Page 99 - DMGT310_ENTREPRENEURSHIP_AND_SMALL_BUSINESS_MANAGEMENT

Entrepreneurship and Small Business Management

Notes 7.3.4 Feasibility Analysis

Feasibility study is done to find whether the proposed project (considering the above
environmental appraisal) would be feasible or not. It is important to demarcate environmental
appraisal and feasibility study at this point. Environmental appraisal is carried out to assess the
external and internal environment of the geographical area/areas where, entrepreneur intends
to set up his business enterprise, whereas feasibility study is carried out to assess the feasibility
of the project itself in a particular environment in greater detail. Hence, though feasibility study
would be dependent on environmental appraisal yet it is far more descriptive. The various
variables/dimensions are:

Market Analysis

Market analysis is to be conducted for the following reasons:

1. To estimate the demand of the proposed product/service in future.
2. To estimate the market share of the proposed product/service in future.
The demand analysis and market share is based on a number of factors like consumption pattern,
availability of substitute goods/services, type of competition etc. A wide variety of information
has to be collected to make these estimations.
A preliminary discussion with consumers, retailers, distributors, competitors, suppliers etc. is
carried out to understand the consumer preferences, existing, latent and potential demands,
strategy of competitors and practices of distributors, retailers etc. The objective of a formal
study needs to be comprehensive enough that they are able to generate the desired answers to
the following questions:

1. Who are the consumers (customers), both present and prospective?
2. What is the present and future demand?
3. How is the demand distributed seasonally (for example, air-conditioners are required
from May to September in most part of our country)?
4. How is demand distributed geographically?
5. How much price is the consumer willing to pay?
6. What is the marketing mix of competitors?
7. What marketing mix would the consumers accept?

In nearly all cases research is required to obtain enough information to answer the above
questions and to identify whether a project is feasible or not. This is done through a market
research.

Technical/Operational Analysis

Technical/Operational Analysis is done to assess the operational ability of the proposed business
enterprise. The cost and availability of technology may be of critical importance to the feasibility
of a project or it may not be an issue at all. Key questions to be answered are:
1. What are the technological needs of the proposed business?
2. What other equipment does the proposed business need?

3. From where will this technology and equipment be obtained?

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