Transcript Feasibility and Business Planning

Feasibility and Business Planning
5.1
Understand the process and value of conducting
a feasibility analysis for your business
Key Terms:
• Industry
• Target customers
• Competitive grid
• Prototype
• Business model
• Value chain
Section 5.1 Feasibility Analysis: Testing an Opportunity
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Feasibility and Business Planning
Developing a Business
Concept
You now have developed
your business concept.
What next???
Section 5.1 Feasibility Analysis: Testing an Opportunity
business concept
a clear and concise
description of a business
opportunity; it contains
four elements: the
product or service, the
customer, the benefit,
and the distribution
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Feasibility and Business Planning
Testing the Concept
in the Market
An entrepreneur can use a
feasibility analysis in
order to decide if there is
enough demand for a
product or service.
feasibility analysis
the process that tests a
business concept; it
allows the entrepreneur
to decide whether a new
business concept has
potential
Should I
proceed with
this business?
Section 5.1 Feasibility Analysis: Testing an Opportunity
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Feasibility and Business Planning
Testing the Industry
The broadest level of
feasibility analysis looks at
the industry in which the
business will operate.
industry
a group of
businesses
with a
common
interest
Section 5.1 Feasibility Analysis: Testing an Opportunity
Factors to consider:
• stability of the industry
• market trends
• patterns of change
• major players
(competition)
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Feasibility and Business Planning
Testing Product or
Service Requirements
To consider all the
requirements of a product
or service, you may opt to
create a prototype.
Section 5.1 Feasibility Analysis: Testing an Opportunity
prototype a working
model used by
entrepreneurs to
determine what it takes
to develop their products
or services
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Feasibility and Business Planning
A business can analyze its:
SWOT analysis
An assessment
of a company’s
strengths and
weaknesses and
the opportunities
and threats that
surround it;
SWOT:
strengths,
weaknesses,
opportunities,
threats.
Strengths
Weaknesses
Opportunities
Threats
in the marketplace using a process called a
SWOT analysis.
This procedure helps because it:
• prepares a company for competition or a
changing marketplace.
• provides guidance and direction for
future business strategies.
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Feasibility and Business Planning
Internal Strengths and Weaknesses
Strengths and weaknesses are internal
factors that affect a business operation.
The analysis centers around three Cs:
•Company
•Customers
•Competition
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Feasibility and Business Planning
Internal Strengths and Weaknesses
• Company
When evaluating itself, a company must
analyze these areas:
•Company staff
•Financial situation
•Production capabilities
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Feasibility and Business Planning
Talking to Customers
• Customers
The most important part of the
feasibility analysis is testing
customers to measure interest
and identify the target
customers.
Companies study customer
buying patterns using surveys
or conducting interviews with
people in their target markets.
Section 5.1 Feasibility Analysis: Testing an Opportunity
target customers
people most likely to buy
a business’s products and
services
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Feasibility and Business Planning
Studying the Competition
• Competition
A company may find that it has certain
strengths and weaknesses when compared to its
competitors. Questions that help a business to
analyze its competitive position are:
• What market share does the company have?
• What advantages does the company have
over its competitors?
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Feasibility and Business Planning
Studying the Competition
An easy way to evaluate
the competition is to create
a competitive grid.
Competitor
Customer
Benefits
Distribution
Strengths
Section 5.1 Feasibility Analysis: Testing an Opportunity
competitive grid
a tool for organizing
important information
about a business
venture’s competition
Weakness
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Feasibility and Business Planning
Competition
Companies need to know
what their competitors are
doing at all times. Changes in
other companies’ financial
situations affect the
marketplace, and conducting
a SWOT analysis helps a
business react and adjust to
these shifts.
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Feasibility and Business Planning
External Opportunities
and Threats
Businesses must always
look for opportunities to
create competitive
advantage if they are to
succeed in the
marketplace.
Marketing Essentials Chapter 2, Section 2.1
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Feasibility and Business Planning
environmental
scan
An analysis of
outside
influences that
may have an
impact on an
organization.
Environmental Scan
Often, a business will conduct an
environmental scan to methodically
examine four main areas of the
marketplace. The acronym PEST refers
to each of the four factors evaluated
in the scan:
• Political
• Economic
• Socio-cultural
• Technological
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Feasibility and Business Planning
Political
Political issues center around
government involvement in
business operations, such as:
• Laws
• Regulations
Global companies need to know
the political structure and
regulations of each foreign
country in which they conduct
business.
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Feasibility and Business Planning
Economic
Businesses are always interested in the economy because if it is
healthy, people will be more likely to invest in products and
markets. If the economy is in recession, companies need to be
more cautious in their decisions.
The economy is affected by factors such as:
• Unemployment rate
• Inflation
• Retail sales figures
• Productivity
• Consumer confidence
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Feasibility and Business Planning
Socio-Cultural
A socio-cultural analysis is based on customers
and potential customers. It focuses on their:
• Attitudes
• Lifestyles
• Opinions
And also considers:
• Age
• Income
• Occupation
• Education level
• Marital status
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Feasibility and Business Planning
Technological
Changing technology may
be a threat for one
industry, but an
opportunity for others.
Companies develop
completely new products or
capitalize on new
developments by making
products to support them.
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Feasibility and Business Planning
Looking at Start-Up
Resources
A strong business model Factors to consider:
• Purchase or lease of
is important to investors.
business model
a description of how entrepreneurs
plan to make money with their
business concepts
Section 5.1 Feasibility Analysis: Testing an Opportunity
equipment, furnishings,
and a facility
• Buying starting inventory
• Paying employees
• Product development
• Carry company expenses
until you have enough
sales to generate a positive
cash flow
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Feasibility and Business Planning
Analyzing the Value Chain
Value chain – the distribution
channel through which your
product or service flows from the
producer to the customer
The value chain can include
manufacturers, distributors and
retailers.
Section 5.1 Feasibility Analysis: Testing an Opportunity
Entrepreneurs can create
a competitive advantage
by looking for ways to
make the value chain
more efficient.
The goal is to deliver
maximum value at the
least possible cost.
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