Q2 - Feasibility study Is not the same as a business plan...

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Feasibility study Is not the same as a business plan. Serves as a filter, screening out ideas that lack potential for building a successful business before an entrepreneur commits the necessary resources to building a business plan. Is an investigative tool Elements of a Feasibility Analysis Industry and Market Feasibility Product or Service Feasibility Financial Feasibility +Organizational Feasibility Industry and Market Feasibility Analysis Determining how attractive an industry is overall as a “ home “ for a new business. Identifying possible niches a small business can occupy profitably. Five Forces Model Five forces interact with one another to determine the setting in which companies compete and, hemce, the attractiveness of the industry: 1. Rivalry among companies in the industry 2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threat of new entrants 5. Threat of substitute products or services Rivalry Among Companies Strongest of the five forces Industry is more attractive when: Number of competitors is large, or, at the other extreme, quite small Competitors are not similar in size or capacity Industry is growing fast Opportunity to sell a differentiated product or service exists Bargaining Power of Suppliers The greater the leverage of suppliers, the less attractive the industry. Industry is more attractive when: Many suppliers sell a commodity product Substitutes are available Switching costs are low Items account for a small portion of the cost of finished products
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Bargaining Power of Buyers Buyers’ influence is high when number of customers is small and cost of switching to a competitor’s product is low. Industry is more attractive when: Customers’ switching costs are high Number of buyers is large Customers want differentiated products Customers find it difficult to collect information for comparing suppliers Items account for a small portion of customers’ finished products Threat of New Entrants The larger the pool of potential new entrants, the less attractive an industry is. Industry is more attractive to new entrants when Advantages of economies of scale are absent Capital requirements to enter are low Cost advantages are not related to company size Buyers are not loyal to existing brands Government does not restrict the entrance of new companies Threat of Substitutes Substitute products or services can turn an industry on its head. Industry is more attractive to new entrants when
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This note was uploaded on 02/03/2012 for the course MANAGEMENT 260 taught by Professor Michelemasterfano during the Spring '11 term at Drexel.

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Q2 - Feasibility study Is not the same as a business plan...

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