MGT 601 Assignment 2020

Mr. Ahmed should do online business because of following reasons:

1. He has not enough finance to setup traditional business.
2. Secondly, he is computer geek.
Because his education is MBA and has 15 years of management and IT experience. He has good
grip on management and also have knowledge about IT so he can manage well and his financial
resources also limited so he can easily start online business.
1. Technical Feasibility:
Its identify the critical technical specification comprising. This function designs
of the products, adoptability to the new customer demand and durability. The reliability of the
performance is safety, reasonable utility, and standardization.
Examination of product quality-cost relationship:
In making this investigation, the entrepreneur must understand that there are
tradeoffs between technical excellence and associated cost i.e. a positive relationship exists
between technical quality and costs. It is possible through an increase in the technical excellence
of a product to that level at which marginal product quality equals marginal cost. This level is
reached where slope of product quality and product cost curves are equal.

Quality enhancement should not be carried beyond a particular point because it would cause cost
increase and lead to decrease in total market demand (except where the product has a snob
value). Thus, entrepreneur should avoid unnecessary gold plating when market situation does not
justifies it.

2. Market Feasibility:
The following process can be adopted to assure the market opportunities of a product.
I. Identifying the Market Potential
It involves an estimation of both the current demand of the product and
Projection of future market trends. The prospective entrepreneur will do well to identify (a)
specific end users, (b) major market segments, and (c) potential volume of purchases within each
market segment. Some statistical yardstick may be of quite help in accomplishing this work. To
illustrate, a potential manufacturer of helmets may find out the annual production of two
wheelers, percentage of helmet users and proportion of demand already met.
II. Estimating Cost-volume Relationship to ascertain how various price levels may
affect total sales volume
The price must reflect the value of the product. The entrepreneur may not adopt a uniform price
structure to take care of the sensitivity of the buyer to price changes. The cost-volume analysis
would also facilitate the determination of appropriate economies of scales i.e. optimum size of
enterprise, which has lowest average per unit cost of production and distribution.
 III.Sources of Market Information.
Relevant data for market analysis can be gathered from two main sources viz (a) primary sources
such as interviews, mailed questionnaire, survey etc and (b) secondary sources like government
agencies, trade unions, chambers of commerce etc. Whereas the former is costly, the latter may
not meet the requirements of the entrepreneur.

3. Financial Feasibility

The financial feasibility of the given scenario that he can use their on hand resources to utilize
the business. The estimation, provision must be made for cost escalation that is inevitable due to
price changes. Besides, appropriate sales forecasts should also be made to have a clear picture of
expenditure. The projection could be weekly or monthly.

Financial resources and other costs;

The Financial resources are categorized based on periodicity he can use short term resources
like trade credit supplies, short terms loan from bank and other institutions. Ahmed can manage
their work in these recourse and he can extend their business by this way.

Term Loans: Intermediate term loans are those available for one to three (sometimes five)
years. It includes terms loans from banks, lease finance, financial assistance from institutions etc.

Long-term loans are those from banks, equity capital and investments of earnings. While
considering different sources, it is better to consider specific costs as well as advantages and
disadvantages of each.

Anticipated return on investment

Financial feasibility is adjudged based on satisfactory yield on investment. It can be calculated

by relating the average earnings expected over a given period to either the total amount of
investment or net worth of organization (Return on equity). Both are compared with potential
yield from alternative investment opportunities to ascertain the acceptability or otherwise of a
new venture.