Feasibility Studies

Written by Rivary Finan Hernawan on 28/03/2024
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

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Introduction

Feasibility Study (FS) serves as a fundamental tool in project management, providing essential insights into the viabilities of projects and their potential. This analytical technique is indispensable for decision-making processes by enabling teams to assess project feasibility, human resource needs, and logistical requirements. Feasibility Study facilitates an analysis of the return on investment that is crucial for informed decision-making. This article will delve into the intricacies of Feasibility Study and explore its practical applications in project management.

Definition

Feasibility Study is the culmination of research conducted by experts from various entities, as defined by the Ministerial Regulation of Bappenas Number 1 of 2009. These entities can be ministries, institutions or regional governments. This comprehensive study provides a detailed illustration of the appropriateness of an activity which serves as a basis for decision-making in project implementation.

Typically conducted in the early stages of a project, the Feasibility Study forms an integral part of the main design stage during the planning period. It aims to objectively reveal the strengths and weaknesses of proposed projects by guiding project managers in identifying opportunities, threats, and resource requirements.

The Importance of Feasibility Study

Feasibility Study holds significant importance for companies by offering a comprehensive understanding of all aspects in a project or plan. It serves as a proactive measure to anticipate potential challenges and mitigate risks before project implementation. By uncovering new insights and altering project plans, a feasibility study enhances the likelihood of project success. Some key advantages of conducting a feasibility report in project management include:

Opening New Possibilities
The study can lead to innovative ideas and alternative project designs.
Providing Useful Feedback
Offers valuable insights for present and future decision-making.
Increasing Success Rate
Improves the chances of project success by addressing potential issues upfront.

Project Worth Summary
Provides decision-makers with a clear understanding of the value of the projects.

Determining Financial Viability
Assesses whether the project is financially feasible.

Recognizing Market Entry Strategies
Identifies effective approaches for introducing products or services to the market.

Types of Feasibility Studies

Technical Study
This type assesses whether the technical resources of a company are sufficient and if the technical team can effectively translate ideas into functional systems. It includes an evaluation of proposed hardware, software, and other technical requirements.
Economic Study
Economic feasibility study examines the costs and benefits of a project to determine its viability before allocating financial resources. It serves as an independent appraisal technique, enhancing project credibility and aiding decision-makers in identifying positive economic outcomes.
Legal Study
Legal feasibility study investigates whether any aspect of the project conflicts with legal requirements, such as zoning laws or data protection regulations. It ensures compliance and reveals potential legal obstacles that need to be addressed.

Operational Study
Operational feasibility study analyzes whether the project can meet the needs and objectives of the organization. It evaluates if the project plan aligns with business development requirements and identifies any operational challenges that may arise.

Aspects of Feasibility Studies

A comprehensive business feasibility study encompasses several essential aspects that must be thoroughly researched. These aspects include:

Management Aspect
This aspect is crucial as it relates to the overall management of the business and its operations. It covers a wide scope, including financial management and utilization of company resources.
Financial Aspect
Capital planning is pivotal for business ventures. This aspect involves estimating project value using cash flow projections or profitability forecasts and financial viability assessments.
Legal Aspect
Legal compliance is essential for any business endeavor. This aspect involves examining the accuracy and completeness of business documents, ensuring adherence to regulations, and obtaining necessary permits and licenses.
Economic and Cultural Aspects
Understanding the economic and cultural environment in which the business operates is vital. Economic analysis assesses the impact on local income levels, while cultural analysis examines the influence of the business on local customs and corporate social responsibility.
Market and Marketing Aspect
Analysis of market opportunities and marketing strategies is crucial for business success. This aspect involves studying market potential, consumer behavior and segmentation, as well as competitive landscape.
Technical and Operational Aspect
This aspect focuses on the technical and operational characteristics of the business including infrastructure, production capabilities, and logistical requirements.

The Best Time to Conduct Feasibility Studies

Feasibility studies are most effective when conducted early in the project lifecycle, particularly during the planning and design stages. This timing allows businesses to assess the viability of their projects before significant resources are committed. By conducting feasibility studies at the outset, companies can make informed decisions about whether to proceed with their projects, thus minimizing the risk of potential losses.

How We Can Help

A feasibility study serves to elucidate the significance of a project and its anticipated outcomes, providing valuable insights for project stakeholders. Once completed, the study is presented to the project owner for further examination and familiarization with all its facets.

Here are how Putranto Alliance can assist:

Conducting Feasibility Study
Putranto Alliance has extensive expertise in conducting feasibility studies for various projects and aspects.
Third-Party Market Research
Engaging a third-party market research agency to conduct a feasibility study offers numerous advantages such as bias minimization which can be minimized by providing an external perspective.
Legal Drafting
Putranto Alliance specializes in drafting clear and comprehensive legal documents tailored to the specific needs of feasibility study.

Legal Compliance
With a deep understanding of relevant laws and regulations, Putranto Alliance ensures that the feasibility studies are legally sound and compliant with industry standards.

FAQs

What is the difference between Feasibility Study and concept planning?

While both are usually carried out in the early stage of a project, there is a core difference between the two. Concept Planning generates the concept of the project, while Feasibility Study assesses the viability of the concept. To ensure impartial judgment and transparent processes, the two processes are usually carried out separately by independent parties.

What are some of the best practices in conducting a feasibility study?

While practices may vary depending on the aims and demands of the projects, several common practices are typically found in a feasibility study:

Preliminary analysis, including gathering feedback from relevant stakeholders on the new projects;
Data verification to ensure the reliability of the project;
Market study or research to determine market demand and opportunities;
Analysis of the labour requirements of the projects;
Projection of the profit of the projects;
Identification of potential hurdles and vulnerabilities, along with strategies to address them; and
Making a preliminary “do” or “not “decision regarding the project strategy.

What are the potential outcomes of a feasibility study?

The outcomes of a Feasibility Study may include a recommendation to:

Proceed with the project;
Modify the project plan;
Explore alternative options; or
Abandon the project altogether if it is deemed unfeasible.

What are the points that are usually highlighted in the feasibility study report?

Some components often found in a feasibility study report include, but are not limited to:

Summary of the report;
Technical considerations, outlining the technological requirements and constraints of the projects;
Currently existing markets, listing the products and services already present in local and global markets;
Details of the marketing approach of the projects;
Staffing requirements, often presented using an organizational chart;
Timeline and schedule;
Funding of the project; and
Conclusions and suggestions.

What aspects of the business venture does Putranto Alliance analyze when conducting a feasibility study?

Putranto Alliance comprehensively analyzes various aspects of the proposed business venture when conducting feasibility studies, such as:

Legal Aspect;
Technical Aspect;
Marketing Aspect;
Business Pattern Aspect;
Management Model Aspect; and
Financial Aspect.

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