Feasibility studies

Feasibility Studies

By Prof. Mohammed I. Migdad
Feb. 2013

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A course for a master
degree of economic
development

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An important work in project
evaluation in developing
countries

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Manual for OECD. 1
 Manual of industrial project analysis

For
Little & Mirrlees 1969 & 1974
 Project appraisal and planning for developing countries ,

For
Little & Mirrlees 1982

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Manual for UNIDO. 2
 UNIDO guideline for project evaluation in 1972.
 Manual for the preparation of the industrial feasibility

studies UNIDO 1991. including: Computer model for
feasibility analysis and reporting (CMFAR III Expert) in 1995.
 Guide to practical project appraisal: social benefit-cost
analysis in developing countries

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World Bank Guidelines. 3
 World Bank Guidelines in 1975.
 Economic analysis of projects

by: Squire, L & Van Der Tak 1984.

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business success
 Establishing a feasibility study of projects is a

critical factor in business success.
 Many factors can be involved and invariably luck can

and probably will play a hand.

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Key factor
 A key factor in any feasibility study must be ensuring

that you are dealing with correct facts, correct
assumption, and up to date financial data.

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Countless feasibility studies
 Any project which have passed a countless

feasibility studies, have been sunk by unexpected
events such as flood.
 Many projects fail because of incorrect assumptions

or because assumptions were based on incorrect
facts.

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Preliminary investigation
 When complex problems or opportunities are to be

defined, it is generally desirable to conduct a
preliminary investigation called a feasibility study.
 The primary objectives of the feasibility study is to

assess three types of feasibility

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Types of feasibility Study
1. Technical feasibility
can a solution be supported with the existing technology or
not?
2. Economic feasibility
is the existing technology cost effective?
3. Operational feasibility
Will the solution work in the organization if implemented?

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The Components of a
Feasibility Study
1. Description of the Business: The product or services to be

offered and how they will be delivered.
2. Market Feasibility: Includes a description of the industry, current
market, anticipated future market potential, competition, sales
projections, potential buyers, etc.

3. Technical Feasibility: Details how you will deliver a product or
service (i.e., materials, labor, transportation, where your
business will be located, technology needed, etc.).

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continue
4.
5.

6.

Financial Feasibility: Projects how much start-up capital is
needed, sources of capital, returns on investment, etc.
Organizational Feasibility: Defines the legal and corporate
structure of the business (may also include professional
background information about the founders and what skills they
can contribute to the business).
Conclusions: Discusses how the business can succeed. Be
honest in your assessment because investors won’t just look at
your conclusions they will also look at the data and will question
your conclusions if they are unrealistic.

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Feasibility Study
 A Feasibility Study is the analysis of a problem to

determine if it can be solved effectively.
 The results determine whether the solution should

be implemented.
 This activity takes place during the project initiation

phase and is made before significant expenses are
engaged.

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Definition of Feasibility
Studies
 A feasibility study is an evaluation of a proposal

designed to determine the difficulty in carrying out a
designated task. Generally, a feasibility study
precedes technical development and project
implementation.

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Definition of Feasibility
Studies
 A feasibility study looks at the viability of an idea

with an emphasis on identifying potential problems
and attempts to answer one main question: Will the

idea work and should you proceed with it?

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Objective
 The feasibility study answers the basic questions: is

it realistic to address the problem or the opportunity
under consideration?
 And it produce a final proposal for the management,

this final report might includes:

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Feasibility includes
1.
2.
3.
4.
5.
6.
7.
8.
9.

Project name
Problem or opportunity definition

Project description
Expected benefit
Consequence of rejection
Resource requirements
alternatives
Other consideration
Theorization
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Five common factors
(TELOS)
1.

Technology and system feasibility

2.

Economic feasibility

3.

Legal feasibility

4.

Operational feasibility

5.

Schedule feasibility

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1. Technology and system
feasibility
 The assessment is based on an outline

design of system requirements in terms of
Input, Processes, Output, Fields, Programs,
and Procedures. This can be quantified in
terms of volumes of data, trends, frequency
of updating, etc. in order to estimate
whether the new system will perform
adequately or not this means that feasibility
is the study of the based in outline.
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2. Economic feasibility
 Economic analysis is the most frequently used method

for evaluating the effectiveness of a new system. More
commonly known as cost/benefit analysis, the
procedure is to determine the benefits and savings that
are expected from a candidate system and compare
them with costs. If benefits outweigh costs, then the
decision is made to design and implement the system.
An entrepreneur must accurately weigh the cost versus

benefits before taking an action. Time Based: Contrast
to the manual system management can generate any
report just by single click .
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Legal feasibility. 3
 Determines whether the proposed system conflicts

with legal requirements, e.g. a data processing
system must comply with the local Data Protection
Acts.

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4. Operational feasibility
 Is a measure of how well a proposed system solves

the problems, and takes advantages of the
opportunities identified during scope definition and
how it satisfies the requirements identified in the
requirements analysis phase of system development.
[1]

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5.schedule feasibility
 A project will fail if it takes too long to be completed before it

is useful. Typically this means estimating how long the
system will take to develop, and if it can be completed in a
given time period using some methods like payback period.
Schedule feasibility is a measure of how reasonable the
project timetable is. Given our technical expertise, are the
project deadlines reasonable? Some projects are initiated
with specific deadlines. You need to determine whether the
deadlines are mandatory or desirable.

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Other feasibility factors
 Market and real estate feasibility
 Resource feasibility
 Cultural feasibility

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