Introduction to Feasibility Analyses Modified from Barringer and
Introduction to Feasibility Analyses Modified from Barringer and Ireland (2006)
What Is Feasibility Analysis? l Feasibility Analysis – Preliminary evaluation of idea to determining if it’s worth pursuing – Provides more secure notion that a business idea is viable l Did analysis, feasible business: Intuit (Quicken, Quickbooks, etc. ) – l l Personal experience, observed others, surveyed customers Did analysis, not feasible: Retailing Insights (grocery cart) – Determined not a sufficient scale for advertising, needed large proportion of grocery stores – Dropped idea, focused on core competency, developed Trakus No analysis, failed firm: Iridium (satellite phones) – Too complex technology, too long to develop, new technology took over, line of sight to satellite, large phone, low battery power
Prior to Feasibility Analysis Prepare a Concept Statement l Concept Statement – – One page description of a business (not just the offering) that includes l Description of the product or service l Description of target market l Benefits of the product or service (value proposition) l Description of product/service differentiators l Description of how product/service sold/distributed l Description of the founder(s) of the firm Given to people who provide feedback on the potential of the idea l Give sense of the viability of the business idea l Suggestions for how the idea can be strengthened or altered before proceeding
When To Conduct a Feasibility Analysis l l Timing of Feasibility Analysis – After concept statement evaluation – After opportunity recognition, before business plan – Before a lot of resources are invested Four Components of Full Feasibility Analysis – Product/Service Feasibility – Industry/Market Feasibility – Organizational Feasibility – Financial Feasibility (covered in Dr. Janney’s class) Must pass all feasibility analyses to proceed to full business plan development
Component 1: Product/Service Feasibility l Product/Service Feasibility Analysis – – l 3 reasons to conduct 1. 2. 3. l Assessment of overall appeal of proposed product/service Main idea: before rushing to development, be sure product/service is what prospective customers want Validate underlying premises of product/service idea Help developing idea Estimate potential market share 5 benefits 1. 2. 3. 4. 5. Getting product right the first time Create a beta (or early adopter community) Avoid obvious flaws in product/service design (e. g. , Mobile. Star wireless “hotspots”) Use time and resources more efficiently Potentially identify complementary product/ service offerings (e. g. , i. Pod accessories)
Component 1: Product/Service Feasibility l Two components of product/service feasibility analysis: 1. Concept testing l l Purpose: Gauge customer interest, desirability, purchase intentions, technical feasibility Involves showing a representation of product/service to prospective users and industry experts Occurs before the prototype stage – Websites and graphic designs are taking this to a new level – l 2. Concept test ≠ concept statement Usability testing l Purpose: determine ease-of-use and user’s perceptions of using product Iterative process that involves creating a physical prototype (basic, elaborate, or hybrid prototypes) and giving it to users, measuring usage results, and making modifications as necessary – Also called: user tests, beta tests, or field trials – l Example (elaborate prototype): http: //scholar. google. com
Component 2: Industry, Competitive, & Market Feasibility Analysis l Industry/Market Feasibility Analysis – Purpose: assess overall appeal of the industry and market – 3 primary issues to consider: 1. Industry attractiveness: attractive industry characteristics include but are not limited to—is the industry large and growing? Is the industry important to consumers (e. g. , needs vs. wants)? Stage of the industry life cycle? Industry not crowded with competitors? 2. Market timeliness: asks if the market will be receptive to the product/service—is the Wo. O open? What do trends in the external environment impact us? Are customers buying? Are competitors making money? Can we gain a first- or second-mover advantage? 3. Identification of market to be served: Are we competing in a niche market —a place in a larger market segment that represents narrower groups of customers—or within a larger segment of the industry? Determines the scope of our competitors and how we will serve our market.
Component 3: Organizational Feasibility Analysis l Organizational Feasibility Analysis – Purpose: determine if business has sufficient skills/resources to bring product/service to market successfully – 3 primary issues to consider: 1. Appropriateness of the Business Model (e. g. , fundamental logic underlying firm) 2. Management prowess and human resource needs: must evaluate the ability of the management team to determine if the firm has or is able to recruit human resources with the required areas of expertise 3. Resource sufficiency: must assess adequacy of resources necessary for successfully venture launch, development, and competition
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