Feasibility study
Overview
 
Feasibility studies aim to objectively and rationally uncover the strengths and weaknesses of the existing business or proposed venture, opportunities and threats as presented by the environment
Natural environment
The natural environment encompasses all living and non-living things occurring naturally on Earth or some region thereof. It is an environment that encompasses the interaction of all living species....

, the resources required to carry through, and ultimately the prospects for success
Success
Success may refer to:* a level of social status* achievement of an objective * the opposite of failure- Places :* Success, Western Australia, a suburb of Perth, Australia* Success, Arkansas, United States* Success, Missouri, United States...

. In its simplest term, the two criteria to judge feasibility are cost
Cost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...

 required and value
Value
Value or values may refer to:Concepts of worth:* Value theory – overview of approaches in various disciplines* Value ** Value * Value ** Theory of value ** Value investing...

 to be attained. As such, a well-designed feasibility study should provide a historical background of the business or project, description of the product
Product
- Business :*Product , an item that ideally satisfies a market's want or need**Product , a deliverable or set of deliverables that contribute to a business solution**Nanoproduct, a product that has been enhanced with nanotechnology...

 or service, accounting statements, details of the operations and management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...

, marketing research
Marketing research
Marketing research is "the function that links the consumer, customer, and public to the marketer through information — information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve...

 and policies, financial data, legal requirements and tax obligations.
Encyclopedia
Feasibility studies aim to objectively and rationally uncover the strengths and weaknesses of the existing business or proposed venture, opportunities and threats as presented by the environment
Natural environment
The natural environment encompasses all living and non-living things occurring naturally on Earth or some region thereof. It is an environment that encompasses the interaction of all living species....

, the resources required to carry through, and ultimately the prospects for success
Success
Success may refer to:* a level of social status* achievement of an objective * the opposite of failure- Places :* Success, Western Australia, a suburb of Perth, Australia* Success, Arkansas, United States* Success, Missouri, United States...

. In its simplest term, the two criteria to judge feasibility are cost
Cost
In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...

 required and value
Value
Value or values may refer to:Concepts of worth:* Value theory – overview of approaches in various disciplines* Value ** Value * Value ** Theory of value ** Value investing...

 to be attained. As such, a well-designed feasibility study should provide a historical background of the business or project, description of the product
Product
- Business :*Product , an item that ideally satisfies a market's want or need**Product , a deliverable or set of deliverables that contribute to a business solution**Nanoproduct, a product that has been enhanced with nanotechnology...

 or service, accounting statements, details of the operations and management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...

, marketing research
Marketing research
Marketing research is "the function that links the consumer, customer, and public to the marketer through information — information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve...

 and policies, financial data, legal requirements and tax obligations. Generally, feasibility studies precede technical development and project
Project
A project in business and science is typically defined as a collaborative enterprise, frequently involving research or design, that is carefully planned to achieve a particular aim. Projects can be further defined as temporary rather than permanent social systems that are constituted by teams...

 implementation.

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. Technological feasibility is carried out to determine whether the company has the capability, in terms of software, hardware, personnel and expertise, to handle the completion of the project. When writing a feasibility report the following should be taken to consideration:
  • A brief description of the business
  • 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).

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
Cost-benefit analysis
Cost–benefit analysis , sometimes called benefit–cost analysis , is a systematic process for calculating and comparing benefits and costs of a project for two purposes: to determine if it is a sound investment , to see how it compares with alternate projects...

, 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.

Cost-based study: It is important to identify cost and benefit factors, which can be categorized as follows: 1. Development costs; and 2. Operating costs. This is an analysis of the costs to be incurred in the system and the benefits derivable out of the system.

Time-based study: This is an analysis of the time required to achieve a return on investments. The future value of a project is also a factor.

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.

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 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 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
Culture
Culture is a term that has many different inter-related meanings. For example, in 1952, Alfred Kroeber and Clyde Kluckhohn compiled a list of 164 definitions of "culture" in Culture: A Critical Review of Concepts and Definitions...

. 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

Output

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

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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