Marco Teórico

When one has a business to establish or to develop a new product, the right thing is to carry out a feasibility study into the viability of the idea or product or business to be selected. The feasibility study is supposed to bring out facts about the business (product) which has to be consideredbefore actual investment is made. This is very important, as any casual entry into a business may lead to monumental failure.

A feasibility study is a structured and systematic analysis of the various aspects of a proposed entrepreneurial venturedesigned to determine its workability. A well – prepared feasibility study can be an effective evaluation tool to determine whether an entrepreneurial idea is a potentially successful one. In addition the feasibility study can serve as a basis for the all – important business plan.

Importance of a Feasibility Study

A good feasibility study is carried out for one or more of the following: Reasons:-

a) Feasibility study helps to ascertain whether or not a project is worth undertaking.

b) For a business project, a feasibility report ascertains the viability, profitability and technical practicability of the proposed project.

c) Itassists business decisions in the area of investment and finances.

d) It helps an entrepreneur not only to make decision on whether to invest or not but who helps to raise capital for venture or business.

e) It also serves as an implementations guide to the project to which it relates.

f) It helps to determine the set-up and gestation periods indicating the possible time duration for a business to break even and start making profit. g) It provides a basis for prospective investors, consultant, financial analyst,

the bank or the various government agencies on which to make decision to assist the entrepreneur.

Preparation of Feasibility Studies

It is better to approach the business and management consultants or other professional in relevant fields for the preparation of feasibility study. It is very important because the final report constitutes a vital document that can influence a decision for the possible funding of a project. It therefore needs a professional touch. This not to say that the potential investor is totally free from the burden of assisting study. From past experience, it shows that if the investor is involved, at least in the collection of data, it will help him to understand more what is in the

report and then answer question arising there from. Nevertheless, the consultant will be able to put him through even If he did not participate in

preparation of the feasibility study it will show the economic desirability or value, technical feasibility, organization and manpower profitability of the project or idea.

The Contents of a Feasibility Study

The following items of information are meant as a guide on feasibility study preparation:

1. A brief description or background information of the business or project. 2. The objective of the projector business

3. The economic and social justification for the project. 4. Organization and personnel analysis

5. Technology and production consideration 6. Financial analysis

7. Marketing Analysis 8. Risk analysis

9. Legal consideration

10. Project implementation, Strategy. 11. Appendix

We can now look in more detail at each of the above.

1). A brief description or background information of the business or projects

This analysis supposed to give any reader the basic fundamental information about the project or business. Such information should include the following:

b) The location of the organization in terms of the registered address of organization, as usually required when in cooperating or registering name of the organization.

c) A brief description of the project in order to give a profile of the project. d) The nature of organization that owns the project as business whether

limited Liability Company or one-man business and whether it is engaging in production or service.

e) Strengths and weaknesses of the business.

f) Ease of entry into the industry including competitor analysis.

g) Organization chart to show the various positions in the organization.

2). The Objective of the project or business

The overall business objective will fully integrated into the various aspect of the analysis mentioned under the content. Above such as economic justification of the project, social justification, finance, marketing, legal and the whole of others. The policies and strategies in term of human resources, material, and money need to be formulated where necessary.

3). The Economic and social justification for the project:

This contains the desirability of the project as why the particular project necessary? Of what use is it to the society? Of what is the government policy on similar projects? Is it export – oriented type of enterprise that will earn the country foreign exchange? That can enhance the quality of life of the citizens and which can generate employment?

4). Organization and Personnel analysis:

The success or failure of business or project will depend upon the ability of personnel to effect the plan. Personnel planning therefore vital.This is the reason why it is always considered during this strategicstage in filling in the manpower requirement. The plan under this will focus on:

a) The organization structure to adopt.

b) What human resources to be needed based on manpower planning? c) How to secure the needed personnel

d) What training to be given to workers e) How to remunerate the workers f) Incentive package for workers.

g) Considering the resource of the organization.

5). Technology and Production Consideration:

The technical consideration and production analysis should indicate a product either is to be designed and manufactures at a reasonable cost and in a particular location. It also determines if the required facilities and technologies are available. This stage should highlight the following:

a)

Product(s) to be produces involving

i. Describing the product(s) physically, mechanically and chemically, where applicable.

ii. Uses to which the product will be put.

iii. Product analysis indicating what constitutes the product, especially from the perspective of the consumers.

b)

Manufacturing process will highlight the following:

ii). Alternative process and justification for choosing one process instead of the other.

iii) Technical assistance used and contracts needed to be awarded.

c)

Plant size and production schedule:

i). Relate annual and daily capacity pershift – showing operating days per –year and factors used to determine capacity.

ii). Expected production activities will be planned.

d)

Machinery and equipment layout – indicating floor plan.

i). Machinery and equipment indicating floor plan. ii). Specification of Machines and equipment required. iii). Plan capacity and production volume.

iv). Comparative analysis of alternative machines in terms of cost reliability.

e)

Plant Location:

i). Location map to show plant location of the site.

ii). Desirability of location in term of distance from source of raw materials or any other advantages.

iii). Comparative analysis of different locations indicating advantages and disadvantages of each.

iv). Description of plant layout.

f)

Building and Facilities: needed to carryout production process.

g)

Raw materials needed

h)

Utilities required

i. Waste disposal availability ii. Electricity, water, roads etc.