growing/expected to grow?
    • How is the industry structured – consolidated versus fragmented? Who are the leading players and what are their market shares? What makes them market leaders?
    • How is the industry’s value chain? Who are the key entities and what are their roles and responsibilities?
    • What are the target customer segments? Who are the decision makers? What are the factors used for selecting a vendor? Are there any pain points or expectations from a new supplier in the market?
  • Technical Feasibility
    • Which location/s will be ideal for setting up the facility/factory?
    • What are the resources (i.e., infrastructure, machineries/equipment) required to manufacture/offer the proposed product/service? Who will be the ideal vendor for this?
    • How many people will be required to run the facility/factory?
  • Financial Projections and Analysis
    • What will be the cost of setting up the entire business?
    • What will be the ideal sources for funding?
    • How profitable can the proposed business be? What will be the expected return on investments?
    • What will be the expected payback period of this business?
  • Findings and Recommendations
    • Are there any gaps and opportunities in the industry?
    • How would the marketing mix (7 Ps) look like for the proposed project?
    • What would be the strengths, weaknesses, opportunities and threats?
    • How profitable would the venture be?
    • What are the critical success factors and business risks that could affect the business’s success?
  • Project Implementation Timeline
    • What are the tasks/activities required to start the business, and how long would it take for operations to commence?

How can Aranca help?
Aranca, as a leading global research and advisory firm, has expertise in preparing feasibility study reports on a wide range of industries such as consumer, healthcare, BFSI, engineering and electric products, construction, metal and mining, oil and gas, IT, automobile, and chemicals. Aranca’s team of sectoral experts gathers real-time market data (on both competitors as well as customers), leveraging its deep primary research capabilities that form the basis for a “go” or “no-go” recommendation.

A feasibility study enhances the chances of success of a venture. It helps identify valid reasons to either proceed or not proceed with the plan and take wise decisions.