ENTREPRENURESHIP AND LEGAL ASPECTS

Course Code: 21MBA206

Mr Ananth Alias Rohith Bhat P

Assistant Professor
St Joseph Engineering College
Vamanjoor, Managalore-575028

ANANTH ROHITH
MODULE 2: DEVELOPING BUSINESS MODEL

IMPORTANCE OF BUSINES PLANNING

BUSINESS MODEL PROCESS

• Starting a small
• Meaning of business plan
scale industry • Business plan process
• Components of an • AdvantageS of business plan
effective business • Final project report with
model feasible study
• Osterwalder • Preparing model project
• Report for starting a new
business model venture
canvas

ANANTH ROHITH
MODULE 2: DEVELOPING BUSINESS MODEL

BUSINESS MODEL
Peter Drucker
"Business model is supposed to answer who your
customer is, what value you can create/add for the
customer and how you can do that a, reasonable costs".
⮚ Business Model is a conceptual structure that supports the viability of a
product or company
⮚ It explains how the company operates, makes money, and how it intends to
achieve its goals.

Internal Constitution External Alignment

ANANTH ROHITH
 BUSINESS MODEL
FEASABILITY
0 WHAT ARE YOU CREATING ?

1 CAN YOU CREATE SOMETHING

THAT CUSTOMERS WANT TO
BUY?

DESIRABILITY
02 WHO ARE YOU GO TO MARKET
AND SELL IT TO? WHY WILL
THEY WANT TO BUY IT?

VIABILITY
03 HOW MUCH DOES IT COST TO
PRODUCE AND MARKET AND
HOW MUCH WILL WE MAKE – IS
IT PROFITABLE?

ANANTH ROHITH
MODULE 2: DEVELOPING BUSINESS MODEL

IMPORTANCE OF BUSINESS MODEL

1 Helps to influence both technology and its market value.

2 Develops a new framework in the organizations

3 Deliver the way of executing the planning of further operation

4 Helps in the efficient and effective working of business firms.

ANANTH ROHITH
 Manufacturer
Low Touch Distributor
High Touch Retailer

SAAS, IAAS, Franchise

PAAS
Blockchain Brick-and-mortar

Peer 2 Peer Platform E-Commerce

TYPES
OF BUSINESS
Crowdsourci Bricks-and-clicks
ng MODELS
Network Nickel-and-dime
Marketing
Dropshippi Freemium
ng
Affiliate Marketing
Subscription
Agency- Aggregator
Based
Data Licencing/Data Selling Online
AdvertisementMarketplace
ANANTH ROHITH
MODULE 2: DEVELOPING BUSINESS MODEL

SMALL SCALE INDUSTRIES

Small businesses are normally privately owned corporations,
partnerships, or sole proprietorships , which constitutes small in
terms of government support and tax policy varies depending on the
country and industry.

An industrial undertaking in which the investment in fixed assets in

plant and machinery whether held on ownership terms on lease or
on hire purchase does not exceed Rs.10 million

ACCORDING TO SSI BOARD- “A unit employing less than 50 persons

if power and less than 100 persons without the use of power and
with a capital investment rupees 5 lakh”

ANANTH ROHITH
MODULE 2: DEVELOPING BUSINESS MODEL

1 Labour Intensive Balanced Economic 7

Growth

2 Flexibility Profit Motive 8

3 One-man Show CHARACTERISTICS Balanced regional 9

OF development
SMALL SCALE
4
Use of indigenous raw INDUSTRIES Innovative 10
materials
Employment Opportunities
5 Localised Operation In Rural Areas
11

6 Lesser gestation Outlet for Expression 12

period
ANANTH ROHITH
MODULE 2: DEVELOPING BUSINESS MODEL

OBJECTIVES OF SMALL SCALE INDUSTRIES

LARGE SCALE EMPLOYMENT
1
OPPORTUNITIES
EQUITABLE DISTRIBUTION OF
8
NATIONAL INCOME
ELIMINATE ECONOMIC
2
BACKWARDNESS
UTILISATION OF UNEXPLOITED
9
BALANCED REGIONAL RESOURCES
3
DEVELOPMENT
MOBILISE MORE CAPITAL
10
RESOURCES AND SKILL
4 STANDARD OF LIVING OF PEOPLE

11 ADOPT LATEST TECHNILOGY

5 ATTAIN SELF RELIANCE
TO PROVIDE SUBSTITUTE FOR
12
INDUSTRIAL PRODUCTS
6 MOBILISE FINANCIAL RESOURCES
MEET ECONOMIC REQUIREMENTS
13
MOBILISE MORE CAPITAL OF CONSUMER GOODS
7 RESOURCES ANANTH ROHITH
ADVANTAGES OF SMALL SCALE INDUSTRIES

01 CLOSE 06
DIRECT RELATION B/W
SUPERVISION CUSTOMERS & PRODUCERS

02 NATURE OF 07 EASY
DEMAND MANAGEMENT

03 MORE 08 FREEDOM OF
EMPLOYMENT WORK

NEED OF EXTERNAL
04 09
SMALL CAPITAL ECONOMIES

05 DIRECT RELATION B/W 10 LESS POSSIBILITIES OF

WORKERS & EMPLOYERS STRIKE AND LOCKOUTS
 DISADVANTAGES OF SMALL SCALE INDUSTRIES
01 06
Difficult to face Economic
High cost of Production
Crisis
02 07
Wastage of by-products Costly Raw Materials

03 08
Lack of Standardised
Less use of Machines
Goods
04 09
Lack of Division of
Old Techniques
Labour

05 10
Difficulty in getting Loans Lack of Research
 ROLE OF SMALL SCALE INDUSTRIES
The basic problem that is confronting the Indian economy is increasing
pressure of population on the land and the need to create massive employment

01 EMPLOYMENT
GENERATION
opportunities. This problem is solved to a large extent by small-scale industries
because small-scale industries are labour intensive in character. They generate
huge number of employment opportunities. Employment generation by this sector
has shown a phenomenal growth It is a powerful tool of job creation.
Small-scale industries can mobilize a good amount of savings and
entrepreneurial skill from rural and semi-urban areas which remain
untouched from the clutches of large industries and put them into
MOBILISATION OF RESOURCES
02& ENTREPRENEURIAL SKILL
productive use by investing in small-scale units. Small entrepreneurs
also Improve social welfare of the country by harnessing dormant
previously overlooked talent.

Small entrepreneurs stimulate redistribution of wealth, income and political

power within societies in ways that are economically positive and without
EQUITABLE being politically disruptive. Thus small-scale industries ensures equitable
03 DISTRIBUTION OF
INCOME
distribution of income and wealth in the Indian society which is largely
characterised by more concentration of income and wealth in the organised
sector keeping the unorganised sector undeveloped. This is mainly due to the
fact that small industries are widespread as compared to large industries and
are having large employment potential.
04 REGIONAL
DISPERSAL OF
INDIUSTRIES

small-scale industries have tremendous capacity to generate or

05 PROVIDES
OPPORTUNITIES FOR absorb innovations. They provide ample opportunities for the
DEVELOPMENT OF development of technology and technology in return, creates an
TECHNOLOGY
environment conducive to the development of small scale units. The
entrepreneurs of small scale units play a strategic role in
commercialising new inventions and products. It also facilitates the
transfer of technology from one to the other. As a result, the economy
reaps the benefit of improved technology
Small-scale industries make better use of indigenous
organisational and management capabilities by drawing on a pool of
06 INDEGNIZATION entrepreneurial talent that is limited in the early stages of economic
development. They provide productive outlets for the enterprising
independent people. They also provide a seed bed for
entrepreneurial talent and a testing ground for new ventures.
 ROLE OF SMALL SCALE INDUSTRIES
Small-scale industries can promote exports by focusing on producing high-
quality and innovative products. They should conduct thorough market
07 PROMOTES
EXPORTS
research to identify potential markets, utilize government incentives and
support, and participate in international trade fairs. Online platforms and e-
commerce can help them reach a global audience, while building strong
relationships with distributors and adhering to export regulations is crucial.
Customized marketing and sustainable practices can further enhance their
competitiveness in international markets.

Small-scale industries play an important role in assisting bigger industries

08 SUPPORTS THE
GROWTH OF LARGE
and projects so that the planned activity of developmental work is facilitated.
They support the growth of large scale industries by providing components,
SCALE INDUSTRIES
accessories and semi finished goods required by them. In fact, small
industries can bring vitality into the life of large scale industries.

Better industrial relations between the employer and employees help in

increasing the efficiency of employees and reducing the frequency of

09 BETTER INDUSTRIAL
RELATIONS
industrial disputes. The loss of production and man-days are comparatively
less in small- scale industries. There are hardly any strikes and lockouts in
these industries due to good employee-employer relationship.
 COMPONENTS OF AN EFFECTIVE BUSINESS MODEL
HIGH-LEVEL VISION PRICING
A basic description of your business model How you will package your solution and
two or three that your true north. what it will cost.

KEY OBJECTIVES MESSAGING

The top goals and how you plan to measure A clear and compelling message that
them. explains why your solution is worth buying

CUSTOMER TARGETS AND CHALLENGES GO-TO-MARKET

The types of customers who will purchase The channels that you will use to market
your along with their exact pain points. and sell to your customers

SOLUTION INVESTMENT REQUIRED

The primary way that you solve your customer's The costs required to make the solution a
problems. success.

VALUE GROWTH OPPORTUNITY

The core elements of your solution that make it The ways that you will grow the business,
unique and differentiated (and ultimately valuable). including key partnersmcs if you need them.
 OSTERWALDER BUSINESS MODEL CANVAS

⮚ The canvas was invented by Alex Osterwalder, a

Swiss business theorist and entrepreneur as a
part of his PhD research.

⮚ The Business Model Canvas was elaborated in a

book called Business Model Generation co-
authored with his graduate supervisor Yves
Pigneur, a Belgian computer scientist
 OSTERWALDER BUSINESS MODEL CANVAS
CUSTOMER CUSTOMER
KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS
RELATIONSHIPS SEGMENTS

CUSTOMER
KEY RESOURCES
CHANNELS

COST STRUCTURES REVENUE STREAMS

 OSTERWALDER BUSINESS MODEL CANVAS
CUSTOMER CUSTOMER
KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITIONS
RELATIONSHIPS SEGMENTS

CUSTOMER
KEY RESOURCES
CHANNELS

COST STRUCTURES REVENUE STREAMS

Key Partners
Key partners are the external companies or suppliers that will help you carry out
your key activities. These partnerships are forged in order to reduce risks and
acquire resources.

There are usually three reasons for creating a partnership:

✔ Economies of scale.
✔ Reduction of risk and uncertainty.
✔ Acquisition of resources or activities (e.g. music for Spotify).

Types of partnerships are

✔ Strategic alliance: Partnership between non-competitors
✔ Coopetition: Strategic partnership between partners
✔ Joint ventures: Partners developing a new business
✔ Buyer-supplier relationships: Ensure reliable supplies
Key Activities
What are the activities/ tasks that need to be completed to fulfil your business purpose?
In this section, you should list down all the key activities you need to do to make your business model
work.

These key activities should focus on fulfilling its value proposition, reaching customer segments and
maintaining customer relationships, and generating revenue.

There are 3 categories of key activities

⮚ Production: designing, manufacturing and delivering a product in significant
quantities and/ or of superior quality.
⮚ Problem-solving: finding new solutions to individual problems faced by
customers.
⮚ Platform/ network: Creating and maintaining platforms. For example, Microsoft
provides a reliable operating system to support third-party software products.
Key Resources
This is where you list down which key resources or the main inputs you need
to carry out your key activities in order to create your value proposition.

There are several types of key resources and they are

✔ Human (employees)
✔ Financial (cash, lines of credit, etc.)
✔ Intellectual (brand, patents, IP, copyright)
✔ Physical (equipment, inventory, buildings)
Value propositions
This is the building block that is at the heart of the business model canvas and it represents your unique
solution (product or service) for a problem faced by a customer segment, or that creates value for the
customer segment.
A value proposition should be unique or should be different from that of your competitors. If you are
offering a new product, it should be innovative and disruptive. And if you are offering a product that
already exists in the market, it should stand out with new features and attributes.
Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience
or design).
Some of the most common value propositions are:
∙ Newness.
∙ High performance.
∙ Ability to customize.
∙ Design.
∙ Brand/Status.
∙ Price.
∙ Cost reduction.
∙ Risk reduction.
∙ Convenience.
Customer relationships
In this section, you need to establish the type of relationship you will have with each of your
customer segments or how you will interact with them throughout their journey with your
company.

There are several types of customer relationships

⮚ Personal assistance: you interact with the customer in person or by email, through phone call or other means.

⮚ Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.

⮚ Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help
themselves.

⮚ Automated services: this includes automated processes or machinery that helps customers perform services
themselves.

⮚ Communities: these include online communities where customers can help each other solve their own problems
with regard to the product or service.

⮚ Co-creation: here the company allows the customer to get involved in the designing or development of the
product. For example, YouTube has given its users the opportunity to create content for its audience.
Channels
This block is to describe how your company will communicate with and reach out to
your customers. Channels are the touchpoints that let your customers connect with
your company.

Channels play a role in raising awareness of your product or service among customers
and delivering your value propositions to them. Channels can also be used to allow
customers the avenue to buy products or services and offer post-purchase support.

There are two types of channels

⮚ Owned channels: company website, social media sites, in-house sales, etc.
⮚ Partner channels: partner-owned websites, wholesale distribution, retail, etc.
Customer segments
These are the groups of people or companies that you are trying to target and sell
your product or service to.

Segmenting your customers based on similarities such as geographical area,

gender, age, behaviors, interests, etc. gives you the opportunity to better serve
their needs, specifically by customizing the solution you are providing them.

After a thorough analysis of your customer segments, you can determine who you
should serve and ignore. Then create customer personas for each of the selected
customer segments
Cost structure
In this block, you identify all the costs associated with operating your business
model.

You’ll need to focus on evaluating the cost of creating and delivering your value
propositions, creating revenue streams, and maintaining customer relationships.
And this will be easier to do so once you have defined your key resources,
activities, and partners.

Businesses can either be cost-driven (focuses on minimizing costs whenever

possible) and value-driven (focuses on providing maximum value to the
customer).
Revenue streams
Revenues streams are the sources from which a company generates
money by selling their product or service to the customers. And in
this block, you should describe how you will earn revenue from your
value propositions.

A revenue stream can belong to one of the following revenue models,

⮚ Transaction-based revenue: made from customers who make a

one-time payment
⮚ Recurring revenue: made from ongoing payments for continuing
services or post-sale services
There are several ways you can generate revenue from
⮚ Asset sales: by selling the rights of ownership for a product to a buyer
⮚ Usage fee: by charging the customer for the use of its product or service
⮚ Subscription fee: by charging the customer for using its product
regularly and consistently
⮚ Lending/ leasing/ renting: the customer pays to get exclusive rights to
use an asset for a fixed period of time
⮚ Licensing: customer pays to get permission to use the company’s
intellectual property
⮚ Brokerage fees: revenue generated by acting as an intermediary
between two or more parties
⮚ Advertising: by charging the customer to advertise a product, service or
brand using company platforms
Example 1: Google
The first thing you should know about Google’s business model is that it is
multi-sided. This means that it brings together two distinct but related
customers.

In Google’s case, its customers are its search users and its advertisers. The
platform is only of interest to advertisers because search users are also
present. Conversely, search users would not be able to use the platform free
of charge were it not for advertisers.
Example 1: GOOGLE
Example 2: Skype
Example 3: Gillette
 BUSINESS PLAN
• A Business Plan is a written document prepared by the entrepreneur that describes
all the relevant external and internal elements involved in starting a new venture.

• It is often an integration of functional plans such as marketing, finance, manufacturing

and human resources.

• A business plan is valuable to the entrepreneur, potential investors or even new

personnel who are trying to familiarize themselves with the venture, its goals and
objectives.

• The business plan serves as a roadmap to reach the destination determined by the
entrepreneur.
ADVANTAGES OF BUSINESS PLANNING
1. Analysis of ideas on a piece of paper
2. Help in convincing others.
3. Reduction in emotional bias.
4. Provide SWOT analysis
5. Justify one’s ideas/plans
6. Develop consistent strategy
7. Achieve one’s commitment.

DISADVANTAGE OF BUSINESS PLANNING

1. Discouragement
2. Cutting corners
3. Time
4. Tunnel vision
5. Expense
 BUSINESS PLAN FORMAT/CONTENTS
It is the starting point of the business Pricing policy, promotion policy, field
plan. It gives brief and quick information
The executive Marketing support, technology adopted, intellectual
1 summary strategy 8
of who you are and what the business is property rights.
all about
Physical facilities, key suppliers,
Name of the business, its location, its Description of Product/ labour/employee situation.
goals and the strategies adopted
2 9
the business Operations manufacturing processes.
plan
Describes the nature of product/service
offered, the target market being served 3 Product/servic Ownership 10 Names, addresses of owners
e
and the customer demand situation,

Form and type of organization and its 4 Management Key personnel 11 Duties, responsibilities, job descriptions
culture

Purpose of financing and financial Financial Accounting Accounting methods, record keeping
history of the business
5 records 12 systems.
requirements
Responsibility and authority, Balance sheet, income statement, cash
organization chart describing the level 6 Organisation Financial flow, projections, sources and uses of
and status of each executive, legal
13
description Information funds.
structure.
Industry size, market share analysis, Catalogs, sales brochures, public relations
principal markets, factors affecting 7 Industry Appendices 14 material, customer lists, transacting banks,
industry, customer tastes and terms of loan, market research data,
preferences, nature of competition, reference letters etc
competitor's strengths and weaknesses
 FINANCIAL PLAN
Before preparing the business plan, the entrepreneur must have a complete evaluation of the profitability of the venture.
The assessment will primarily tell potential investors if the business be profitable, how much money will be needed to
launch the business and meet short term financial needs and how this money will be obtained (E.g.: stock or debt).

EXPECTED SALES AND CURRENT BALANCE SHEET

01 EXPENSE FIGURES FOR AT 02 CASH FLOW FIGURES FOR

LEAST THE FIRST THREE
YEARS
Determination of the expected
sales and expense figures for
each of the first twelve months
and each subsequent year is
based on the market
information. Each item of
expense should be clearly
identified
THE FIRST THREE YEARS
Estimates of cash flow
consider the ability of the new
venture to meet expenses at the
designated time of the year. The
forecasted cash flow should
identify cash at the beginning,
expected accounts receivable
and other receipts & all
payments on a monthly basis for
the entire year.
03 FIGURES AND PROFORMA
BALANCE SHEETS FOR THE
FIRST THREE YEARS
Current balance sheet figures
reflect the financial conditions
of the business at any particular
time. They identify the assets of
the business, the liabilities
(what is owed) and the
investment made by the owner
or other partners
 MARKETING PLAN
The size of the market first needs to be ascertained. To do this, it is necessary to first define the market. For example, who
are the purchasers of the product— men/women? What is the income level- high/low? Are the dwellers rural/urban?
Are they literate/illiterate

A market that is well-defined will make it easier to target it to the right people, project market size and
Well defined determine subsequent market goals for the new venture.
market
It is also necessary to take into account the channel strategy i.e. how the product]service will reach the
consumers. There are different channels available. The choice of the channel will depend on the nature of
Channel strategy product/service to be sold and the industry in which it is operating

Here the needs are to be prepared. This will put forth the attributes/ benefits of the product/service
and create a favourable image in the minds of customers. It will also describe, in what way the
Positioning product has been designed and tailored to meet the of the target customer.
statement Here the needs are to be explained i.e. on what basis is the price determined and why it will be
effective with target customers. Also, the discounts offered at each level of the channel need to
Pricing be considered
strategy Communicates the benefit of using the product/service to the consumer via media
advertising, outdoor advertising, public relations, e-commerce and the like Brand name,
Communication logo, tagline, colour scheme, packaging etc. will all go in creating a brand image
strategy The sales strategy will describe the manner in which the product/service will be sold
i.e. Through sales force, tele marketing, direct mail etc. The procedure of generating
Sales strategy leads, recruiting, training and compensating the sales force also need to be
established.
 MARKETING PLAN CHARACTERISTICS OF AN EFFECTIVE MARKETING PLAN

1. It should provide a strategy for accomplishing the company mission or goal.

2. It should be based on facts and valid assumptions.
3. It must provide for the use of existing resources. Allocation of all equipment,
financial resources and human resources must be described.
4. An appropriate organization must be described to implement the marketing plan.
5. It should provide for continuity so that each annual marketing plan can build on
it, successfully meeting long term goals and objectives.
6. It should be simple and short However, the plan should not be so short that
details on how to accomplish a goal are excluded.
7. The success of the plan may depend on its flexibility, changes, if necessary,
should be incorporated by including "what if” scenarios and appropriate
responding strategies.
8. It should specify performance criteria that will be monitored and controlled. If
not attained then new strategy or performance standards may be established
 HR PLAN
An efficient and competent team of people is a prerequisite to the success of any organization. The talents and experience
that the team brings to the business is very valuable. A description of the organizational structure along with
organisational chart is needed

1.Top level management

The structure of the top level management should be
listed down It is the apex body which makes policies,
sets goals, pools the resources etc
5. Advisors
HRM Advisory services in case of matters such as legal,
2. Middle level management ASPECTS OF quality, finance and auditing are required. These
It is responsible for putting the plans into BUSINESS services are needed because an entrepreneur
requires expert opinion from time to time.
action. PLAN

3.Operational level management 4. Supporting staff

The supporting staff plays an important role in the
This has people who are working at the operational
organization. Hence its duties need to be clearly
level, be it the shop floor in case of manufacturing,
laid down
on the field in case of sales and service personnel
and in different branches in case of service
providers. These are the people who interact with
the customers and vendors directly

The following information about human resources in the business plan will add clarity.
a)Number and type of employees. b)Pay structure. c)Training methods. d)Job descriptions.
 TECHNICAL PLAN
When outlining the plan of technology, it should be borne in mind how the company might grow or change. Also
the technology chosen should be simple and flexible. Technology is used in various areas such as

⮚ Accounting, taxes, finance

⮚ Order taking and tracking
⮚ Inventory management
⮚ Database management
⮚ Presentations
⮚ Human resource
management
⮚ Internet
Factors to bemarketing
considered etc
1. Functions
2. Ease of use
3. Security
4. Flexibility
5. Maintainability
6. Financial consideration
 SOCIAL PLAN

A business has certain social responsibilities in addition to the objective of

maximising profits. The following are the Social aspects of a business plan.
1. Take the welfare of society into consideration.
2. Focus on societal values.
3. Optimise the use of resources
4. Protect the environment, ecology by undertaking anti-pollution measures
5. Participate in social welfare programmes, make charitable undertake
forestry and adopt villages for their all round development and the like.
6. Share the gains arising out of improved production technique with all the
stakeholders business.
7. Assist in the establishment of an egalitarian (democratic) social order.
 OPERATIONAL PLAN
An operational plan can be defined as a plan prepared by a component of an
organisation that clearly defines actions it will take to support the strategic objectives
and plans of management.
STAGE OF DEVELOPMENT SECTION
1. PRODUCTION 3. SUPPLY CHAINS
OUTFLOW An explanation of who your suppliers are and their prices, terms, and
A high level step by step description of how you are products or service will
be made, identifying the problems that may occur in the production process. conditions. Describe what alternative arrangements you have made or will
Follow this with subsection titled “Risks” which outlines the potential make if these suppliers let you down.
problems that may interfere with the production process and what you're
going to do to negate these risks. If hazardous materials will be used,
describe how these will be safely stored, handled. and disposed.

2. INDUSTRY ASSOCIATION MEMBERSHIP 4. QUALITY CONTROLS

Show your awareness of your industry’s local, regional, or national standards
and regulations by telling which industry organizations you are already a
member of and which one you plan to join. This is also an opportunity to
outline what steps you've taken to comply with the laws and regulations
that apply to your industry
An explanation of the quality control measures that you've set up or are
going to establish. For example, if you intend to pursue some form of quality
control certification such as ISO 9000, describe how you will accomplish this.
FUNDING PLAN

A funding plan is a financial forecast to determine the revenue stream

required providing sufficient funds for the estimated future major repair and
replacement costs as determined by the site visit and component condition
assessment. A number of factors must be considered in determining the
funding plan. The factors that are inherent in this determination are.
1. Funds presently available for reserves
2. The annual amount to be funded
3. The acceptable increase in the annual amount to be funded
4. Inflation estimate
5. Interest earnings estimate
6. Contingency factors, and
7. The possibility of additional funding from either special assessments or
loans
FEASIBILITY STUDY
The feasibility of a project can be ascertained in terms of technical factors, economic factors or
both. A feasibility study is documented with a report showing all the ramifications of the project
Feasibility studies aim to objectively and rationally uncover the strengths and weaknesses of the existing
business or proposed venture, opportunities and threats as presented by the environment the resources
required to carry through, and ultimately the prospects for success.

PROJECT FEASIBILITY
Project feasibility refers to the probability of a project with respect to its inflows and outflows of
fund i.e. costs and benefits in terms of technology, finance, market, environment etc.
A project feasibility study is an analytical tool used during the project planning process, shows
how a business would operate under an explicitly stated set of assumptions. These assumptions include
the technology used (the facilities, types of equipment, manufacturing process etc.) and the financial
aspects of the project (capital needs, volume, cost of goods, wages etc.).

PROJECT FEASIBILITY ANALYSIS

Project feasibility analysis can be defined as the process of viability of a project which associated
with the project such as technical, financial, socio economic, managerial and environmental etc.
TYPES OF PROJECT FEASIBILITY

FINANCIAL MARKET
FEASIBILITY FEASIBILITY

TECHNICAL SAFETY
FEASIBILITY FEASIBILITY
TYPES OF PROJECT FEASIBILITY

FINANCIAL MARKET
FEASIBILITY FEASIBILITY

TECHNICAL SAFETY
FEASIBILITY FEASIBILITY
1. TECHNICAL FEASIBILITY
Technical feasibility refers to the ability of the process to take advantage of the current state of the
technology in pursuing further improvement. This area reviews the engineering feasibility of the project,
including structural, civil and other relevant engineering aspects necessitated by the project design.
A. Input Analysis: Input analysis is mainly concerned with the identification, quantification and evaluation of project
inputs, that is, machinery and materials. You have to ensure that the right kind and quality of inputs would be available
at the right time and cost throughout the life of the project You have to enter into long-term contracts with the
potential suppliers; in many cases you have to cultivate your supply sources. When Macdonald entered India, they
developed sustainable sources of supply of potatoes, lettuce and other ingredients for their burger. The activities
involved in developing and retaining supply sources are referred to as supply chain management

A. Throughput Analysis: It refers to the production/operations that you would perform on the inputs to add value, Usually,
the inputs received would undergo a process of transformation in several stages of manufacture. Where to locate the
facility, what would be the sequence, what would be the layout, what would be the quality control measures, etc. are
the issues that you would leam in greater details in subsequent lessons.

A. Output Analysis: This involves product specification in terms of physical features- colours, weight, length, breadth,
height; functional features; chemical material properties; as well as standards to be complied with such as BIS, ISI, and
ISO etc.
2. MANAGERIAL FEASIBILITY
Managerial feasibility refers to that feasibility which involves the capability of
the infrastructure of a process to achieve and sustain process improvement.
Management support, employee involvement, and commitment are key
elements required to ascertain managerial feasibility. Demonstrated
management capability and availability, employee involvement, and
commitment are key elements required to ascertain managerial feasibility.
This addresses the management and Organizational structure of the project,
ensuring that the proponent's structure is as described in the submittal and is
well suited to the type of operation undertaken.
3. ECONOMIC FEASIBILITY
Economic feasibility refers to the analysis of a project's costs and revenues in an effort to determine whether
or not it is logical and possible to complete. This involves the feasibility of the proposed project to generate
economic benefits.
A benefit-cost analysis (addressing a problem or need in the manner proposed by the project compared to
other, the cost of other approaches to the same or similar problem) is required.
A breakeven analysis when appropriate is also a required aspect of evaluating the economic feasibility of a
project This addresses fixed and variable and utilisation/sales forecasts.
The tangible and intangible aspects of a project should be translated into economic terms to facilitate a
consistent basis for evaluation. Even when a project is non-profit in nature, economic feasibility is critical.

Elements of Economic Feasibility

1. Increased agency revenue.
2. Decreased agency revenue.
3. Increased agency costs.
4. Decreased agency costs.
5. Increased revenue to other agencies and/or the general public.
6. Decreased revenue to other agencies and/or the general public.
7. Increased costs to other agencies and/or the general public.
8. Decreased costs to other agencies and/or the general public.
9. Other public benefits
4. FINANCIAL FEASIBILITY
Financial feasibility refers to a study on whether a project is viable after taking into consideration its total
costs and probable revenues. If the revenues cover the costs of the project, then the project is feasible.
Financial feasibility involves the capability of the project organisation to raise the appropriate funds needed
the implement the proposed project.
A financial feasibility analysis provides you in-depth insight into the financial future of any move that
you make in your business. When taking any investment decision, you would want to minimize risks and
eliminate the chances of losses. We can help you analyse the financial feasibility of your critical business
decisions, whether you are starting up your business, entering into a new market or just expanding your
product base. Before moving ahead with any business project, it is important to analyse the same in terms of:
1. Expenditures
2. Expected cash flows
3. Discounted cash flow analysis
4. Rate of Return on Investment
5. Risk analysis
5. CULTURAL FEASIBILITY
• A cultural feasibility study is defined as one that investigates scientific as
well as ethical, behavioural, and social issues in the design of clinical Trials.

• Cultural feasibility deals tie compatibility of the proposed project with the
cultural environment of the project.

• In labour-intensive projects, planned functions must be integrated with the

local cultural practices and beliefs.

• For example, religious beliefs may influence what an individual is willing to

do or not do.
6. SOCIAL FEASIBILITY
• Social feasibility addresses the influences that a proposed project may have
on the social system in the project environment.
• Many a time plants may be viable economically and financially but would be
socially undesirable.

• An example would be dye units, which have mushroomed around

Ahmedabad. These are polluting and generate effluents not acceptable to
the society and environment
7. SAFETY FEASIBILITY
• Safety feasibility refers to an analysis of whether the project is capable of
being implemented and operated safely with minimal adverse effects on the
environment.
• Safety feasibility is aspect that should be considered in project planning.
• Safety feasibility refers to an analysis of whether the project is capable of
being implemented and operated safely with minimal adverse effects on
free environment.
• Unfortunately, environmental impact assessment is often not adequately
addressed in complex projects
8. POLITICAL FEASIBILITY
• Political considerations often dictate directions for a proposed project.
• This is particularly true for large projects with significant visibility that may
have significant government inputs and political implications.
• For example, political necessity may be a source of support for a project
regardless of the project's merits.
• On the other hand, worthy projects may face insurmountable opposition
simply because of political factors.
• Political feasibility analysis requires an evaluation of the compatibility of
project goats with the prevailing goals of the political system
9. ENVIRONMENTAL FEASIBILITY
• Environmental feasibility analysis is to describe the existing environmental
conditions within the proposed study area, and to identify potential
environmental concerns for future development.
• Concern must be shown and action must be taken to address any and all
environmental concerns raised anticipated.
• This component also addresses the ability of the project to timely obtain and
at a reasonable cost, needed permits, licenses and approvals.
10. MARKET FEASIBILITY
• Marketing feasibility involves testing geographic locations to determine the best locations. The market needs
analysis to view the potential impacts of market demand, competitive activities, etc and market share
available.
• The market needs analysis to view the potential impacts of market demand, competitive activities etc. and
"divertible" market share available.
• Price war activities by competitors, whether local, regional, national or international, must also be analysed for
early contingency funding and debt service negotiations during the start up. ramp up and commercial start up
phases of the project
• The financial institutions look into following considerations in considering the marketing appraisal of the
project
a) Product, scope of the market, competition.
b) Special features, quality and price
c) Examining reasonableness of demand projections (existing and future)
d) Export facilities
e) Assessing adequacy of marketing infrastructure and principal customers
f) Judging competence of key marketing personnel
g) Selling arrangements