Types of Feasibility Study Meaning, Importance, Objectives

Types of Feasibility Study

A feasibility study is an important step in the project planning process of any new project, be it a business venture, new product development, or infrastructure project. There are several feasibility studies and all types of feasibility study focuses on specific aspects of a project. Below is a detailed overview of the most common types of feasibility study:

The feasibility analysis includes several types of feasibility study, some of which are as follows:

Technical Feasibility
Economic Feasibility
Marketing Feasibility
Financial Feasibility
Managerial Feasibility
Political Feasibility
Cultural Feasibility

The above-mentioned types of feasibility study are explained in detail below:

1) Technical Feasibility

Technical feasibility refers to the ability of the process to take advantage of the current state-of-the-art technology in pursuing further improvement. The technical capability of the personnel as well as the capability of the available technology about the requirements of the proposed project ideas should be considered and the extent of compatibility should be studied.

2) Economic Feasibility

The economic feasibility analysis evaluates a proposed project’s potential for generating economic benefits. This assessment involves conducting a detailed cost-benefit analysis and break-even evaluation for new industrial projects.

In the cost-benefit analysis, both tangible and intangible benefits and costs are identified to calculate the benefit-cost ratio (B-C ratio). Meanwhile, the break-even analysis determines the point at which the project neither makes a profit nor incurs a loss.

To ensure a project’s success and profitability, it’s important to conduct a detailed analysis that considers all potential benefits and costs, both tangible and intangible. This enables an accurate determination of the benefit-cost ratio (B-C ratio), which serves as a key indicator of the project’s economic viability.

Moreover, the break-even analysis plays an important role in assessing the project’s financial sustainability. It identifies the specific quantity at which the project reaches the break-even point, where neither profit nor loss occurs. Understanding the essential threshold allows one to make well-informed decisions about the project’s feasibility and potential profitability.

3) Marketing Feasibility

Marketing Feasibility comprises of description of various suppliers, customers, major market players, market prospects, market choices, various sales and channel of distribution. Along with these contents, it also includes the sources, quantity and quality of raw material required with the timing of ordering and availability of it.

4) Environmental Feasibility

Environmental feasibility holds great importance. Any pollution arising from the project’s operations will be immediately noticeable to the public, administrators, and politicians. Failing to adopt the required corrective and preventive measures to minimize pollution can bring about substantial challenges for the project, including resistance from various stakeholders. Consequently, the project company may face tough choices, possibly needing to close down or move, which would lead to significant expenses for the organization.

5) Financial Feasibility

Financial feasibility is a necessary evaluation that looks at whether a project organization can secure the required funds for their proposed project. Key factors like available cash, creditworthiness, equity, and loan terms are essential in a thorough financial feasibility analysis. By assessing these aspects, it can easily be determined if the project organization has the financial resources to carry out the project. This evaluation considers the organization’s ability to access available resources, its creditworthiness to potential lenders, the equity it can invest, and the proposed loan terms.

6) Managerial Feasibility

Managerial feasibility is all about whether the setup can make and keep processes better. Key factors such as support from managers, employee participation, and dedication are important for figuring out if management is effective. To check if managerial feasibility is in place, strong support from managers is a must. This means giving the resources, guidance, and direction needed to make process improvements work. Also, the involvement of employees is a big deal for effective management. When employees actively take part in improving things, they develop a sense of responsibility and dedication to reach the desired goals.

7) Political Feasibility

Political feasibility assesses if a project can get approval initially and maintain support over time in the existing political environment. This is especially important for major national projects that involve influential government involvement and have political importance. Several issues can trigger political involvement, such as converting agricultural land for industrial use, potential health risks from the project, concerns about air and water pollution, and the possibility of job losses due to the introduction of high-tech projects.

Ensuring political feasibility is important for a project’s success. It involves carefully considering how the project affects the existing political environment and the potential challenges it might face. Large-scale projects with national visibility are particularly sensitive to political scrutiny because they can significantly impact a region’s or even a whole country’s socioeconomic structure.

8) Cultural Feasibility

Cultural feasibility is about making sure a project fits well with the local culture where it’s happening. In projects that involve a lot of labour, it’s really important to make sure the work plans match the local customs and traditions. Things like religion and customs can be a big deal in this.

Making sure a project is culturally feasible is important for its success. When a project’s goals and activities match the local community’s cultural norms and values, it helps build a good relationship and gain their support. This not only makes the project more accepted but also helps it last a long time.

Religion is a key part of culture and can have a big impact on whether a project works. Understanding and respecting the community’s religious belief and practices is essential to avoid conflicts or misunderstandings. When we consider religion in how we plan and do the project, we can create an inclusive and respectful environment.

Customs and the way people live are also really important when thinking about cultural feasibility. Every community has its customs, traditions, and ways of living. If the project can adapt to fit these practices, it can build trust and good relationships with the local people. It also helps make the most of what the community already knows and has, which leads to better project results.

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Feasibility Study Meaning

The primary focus during the systems investigation stage is conducting the feasibility study. When organizations face a business problem related to an information system, they usually have three basic options to consider.

In the systems investigation stage, the primary focus is on conducting a feasibility study. When organizations encounter a business problem related to an information system, they generally have three basic solutions to consider:

1) Modify or enhance the existing system, or

2) Develop a new system.

3) Do nothing and keep using the current system as it is.

The feasibility study analyses which of these three solutions best fits the particular business problem. This study also determines the probability that the proposed system development project will succeed or not. It also provides a rough assessment of the project’s technical, economic, behavioural, and organisational feasibility. The feasibility study is critically important to the systems development process because it can prevent organisations from making costly mistakes.

The purpose of the feasibility study is to validate that the project meets the feasibility of cost, technological, safety, marketability, and ease of execution requirements. The company may use outside consultants or Subject Matter Experts (SMEs) to assist in both feasibility studies and benefit-to-cost analyses. The completion of the feasibility study might be a prerequisite for assigning a project manager.

Feasibility Study in Project Evaluation

Feasibility is the determination of whether or not a project is worth pursuing. The process used to make this determination is referred to as a feasibility study. This type of study determines whether a project can and should be undertaken. Once it has been determined that a project is feasible, the analyst can proceed to prepare the project specification, which finalizes project requirements.

Generally, feasibility studies are conducted within tight time constraints and typically conclude with a written and oral feasibility report. The contents and recommendations of such a study will be used as a sound basis for deciding whether to postpone, proceed, or cancel the project.

Therefore, given that the feasibility study may involve a significant commitment of resources, it must be conducted competently, with no fundamental errors in judgment.

Feasibility, also known as workability, literally refers to whether an idea will work or not. It involves the preliminary evaluation of a business idea to determine its worthiness of pursuit. Feasibility analysis reduces guesswork to a certain degree, providing an entrepreneur with a more secure understanding of whether a business idea is feasible or viable. It entails knowing in advance whether there is a sizable market for the proposed product/service, the investment requirements, potential funding sources, availability of necessary technical know-how to convert the idea into a tangible product, and more.

In essence, a feasibility study examines the technical, financial, HR, and marketing aspects of a business on an ex-ante basis (before the venture comes into existence). A business feasibility study supports the decision-making process based on a social cost benefit analysis of the business or project’s viability. It should be conducted even before the commencement of a formal business plan and relies heavily on market research and analysis.

Importance of Feasibility Study

A feasibility study helps to determine if an idea for a product or service is feasible. The main objective of the feasibility study is to decide whether the organisation should proceed with the project idea. Early identification of the fact that a project idea will not work, saves time, and money and avoids backtracking of the project at a later stage.

A feasible project is one where the business will generate adequate cash flow and profits, withstand the risks that it will encounter, remain viable in the long term and meet the goals of the stakeholders. The project venture offers various possibilities, including starting a new business, buying an existing one, expanding current operations, or creating a new enterprise within an existing business.

Various dimensions of the project feasibility study are analyzed throughout different stages of the feasibility study in varying degrees of detail, both separately and about others. Thus, A multi-dimensional feasibility analysis guides us in making informed choices.

Before conducting a feasibility study, a pre-feasibility study is to be conducted mainly to collect and analyze certain key data. A Pre-feasibility study should be viewed as an intermediate stage between a project analysis and a feasibility study, the difference being primarily the detail of the information obtained.

Steps in the Pre-Feasibility Study

Thus, the pre-feasibility study includes the following steps:

1) Preliminary re-compilation of data is as given below:

General geography of the region,
Climate (temperature, wind, rain, evaporation),
The general socio-economic level of the population,
Preliminary estimate of demand,
Existing products and their market shares,
Availability of the land to construct the project, and
Availability of energy and energy cost.

2) Proposing the potential limits of the project (physical limits and design horizon in time).

3) Identifying potential alternatives for the project idea.

4) Proposing different technologies which can be deployed in the project firm.

5) Performing a preliminary estimate of the project cost.

6) Identifying lacking information which will be necessary for the feasibility study.

7) Identification of potential financial sources for the project.

8) Identification of general characteristics of the customers in the region of interest for the project firm.

9) Preparing a report on the pre-feasibility study if the pre-feasibility study is feasible. This will serve as input for the feasibility study.

Objectives of Project Feasibility Study

The main objectives of project feasibility are:

1) To estimate the quantum of bank finance required.

2) To realistically determine the market demand for the proposed product and the achievability of the projected sales.

3) To examine the technical feasibility of the process of manufacturing the product and the availability of the infrastructural facilities, raw materials, etc.

4) To assess the profitability of the project on a realistic basis and the adequacy of the cash surplus for repayment of the loan within a reasonable time.

5) To assess whether the entrepreneurs are technically and managerially equipped to execute the project and whether their antecedents like character, creditworthiness, integrity, etc., are satisfactory.

6) To thoroughly understand all aspects of a concept, project, or plan.

7) To become aware of any potential problems that could occur during the implementation of the project.

8) To determine if, after considering all important factors, the project is viable—that is, worth undertaking.