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Feasibility Study. Dr. Sandra S. Liu. Starting a Business. Come up with a good business idea Write a business plan Choose a business name Finance money Register your business and get a license Hire employees etc …. Idea Assessment Procedure. Formal & Detailed. Explore Ideas.

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feasibility study

Feasibility Study

Dr. Sandra S. Liu

starting a business
Starting a Business
  • Come up with a good business idea
  • Write a business plan
  • Choose a business name
  • Finance money
  • Register your business and get a license
  • Hire employees
  • etc…
idea assessment procedure
Idea Assessment Procedure

Formal & Detailed

Explore Ideas

Refine Ideas

Prepare Business Plan

Feasible?

  • Market trends
  • Your own competence
  • Invention
  • Add values
  • Market
  • Technology
  • Management
  • Finance (profit)
  • Action plan
  • Based on feasibility study
  • Secure funding

Exit

what is a feasibility study
What is a Feasibility Study?
  • Investigation function - “Should we proceed with the proposed project idea?”
  • Exploratory journey to evaluate business alternatives
  • Assessment of trade-off between risks and rewards
  • Mainly for new-start up businesses by consultants
key areas of a feasibility study
Key Areas of a Feasibility Study

Technical

Feasibility

Market

Feasibility

Financial

Feasibility

Managerial (Organizational)

Feasibility

technical feasibility
Technical Feasibility
  • Assessing whether the product can be manufactured or service can be rendered efficiently
    • Specific functional design & required technology
    • Availability of raw materials
    • Required production facilities
    • Suitability of site
    • Other inputs (key labor)
market feasibility
Market Feasibility
  • Assessing the viability of the product in the market (business opportunity)
    • Characteristics of the industry
    • Identification of your target market
    • Characteristics of your target customers
    • Analysis of competitiveness
    • Unique value of your product
    • Consumer demands for your product

► Requires a market survey

1 industry analysis
(1) Industry Analysis
  • The history & nature of the industry
  • Market size and fluctuation
  • Industry market trends
  • Product life cycle
  • Leading companies
  • Major consumer groups
2 competition analysis
(2) Competition Analysis
  • The boundary of your competition
  • Your key competitors
  • What your competitors are currently offering
  • Where market opportunities exist
  • Consumer evaluation of current competitors
  • Barriers to entry into the market
the components of a competitor analysis
The components of a competitor analysis

What drives the competitor?

What the competitor is doing and can do?

Future Goalsat all levels of management and in multiple directions

Current Strategieshow the business is currently competing

Competitor’s response profile

is the competitor satisfied with its current position?

what likely moves or strategy shifts will the competitor make?where is the competitor vulnerable?

what will provide the greatest and most effective retaliation by the competitor?

AssumptionsHeld about itself and the industry

Capabilitiesboth strengths and weaknesses

3 target customer analysis
(3) Target Customer Analysis
  • Types (Individuals/ Businesses/ Government )
  • Characteristics of target customers
      • Demographic
      • Behavioral
      • Psychological
  • Market size of your potential customers
  • Available sales strategies
demographic information
Demographic Information
  • Demographic profile of your target market
  • Traditional criteria for market segmentation
  • The most basic descriptive information
  • Age / Gender / Education level Profession / Household income level Marital status / Geographic location
behavioral information
Behavioral Information
  • How your target customers use products or services in the same category
  • Purchasing Habits
    • Frequency & volume
    • Product selection criteria (e.g. price, quality)
    • Buying process & shopping channels
an example of a typical customer profile
An example of a typical customer profile
  • Company X, an upscale sporting goods company, targets American male executives between the ages of 25 and 35, with an average household income of greater than $100,000, who enjoy outdoor sports and purchase sporting goods at least twice per year for recreation and travel.
  • What is missing ??
psychographic information
Psychographic Information
  • Personal traits, Cultural values, Life styles,Subjective perceptions, etc.
  • Tools for Measuring Psychological Traits
    • Value and Life Styles (VALS)
    • The Edwards Personal Preference Schedule (EPPS)
    • Rokeach Value Survey (RVS)
value and life styles vals
Value and Life Styles (VALS)

Innovators

Thinkers

Achievers

Experiencers

Believers

Strivers

Makers

Survivors

value and life styles vals1
Value and Life Styles (VALS)
  • Personality traits are stable motivations that drive behaviors
  • Tool for segmenting consumers on the basis of personality traits
  • Product positioning / Finding an opportunity
  • Useful for marketing planning (media selection, distribution channel, advertisement etc.)
financial feasibility
Financial Feasibility
  • Assessing total required capital and its availability as well as estimating sales (profit analysis)
    • Estimate the total capital requirements
      • “Seed money”
      • Fixed costs & Variable costs
    • Capital sources &Credit availability
    • Expected sales
estimating costs
Estimating Costs
  • Fixed Costs
    • Do not vary with the level of your sales
  • Variable Costs
    • Directly related to sales
  • Break-even
    • The point where your business has neither a profit nor a loss
    • Provides a rough idea of financial feasibility
calculating break even
Calculating “Break-even”
  • Selling price for a bag: $6
  • Variable costs per bag: $3
  • Total fixed costs : $72,000
  • Contribution margin = Price – Variable costs = ?
  • Break-even (units) =

Total Fixed Costs Contribution Margin

estimating potential sales
Estimating Potential Sales
  • Estimating Potential Sales
    • Market Potential / Market Share
    • Customer Counts
    • Sales of Existing Competitors
    • etc…
managerial feasibility
Managerial Feasibility
  • Analysis of organizational capabilities and personnel requirements
    • Legal structure of the business
      • Solo / Partnership / Corporation / Limited Liability Company
    • Availability of skillful business managers
    • Business founders

- Characteristics and mindset

- Rewards systems (e.g. stock option)

homework
Homework
  • Take a VALS test and know your type:

http://www.sric-bi.com/VALS/presurvey.shtml

about amy s ice cream
About Amy’s Ice cream…

Austin, TX based private owned ice cream shop chain.

Founded by Amy Miller (now Amy Simmons) at 1984

They have 10 stores in Texas now.

competitors
Competitors

Edy’s

Marble Slab Creamery, Inc

Haagaen-Dazs

Ben & Jerry’s

American Dairy Queen

Ben & Jerry’s

location
Location:

But a experienced market which they don’t need to put too much effort in “educate” the consumers how to shop ice cream.

value assessment
Value assessment

For a small business like Amy’s, distributing surveys costs them too much effort and time.

Scoopers (employees)/ customers relationships

Amy’s experience in ice cream industry

the mission product differentiating
The mission— Product differentiating

Memorable experience- for celebration

Fun and tasty

Feel the humanity

But also the experience !

Not only selling the ice cream

product differentiating
Product differentiating

Product categories:

  • Standard ice creams
  • Fruit ice creams- with fruits on your ice cream!
  • Ice cream drinks- Coke cola, Guinness, Cocktails, Cappuccino with ice creams!!

Making scooping a show!

Scooping trick competition