Module 3
Module 3
0 10-July-2020
This module emphasizes the importance of feasibility analysis. It discusses the proper time to
complete a feasibility analysis. Moreover, it also discusses the forms of feasibility analysis
which include product/service feasibility, industry/target market feasibility, organizational feasibility
and financial feasibility. Lastly, it presents the outline for a comprehensive feasibility analysis.
- The thought is to screen ideas before a lot of resources are spent on them.
• Components of a Properly Conducted Feasibility Analysis
- A properly conducted feasibility analysis includes four separate components:
✓ Product/Service Feasibility
✓ Industry/Target Market Feasibility
✓ Organizational Feasibility
✓ Financial Feasibility
Figure 3.1 shows the role of feasibility analysis in developing business ideas.
• Organizational Feasibility
- Purpose
✓ Conducted to determine whether a proposed business has sufficient
management expertise, organizational competence, and resources to
successfully launch a business.
✓ Focuses on non-financial resources.
- Components of organizational feasibility analysis
✓ Management Prowess
- A firm should candidly evaluate the prowess, or ability, of its management team
to satisfy itself that management has the requisite passion and expertise to
launch the venture.
- Two of the most important factors in this area are: 1) The passion that the solo
entrepreneur or the founding team has for the business idea. 2) The extent to
which sole entrepreneur or the founding team understands the markets in which
the firm will participate.
✓ Resource Sufficiency
- This topic pertains to an assessment of whether an entrepreneur has sufficient
resources to launch the proposed venture.
- To test resource sufficiency, a firm should list the 6 to 12 most critical
nonfinancial resources that will be needed to move the business idea forward
successfully. If critical resources are not available in certain areas, it may be
impractical to proceed with the business idea.
- Examples of nonfinancial resources that may be critical to the successful launch
of a new business:
1. Availability of affordable office or lab space.
2. Likelihood of local and state government support of the business.
3. Quality of the labor pool available.
4. Proximity to key suppliers and customers.
5. Willingness of high quality employees to join the firm.
6. Likelihood of establishing favorable strategic partnerships.
7. Proximity to similar firms for the purpose of sharing knowledge.
8. Possibility of obtaining intellectual property protection in key areas.
• Financial Feasibility
- Purpose
✓ The final component of a comprehensive feasibility analysis.
✓ A preliminary financial assessment is sufficient.
- Components of financial feasibility analysis
LEARNING ACTIVITY 1
Application Questions:
1. Michelle Smith is thinking about launching a website to sell sports apparel for petite women. She
designed a website but not isn’t sure if it’s user friendly enough to launch. Provide Michelle some
concrete suggestions for how she can receive feedback on the usability of her site.
2. Suppose you’re interested in opening a musical instruments store near the college or university
you attend, to sell guitars, drums, and other types of musical instruments. What online resources
would you draw on to conduct secondary research regarding the industry/target market feasibility of
your business idea? How would you use the resources?
RNING ACTIVITY 2
LEARNING ACTIVITY 2
SUMMARY
REFERENCES
Barringer, B.R. & Ireland, R.D. (2013). Entrepreneurship: Successfully Launching New Ventures,
4th Ed. Pearson Education.
Allen, Kathleen R. (2016). Launching New Ventures: An Entrepreneurial Approach, 7 th Ed. Cengage
Learning.