A feasibility study is an analysis that seeks to identify the viability of a project. It protects businesses from investing in projects that are not viable thus averting losses. Organisations face many opportunities that necessitate investigation aimed at identifying whether they are worth exploiting. Examples of projects that require feasibility study include a new product, plant establishment, and a new branch among others. Besides identifying whether a business is viable, feasibility study helps to point out constraints facing a project which forms a basis of strategy formulation.
Areas of Feasibility Study
- Technical feasibility– this feasibility involves assessing the organisation’s technical resources to identify whether they can support project implementation. It requires an assessment of the internal environment as well as the external technological environment to determine the presence or absence of crucial technology resources needed for project implementation. Resources that are put into consideration when carrying out this assessment include hardware, software, and skills. A project is technically viable when the firm has the necessary technology or can procure the relevant technology to support implementation.
- Economic feasibility– this area involves carrying out a cost-benefit analysis. All costs and benefits are identified and quantified in monetary terms. The total costs and benefits are compared and a project is considered viable when the benefits outweigh the costs.
- Legal feasibility– this assessment involves analysing a project in the light of the existing legal environment. A project that does not comply with the current laws is not implementable as it leads to high legal costs which are a threat to profitability.
- Social feasibility– this feasibility is concerned with evaluating how a project affects people. Project implementation in a business environment affects customers, employees, and members of the public among other human elements. A project that is socially viable balances the interests of different groups of people. However, it is difficult to meet the interests of all people in a project that makes social feasibility a non-core activity in a feasibility study.
- Market feasibility– this area focuses on examining the current and future market potential. It entails a thorough industrial analysis to ascertain the sustainability of the existing market. Competitive analysis is carried out where the capabilities of the current competitors are identified and their impact on project implementation.