1. Introduction to Feasibility Analysis
Chapter 3
Modified from Barringer and Ireland (2006)

2. What Is Feasibility Analysis?
Preliminary evaluation of idea to determining if it’s worth pursuing
Provides more secure notion that a business idea is viable
Did analysis, feasible business: Intuit (Quicken, Quickbooks, etc.)
Personal experience, observed others, surveyed customers
Did analysis, not feasible: Retailing Insights (grocery cart)
Determined not a sufficient scale for advertising, needed large proportion of grocery stores
Dropped idea, focused on core competency, developed Trakus
No analysis, failed firm: Iridium (satellite phones)
Too complex technology, too long to develop, new technology took over, line of sight to satellite, large phone, low battery power

3. Preparing a Concept Statement
One page description of a business
Given to people who provide feedback on the potential of the idea
Purpose of feedback:
Give sense of the viability of the business idea
Suggestions for how the idea can be strengthened or altered before proceeding
Prepare before feasibility analysis

4. Preparing a Concept Statement
Components of Concept Statement (similar to elevator pitch components)
Description of the product or service
Description of target market
Benefits of the product or service (value proposition)
Description of product/service differentiators
Description of how product/service sold/ distributed
Description of the founder(s) of the firm

5. When To Conduct a Feasibility Analysis
Timing of Feasibility Analysis
After concept statement evaluation
After opportunity recognition, before business plan
Before a lot of resources are invested
Four Components of Full Feasibility Analysis
Product/Service Feasibility
Industry/Market Feasibility
Organizational Feasibility
Financial Feasibility (covered in Dr. Janney’s class)

6. Role of feasibility analysis in developing successful business ideas
Figure 3.1
Role of feasibility analysis in developing successful business ideas

7. Overview of Full Feasibility Analysis (4 forms of feasibility analysis)
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment

8. Overview of Full Feasibility Analysis
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment

9. Product/Service Feasibility
Product/Service Feasibility Analysis
Assessment of overall appeal of proposed product/service
Main idea: before rushing to development, be sure product/service is what prospective customers want
Two components of product/service feasibility analysis:
Concept testing
Usability testing

10. Product/Service Feasibility: 1st Component
Concept Testing
Purpose: Gauge customer interest, desirability, purchase intentions
Involves showing a representation of product/service to prospective users
Occurs before the prototype stage
Websites and graphic designs are taking this to a new level
Concept test ≠ concept statement
Concept test: tests feasibility of specific product/service idea
Concept statement: is a preliminary evaluation of entire business idea

11. Product/Service Feasibility: 3 reasons to conduct
Validate underlying premises of product/ service idea
Use phone interviews, focus groups, watch consumers perform tasks, customer advisory boards
Ex: PepsiCo developed model of 5 types of teens and tries to predict how trends move through teen populations
Help developing idea
Iteratively show idea to potential customers and make changes along the way
Ex: IDEO product development firm
Estimate potential market share
Survey questions
Market research surveys
Caution: Numbers always optimistic

12. Product/Service Feasibility: 2nd Component
Usability Testing
Purpose: determine ease-of-use and user’s perceptions of using product
While tempting to rush a product/service to market usability tests are good investments of resources
Eliminate potentially frustrating aspects of product/services
Involves creating a physical prototype and giving it to users, measuring usage results, and making modifications as necessary
Iterative in nature
Also called: user tests, beta tests, or field trials

13. Product/Service Feasibility: 3 forms of usability testing
Basic Prototype: fairly simple prototype that is given to friends/colleagues for feedback
American Inventor
Gym class exercise mat
Elaborate Usability Test: large-scale tests for well-funded or existing ventures
Lab testing, elaborate customer measurement devices (e.g., Google), etc.
Hybrid Test: Follow-me-home testing (e.g., day-in-the-life research)

14. Product/Service Feasibility: 5 Benefits
Getting product right the first time
Create a beta (or early adopter community)
Avoid obvious flaws in product/service design
MobileStar wireless “hotspots”
Use time and resources more efficiently
Potentially identify complementary product/ service offerings
iPod accessories

15. Overview of Full Feasibility Analysis
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment

16. Industry/Market Feasibility Analysis
Purpose: assess overall appeal of the market
3 primary issues to consider:
Industry attractiveness,
Market timeliness, and
Identification of a niche market

17. Industry/Market Feasibility Analysis: Industry Attractiveness
Issue 1: Industry Attractiveness
Primary determinant of feasibility is attractiveness of industry chosen
Characteristics of attractive industries:
Large and growing (growth is very important)
Industries are important to customers (e.g., must haves vs. likes)
Early in the industry lifecycle to avoid price competition
Industries are not crowded with competitors
How to assess industry attractiveness?
Forces in the broad environment (e.g., technological, sociocultural/demographic, political/legal, economic, global trends)
Porter’s Five Forces analysis (we’ll cover next week)
Other primary and secondary research

18. Industry/Market Feasibility Analysis: Market Timeliness
Issue 2: Market Timeliness
Will the market be receptive to the product/service?
If it’s a modification on existing offerings (e.g., cell phones with cameras) ask:
Is the window of opportunity open?
Are customers buying?
Are competitors making money?
If it’s a breakthrough product/service (e.g., Yahoo with internet search engines, eBay with online auctions, etc.) ask:
Can we capture a first-mover advantage?
Example: Microsoft in computer operating systems
Will we suffer from a second-mover advantage?
Example: IBM vs. Dell in personal computer retailing

19. Industry/Market Feasibility Analysis: Niche Markets
Issue 3: Identification of a Niche Market
Niche markets are places in larger market segments that represent narrower groups of customers
2 reasons for new firms to sell to niche markets:
Allows a firm to establish itself in industry and avoid competing against major competitors (e.g., specialty retailers vs. Wal-Mart)
Allows a firm to focus on serving specialized markets very well
Avoids trying to be everything to everybody in a broad market
Successful example: buyandhold.com and small scale investments
Problematic example: Iridium and satellite phones (tried to serve everyone)

20. Overview of Full Feasibility Analysis
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment

21. Organizational Feasibility Analysis
Purpose: determine if business has sufficient skills/resources to bring product/service to market successfully
Non-financial factors important to consider here
2 primary issues to consider:
Management prowess
Resource sufficiency

22. Organizational Feasibility Analysis: Management Prowess
Issue 1: Management Prowess
Firm must evaluate the ability of the management team
Determine if has the passion and expertise to launch the venture
2 most important factors in this area:
Passion the solo entrepreneur/founding team has for the idea
Extent the entrepreneur/founding team understands the markets in which the firm will participate
Ventures with established networks have an advantage
Successful Example: eBay
Failed Example: Garden.com (e.g., no gardening/ gardening retail expertise

23. Organizational Feasibility Analysis: Resource Sufficiency
Issue 2: Resource Sufficiency
Assessment of resources needed to launch proposed venture
Focus is on nonfinancial resources:
Availability of affordable office or lab space,
Likelihood of government support,
Labor pool quality,
Proximity to key suppliers, customers, and similar firms (clusters)
Likelihood of strategic partnerships,
Likelihood of attaining IP
To test resource sufficiency: list critical nonfinancial resources needed to move idea forward successfully
If resources not available, it may be impractical to proceed with the business idea

24. Overview of Full Feasibility Analysis
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment