Chapter 4: (cont)

Feasibility of the business idea

Lecturer : Tran Minh Thu PhD
Email: thutm@ftu.edu.vn
 Objectives
• Source of business ideas
• Lean start up
• Innovation vs Creativity
• Feasibility analysis
 Where are the business ideas
from?
• 3 Popular sources:
• - environment trend’s changes
• - unsolved problems
• - the gap in the market
 Where are the business ideas
from?
• Environment trend’s changes:
• - economic trends
• - social trends
• - technological development
• - legal and political changes
 Where are the business ideas
from?
• Unsolved problems:
• - People face a difficulty in their life and then
they find the solutions. This become a
business opportunity.
 Where are the business ideas
from?
• The gap in the market:
• -The customers want to buy some goods or
services that are not in the current market.
 Feasibility Analysis/
Process of business planning

Step 2: checking Step 3: analysing

Step 1: making
preliminary comprehensive
business idea
feasibility of idea feasibility

Step 5: Step 4: preparing

presenting the to write business
business idea plan
 Feasibility analysis of business idea

• The businessman do not shorten creative ideas but …

• If a specific idea is a based foundation to set a successful
business?
• Feasibility analysis can help us answer the question
“ Should we implement this business idea?”
 Feasibility analysis of business idea
Feasibility analysis:
•Not like a business plan
• Play a role as a filter in order to reject unfeasible ideas in
making a successful business before a businessman uses
necessary resources to implement that business plan
• Be a investigative tool
 Comprehensive feasibility analysis
Introduction:
•Enterprise’s name
• Founders’ name
•A paragraph to introduce about the enterprise
Part 1: Feasibility of goods/ services.
•Customers’ wants, needs about the goods/ services
• Customers’ demands about goods/ services
 Comprehensive feasibility analysis
Part 2: Feasibility about target market/ sector
•Sector ‘s attraction
•Target market ‘s attraction
•Opportunist of market
Part 3: Feasibility about organization
•Management skills
•Necessary resources
Part 4: Feasibility about finance
• Total initial capital
• Financial result of similar enterprises
•Financial attraction of this business plan
 Comprehensive feasibility analysis
Feasibility Unfeasible Uncertain Feasible
about
goods/services
Feasibility Unfeasible Uncertain Feasible
about
market/sector
Feasibility Unfeasible Uncertain Feasible
about
organization
Feasibility Unfeasible Uncertain Feasible
about finance

Overall Unfeasible Uncertain Feasible

evaluation
Propound the Unfeasible Uncertain Feasible
feasibility of 1
 Factors in feasibility analysis

Feasibility about
goods/services

Feasibility
Feasibility
about
about finance
market/sector

Feasibility about
organization
 Feasibility about goods/ services
• Determine the attraction of a idea about good/ service to
the target customers and collect the necessary resources
to produce it
• 2 questions:
– 1. Are the customers willing to buy our goods/
services?
– 2. Can we get profit when supplying these
goods/services?
 Feasibility about goods/ services
• Products:
– Goods/ services description
– Expected Target market
– Advantages of goods/services
– Describe how to locate the goods/services in comparison
with competitors
– Describe how to build the goods/services
– Describe the management team
 Feasibility about goods/ services
• Primary analysis:
– Collect data directly and analyze
– Examine customers and questionnaire
– Limit at some specific groups
• Secondary analysis: Take into account the collected and
analyzed data
• Sample
• Test at home
 Feasibility analysis of market/sector

we need to focus on 2 fields:

•Determine the attraction of sector to a new enterprise
•Determine the suitable market in which a small enterprise
can earn profit
Michael Porter’s five forces competition model
a. Customers
• People who consume goods/ services of the enterprise.
Customers are decisive factor for the output of products.
• Customers are:….
• Pressure of customers to the business:
✓Customers’ demands always change
✓Customers have right to bargain
✓When customers purchase a large amount of products,
they require enough supply and discount, sale off, …
✓Customers can buy the similar products from
competitors
✓The sector includes many small enterprises; and the
quantitiy of buyer is small
b. Suppliers
• Individuals or organizations that supply the input factors:
raw materials, machines, capital, labors, semi-products
or services( information, management, market research
…) for the enterprise
• The pressure depends on some following factors:
✓Products are vital
✓Lack of substitutes
✓Products are different from other suppliers
✓Lack of similar suppliers
✓Have to pay high cost to move to another supplier
c. Competitors:
• Individuals or organizations who can meet the
target customers’ demand of a enterprise with the
same goods/ services or substitutes.
• Competitors are:
✓Current competitors
➢Competitors in the same sector/ Direct
competitors
➢Competitors supply the substitute products
✓Potential competitors
c. Competitors:
• Competition among enterprises in the same sector:
✓Sector ‘s structure: quantity and scale of enterprises in
the same sector
✓Sector ‘s growth rate
✓Demand ‘s growth rate
✓Structure of fixed costs
✓Variety level of products
✓Surplus: Supply > Demand
✓High barriers to entry, low barriers to retreat
c. Competitors:
• Barriers for potential competitors:
✓Government’s policies about entering into a sector
✓High initial capital
✓Advantages because of big scale production
✓Products with a lot of differences
✓High cost to change the kind of product
✓Difficulty in finding the stable market
✓Customers’ loyalty
✓Price advantages that the competitors can not create
(monopoly technology, favorable raw material
resources )
✓Strong resistance of existing enterprises
c. Competitors:
• Competitors who supply the substitute goods/services
✓Most of substitutes are the result of technology
development
✓Pressures from substitutes restrict the potential profit
of the sector because the highest price is limited
 Feasibility about organization

• Human resources and management capability

• Necessary resources
 Feasibility about finance

• Capital: Initial capital that required to implement a

business plan
• Expected profit
• Rate of return
 Group work
• Research market
• Research legal issue
• Stating main resources
• Design a poster for your business idea
• Write a company name, logo, slogan, vision,
mission for your new company
• Think about the marketing campaign that you
may use to promote your products or services