Feasibility Analysis

 

A feasibility study is an evaluation and analysis of the potential of the proposed project which is based on extensive investigation and research to give full comfort to the decisions makers. Feasibility studies aim to objectively and rationally uncover the strengths and weaknesses of an existing business or proposed venture, opportunities and threats as presented by the environment, the resources required to carry through, and ultimately the prospects for success. In its simplest terms, the two criteria to judge feasibility are cost required and value to be attained. As such, a well-designed feasibility study should provide a historical background of the business or project, description of the product or service, accounting statements, details of the operations and management, marketing research and policies, financial data, legal requirements and tax obligations. Generally, feasibility studies precede technical development and project implementation.

A feasibility study evaluates the project's potential for success; therefore, the perceived objectivity is an important factor in the credibility to be placed on the study by potential investors and lending institutions. It must therefore be conducted with an objective, unbiased approach to provide information upon which decisions can be based^.

The acronym TELOS refers to the five areas of feasibility - Technical, Economic, Legal, Operational, and Scheduling.

Technology and system feasibility

The assessment is based on an outline design of system requirements, to determine whether the company has the technical expertise to handle completion of the project. When writing a feasibility report, the following should be taken to consideration:

·         A brief description of the business to assess more possible factor/s which could affect the study

·         The part of the business being examined

·         The human and economic factor

·         The possible solutions to the problems

At this level, the concern is whether the proposal is both technically and legally feasible (assuming moderate cost).

Legal feasibility

Determines whether the proposed system conflicts with legal requirements, e.g. a data processing system must comply with the local Data Protection Acts..

Operational feasibility

Operational feasibility is a measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development.^[4]

Schedule feasibility

A project will fail if it takes too long to be completed before it is useful. Typically this means estimating how long the system will take to develop, and if it can be completed in a given time period using some methods like payback period. Schedule feasibility is a measure of how reasonable the project timetable is. Given our technical expertise, are the project deadlines reasonable? Some projects are initiated with specific deadlines. You need to determine whether the deadlines are mandatory or desirable.

Market feasibility studies typically involve testing geographic locations for a real estate development project, and usually involve parcels of real estate land. Developers often conduct market studies to determine the best location within a jurisdiction, and to test alternative land uses for given parcels. Jurisdictions often require developers to complete feasibility studies before they will approve a permit application for retail, commercial, industrial, manufacturing, housing, office or mixed-use project. Market Feasibility takes into account the importance of the business in the selected area.

Resource feasibility

This involves questions such as how much time is available to build the new system, when it can be built, whether it interferes with normal business operations, type and amount of resources required, dependencies,

Cultural feasibility

In this stage, the project's alternatives are evaluated for their impact on the local and general culture. For example, environmental factors need to be considered and these factors are to be well known. Further an enterprise's own culture can clash with the results of the project.

Financial feasibility

In case of a new project, financial viability can be judged on the following parameters:

·         Total estimated cost of the project

·         Financing of the project in terms of its capital structure, debt equity ratio and promoter's share of total cost

·         Existing investment by the promoter in any other business

·         Projected cash flow and profitability

The financial viability of a project should provide the following information:^{[citation needed]}

·         Full details of the assets to be financed and how liquid those assets are.

·         Rate of conversion to cash-liquidity (i.e. how easily can the various assets be converted to cash?).

·         Project's funding potential and repayment terms.

·         Sensitivity in the repayments capability to the following factors:

·         Time delays.

·         Mild slowing of sales.

·         Acute reduction/slowing of sales.

·         Small increase in cost.

·         Large increase in cost.

·         Adverse economic conditions.

Market Research Study & Analysis

This is one of the most important sections of the feasibility study as it examines the marketability of the product or services and convinces readers that there is a potential market for the product or services.^{[citation needed]} If a significant market for the product or services cannot be established, then there is no project.

Typically, market studies will assess the potential sales of the product, absorption and market capture rates and the project's timing.

The feasibility study outputs the feasibility study report, a report detailing the evaluation criteria, the study findings, and the recommendations

1.     Matson, James. "Cooperative Feasibility Study Guide", United States Department of Agriculture, Rural Business-Cooperative Service. October 2000.

2.     ^ ^a ^b Justis, R. T. & Kreigsmann, B. (1979). The feasibility study as a tool for venture analysis. Business Journal of Small Business Management 17 (1) 35-42.

3.     ^ Georgakellos, D. A. & Marcis, A. M. (2009). Application of the semantic learning approach in the feasibility studies preparation training process. Information Systems Management 26 (3) 231-240.

4.     ^ Young, G. I. M. (1970). Feasibility studies. Appraisal Journal 38 (3) 376-383.

5.     ^ Bentley, L & Whitten, J (2007). System Analysis & Design for the Global Enterprise. 7th ed. (p. 417).

6.     ^ Michele Berrie (September 2008), Initiating Phase - Feasibility Study Request and Report

 

 

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