The document discusses conducting a feasibility analysis before starting a new business. It explains that a feasibility analysis answers whether an idea is viable and consists of three parts: an industry and market analysis, a product or service analysis, and a financial analysis. The industry and market analysis assesses attractiveness using Porter's Five Forces model to evaluate competition, suppliers, buyers, potential entrants and substitutes. It also identifies potential market niches.

1. CHAPTER 4 DISCUSSION QUESTIONS
1) What is a feasibility analysis?
2) What is an industry & market feasibility analysis?
3) Explain the 5 forces model.
4) What is a product or service feasibility analysis?
5) What is the difference between primary & secondary
research?
6) What is a financial feasibility analysis?

2. FEASIBILITY ANALYSIS
”THE PROCESS OF DETERMINING WHETHER AN ENTREPRENEUR’S IDEA IS A
VIABLE FOUNDATION FOR CREATING A SUCCESSFUL BUSINESS.”
-ANSWERS THE QUESTION: “SHOULD WE PROCEED WITH THIS BUSINESS
IDEA?”
-THE EASY PART OF LAUNCING A BUSINESS IS COMING UP WITH AN IDEA FOR
A NEW BUSINESS CONCEPT OR APPROACH.
-THE HARD PART OF LAUNCHING A BUSINESS IS TRANSFORMING THE IDEA
INTO A VIABLE BUSINESS.
-A FEASABILITY ANALYSIS IS CONDUCTED PRIOR TO COMMITTING THE
NECESSARY RESOURCES REQUIRED TO BUILDING A BUSINESS PLAN.

3. FEASIBILITY ANALYSIS
-CONSISTS OF 3 INTERRELATED COMPONENTS:
1) INDUSTRY & MARKET FEASIBILITY ANALYSIS
STEP 1: ASSESSING INDUSTRY ATTRACTIVENESS (5
FORCES MODEL)
STEP 2: IDENTIFYING POTENTIAL NICHES
2) PRODUCT OR SERVICE FEASIBILITY ANALYSIS
GATHERING PRIMARY & SECONDARY RESEARCH
3) FINANCIAL FEASIBILITY ANALYSIS
A)CAPITAL REQUIREMENTS
B)ESTIMATED EARNINGS
C)RETURN ON INVESTMENT

4. I. INDUSTRY & MARKET FEASIBILITY ANALYSIS
-TWO MAIN PURPOSES:
1) ASSESSING INDUSTRY ATTRACTIVENESS
-TO DETERMINE HOW ATTRACTIVE AN INDUSTRY IS
OVERALL AS A “HOME” FOR A NEW BUSINESS.
2) IDENTIFYING POTENTIAL NICHES
-TO IDENTIFY POSSIBLE NICHES A SMALL BUSINESS CAN
OCCUPY PROFITABLY.
NICHE:
-A DISTINCT SEGMENT OF A MARKET.

5. INDUSTRY & MARKET FEASIBILITY ANALYSIS
STEP 1: ASSESSING INDUSTRY ATTRACTIVENESS

6. FIVE FORCES MODEL
”A MODEL THAT RECOGNIZES THE POWER OF 5 FORCES ON AN
INDUSTRY.”
-A USEFUL TOOL FOR ANALYZING AN INDUSTRY’S
ATTRACTIVENESS.

8. 1) RIVALRY AMONG COMPANIES COMPETING IN THE INDUSTRY
-THE STRONGEST OF THE 5 FORCES.
-LIKE HORSES RUNNING IN A RACE, BUSINESSES IN AN
INDUSTRY ARE JOCKEYING FOR POSITION IN AN ATTEMPT TO
GAIN A COMPETITIVE ADVANTAGE.
-FACTORS THAT MAKE AN INDUSTRY MORE ATTRACTIVE:

9. 1) NUMBER OF COMPETITORS IS LARGE OR SMALL.

10. 2) COMPETITORS ARE NOT SIMILAR IN SIZE OR CAPABILITY.

11. 3) THE INDUSTRY IS GROWING AT A FAST PACE.

12. 4) THE OPPORTUNITY TO SELL A DIFFERENTIATED
PRODUCT/SERVICE IS PRESENT.

13. 2) BARGAINING POWER OF SUPPLIERS TO THE INDUSTRY
-THE GREATER THE LEVERAGE THAT SUPPLIERS OF KEY RAW
MATERIALS OR COMPONENTS HAVE, THE LESS ATTRACTIVE
THE INDUSTRY IS.

14. FACTORS THAT MAKE AN INDUSTRY MORE ATTRACTIVE:
1)MANY SUPPLIERS SELL A COMMODITY PRODUCT TO THE
COMPANIES IN IT.
1)SUBSTITUTE PRODUCTS ARE AVAILABLE FOR THE ITEMS
SUPPLIERS PROVIDE.
1)COMPANIES IN THE INDUSTRY FIND IT EASY TO SWITCH
FROM ONE SUPPLIER TO ANOTHER OR TO SUBSTITUTE
PRODUCTS.
1)THE ITEMS SUPPLIERS PROVIDE THE INDUSTRY
ACCOUNT FOR A RELATIVELY SMALL PORTION OF THE
COST OF THE INDUSTRY’S FINISHED PRODUCTS.

15. 3) BARGAINING POWER OF BUYERS
-IN A CAPITALIST SOCIETY CONSUMERS HOLD A LOT OF POWER,
HOWEVER, WE RARELY EXERT OUR POWER.
-IN A FREE MARKET SOCIETY, THE CUSTOMERS MOST POWERFUL
BARGAINING TOOL IS SWITCHING TO A COMPETITOR.
-SWITCHING COSTS:
-AMOUNT OF $ IT COSTS A CONSUMER TO SWITCH TO A
COMPETITOR’S PRODUCT OR A SUBSTITUTE PRODUCT.
-FACTORS THAT MAKE AN INDUSTRY MORE ATTRACTIVE:

16. 1)INDUSTRY CUSTOMERS’ SWITCHING COSTS TO COMPETITORS
PRODUCTS OR TO SUBSTITUTES ARE RELATIVELY HIGH.

17. 2) THE NUMBER OF BUYERS IN THE INDUSTRY IS LARGE.

18. 3) CUSTOMERS FIND IT DIFFICULT TO GATHER INFORMATION ON
SUPPLIERS’ COST, PRICES, & PRODUCT FEATURES.

19. 4) THREAT OF NEW ENTRANTS TO THE INDUSTRY
-WHEN “BARRIERS TO ENTRY” INTO AN INDUSTRY ARE LOW, THE
GREATER THE POSSIBILITY OF NEW ENTRANTS.
-BARRIERS TO ENTRY:
-OBSTACLES THAT MAKE IT DIFFICULT FOR A NEW
BUSINESS TO ENTER AN INDUSTRY.
-CAPTIAL REQUIREMENTS, SPECIALIZED KNOWLEDGE,
TECHNOLOGY
-THE LARGER THE POOL OF POTENTIAL NEW ENTRANTS TO AN
INDUSTRY, THE GREATER IS THE THREAT TO EXISTING COMPANIES
IN IT.
-FACTORS THAT MAKE AN INDUSTRY MORE ATTRACTIVE:

20. 1) CAPITAL REQUIREMENTS TO ENTER THE INDUSTRY ARE LOW.
-TYPICAL BUDGET FOR A KEG ONLY CRAFT BREWERY USING
USED EQUIPMENT IS $150-200,000
-UP TO 1/3 OF THAT MAY BE USED FOR BUILDING
IMPROVEMENTS
-THE AVERAGE BREWPUB INVESTMENT IS AROUND $500,000
FOR BREWERY EQUIPMENT & LEASEHOLD IMPROVEMENTS

21. 2) COST ADVANTAGES ARE NOT RELATED TO COMPANY SIZE.

22. 3) BUYERS ARE NOT EXTREMELY BRAND LOYAL.