The document discusses the importance of conducting comprehensive feasibility studies for new ventures. It outlines three key areas of feasibility studies: technical feasibility, market feasibility, and financial feasibility. Technical feasibility involves product testing and development. Market feasibility requires identifying the target market and demand. Financial feasibility involves determining funding needs, costs, cash flow, and return on investment. Comprehensive feasibility studies across all three areas are necessary to avoid common reasons why new ventures fail such as inadequate market knowledge, ineffective marketing, or undercapitalization.

1. Feasibility Studies
Technical Feasibility
Market Feasibility
Financial Feasibility

2. Why new ventures fail?
Need for comprehensive feasibility study
• Inadequate market knowledge
• Faulty product performance
• Ineffective marketing and sales effort
• Inadequate awareness of competitor's
reaction
• Rapid product obsolescence
• Poor timing of starting the venture
• Undercapitalization, unforeseen operating
expenses, excessive investments & related
financial difficulties

3. Technical Feasibility
A] Identification of critical technical
specification comprising:
 the functional design of the product
 adaptability to new customer demand
 durability
 reliability of performance
 safety
 reasonable utility(acceptable level of
obsolescence)
 standardization (elimination of unnecessary
variety)

4. Technical Feasibility
B] Examination of product-quality-cost
relationship:
trade-off between technical excellence and
associated cost
Entrepreneur should avoid unnecessary gold
plating when the market situation doesn’t
justify it.

5. Technical Feasibility
C] Product testing:
• engineering studies relating to
machinery, tools, instruments, work flow
etc
• product development through blueprint,
models, prototypes
• product testing through lab & field
testing

6. Market Feasibility
A] Identifying the market potential:-
estimation of current demand
projection of future market trends
identify specific end users, major market
segments, potential volume of purchasers
within each market segment.
Ex:- A potential manufacturer of helmets may
find out the annual production of two
wheelers percentage of helmets and
proportion of demand already met.

7. Market Feasibility
B] Estimating cost-volume relationship:-
The price levels must reflect the value of the
product
The Cost-Volume Analysis would facilitate
the determination of appropriate economy
of scales i.e. optimum size of enterprise
which has lowest average per unit cost of
production & distribution.
Helps ascertain how various price levels may
affect the total sales volume

8. Market Feasibility
C] Sources of Market Info:-
Relevant data for market analysis can be gathered
from=>Primary Sources (Interview, Questionnaire) or
Secondary Sources (Govt. Agencies, Chamber of
Commerce, Trade Association etc)
• Data relating to general economic trends-housing activity,
consumer spending, inventories
• Pricing data-price for same, complementary, substitute
products, discount structure
• Channels of distribution-wholesale & retail
• Demand pattern, seasonal variation
• Competitors

9. Market Feasibility
D] Market Testing:-
• Displaying the product at trade fairs
• Test marketing to analyse the receptivity of product
• Sample sales
Use:
Likely sales volume & profitability
Sales volume at different price levels
Soundness of chosen market strategy
Unknown weakness that need attention

10. Financial Feasibility
A] Determination of total financial requirement:-
Initial Expenses
Fixed Investments
Operational Expenditure
Contingency
Provision must be made for cost escalation,
appropriate sales forecast should also be made.
Projection could be weekly or monthly.

11. Financial Feasibility
B] Financial Resources & Other Costs:-
Short-term Resources-payable in 1 year
Term Loans-
Intermediate term loans- available for 1-3
years(even 5)
Long term loans- banks, equity capital &
reinvestment of earnings
C] Cash Flow Analysis
D] Anticipated Return on Investment

12. Other Feasibility Studies
• Assessment of personnel requirement &
organizational capabilities
– Ascertaining the anticipated workflow & the various
activities
– Grouping the activities into set of tasks that individuals
can handle effectively
– Categorization of various tasks to form the basis of
structure of the organization
– Determination of inter-relationship between different
position & designing of organizational hierarchy
• Analysis of Competition
1. direct competition from similar products
2. indirect competition from substitutes