Technical and economic feasibility studies
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Technical and economic feasibility studies. Methodology and useful tools. Table of contents. Methodology Methodology overview Offer analysis Strategic segment analysis Competitive position Business plan Useful tools. Table of contents. Methodology Methodology overview Offer analysis

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Technical and economic feasibility studies

Technical and economic feasibility studies

Methodology and useful tools


Table of contents

Table of contents

  • Methodology

    • Methodology overview

    • Offer analysis

    • Strategic segment analysis

    • Competitive position

    • Business plan

  • Useful tools


Table of contents1

Table of contents

  • Methodology

    • Methodology overview

    • Offer analysis

    • Strategic segment analysis

    • Competitive position

    • Business plan

  • Useful tools


Technical and economic feasibility studies

Legal

environment

Venture Cap

Competitors

Start-up

IP

Ex-employer

Customers

Market prices

End-users

A technical and economic feasibility study aims at transforming an idea or an innovative technology into a structured project

  • The way is long from an idea or a technology to a successful company

  • An entrepreneur faces diverse issues from market sizing to intellectual property and has to deal with the different and numerous stakeholders of his industry

Examples of constraints and stakeholders

  • The technical and economic study will help the entrepreneur to define his offer and his strategy


Methodology overview

Methodology overview

  • The methodology will progress through four stages which answer each to a main question for the client:

    • Which offer based on our idea or technology will match an unmet need ?

    • Is the strategic segment I target attractive and what is required to success ?

    • Which model should we build to be successful on that segment ?

    • What are the next steps ?

Offer analysis

Strategic

segment

analysis

Competitive

position

Business

plan


Table of contents2

Table of contents

  • Methodology

    • Methodology overview

    • Offer analysis

    • Strategic segment analysis

    • Competitive position

    • Business plan

  • Useful tools


Technical and economic feasibility studies

The first goal to reach is to transform an innovative technology or an idea into a solution for an unmet need

  • Séparer capacité de l’offre à répondre aux besoins et attentes des clients / utilisateurs finaux (parfois différents)


Table of contents3

Table of contents

  • Methodology

    • Methodology overview

    • Offer analysis

    • Strategic segment analysis

    • Competitive position

    • Business plan

  • Useful tools


Technical and economic feasibility studies

Strategic segment analysis is mandatory in order to build an appropriate value offer and the suitable business model

  • The future enterprise will work on a specific value network, deal with specific competitors which want to sell a similar product to the same clients

  • The first step is to define the pertinent strategic segment and its borders

  • The segment’s size and dynamics will be part of its attractiveness

  • In order to pick up the key success factors and to define a successful business model, the structure of the segment must be analyzed

  • The analysis structure should then be the following:

Define the targeted strategic segment

Analyze the segment’s size and dynamics

Analyze the competitive structure and forces

Define the key success factors


Strategic segmentation is the basis of a pertinent further analysis

Strategic segmentation is the basis of a pertinent further analysis

  • Marketing segmentation is the process of dividing the market into homogeneous groups of customers, who respond similarly to a particular mix marketing of the four Ps –product, price, place, promotion

  • Market segments must be distinguished from strategic segments which are those segments who require distinct value networks rather than just changes in the marketing mix

  • For example in the airline industry flag carriers and low-cost companies are on two different strategic segments with their own value network, and a flag carrier could not be successful on low cost segment by keeping the same value network (cf. British Airways selling its subsidiary GO to EasyJet)

  • Strategic segments regroup actors submitted to similar “forces” and who share the same key success factors

Identify a strategic segment

Elements of identification

Clients

  • Value network

  • Economic model

  • Competitive forces

  • Key success factors

  • Competitive advantage sources

New entrants

Products

Rivalry

Suppliers

Clients

Substitute products

Source: Strategor, Chap. 2, From Market segments to strategic segments, Harvard BS Press


Technical and economic feasibility studies

Very premium

Perfume

Cognac and spirits

Champagne

Premium

Wine and spirits

Champagne and wine

LVMH

Wine

Leather and fashion

Retailing

Segmentation is an iterative process which must lead to the appropriate level with an arborescence principle

  • The appropriate level of segmentation is key:

    • Too detailed: confusion in the recommendations

    • Too rough: “economic journalism” risk

  • Each sector has its “natural” segmentation criteria, eg. (production process x product) for industry

  • First stages are generally obvious but as the segmentation progresses it becomes more complex and conceptual

Example: LVMH activities

  • The segmentation can be finally tested by placing the competitors on a matrix (eg. products/clients)


How to proceed to study a segment s dynamics

How to proceed to study a segment’s dynamics ?

1

Market picture

  • Data may not always exist on the segment’s volume and value and the size must be assessed with a market sizing (eg. basically unit sales x price per unit)

  • A particular attention must be paid to the completeness of demand growth drivers analysis

  • Major shifts can (sometimes) be anticipated (eg. music industry) and consist in a threat or an opportunity for the start-up

3

  • Quantification of segment’s volume/value

  • Past growth on a long period

Projected dynamics

2

  • Underlying demand growth drivers

  • Pricing growth drivers

  • Possible shifts

Structure of the segment and breaks

  • Segment’s structure

  • Breaks affecting competitors


Technical and economic feasibility studies

The maturity level of the strategic segment is a key point to define to understand the actors’ strategy and measure the attractiveness

Evolution of sales and profits of an activity

Sales

and profit

Start

Growth

Maturity

Decline

Sales

Profit

Time

Source: Strategor, Chap. 2


The useful dimensions of a strategic analysis can be summarized with porter s five forces

The useful dimensions of a strategic analysis can be summarized with Porter’s five forces

  • The five forces diagram summarizes the useful dimensions for an activity and competition analysis:

    • Vertical relationships between suppliers and their clients, and the retailers or clients of those ones

    • External forces: other industries (innovation or substitutes) and governments and laws

A renovated approach of Porter’s five forces

Suppliers

What is the bargaining power of suppliers?

Are there any entry barriers? Which ones?

Is there a risk of substitution products?

Rivalry between

existing firms

New entrants /

Substitutes

Regulation / governments

Is the activity threaten by regulation?

What is the bargaining power of clients?

Clients

Source: Strategic choices and competition, M.E. Porter, Strategor


The attractiveness of a strategic segment takes into account all the dimensions previously analyzed

The attractiveness of a strategic segment takes into account all the dimensions previously analyzed

Valuation statement of a segment attractiveness

  • The intrinsic attractiveness of a segment must be corrected with the success capacity of the firm on this segment

Source: Strategor, Chap. 4


The mastery level of the key success factors ksf defines the competitive position of the firm 1 3

1

Identify the KSF of the segment

2

Weight the different criteria

The mastery level of the key success factors (KSF) defines the competitive position of the firm (1/3)

  • Competitive position mixes external approach – the strategic segment – and internal approach –resources and skills of the firm – to diagnose the strategic position of the firm

  • The KSF must be few: 3 to 5 maximum

  • They must define the key elements which distinguish competitors and not those mastered by all

  • KSF are resources, skills, assets specific to an activity and mandatory for a firm to success

  • Their identification is based on an experimental approach where four sources must be analyzed:

    • Demand: growth drivers, clients types, bargaining powers…

    • Competition: entry barriers, concentration level…

    • Direct competitors: what distinguishes the best competitors?

    • Financial structure ratios: major costs, capital intensity…

  • There are dominant KSF and the KSF must therefore be classified

  • An acceptable weighting won’t be exhaustive but reduced to 5 KSF

  • The result will be validated with objective data and confronted to operational management perception

Source: Strategor, Chap. 4


The mastery level of the key success factors ksf defines the competitive position of the firm 2 3

3

Evaluate the mastery level

4

Evaluate globally

The mastery level of the key success factors (KSF) defines the competitive position of the firm (2/3)

  • The performance of the firm and the main competitors must be evaluated

  • The evaluation must be simple (eg. 0 to 5) with an even number scale to avoid medium ratings

  • This stage implies to collect lots of data on the competitors to get objective information

  • By multiplying the ratings and the weights and adding up all the ratings, a global evaluation is obtained

  • A visual display can be used to transcribe the results and identify the advantages and disadvantages

  • The strengths and weaknesses of the firm can be easily extracted

Source: Strategor, Chap. 4


The mastery level of the key success factors ksf defines the competitive position of the firm 3 3

The mastery level of the key success factors (KSF) defines the competitive position of the firm (3/3)

Radar chart of competitive position (example)

Competitive profile example

Source: Strategor, Chap. 4


Table of contents4

Table of contents

  • Methodology

    • Methodology overview

    • Offer analysis

    • Strategic segment analysis

    • Competitive position

    • Business plan

  • Useful tools


Technical and economic feasibility studies

  • What ? What business model ?

    • Who gets the most value added from the offer ? Who is ready to pay ? How much ?

    • Key success factors

    • Best practices

  • With whom ? (team, collaborations…)

  • How much ? (financial projections, financing…)

    • Customers acquisition plan

    • Costs projections

  • Barriers to entry ?

    • Which barriers am I able to build to protect my business?

  • Choose the best scenario: ROA, sustainable competitive advantage…


Table of contents5

Table of contents

  • Methodology

    • Methodology overview

    • Offer analysis

    • Strategic segment analysis

    • Competitive position

    • Business plan

  • Useful tools


Table of contents6

Table of contents

  • Methodology

    • Methodology overview

    • Offer analysis

    • Strategic segment analysis

    • Competitive position

    • Business plan

  • Useful tools


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