Posted: May 4th, 2015

Assignment : Feasibility Study

Assignment : Feasibility Study

You have expressed interest in setting up a business to provide a professional service. Your friend is+ tired of hearing you talk about the idea. You feel that there is an unsatisfied and significant demand for the services you intend to provide although you have not researched the market. Moreover, you have never been involved in running a business and are unsure of your ability to operate the business successfully. You want to start this business from scratch and are not interested in a franchise because you do not want to limit the scope of activities you can undertake. Your friend has advised that you assess the feasibility of the idea. Write a feasibility report covering the following:

1. A description of the business idea
2. A description of the specific industry in which the business will operate, identifying current and future trends and justifying the opportunity that you intend to pursue. Present the key driving forces and key success factors for the industry. Driving forces refer to external factors with significant impact on performance in an industry and include but are not limited to: increasing household income, rising number of retired baby boomers with time and money to spend, a desire to see the world, ready access to information from the internet, high literacy levels among the population and so on.
3. A description of the target market covering:
   1. A profile of each market segment (where there is more than one homogenous target market).
   2. For each market segment describe their needs and buying motives.
   3. The purchasers if they are not the same as the consumers (e.g. health services for children) and the bases of their purchase decisions (price, quality, service, personal contracts, convenience, or a combination of these)
   4. An estimate of the size of the current market and the sales potential for your business. The estimates should be supported by statistics and references.
   5. Factors that could affect sales such as seasonal demand, socio-economic trends and changing demand patterns, government policy, whether demand for the service is tied to demand for another and so on. Estimate the potential annual growth of your market share for at least three years.
      1. A description of the competition
         1. This should identify the major competitors (in your strategic group). Demonstrate these with a strategic group map.
         2. Each competitor should be rated on the key success factors identified in section 2 and provide an indication of their share of the market. The ratings should be explained, noting especially where competitors are vulnerable, allowing your business to capture a share of their market.
         3. The analysis of the competition should also address threats and barriers of entry, substitute products, and the influence of buyers and suppliers.
         4. Explain how your business is positioned against the competitors, identifying your strengths as well as weaknesses
      2. A description of your services and any associated products. Where there is more than one service line describe the components of each service line and the benefits to customers.
      3. The marketing plan showing:
         1. How each service line will be priced including percentage mark-up on cost. Justify your prices with respect to the target market, competitors and cost of providing the service. Prices that are higher or lower than competitor prices must be justified.
         2. The promotion strategy showing the media to be used and justifying their choice. A promotion budget should be provided with estimated costs for each year including the cost of launching the service.
         3. A place strategy explaining the atmosphere to be created and its relevance to the services provided.
      4. Present your operations plan which should cover the following:
         1. The proposed location – this must be justified, stating the advantages and disadvantages.
         2. How the premises will be acquired (purchased, built, or leased). An estimate of the cost must be presented and the chosen acquisition method justified.
         3. The service process; use a flow chart to illustrate and explain the various stages of service delivery.
         4. A graphical illustration of the layout, with explanations as to how it relates to the service process and will enhance delivery efficiency.
         5. The facilities (plant and equipment) required for operations should be listed. For each item in the list, the method of acquisition must be explained and an estimate of costs provided. For leased items the estimated annual cost of the lease must be specified.
         6. The processes to be followed to maintain the facilities must be presented.
         7. The materials and supplies required and suppliers or sub-contractors to be used are to be provided. The criteria for selection of suppliers or sub-contractors must be explained. Contracts or agreements to be established with them and associated costs such as transportation must be stated.
         8. The inventory management system (for supplies used to provide the services) should be discussed. The discussion should cover ordering times, safety stock levels, minimum and maximum inventory levels as well as measures to ensure safe storage of inventory.
         9. Strategies for managing any seasonal variations in demand for the services are to be presented.
         10. A discussion of all relevant regulatory and legal issues associated with the business, including state, federal, or local regulatory requirements and steps to be taken to ensure compliance. Licences, zoning permits, health permits and environmental approvals necessary to begin operations should be addressed as well as any pending regulatory changes that could affect the nature of the business and its timing.
      5. A human resource plan comprising:
         1. Number of employees required, specifying the positions for which they will be employed as well as the terms of employment (eg full time, part-time, casual). Identify the recruitment sources for each position.
         2. What training will be provided for each position and how will you assess performance of employees?
         3. Present and justify the remuneration package for each position including superannuation contributions.
         4. What legal requirements are associated with employees and what steps will you take to ensure compliance?
      6. Explain the legal form of the business and why it is preferred to other forms. Describe the management structure and present the salaries of members of the management team. If there will be no management team explain what would be reasonable wages for the owner(s).
      7. Develop and present the financial statements based on the most likely situation comprising:
         1. The pro-forma or projected balance sheet showing the financial position of the business at the end of each of the period of three years. It should show the assets of the business and how they will be financed – i.e. equity and liabilities. All assumptions used to prepare the balance sheet must be provided.
         2. The pro-forma cash budget for three years should show the amount and timing of expected cash flows, sources of additional financing, and repayment terms (for any loans to be taken). They should be prepared on a quarterly basis. All assumptions associated with the estimates should be stated.
         3. The income statement should present the projected operating results, comprising all revenue and expense items on a quarterly basis for three years.
      8. Financial analysis and economics of the business based on the most likely situation.
         1. Important financial ratios should be computed and explained in comparison to selected standards. The ratio analyses should indicate profitability, liquidity, efficiency and long term leverage for the business.
         2. The financial analysis should also include break-even sales (in volume and/or dollars) and a discussion of its attainability, when it will be achieved, and how the break-even point could be lowered if actual sales are less than predicted. This may require reference to the relationship between fixed, variable, semi-variable and total costs and total revenue.
         3. The analysis should indicate when the business will achieve positive cash flow, when it will run out of cash, and how increased capacity will affect cash.

From the information presented, explain the market, product, technical and commercial feasibility of the idea and your ability to operate the business. Technical feasibility assesses whether the business will have the facilities and resources to provide the goods or services at reasonable costs.

Use a report format showing: title page, executive summary and table of contents. These will not be included in the word count. The cover page must include the word count.

With respect to presentation use Times New Roman or similar font, 1.5 spacing and 12-pointfont size. Marks will be lost for single-spaced reports.

A list of references for all materials used in preparing the report must be presented at the end of the report. All quotes and statistics must be referenced in the report with year of publication and page numbers. Other referenced materials can be included only in the list at the end of the report. Place the appendices after the reference list.

The assignment is due on 22 May 2015. Marks will be awarded for creativity, amount of research carried out, as well as presentation.

External students are encouraged to work in teams of up to a maximum of four students for this assignment. Where the assignment is completed by two or more students, the peer assessment forms below must be used by each team member to assess the other team members.