The document discusses the components of a feasibility analysis for a new business. It explains that a feasibility analysis assesses the viability of a business idea and consists of three parts: an industry and market analysis, a product or service analysis, and a financial analysis. The industry and market analysis involves using Porter's Five Forces model to evaluate the attractiveness of an industry and identifying potential niches a business could target. The document provides examples of niches various breweries have occupied.

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. 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

15. 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.

16. 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.

17. 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:

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

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

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

21. 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:

22. 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

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

24. 3) BUYERS ARE NOT EXTREMELY BRAND LOYAL.

25. 5) THREAT OF SUBSTITUTE PRODUCTS OR SERVICES
-WHEN BUYERS HAVE AN OPPORTUNITY TO PURCHASE
SUBSTIUTE PRODUCTS/SERVICES, AN INDUSTRY CAN BE
TURNED ON ITS HEAD.
-SUBSTITUTE PRODUCT: A PRODUCT THAT SATISFIES THE NEED
OF A CONSUMER THAT ANOTHER PRODUCT FULFILLS.
-FACTORS THAT MAKE AN INDUSTRY MORE ATTRACTIVE:

26. 1) QUALITY SUBSTITUTE PRODUCTS ARE NOT READILY
AVAILABLE.

27. 2) THE PRICES OF SUBSTITUTE PRODUCTS ARE NOT
SIGNIFICANTLY LOWER.

28. 3) BUYERS’ COST OF SWITCHING TO SUBSTITUTE
PRODUCTS IS HIGH.

29. INDUSTRY & MARKET FEASIBILITY ANALYSIS
STEP 2: IDENTIFYING POTENTIAL NICHES

30. INDUSTRY NICHES
-MANY SMALL BUSINESSES PROSPER BY STICKING TO NICHES
THAT ARE TOO SMALL TO ATTRACT THE ATTENTION OF LARGE
COMPETITORS.
-OCCUPYING AN INDUSTRY NICHE SHIELDS A BUSINESS, TO
SOME EXTENT, FROM THE POWER OF THE 5 FORCES.
-KEY QUESTIONS:
1)“CAN WE IDENTIFY A NICHE THAT IS LARGE ENOUGH TO
PRODUCE A PROFIT?”
OR
2) “CAN WE POSITION OUR COMPANY UNIQUELY IN THE
MARKET TO DIFFERENTIATE IT FROM THE COMPETITION IN A
MEANINGFUL WAY?”

31. BREWERY: WHITE BIRCH BREWING
NICHE: NANOBREWING (NH’S FIRST NANOBREWERY)

32. BREWERY: DOGFISH HEAD BREWERY (DE)
NICHE: NON-TRADITIONAL INGREDIENTS

33. BREWERY: PEAK ORGANIC BREWING COMPANY (ME)
NICHE: LOCAL INGREDIENTS &/OR ORGANIC

34. BREWERY: SLY FOX (PA)
NICHE: 360 LID

35. BREWERY: CLOWN SHOES BEER (MA)
NICHE: CREATIVE NAMES & LABELS

36. BREWERY: BREW DOG (SCOTLAND)
NICHE: EXTREME BEER
ABV: 32% IBU: 41