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Contents
1.0 Introduction to this Guide 2.0 Technical Feasibility 2.1 Product/Service 2.2 Technology & Intellectual Property 3.0 Commercial Feasibility 3.1 Target Market 3.2 Competition 3.3 Industry Analysis 3.4 What is Market Research? 3.5 Points to remember when conducting Market Research 4.0 Financial Feasibility 4.1 Pricing and Business Model 4.2 The Business Model 5.0 Organisational Feasibility 5.1 Team 5.2 Organisational Structure 6.0 Outputs of a Business Feasibility 6.1 Feasibility Structure 6.2 Terms of Reference 6.3 The Executive Summary 6.4 SWOT Analysis and Critical Risk Factors 6.5 Recommendations 6.6 Conclusion to the Guide 7.0 Appendix 7.1 Terms of Reference 7.2 Market Research 7.3 Organisational Charts
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2.1 Product/Service
Under technical feasibility, the promoter must look at the product/service that your business offers/intends to offer customers. This section provides evidence that it is technically possible, given appropriate resources, to produce or manufacture the product/service examined in the feasibility. New businesses can be founded by individuals in any industry and should have strong technical capabilities. The purpose of the feasibility is not to physically create a new product that is ready for market but to prove that such a product can be created. This may consist of providing validated drawings or designs and possibly by producing a working prototype. This feasibility analysis should cover: A comprehensive description of the product/service from a technical viewpoint. . Details of the means used to provide the product/service to customers e.g. ecommerce website, physical store, direct sales Details of the components to be used in producing the product/service and who will supply them. Details of the plant, machinery and processes involved in producing the product/service. The promoter must also stipulate details of whether the product is manufactured internally or will be manufactured using outsourcing. Information regarding whether the product/service will link to other product/service lines if an existing business, or if there is an option to offer complimentary product lines. Details relating to how the product will be packaged must also be provided in this section.
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2.1 Product/Service
Technology & Intellectual Property focuses on whether intellectual property will be created by engaging in this new venture. This is particularly relevant for software, or highly technical products. The promoter must provide details of the existence of any existing IP agreements or planned agreements along with details of any patent searches undertaken. There are several Patent Databases available to use, Espacenet is a worldwide database of published patents and patent applications. This website is free to use and search, and is administered through the European Patent Office. Other points to be addressed: Details of any patent advisors to the business. Any licensing agreements related to the product/service must be explored. Details of any costs incurred to date relating to patents. Details of the technology incorporated into the product/service. This area is particularly relevant for businesses specialising in products featuring specialised software The patents, copyrights and trademarks held by the business in relation to its product/service Details referring to the protection of trade secrets should also be referred to here External partners must also be identified in this section. These partners may be brought in to meet any gaps that the business may have in the research and development capability. If the business has secured, or intends to secure funding for R & D grants such as innovation vouchers or an Enterprise Ireland R& D growth fund must be provided here. Now that all technical issues have been discussed, this guide will now focus on what needs to be considered under the heading of Commercial Feasibility.
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B2B applications have these unique characteristics that set them apart from B2C applications -Different types of purchases and authorizations -Unique contracts, terms, and conditions for different business customers -Participation in customer's supply chain -Variety of customer sizes, demands, and requirements Fig 1.2
It is vital that the promoter(s) take advantage of any secondary research previously compiled that relates to their target market. Secondary research can often provide a solid base on which to formulate a primary research plan.
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3.2 Competition
It is vital when conducting a feasibility study to perform a detailed analysis of the business that you will be competing against directly, as well as indirectly. This will enable the business promoter to develop an understanding of the target customers needs and expectations and how these needs are being served. By studying how competitors interact with their customers, the promoter can learn a great deal. This section should include: Details of all significant direct competitors Details of any indirect competitors Your businesss advantages and disadvantages versus the competition Barriers to entry for anyone who wishes to enter the market Your businesss USP (Unique Selling Point)
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Fig 1.3
This analysis will have significant influence on business model and route to market decisions which will be discussed in section 4.2. An honest appraisal of the customer problem may require redesign or tailoring of the product configuration. The ability to tailor the product if required by customers has to be fully addressed by the Technical Feasibility. If a positive assessment is determined during the Commercial feasibility stage, the study moves on to address financial feasibility. Customer research is an important element for any feasibility study. Before this guide moves on to discussing Financial Feasibility, it will take a closer look at the importance of Market Research.
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Fig 1.4 The input to every business model is its customers. Following this, the product/service offered by the business must demonstrate a unique capability which the business has to meet a critical need of the market. The business unique capability may be comprised of valued, highly capable employees, innovative new technology specific to the firm, company structure etc. The route to market, or channel of distribution, must also feature in a business model. The agreed upon pricing model then results in the generation of revenue streams for the business.
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5.1 Team
The feasibility study must also assess the management team that will be behind the business venture. Information regarding each key individual involved in the running of the business is dealt focused on to determine if the selected individuals have the skills and qualities required to run the business venture effectively. Items to be addressed in this section would include: The background of the promoters Key profiles of management/Profiles of management to be recruited The roles and duties of each member of the management team Full CVs of the Senior Management A brief description of any non executive directors must also be provided Details of advisors and mentors to be sought by the promoters
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Terms of Reference Executive Summary Contents Page Product/Service Technology &Intellectual Property Market Environments Target Customers Competition Pricing and Business Model Financials
SWOT Analysis & Critical Risk Factors
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It is important that certain elements of the feasibility study be undertaken in sequence e.g. Technical Feasibility must be conducted before Financial Feasibility. The key element to every feasibility study is the message that is conveyed in the report. This guide examines each of these areas, and describes the basic information to be included within each section. It is always advised that the business promoter or senior decision maker is centrally involved in the conducting of the feasibility study, this is especially critical if an external marketing company has been commissioned to undertake the study. The promoter is also advised to include objective reviewers at various stages of the study to provide unbiased scrutiny. We have now dealt with what a Feasibility Study is comprised of, along with the elements to be included and the structure to be followed. This guide will now explore the Terms of Reference and Executive Summary sections of a Feasibility Study.
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Essentially, the Terms of Reference specify all aspects of the study such as the objectives, goals, scope and deliverables to be achieved. Each of these need to be agreed upon by all members of the project team. Common elements to be included in this section include: Background of Feasibility Title and Location Project Summary -Background -Methodology -Rational -Purpose -Goal(s) -Development Context Scope -General -Key Consideration -Activities Cost of Study All goals and objectives detailed in the project terms of reference must be SMART. That is to say, that each goal must be Specific, Measurable, Agreed Upon, Realistic and Timely. To see an example of a Feasibility Study Terms of Reference see Appendix 7.1.
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If a group of potential customers were interviewed or surveyed, the results of this research should be demonstrated using visual illustrations such as graphs and charts. Similarly, this section should outline the key financial assumptions and projects under numerous possible scenarios. These may also be presented on graphs or charts. The executive summary should cover no more than two pages of text. It should be set out in paragraphs of approximately equal length which follow the headings of the study and must be written after all other areas of the Feasibility Study have been completed. Now that the Terms of Reference and Executive Summary sections of a Feasibility Study have been explored, we will now focus on the four key areas of Technical, Commercial, Financial and Organisational Feasibility, detailing the information and points to be considered under each heading.
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6.5 Recommendations
Some areas where recommendations may be made would include: Product: A particular feature of the product is not popular among consumers. The feature must be changed to coincide with customers opinions. Staff: A member, or members, of the management team may not be sufficiently qualified to meet the business requirements. An alternative member must be identified. Intellectual Property: A patent on the product has not been acquired therefore the product cannot be protected against replication. The promoter must immediately apply for a patent on their product. Price: The price that the product/service is sold at is too expensive/too cheap. The promoter must revise their pricing strategy to correspond with the price that potential customers would be willing to pay. Branding: The brand does not connect with potential customers or add to the product/services credibility. In this case the promoter must review the branding with a view to getting these messages across. Supplier: The suppliers providing the components are too expensive resulting in a reduction in profits. Alternative, more cost effective suppliers must sought and approached. The business model: The current business model is ineffective. A new business model must be adopted for the business. Competition: A major competitor has been omitted. Conduct an in-depth study of this competitor immediately. Financials: Cash flow projections for the business are inaccurate. The projections need to be reviewed by a professional with a view to providing more realistic figures. Channel of distribution: The channel of distribution planned for the product/service is not ideal. The promoter needs to assess all other possible routes to market and determine which route is most suitable. Even if the business idea is found to be flawed, this does not necessarily mean that the idea should be completely abandoned. It may be possible for the promoter to alter some aspects of so that the idea can become viable. Once the feasibility study has been completed, it is the promoters decision whether or not to go ahead with the business venture.
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Financial: Talk to financial advisor. Collate financial information. Generate projections across multiple scenarios. Define the business model Organisational: Compile up to date CVs of promoters and management team. Define the duties and responsibilities of each member of the management team. Define the business organisational structure. Generate a company organisational chart. Finally: Under take a detailed SWOT analysis. Write a feasibility report to document the key findings of the study. Prepare recommendations at the conclusion of the study. On behalf of Bridgewater Management, I hope that you have enjoyed reading this Guide to Undertaking a Feasibility Study and will find it useful in the conduction of your Feasibility Study.
All reasonable care has been taken in the preparation of this brochure. No responsibility or liability is accepted by the authors, Bridgewater Management, for any errors, or omissions or misstatements it may contain, or for any loss or damage howsoever occasioned, to any person relying on any statement or omission in this brochure.
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Types of Primary Research Personal observation of consumers Personal Interviews/ Telephone Interviews Surveys Questionnaires Focus Groups Primary Research Advantages/Disadvantages
Advantages Specific information is acquired Large degree of control Direct contact with audience Results are kept private Disadvantages Expensive to conduct Time Consuming Information gathered may only be relevant for a short time period.
Secondary Research Secondary research differs from primary research in the respect that it focuses on the analysis of previously collected, second hand information compiled by another individual or group. It is the most common form of research employed in the industry today and probably, the easiest method of market research. This type of research uses information already collected to generate a conclusion relative to the task faced by the business promoter. Types of Secondary Research Published Reports Internet Libraries Databases Past Sales Data Government Statistics Secondary Research Advantages/Disadvantages
Advantages Disadvantages
Information is already collected Information is easily accessed Low Cost Minimal time is wasted
Quality of research may be poor Research may be bias Information may be outdated Research may not exactly fit your need Page | 23
Director
Training Manager
Sales Manager
Training Staff
Sales Staff
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