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Chapter # 4: Conducting A Feasibility Analysis and Crafting A Winning Business Plan

1) The chapter discusses conducting a feasibility analysis and crafting a winning business plan. A feasibility analysis determines if an idea is viable and screens out unprofitable ideas, while a business plan provides operational and financial details to guide the company and attract investors. 2) A feasibility analysis consists of analyzing the industry, product/service, and financial feasibility. It answers whether the business should proceed, while the business plan answers how it will proceed. 3) Key components of a feasibility analysis include using Porter's Five Forces model to analyze industry attractiveness and conducting primary and secondary research to determine customer demand and the resources needed to deliver the product or service at a profit.

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170 views

Chapter # 4: Conducting A Feasibility Analysis and Crafting A Winning Business Plan

1) The chapter discusses conducting a feasibility analysis and crafting a winning business plan. A feasibility analysis determines if an idea is viable and screens out unprofitable ideas, while a business plan provides operational and financial details to guide the company and attract investors. 2) A feasibility analysis consists of analyzing the industry, product/service, and financial feasibility. It answers whether the business should proceed, while the business plan answers how it will proceed. 3) Key components of a feasibility analysis include using Porter's Five Forces model to analyze industry attractiveness and conducting primary and secondary research to determine customer demand and the resources needed to deliver the product or service at a profit.

Uploaded by

SyedAshirBukhari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Chapter # 4

Conducting a
Feasibility Analysis
and Crafting a
Winning Business
Plan

The

most effective businesses


emerge from a process that
includes
1)
2)
3)
4)

Recognizing a business idea


Testing the feasibility of the idea
Writing a business plan
Launching the business

Feasibility Analysis
The

process of determining
whether or not an entrepreneurs
idea is a viable foundation for
creating a success business.

feasibility study:

Is not the same as a business plan.


Serves as a filter, screening out
ideas that lack the potential for
building a successful business before
an entrepreneur commits the
necessary resources to building a
business plan.
Is an investigative tool.

Business Plan
A

written summary of:

An entrepreneurs proposed business


venture
The operational and financial details
The marketing opportunities and strategy
The managers skills and abilities.
A

business plan is the written proof


that an entrepreneur has performed
the necessary research, has studied
the business opportunity adequately
and is prepared to capitalize on it.

Business Plan
Two

Essential Functions
1. Guiding the company by
charting its future course and
defining its strategy for
following it.
2. Attracting lenders and
investors who will provide
needed capital.

Feasibility Analysis versus


Business Plan
A

business plan is built on the


foundation of feasibility study but
provides a more comprehensive
analysis than a feasibility study.
Feasibility study is primarily an
investigative tool whereas
business plan functions primarily
as a planning tool

Feasibility Analysis versus


Business Plan
A

feasibility study is carried out with the


aim of finding out the workability and
profitability of a business venture. Before
anything is invested in a new business
venture, feasibility study is carried out to
know if the business venture is worthy of
time, effort and resources.
A business plan is developed only after it
has been established that a business
opportunity exist and the venture is
about to commence.

Feasibility Analysis versus


Business Plan
Feasibility

study answers the


question, Should we proceed
with this business idea? A
business plan answers the
question, How we are going to
proceed with this business idea?
Feasibility study is for
entrepreneurs benefit. A
business plan is targeted at
investors, lenders and future
executives to explain how the

Components of Feasibility
Analysis
A

feasibility analysis consists of


three interrelated components
Industry and market feasibility
analysis
Product or service feasibility analysis
Financial feasibility analysis

Industry and Market Feasibility


Analysis
Two

areas of focus:
1) Determining how attractive an
industry is overall as a home
for a new business.
2) Identifying possible niches a
small business can occupy
profitably.

Five Forces Model


Five

forces interact with one another


to determine the setting in which
companies compete and, hence, the
attractiveness of the industry:
1) Rivalry among companies in the
industry
2) Bargaining power of suppliers
3) Bargaining power of buyers
4) Threat of new entrants
5) Threat of substitute products or services

Rivalry Among Companies


Strongest

of the five forces


Industry is more attractive when:
Number of competitors is large, or,
at the other extreme, quite small
Competitors are not similar in size or
capacity
Industry is growing fast
Opportunity to sell a differentiated
product or service exists

Bargaining Power of
Suppliers
The

greater the leverage of


suppliers, the less attractive the
industry.
Industry is more attractive when:
Many suppliers sell a commodity
product
Substitutes are available
Switching costs are low
Items account for a small portion of
the cost of finished products

Bargaining Power of Buyers


Buyers

influence is high when number of


customers is small and cost of switching
to a competitors product is low.
Industry is more attractive when:

Customers switching costs are high


Number of buyers is large
Customers want differentiated products
Customers find it difficult to collect
information for comparing suppliers
Items account for a small portion of
customers finished products

Threat of New Entrants


The

larger the pool of potential new


entrants, the less attractive an industry is.
Industry is more attractive to new entrants
when:
Advantages of economies of scale are absent.
Capital requirements to enter are low
Cost advantages are not related to company
size
Buyers are not loyal to existing brands
Government does not restrict the entrance of
new companies

Threat of Substitutes
Substitute

products or services
can turn an industry on its head.
Industry is more attractive to new
entrants when:
Quality substitutes are not readily
available
Prices of substitute products are not
significantly lower than those of the
industrys products
Buyers switching costs are high

Product or Service Feasibility


Analysis
Determines

the degree to which a


product or service idea appeals to
potential customers and identifies
the resourced necessary to
produce it.
Two questions:
1. Are customers willing to purchase
our product or service?
2. Can we provide the product or
service to customers at a profit?

Product or Service Feasibility


Analysis
Primary

research: Collect data


firsthand and analyze it.
Customer surveys and questionnaires
Focus groups

Secondary

research: Gather
data that already has been
compiled and analyze it.
Prototypes
In-home trials

Financial Feasibility
Analysis
Capital

requirements an estimate
of how much start-up capital is
required to launch the business.
Estimated earnings forecasted
income statements
Return on investment Combining
the previous two estimates to
determine how much investors can
expect their investments to return.

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