MBA General - Project Management

Feasibility Study

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Learning objectives :
1.Determine the economical meaning of
feasibility study.
2.Important of Feasibility Studies.
3.The Components of a Feasibility Study
4.Reasons Given Not to Do a Feasibility Study
5.Reasons to Do a Feasibility Study
6.Pre-Feasibility Study

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 Business Success
• Establishing a feasibility study of projects is a
critical factor in business success.

• Many factors can be involved and invariably

luck can and probably will play a hand.

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 Key factor
• A key factor in any feasibility study must be
ensuring that you are dealing with correct facts,
correct assumption, and up to date financial
data.

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 Countless feasibility studies
• Any project which have passed a countless
feasibility studies, have been sunk by
unexpected events such as flood.

• Many projects fail because of incorrect

assumptions or because assumptions were based
on incorrect facts.

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 Preliminary investigation
• When complex problems or opportunities are to
be defined, it is generally desirable to conduct a
preliminary investigation called a feasibility
study.

• The primary objectives of the feasibility study is

to assess three types of feasibility

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 Feasibility Study
• A Feasibility Study is the analysis of a problem
to determine if it can be solved effectively.

• The results determine whether the solution

should be implemented.

• This activity takes place during the project

initiation phase and is made before significant
expenses are engaged.
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 Introduction
Definition of 'Feasibility Study'
•An analysis of the ability to complete a project
successfully, taking into account legal, economic,
technological, scheduling and other factors. Rather
than just diving into a project and hoping for the best,
a feasibility study allows project managers to
investigate the possible negative and positive
outcomes of a project before investing too much time
and money.

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• A feasibility study is an evaluation of a
proposal designed to determine the difficulty in
carrying out a designated task. Generally, a
feasibility study precedes technical development
and project implementation.

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 Introduction
For example, if a private school wanted to expand its
campus to alleviate overcrowding, it could conduct a
feasibility study to determine whether to follow through
or not (to determine a go or no go scenario). This study
might look at where additions would be built, how much
the expansion would cost, how the expansion would
disrupt the school year, how students' parents feel about
the proposed expansion, how students feel about the
proposed expansion, what local laws might affect the
expansion, and so on.

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 Objective
• The feasibility study answers the basic
questions: is it realistic to address the problem
or the opportunity under consideration?

• And it produce a final proposal for the

management, this final report might includes:

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 Feasibility includes
1. Project name
2. Problem or opportunity definition
3. Project description
4. Expected benefit
5. Consequence of rejection
6. Resource requirements
7. alternatives
8. Other consideration
9. Theorization

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 Five common factors (TELOS)

1. Technology and system feasibility

2. Economic feasibility
3. Legal feasibility
4. Operational feasibility
5. Schedule feasibility

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 1. Technology and system feasibility

The assessment is based on an outline design of system

requirements in terms of Input, Processes, Output, Fields,
Programs, and Procedures. This can be quantified in
terms of volumes of data, trends, frequency of updating,
etc. in order to estimate whether the new system will
perform adequately or not this means that feasibility is
the study of the based in outline.

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• Technical Feasibility: Details how you will
deliver a product or service (i.e., materials,
labor, transportation, where your business will
be located, technology needed, etc.).

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 Importance of technical feasibility
• What type of equipment and technology will the business need
to produce its product? What are the costs involved? This
includes both the initial purchase and installation costs of the
equipment as well as the operational costs of running the
equipment.
• Who are the potential suppliers of this equipment? Where are
they located? What sort of service and warranties do they
provide? How long will it take to acquire the equipment and
begin operations?
• Based on its projected business volume, how much raw product
will be required by the decision maker ? What are the quality
specifications? Will the decision maker have a sufficient
membership base that can provide the raw materials?

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 questions of technical feasibility
• What are the possible locations for the decision
maker ’s facility? What size of facility is needed?
What are the costs of the building? Does the
proposed location have adequate access to
infrastructures and services such as major
highways, railways, and utilities? Will the decision
maker build its own facility, or purchase an
existing location?

• Where will the facility be located relative to the

decision maker ’s customers? Who will be
responsible for the transportation of goods between
the facility and the market? What are the
transportation costs involved?
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 2. Economic feasibility
• Economic analysis is the most frequently used method for
evaluating the effectiveness of a new system. More
commonly known as cost/benefit analysis, the procedure is
to determine the benefits and savings that are expected
from a candidate system and compare them with costs. If
benefits outweigh costs, then the decision is made to design
and implement the system. An entrepreneur must
accurately weigh the cost versus benefits before taking an
action. Time Based: Contrast to the manual system
management can generate any report just by single click .

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• Financial Feasibility: Projects how much start-
up capital is needed, sources of capital, returns
on investment, etc.

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 Questions of financial feasibility:
• What are the total start-up costs required in order to
begin operations? For instance, what are the capital
costs of the land, plant and equipment, and other
start-up costs such as legal and accounting costs?
• What are the operating costs involved? These
include the daily costs involved in running the
business, such as wages, rent, utilities, and interest
payments on outstanding debt. These will
determine the cash flow requirements of the
decision maker .

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Continue : Questions of financial feasibility
• Based on the estimated demand, what are the
decision maker ’s revenue projections? How
will the decision maker determine its pricing
arrangements?
• What are the possible sources of financing for
the decision maker ? Who are potential lenders?
What will be their required terms and
limitations of borrowing?
• Based on the estimated revenues and costs, what
is the projected profit(loss) of the decision
maker ? What is the break-even point?
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 3. 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.

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 4. Operational feasibility

• Is a measure of how well a proposed system

solves the problems, and takes advantages of the
opportunities identified during scope definition
and how it satisfies the requirements identified
in the requirements analysis phase of system
development.[1]

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 5. 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.
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 Reasons to Do a Feasibility Study
• Conducting a feasibility study is a good business
practice.

• If you examine successful businesses, you will find

that they did not go into a new business venture
without first thoroughly examining all of the issues
and assessing the probability of business success.

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• Below are other reasons to conduct a feasibility study.
– Gives focus to the project and outline alternatives.
– Narrows business alternatives
– Identifies new opportunities through the investigative process.
– Identifies reasons not to proceed.
– Enhances the probability of success by addressing and mitigating
factors early on that could affect the project. 
– Provides quality information for decision making.
– Provides documentation that the business venture was thoroughly
investigated.
– Helps in securing funding from lending institutions and other
monetary sources.
– Helps to attract equity investment.
– The feasibility study is a critical step in the business assessment
process. If properly conducted, it may be the best investment you
ever made.
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 Other feasibility factors
• Market and real estate feasibility
• Resource feasibility
• Cultural feasibility

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 Market and real estate feasibility
• Market Feasibility Study typically involves testing
geographic locations for a real estate development
project, and usually involves 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 a 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.
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 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, etc.
Contingency and mitigation plans should also
be stated here.

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 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.

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