are here: Freetutes.com
Analysis and Design
A feasibility study is a preliminary study undertaken before the real work of
a project starts to ascertain the likelihood of the project's success. It is an
analysis of possible solutions to a problem and a recommendation on the best solution
to use. It involves evaluating how the solution will fit into the corporation.
It, for example, can decide whether an order processing be carried out by a new
system more efficiently than the previous one.
A feasibility study is defined as an evaluation or analysis of the potential
impact of a proposed project or program. A feasibility study is conducted to assist
decision-makers in determining whether or not to implement a particular project
or program. The feasibility study is based on extensive research on both the current
practices and the proposed project/program and its impact on the selected organization
operation. The feasibility study will contain extensive data related to financial
and operational impact and will include advantages and disadvantages of both the
current situation and the proposed plan.
Why Prepare Feasibility Studies?
Developing any new business venture is difficult. Taking a project from the
initial idea through the operational stage is a complex and time-consuming effort.
Most ideas, whether from a cooperative or invest or owned business, do not develop
into business operations. If these ideas make it to the operational stage, most
fail within the first 6 months. Before the potential members invest in a proposed
business project, they must determine if it can be economically viable and then
decide if investment advantages outweigh the risks involved.
Many cooperative business projects are quite expensive to conduct. The projects
involve operations that differ from those of the members’ individual business.
Often, cooperative businesses’ operations involve risks with which the members
are unfamiliar. The study allows groups to preview potential project outcomes
and to decide if they should continue. Although the costs of conducting a study
may seem high, they are relatively minor when compared with the total project
cost. The small initial expenditure on a feasibility study can help to protect
larger capital investments later.
Feasibility studies are useful and valid for many kinds of projects. Evaluations
of a new business venture both from new groups and established businesses, are
the most common, but not the only usage. Studies can help groups decide to expand
existing services, build or remodel facilities, change methods of operation, add
new products, or even merge with another business. A feasibility study assists
decision makers whenever they need to consider alternative development opportunities.
Feasibility studies permit planners to outline their ideas on paper before
implementing them. This can reveal errors in project design before their implementation
negatively affects the project. Applying the lessons gained from a feasibility
study can significantly lower the project costs. The study presents the risks
and returns associated with the project so the prospective members can evaluate
them. There is no "magic number" or correct rate of return a project
needs to obtain before a group decides to proceed. The acceptable level of return
and appropriate risk rate will vary for individual members depending on their
Cooperatives serve the needs and enhance the economic returns of their members,
and not outside investors, so the appropriate economic rate of return for a cooperative
project may be lower than those required by projects of investor-owned firms.
Potential members should evaluate the returns of a cooperative project to see
how it would affect the returns of all of their business operations.
The proposed project usually requires both risk capital from members and debt
capital from banks and other financiers to become operational. Lenders typically
require an objective evaluation of a project prior to investing. A feasibility
study conducted by someone without a vested interest in the project outcome can
provide this assessment.
What Is a Feasibility Study?
This analytical tool used during the project planning process shows how a business
would operate under a set of assumptions — the technology used (the facilities,
equipment, production process, etc.) and the financial aspects (capital needs,
volume, cost of goods, wages etc.). The study is the first time in a project development
process that the pieces are assembled to see if they perform together to create
a technical and economically feasible concept. The study also shows the sensitivity
of the business to changes in these basic assumptions.
Feasibility studies contain standard technical and financial components, as
discussed in more detail later in this report. The exact appearance of each study
varies. This depends on the industry studied, the critical factors for that project,
the methods chosen to conduct the study, and the budget. Emphasis can be placed
on various sections of an individual feasibility study depending upon the needs
of the group for whom the study was prepared. Most studies have multiple potential
uses, so they must be designed to serve everyone’s needs.
The feasibility study evaluates the project’s potential for success.
The perceived objectivity of the evaluation is an important factor in the credibility
placed on the study by potential investors and financiers. Also, the creation
of the study requires a strong background both in the financial and technical
aspects of the project. For these reasons, outside consultants conduct most studies.
Feasibility studies for a cooperative are similar to those for other businesses,
with one exception. Cooperative members use it to be successful in enhancing their
personal businesses, so a study conducted for a cooperative must address how the
project will impact members as individuals in addition to how it will affect the
cooperative as a whole.
The feasibility study is conducted to assist the decision-makers in making
the decision that will be in the best interest of the school food service operation.
The extensive research, conducted in a non-biased manner, will provide data upon
which to base a decision.
A feasibility study could be used to test a new working system, which could
be used because:
The current system may no longer suit its purpose,
Technological advancement may have rendered the current system redundant,
The business is expanding, allowing it to cope with extra work load,
Customers are complaining about the speed and quality of work the business
Competitors are not winning a big enough market share due to an effective integration
of a computerized system.
Although few businesses would not benefit from a computerized system at all,
the process of carrying out this feasibility study makes the purchaser/client
think carefully about how it is going to be used.
After request clarification, analyst proposes some solutions. After that for
each solution it is checked whether it is practical to implement that solution.
This is done through feasibility study. In this various aspects like whether
it is technically or economically feasible or not. So depending upon the aspect
on which feasibility is being done it can be categorized into four classes:
The outcome of the feasibility study should be very clear. It should answer
the following issues.
- Is there an alternate way to do the job in a better way?
- What is recommended?
Previous Page | Contents
| Next Page >>