FEASIBILITY STUDY

Notes prepared by: - Prof. Rohit Kumar

Assistant Professor, IIBM Patna
 What is Feasibility Study
Definition:
A feasibility study is an evaluation and analysis of the
potential of the proposed project which is based on
extensive investigation and research to support the process
of decision making.

Aim:
Feasibility studies aim to objectively and rationally uncover
the strengths and weaknesses of an existing business or
proposed venture, opportunities and threats present in the
environment, the resources required to carry through, and
ultimately the prospects for success.

Notes prepared by: - Prof. Rohit Kumar

Assistant Professor, IIBM Patna
 Distinction between Pre-feasibility and
Feasibility studies
Pre-Feasibility Study - Preliminary assessment of project viability
that usually takes place in the Identification stage of the
project cycle. Pre-feasibility studies generally cover the same
subjects as feasibility studies, but do so in much less detail.

The distinction can be on following seven grounds:

1. MEANING
2. OBJECTIVE INVOLVED
3. SCOPE OR SPAN
4. THE TYPE OF RESEARCH INVOLVED
5. THE TIME SPAN INVOLVED
6. COSTS INVOLVED
7. THE ACCURACY OF THE INFORMATION

Notes prepared by: - Prof. Rohit Kumar

Assistant Professor, IIBM Patna
 Distinction between Pre-feasibility
and Feasibility studies
• MEANING
‘Pre-feasibility studies are the studies undertaken by the business
house prior to feasibility studies. These can be called as ‘mini’ or
‘trial’ feasibility studies. That is, it is the starting step in project
planning. As opposed to these, ‘feasibility studies’ are the most
complex types of test which a project is to survive in the final
analysis. It may so happen that a project manager thinks that the
projects are good. However, how good they are based on the
strongest and stringent tests of cold facts where a project is to
withstand can be assessed after a detailed feasibility study. Then
only it is passed for further planning and implementation.

Notes prepared by: - Prof. Rohit Kumar

Assistant Professor, IIBM Patna
 Distinction between Pre-feasibility
and Feasibility studies
• OBJECTIVE INVOLVED
In case of ‘pre-feasibility’ studies, the basic objective is to
determine whether or not the project idea needs further
investigation. As against this, in case of ‘feasibility studies’ the aim
is to determine the true profitability of the project and take
decision on going ahead with the project or not.

• SCOPE OR SPAN
Speaking from the scope or coverage point of view, a pre-feasibility
study reveals an overview of the project proposal through
prefeasibility reports which may have to be silver tongued
whenever called for. As opposed to this, the feasibility documents
cover maximum of the project proposal to facilitate the decision
making of going ahead or not. It is the feasibility report of the
project that acts as the base key decisions.

Notes prepared by: - Prof. Rohit Kumar

Assistant Professor, IIBM Patna
 Distinction between Pre-feasibility
and Feasibility studies
• THE TYPE OF RESEARCH INVOLVED
In case of pre-feasibility studies, a fine combination of the secondary and
primary research methods is used. Mostly, secondary type of information
is obtained and surveys are conducted through informal sources to get the
information. Contrary to this, in case of feasibility studies, all types of
research methods are employed. Basically, primary researches having
formal and informal networks are flushed to obtain the full information on
the project.

• THE TIME SPAN INVOLVED

In case of pre-feasibility studies, as it is a trial attempt, relatively shorter
duration efforts are put in. these efforts can range between one month to
three months depending on the size of the project. Contrary to this, in
case of feasibility studies, as collection of adequate, authentic, update
information is the basic input, much more time is needed. The general
span of time is six months to two years depending on the nature of
proposed project.
Notes prepared by: - Prof. Rohit Kumar
Assistant Professor, IIBM Patna
 Distinction between Pre-feasibility
and Feasibility studies
• COSTS INVOLVED
In case of pre-feasibility studies, the cost involved is less. It normally
ranges between 0.25 percent to 3 percent of the total cost of the project.
The cost involved in conducting detailed feasibility studies is much higher
compared to this. They generally range between 3 to 5 percent of total
project cost in case of small and medium projects and 3 to 10 percent in
case of big projects.

• THE ACCURACY OF THE INFORMATION

The accuracy of the information plays significant role in taking vital
decisions. In case of pre-feasibility studies, the degree of accuracy is to the
tune of 60 to 70 percent. As opposed to this, in case of feasibility studies,
much weightage is given to the point of accuracy. It is because accurate
results are outcome of accurate information collected and analyzed.
Hence accuracy rate ranges between 90 to 100 percent.

Notes prepared by: - Prof. Rohit Kumar

Assistant Professor, IIBM Patna