A Module in

FEASIBILITY STUDY

BS Business Administration
College of Business Management and Accountancy
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Vision

A technologically-advanced university producing professionals and

competitive leaders for local and national development

Mission

To provide quality education responsive to the national and global

needs focused on generating knowledge and technology that will
improve the lives of the people

Core Values

 Excellence
 Accountability
 Service

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PREFACE

This module is a product of the changing demands of time. It is a simplified

textbook simulation of various concepts and principles of Business Management
necessary in writing a Feasibility Study. This material is intended to equip learners
with essential knowledge and skills to lead them in attaining high level literacy
primarily in writing a feasibility study relevant to the field of business management.
This material covers the various studies which make up a complete feasibility report.
As such, this material has been prepared to guide learners in attaining inherent
expected course and program outcomes after completing your degree.

This module contains a total of six (6) units. Each unit presents an
introduction about the subject matter to help you gain a bird’s eye view about the
content. Guided by specific objectives anchored on the general course outcomes,
you are expected to perform specific tasks at the end of every module (course
requirement). The contents are packaged according to the competencies expected of
the course; and images are provided to further highlight major ideas discussed in
every presentation.

Unit 1 will head-dive into the introduction to feasibility study, its importance,
and benefits. Unit 2 will guide you through the process of recognizing the need for
the feasibility study through learning the different aspects needed to write a
marketing feasibility study. Unit 3 will explore management, legal and environmental
aspect of the feasibility study. Unit 4 will help delve into the production and technical
aspect of feasibility study. Unit 5 will help you learn with more detail on financial
aspect of feasibility study. Unit 6, the last module for this course, deals with the
socio-economic aspect of feasibility study

After learning the six units included in this module, the student is expected to
have an improved knowledge on the relevance of making a feasibility study in the
field of Business Administration. The acquired knowledge and developed skill in
conducting a feasibility study will be applied to real life conduct of a study on a topic
chosen by each group. As expected, a final feasibility report will be collected from
each group as a collaborative work—as this will sum up the different module
outcomes expected from the students.

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TABLE OF CONTENTS
Pages
Vision. Mission, and Core Values ii
Preface iii
Unit I: Introduction to Feasibility Study
Lesson 1: What is the Feasibility Study? 2
Lesson 2: Parts of the Feasibility Study 6

Unit II: Marketing Feasibility

Lesson 1: SWOT Analysis 13
Lesson 2: Market Demographics 19
Lesson 3: Market Analysis 27
Lesson 4: The Business Environment 33
Lesson 5: Marketing Strategies 45
Unit III: Management and Legal Study
Lesson 1: Management of the Project 63
Lesson 2: Legal Compliance of the Business 69
Lesson 3: Vision, Mission, Goals, and Objectives 72
Lesson 4: Administrative Personnel and Structure 88
Lesson 5: Management Protocol 92
Lesson 6: Assessment of Risks 101
Unit IV: Production/Technical and Environmental Study
Lesson 1: Production and Technical Study 107
Lesson 2: Environmental Study 124
Unit V: Financial Feasibility
Lesson 1: Major Assumptions 126
Lesson 2: Proposed Capital Distribution 129
Lesson 3: Total Project Cost 131
Lesson 4: Pre-Operating Cash Flow 134
Lesson 5: Pre-Operating Balance Sheet 135
Lesson 6: Projected Income Statement 136
Lesson 7: Projected Balance Sheet 142
Lesson 8: Projected Statement of Cash Flow 147
Lesson 9: Financial Statement Analysis 150

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Lesson 10: Break-Even Analysis 161

Unit VI: Socio-Economic Feasibility Study
Lesson 1: Components of Socio-Economic Feasibility 166
References
Course Guide
Quality Policy and Credits

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GENERAL INSTRUCTIONS

 Use this module with care

 Do not write, highlight, erase, alter, or tear the pages of this

module

 In answering activities or exercises, use a separate sheet of

paper or refer to your instructor for further or other
instructions

 This module must be returned after the end of the semester

 If lost, the holder of this module will pay its equivalent value

If this module is lost and found, please return to:

EASTERN SAMAR STATE UNIVERSITY

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UNIT I

INTRODUCTION TO FEASIBILITY STUDY

INTRODUCTION

Everyone wants to open and operate a successful business or project. This is

the sole intention of any project developer or entrepreneur. However, these are
confronted with a serious reality. This reality is that not all business or projects are
viable of feasible. In other words, these projects or business are faced by the difficult
issue of long-term sustainability.

This is the critical challenge

or question confronting all
business or projects. In this case,
it is important to conduct a
feasibility study to determine the
viability or sustainability of the
project in the future. A feasibility
study provides a blueprint to
determine feasibility of a business
endeavor or a planned project.

LEARNING OUTCOMES

After learning this module, you will be able to:

1. Define what is a feasibility study

2. Understand the benefits of conducting a feasibility study
3. Identify the key factors in a feasibility study
4. Enumerate the different types of feasibility study
5. Familiarized with the parts of a feasibility study

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LESSON 1

WHAT IS A FEASIBILITY STUDY?

Image Source: Dynamic Business

Activity: SITUATION ANALYSIS

Perhaps after graduation, you want to set up your first business—a start-up. Now you
have so many ideas in mind and you want to make sure that you are going to engage
in the right business. The question is, what could be the common questions or
dilemma do you think you would have?

Refer to the following questions below; assess each one if it would be a common
question. Put a check on each question that you think is a common dilemma for any
starting business.

 Which business to do? How to start this business?

 How many people to hire? Who are the people to hire?
 What is my capital investment? Will I get a good return of investment? Will I
get my initial investment back in 1 year?
 What kind of taxes and licenses do I have to pay?
 How will this business fare in comparison to the existing business in the
current market in my locality?
 Who should I sell to? Who are my primary customers?

These are just some of the common questions. There are so much more dilemmas
when starting a business. A Feasibility Study may just come in handy to help you
with your dilemmas—whether it is your own business or a firm you are working for.

Feasibility Study

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 It is a systematic plan and analysis of the sustainability of a project taking into

consideration factors such marketing, production or technical issues,
organizational and management aspects and financial implications. In other
words, feasibility study is the evaluation and assessment of a proposed
project or business.
 A feasibility study is simply an assessment of a proposed plan or method's
practicality.
 In simpler terms, a feasibility study helps you conclude if your business idea
is feasible or viable or not, because in doing so, you are making wise
decisions and avoid losing you money and other investments
 As the name implies, you're pondering the question, "Is this feasible?" For
instance, do you possess or are you capable of developing the technology
necessary to carry out your proposal? Are you equipped with the necessary
personnel, tools, and resources? Additionally, will the project generate the
return on investment that you anticipate?
 A feasibility study concludes the "what" and "when" .The feasibility study
establishes the factors that will determine the success of the business
opportunity, which makes it quite critical. It concludes the "what" and "when"

Who conducts a feasibility study?

 The USDA recommended in 2009 that a feasibility study be conducted by

a qualified consultant who is independent and has recognized experience
with the type of operation being examined. The analyst must be a firm
with a proprietary interest in the project, a vendor, or any other party with
an interest or vested interest in the study's outcome.
 It can either be the following:
 A Manager or Director of a company
 Business Consultants
 Project Managers and teams
 Academicians and Researcher

When should a feasibility study be conducted?

 The feasibility study is conducted before the business plan. A business

plan is prepared only after the business venture has been deemed to be
feasible

Benefits of Conducting a Feasibility Study

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1. It identifies the advantages and disadvantages of a project;

2. It conducts a cost-benefit analysis of engaging in a particular activity,
project, or business;
3. It minimizes risks by acting without fully comprehending or appreciating
the financial, legal, or reputational consequences for an organization or
business.
4. It enables a thorough understanding of a project or plan;
5. It identifies potential obstacles and problems that may arise during the
execution of the plan or project.

Different Types of Feasibility Studies

 A feasibility analysis determines the project's likelihood of success;

consequently, perceived objectivity is critical to the study's credibility with
potential investors and lending institutions.

There are five distinct types of feasibility studies—areas that a feasibility study
examines in detail—which are described below.

1. Technical Feasibility
 This assessment focuses on the organization's technical resources. It assists
organizations in determining whether their technical resources match their
capacity and whether their technical team is capable of transforming ideas
into functional systems.
 Technical feasibility also includes an assessment of the proposed system's
hardware, software, and other technical requirements.
 As an exaggerated example, an organization would not want to attempt to
incorporate Star Trek's transporters into their building—this is not technically
feasible at the moment.

2. Economic Feasibility
 This assessment typically includes a cost/benefit analysis of the project,
which assists organizations in determining the viability, cost, and benefits of a
project prior to allocating financial resources.

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 It serves as an independent project assessment and enhances project

credibility by assisting decision-makers in determining the proposed project's
positive economic benefits to the organization.

3. Legal Feasibility
 This assessment determines whether any aspect of the proposed project
violates any applicable laws, such as zoning laws, data protection laws, or
social media laws.
 Assume an organization wishes to build a new office building in a particular
location. A feasibility study may reveal that the ideal location for the
organization is not zoned for that type of business. That organization has just
saved significant time and effort by recognizing early on that their project was
not feasible.

4. Operational Feasibility
 This assessment entails conducting research to determine whether — and
how well — the project will meet the organization's needs.
 Operational feasibility studies examine how a project plan satisfies the
requirements identified during the system development requirements analysis
phase.

5. Feasibility of Scheduling
 This assessment is critical to the success of the project; after all, a project will
fail if it is not completed on time.
 A scheduling feasibility study is used to determine the length of time required
to complete a project.

Constraints in Feasibility Study

1. Internal Project Constraints: Technical, technological, financial, and

resource constraints, among others.
2. Internal Corporate Constraints: Financial, marketing, and export
restrictions, among others.
3. External Constraints: Logistics, the environment, and applicable laws and
regulations, among others.

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LESSON 2

PARTS OF THE FEASIBILITY STUDY

In writing your feasibility report, it is important to incorporate all the relevant

steps applicable to your study. Depending on the purpose, some of the minor
subparts may be omitted if it is not needed, however you should understand that
each part provides important details in building the structure of your report.
In this lesson, you will learn about the different parts of a feasibility study.
These parts—which will comprise your final feasibility report should serve as your
standard template and guide.
The parts laid out in this lesson will be further discussed in detail in the next modules.

I. Executive Summary

 The executive summary contains a concise summary of the critical

segments of the report and is found at the front page.
 This section allows the reviewer to gain a strong sense of the report’s
significant information and major findings and final conclusions,
significant data reflecting concrete analysis should be provided, and a
summary of the key recommendations listed.
 This segment of the report should provide a context from which the
reader will be able to better decipher all the components and findings of
the report.

The executive summary consists of highlights of the following parts:

1. Market feasibility;
2. Management and personnel feasibility;
3. Technical feasibility;
4. Financial feasibility;
5. Socio-economic feasibility;
6. Conclusion to feasibility

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II. Project Background

 This contains details as to the project proponents, proposed name of the

business, type of business, location of the business, existing facilities of
the business, vision, mission, objectives, and brief description of the
business.

CHAPTER I (Marketing Study)

 This chapter will pinpoint your project’s general to specific market

feasibility topics. It presents your market and an analysis of the past,
present and future demand and supply situations for your particular
product(s).
 If the conditions presented are feasible, then a look at the marketing
practices of your competitors will be studied.

A. SWOT Analysis
B. Market Demographics
1. Current Market Condition: There should be a discussion or evidence
that there is a demand for your product or service given the current
situation in the market
2. Target Market
3. Geographical Location
C. Market Analysis
1. Income/Economic Status: States the level of income earned by the
target market
2. Educational Status
3. Spending Pattern
D. Business Environment
1. Competitive Analysis: Shows the proposed business’ market share
2. Demand
a) Historical Demand: States the demand situation of your
product(s)/service(s); presents the past 5 or 10 demand of your
product(s) indicating your sources/methods of information.
b) Projected Demand: States the demand projection for 5 to 10 years
using projection methods

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3. Supply: The supply section is based on the existing related business’

supply data including that of direct and indirect competitors.
a) Historical Supply
b) Projected Supply
4. Demand-Supply Analysis: From the demand and supply obtained in
the earlier section, present the figures and take note of the
discrepancies. This must show that the demand is greater than the
supply throughput/at most of the study’s time presentation as this will be
one of your reasons to defend your being able to enter the market.
E. Marketing Strategies
1. Product Image and Description
2. Advertising Strategy
3. Pricing Strategy
4. Proposed Marketing Program

CHAPTER II (Human Resource Management and Legal Study)

 This chapter will guide you into determining the various persons who will
manage the proposed company/project/business
 It includes your proposed style of management and contains samples of
your project’s administrative flow diagrams and forms design.

A. Management of the Project: discusses whether the business will take the
form of sole proprietorship, partnership, corporation or cooperative.
B. Administrative Personnel: Discusses the details about the administrative
personnel of the organization
1. Proposed Number of Administrative Personnel
2. Proposed Organizational Chart: Usually line organization
3. Proposed job requirements: Discusses the job description and
duties/responsibilities of each the admin personnel
4. Availability and Source of Personnel: Discusses whether the
personnel will be outsourced or not; or whether the owners of the
business will be the ones to be employed in the business

C. The Personnel: Who composes the team?

1. Proposed number of personnel (rank and file)

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2. Proposed job requirements, responsibilities and functions of personnel

D. Management Protocols
1. Proposed Management Style: Depending on the choice of the
management, management style could be autocratic, democratic, etc.
Most commonly adopted management style is participative where they
work together to make decisions as a group and the staff is highly
involved.
2. Proposed Salary Rates: Include provisions for SSS, philhealth and
pag-ibig contributions

3. Proposed General Policies: Set policies on how employees would

work inside the organization and how they would be compensated

3.1. Working hours: May include discussions on rotating shifts (if

applicable); number of days the worker should be present.
Discussions in overtime should also be stated
3.2. Compensation: May be daily, weekly, or every 15 th, depending on
the management;
3.3. Benefits: Discuss statutory benefits such as SSS, Philhealth and
Pag-ibig and/or bonuses

E. Legal Compliance of the Business: Indicate the steps/procedures in

securing Business License and Permits including Registration

F. Assessment of Risk: List of risks that may be encountered during the

business operation and whether it posts high, moderate or low risk

CHAPTER III (PRODUCTION/TECHNICAL AND ENVIRONMENTAL STUDY)

 This chapter includes all the necessary elements in the production,

technical and environment aspect of the business/ project

A. Product and Services: Describes the products and services of the business
and how they will be presented to the market. B
B. Project Site: Discuss where the business will be located

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C. Building: Discuss how the building will be designed and how much it would
cost. In case the building will only be rented, the author should also discuss
the how it will be carried out.
D. Service Flow: Provide a chart/diagram on the flow of operations or the
procedures that will be followed in serving the customers.
E. Utilities: Discuss the basic utilities that will be needed in the business
including their monthly and annual cost.
F. Equipment: Shows details of the cost of equipments needed in the business
including their cost and suppliers
G. Furniture and Fixtures: Shows the furniture and fixtures needed in the
business including the quantity and estimated cost.
H. Waste Disposal: Discusses how proper waste management will be
observed and practiced in the business. Discussion shall be in narrative form
and through charts.

CHAPTER IV (FINANCIAL STUDY)

 In this chapter, the authors would try to show the different financial
statements of the business which are also expected to be projected for
up to five (5) years. This will also include the major assumptions used in
the conduct of the study.
A. Major Financial Assumptions: Contains information as to the major
assumptions used in the study
B. Proposed capital contribution: Shows how capital contribution would be
divided among the members/owners of the business.
C. Total Project Cost: Shows the computation of the total cost of the project
D. Pre-Operating Cash Flow: Shows the computation for the pre-operating
cash flow of the business which can be determined by getting the amount
for:
a) Cash flow from operating activities
b) Cash flow from investing activities
c) Cash flow from financing activities
E. Pre-operating Balance Sheet
F. Projected income Statement
G. Projected Balance Sheet
H. Projected Statement of Cash Flow
I. Statement of Changes in Equity

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J. Schedule of Profit Distribution

K. Schedule of Accumulated Depreciation
L. Schedule of Salaries and Wages Distribution
M. Consumption Schedules
N. Notes to Financial Statement
a) Salaries and wages
b) Mandatory benefits
c) Depreciation for building
d) Depreciation for equipment
e) Depreciation for furniture and fixtures
f) Utilities expense
g) Revenue and cost of sales
O. Financial Statement Analysis
P. Break-even Analysis

Exercise 1

Direction: Refer to the Google Class Exercise 1 folder, you may submit to the folder
as a file (.doc or pdf form). The questions you will be similar questions found in
Google Class folder. Copied answers will have corresponding deductions.

1. In your own words, what is a feasibility study?

2. As a business student, why is it important for you to learn on how to conduct
a feasibility study?
3. Is feasibility study only for when you are creating a new business? Yes or No,
justify your position. Provide examples to get maximum points.
4. Provide 5 cases (related to business or management) wherein a feasibility
study is conducted
5. Is it important to incorporate each part of the feasibility study? Yes or No.
Justify your position
6. Which one should you do first, a business plan or feasibility study? Explain

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UNIT II
MARKET FEASIBILITY

INTRODUCTION

The most essential research among the detailed studies is the market
feasibility study. Market research is necessary for the rest of the feasibility studies;
without one, it is difficult to go to the comprehensive feasibility study. If the market
feasibility study's result is negative, you cannot proceed to the next step or
procedure; nevertheless, there are other options: (1) Expand the scope of the market
analysis to incorporate other market elements that were not previously considered
(e.g. find other markets were not included in the study to increase sales and thus
increase cash flow); (2) Look for additional investment opportunities in order to
discover a new project. That market analysis was prepared to attain and ensure
some of the project's primary objectives, which cannot begin without defining these
goals in broad terms.

Any coordinated attempt to obtain information about target markets or

customers is referred to as market research. It's a crucial part of the feasibility
analysis. Market research is one of the most important tools for staying ahead of the
competition. Market research is useful for identifying and analyzing market needs,
market size, and competition. Market-research approaches include both qualitative
and quantitative procedures, such as focus groups and in-depth interviews, as well
as customer surveys and secondary data analysis.

LEARNING OUTCOMES

After learning this chapter, you will be able to:

1. Explain what is SWOT analysis and how it is conducted
2. Identify what constitutes market demographics
3. Apply marketing analysis through an actual conduct via survey
4. Discuss the business environment and conduct the various analysis in
understanding the business environment
5. Familiarize with the different marketing strategies and relate to its applicability
to the local setting
6. Design and write a market feasibility study

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LESSON 1

SWOT ANALYSIS

SAMPLE ACTIVITY

Recall on your previous lessons on the use of SWOT Analysis. Without browsing the
next pages of the lessons, try to guess on which box should each statement below
belongs to.

Direction: Make your own SWOT matrix, then analyse the words in the box and
identify to which element it best describes (S, W, O, or T).

At the end of the lesson, you should be able to review your answers and correct your
work. Good job, pat on the back for learning how to do the SWOT analysis correctly.

Pricing Legal Labour Union High Marked-up

disputes Pricing
Skilled Employee Booming Business Strong
Environment Management Team
Eco-friendly Good Location Increase in Good Customer
Government Taxes Service
High Shipping Fee Unskilled workers High-tech Well-made
equipment and Products
machineries

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SWOT Analysis

 Is acronym that stands for Strength, Weakness, Opportunity, and Threat.

 A SWOT analysis assists you in determining your organization's strengths
and weaknesses (S-W), as well as larger opportunities and threats (O-T).
 Gaining a more complete understanding of the situation aids in both
strategic planning and decision-making.
 Although the SWOT analysis was created for business and industry, it is
equally applicable to community health and development, education, and
even personal growth.
 SWOT analysis is not the only technique available. Comparing it to the
other assessment tools in the Community Tool Box will help you
determine whether this is the best approach for your situation.
 The simplicity and applicability of this method to a variety of operational
levels are its strengths.

WHEN SHOULD YOU APPLY SWOT?

A SWOT analysis can be beneficial at any stage of an endeavor. It could be used for
a variety of purposes, including the following:

1. Investigate new initiatives or potential solutions to problems.

2. Decide on the best course of action for your initiative. Identifying your
opportunities for success in the context of your threats to success can help
you make more informed decisions.
3. Determine the areas that are amenable to change. If you are at a crossroads
or turning point in your life, a self-assessment of your strengths and
weaknesses can reveal both priorities and opportunities.
4. Adjust and refine plans as necessary during the course of the project. A new
opportunity may open up new avenues, while a new threat may close down
an existing one.
5. SWOT analysis is also an effective tool for communicating about your
initiative or program and for organizing data gathered through studies or
surveys.

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WHAT ARE THE ESSENTIAL ELEMENTS OF A SWOT ASSESSMENT?

 A SWOT analysis is used to determine an organization's strengths,

weaknesses, opportunities, and threats
 Bear in mind that the purpose of a SWOT analysis is to identify positive forces
that work in concert with one another and potential problems that must be
identified and possibly addressed.

The SWOT may be structured in several ways:

Take a look at the following examples from Community Toolbox

(https://ctb.ku.edu/en/table-of-contents/assessment/assessing-community-needs-
and-resources/swot-analysis/main)

Structure 1

If a more ad hoc structure aids in brainstorming, you can group positives and
negatives to generate a more holistic view of your organization and its external
environment.

Structure 2

Structure 3

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The third option for structuring your SWOT analysis is presented below, and it may
be appropriate for a larger initiative requiring detailed planning. This "TOWS Matrix"
is based on Fred David's text Strategic Management. STRENGTHS

David provides an example for Campbell Soup Company that focuses on financial
objectives but also demonstrates how to pair the items in a SWOT grid to develop
strategies. (This is an abbreviated version of the chart.) STRENGTHS

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Additionally, this example demonstrates how threats can transform into opportunities
(and vice versa). Due to the limitations of tin cans (which are not biodegradable),
there is an opportunity for innovation in the development of biodegradable
containers. There are several formats for conducting a SWOT analysis, including a
simple SWOT form for prompting analysis, but regardless of the format, do not be
surprised if your strengths and weaknesses do not precisely match your opportunities
and threats. You may need to refine, or you may simply need to examine the facts
more closely or from a different angle. Patterns will undoubtedly emerge from your
chart, list, or table.

IDENTIFYING YOUR INTERNAL FACTORS:

WEAKNESSES AND STRENGTHS (S, W)
 Your resources and experiences are considered internal factors. Consider the
following general areas:

1. Human resources - employees, volunteers, and board members - as well as

the target population
2. Physical assets - your location, structure, and equipment
3. Financial - grants, funding agencies, and other revenue sources
4. Activities and processes - the programs and systems that you use

EXTERNAL FACTORS ANALYSIS: OPPORTUNITIES AND THREATS (O, T)

1. Perspectives on future trends in your field or culture

2. Local, national, or international economies
3. Sources of funding - foundations, donors, and legislatures
4. Demographics - changes in the age, race, gender, and culture of the people
you serve or the area in which you live
5. The surrounding physical environment (Is your structure located in a
growing section of town? Is the bus company considering route reductions?)
6. Legislation
7. Events on a local, national, or international scale

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HOW TO CONDUCT SWOT ANALYSIS?

The steps involved in conducting a

SWOT analysis are as follows:

1. Appoint a leader or group

facilitator who possesses
strong listening and group
process skills and is capable
of keeping the group on
track.
2. If your group is large,
designate a recorder to assist the leader. To record the analysis and
discussion points, use newsprint on a flip chart or a large board. You can re-
record in a more polished manner later to share with stakeholders and to
keep current.
3. Introduce the SWOT analysis to your organization and explain its purpose.
This can be as straightforward as asking, "Where are we, and how can we
get there?" If time permits, you could run through a brief example based on a
common experience or well-known public issue.
4. Allow all participants to introduce themselves, depending on the nature of
your group and the time available. Then segment your stakeholders. If your
retreat or meeting brings together several groups of stakeholders, ensure that
the small groups are mixed to ensure a diversity of perspectives and that
participants have an opportunity to introduce themselves.
5. The size of these breakout groups is determined by the size of your entire
group – they can range from three to ten people. If the size increases
significantly, some members may be unable to participate.
6. Assign a recorder to each group and provide each with newsprint or a dry-
erase board. Instruct them to create a SWOT analysis in the format you
specify—a chart, columns, a matrix, or even a separate page for each
qualitative variable.

To learn more about SWOT Analysis, you may try to read the following references:

David, F. (1993). Strategic Management, 4th Ed. New York, NY: Macmillan

Publishing Company. 
Jones, B. (1990). Neighborhood Planning: A Guide for Citizens and Planners.
Chicago and Washington, DC: Planners Press, American Planning Association

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LESSON 2

MARKET DEMOGRAPHICS

Image Source: Inside Manila

Question:

1. What is in the picture?

2. What do you think is the age group being catered to by this product?
3. Do you think it is important for a business to understand who they
are primarily selling to? Why?

Guiding Questions:

1. What is a target market?

2. What is market targeting?
3. What is a consumer behaviour?
4. What are the characteristics of a consumer behaviour?
5. What are the activities concerned with consumer behaviour?
6. As marketers and future entrepreneurs, why do we have to understand how the
behaviour of the consumer?

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MARKET DEMOGRAPHICS

 A demographic refers to
a subset or segment of
the population, such as a
gender, an ethnic group,
or individuals born during
a particular time period.
Individuals can be
classified according to
their social class or
income level, their
location, their climate (desert or tropical), their language, and a variety of
other characteristics that enable them to be classified as a group.
 A market demographic is a segment of the population that is likely to
purchase or use a product, and these are the individuals targeted by
marketing efforts. Often, this is not as straightforward as focusing on a single
segment of the population, such as women or the wealthy.
 Market demographics are frequently quite complex, as no one purchases
or uses everything! Example: Women between the ages of 24 and 30 who
have completed college and own a home are an example of a market
demographic.

Market Demographics includes the following:

1. Current Market Condition

2. Target Market
3. Geographical Location

Current Market Condition

 The section of a marketing plan that describes the overall situation of the
market and a company's position in it.
 Example: If you are planning to put up a bakery in your town, you have to
make prior research on how many bakeries already exist. How many people
buy bread, or how is the consumption pattern of your potential customers.
 You have to know your potential share of the market. Look at the formula
for market share below.

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Image Source: eduCBA

Market Size

 Your market size, or addressable serviceable market, is the maximum

amount of revenue you can produce by offering your products or services to
the possible clients who would profit genuinely from purchasing your
solutions. This metric enables you to accurately assess your business's
growth potential
 That is why it is critical to determine the most revenue you can create by
selling your products or services to the people who would actually benefit
from purchasing your solutions. This figure is referred to as the market size or
serviceable addressable market, and it can be used to accurately estimate
your business's growth potential.

How to compute for your market size

1. Compile a list of all possible customers who would be a suitable fit for your
firm.
2. Multiply that figure by the market's average annual revenue for these
categories of consumers.

Image Source: Forbes

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How to estimate your potential market (with examples and computations)

https://learn.marsdd.com/article/how-to-estimate-market-size-business-and-
marketing-planning-for-startups/

Market Positioning

 Before you can design an effective brand for your firm, you must first
understand its market position (or product, or service).

Market position is determined by three primary tasks:

1. Determine your point of distinction. Your distinguishing characteristics are

what differentiate you from your competitors and attract clients to your
product.
 Attraction: Provide customers with values and attributes they actually
desire or require.
 Distinction: Provide clients with values and benefits that they can
obtain only by interacting with your business or purchasing your
goods.

2. Determine which consumers are the most valuable to you.

 Concentrate on the market segment that you service the best. Rather
than attempting to please everyone in every manner, successful
brands delight a select group of people — a specified sector of the
market — in extraordinary ways through the distinctive and relevant
features and experiences they offer.

3. Determine your position in a competitive landscape. Consider how your

solution fits into your competitive landscape, taking into account

Target Market

 A target market is a group of potential customers to whom a business would

like to sell its goods and services.
 A target market is a segment of a product or service's overall market.
 A target market's consumers have comparable features, such as purchasing
geography, purchasing power, demographics, and incomes.
 Identifying the target market is a crucial stage in developing a marketing
strategy for any business. A business could lose a lot of money and time if it
doesn't know who its target market is.

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 For example: Target market for Diapers are babies or sometimes adult, target
market for make-up, women between the ages of 18-60 or could still be
segmented according to age groups and economic means (high-end brand
for make-up would cater for working and professionals with ages 25-60, lower
end make-up would cater to age group 15-30)
 The use of marketing segmentation strategies would be helpful in
analysing your target market
 Who is the target market for milk tea? Teenagers to young adults

Geographical Location
 Geographic segmentation is primarily about classifying consumers
according to their geographic location.
 Geographic segmentation is used when a user's location is likely to
have an effect on their interactions with a brand, their purchasing
behavior, or their consumer wants and needs.
 Geographical data, like demographic data, is typically objective. This
means that it is founded on factual information about the individual.
 A marketer can use this information to segment and target individuals
based on their location's environment, and determine whether to advertise
lightweight raincoats or strong umbrellas.
 Geographic information about consumers can be extremely important,
if not critical, to marketers attempting to target the appropriate
demographics.
 You may be wondering... does location really have that much influence on
how or what is advertised to an individual? To that end, the answer is yes.
Because geographic segmentation comprises five critical areas that are
critical to market success. And that is precisely what we are going to do
immediately.

Five Critical Aspects of Geographic Segmentation:

1. Location
 Geographic segmentation encompasses more
than a user's country of origin. Additionally, it
applies to global regions, as well as many
states, counties, cities, and neighborhoods
 Geographic segmentation benefits both large
and small enterprises. Geographic

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segmentation is a technique used by large firms with international

markets to discover and address the diverse needs of consumers in
distant areas. While small businesses profit from concentrating their
marketing efforts on certain areas of interest, avoiding superfluous
expenses

2. Urbanicity
 This takes into account the
individual's location, whether
urban, suburban, exurban, or
rural. Urban refers to urban
areas, suburban to places on
the outskirts of the city, exurbs
to areas farther out of the
suburbs, and rural to rural
areas
 To illustrate the potential disparities in the wants of clients with varying
urbanicities, Survey Gizmo provides the excellent example of a bicycle
firm: Suppose this cycling company wishes to market its products to
residents of both urban and rural locations. To accomplish this,
geographic segmentation would be their first – and possibly only –
port of call. Their segmentation research is likely to reveal that people
who live in cities like lightweight bikes, as the frame's light weight and
small tyres enable the biker to maneuver easily through traffic. Rural
cyclists, on the other hand, may select strong, heavy-duty bikes with
thick tyres that are ideal for tackling mountains and harsh terrain.
 Additionally, urbanicity takes into account an area's population
density, which is critical for firms attempting to forecast whether their
products will be in high or low demand. For instance, high-density
cities such as New York are likely to have a higher demand for fast-
food products than rural places. As a result, the marketing methods
implemented at each location will be completely unique.

3. Climate
 Climate change is a significant factor that marketers must consider.
This is a critical part of geographic segmentation, as the products and
services pertinent to each climate are likely to be somewhat distinct.

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According to National Geographic, there are normally five distinct

climate groupings, each of which is further subdivided. They are,
without further ado, the following:
 Tropical
 Dry
 Mild
 Continental
 Polar
 Tropical climates are classified into three subgroups: wet, monsoon,
and both wet and dry. Tropical regions are unquestionably one of the
climate groupings with the most harsh conditions. However, if you
work in the umbrella industry and market to this climate, you will never
be out of work
 Mild, or temperate, regions, as the name implies, have a more
pleasant climate. As is the case with the traditional Mediterranean
climate, which features hot summers and cool, rainy winters.
Marketing to this climate may be slightly easier due to the
predictability of the seasonal weather.
 Polar climate zones exist around the Arctic Ocean, Greenland, and
Antarctica. Alert, Canada, can experience temperatures as low as
-30°C in the dead of winter and as high as roughly 6°C in the summer.
As a result, it's reasonable to say that it's pretty cold almost all of the
time.
 Individuals who live in colder climates often have different
requirements than those who live closer to the equator.
 Therefore, if you are a clothing manufacturer or a company that sells
outdoor clothing, geographic segmentation in polar areas will be rather
simple. As it is reasonable to expect that shoppers in these areas are
eager to don those ultra-cozy garments

4. Culture
 Cultural distinctions and preferences have a significant impact in
geographic division. This is mostly because culture is not simply
defined by the country in which an individual resides. Religion,
communication, the environment, and agreed upon social behaviors
and standards all contribute to the formation or development of

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culture. Additionally, cultural tastes impact our values, ideals, and,

frequently, our overall identities.
 Culture can influence the activities we participate in, the music we
listen to, and the cuisine we consume. Have you ever pondered why
or how McDonald's is so successful in the United States and abroad?
Whichever city you visit in any region of the world, you're going to
come across a McDonald's.
 McDonald's restaurants are located in 101 countries. Over 36,000
eateries worldwide serve 69 million customers daily.
 However, if you expect to constantly receive the things you're
accustomed to, regardless of which region of the world you're in, think
again. McDonald's is an expert in segmenting and targeting
geographic areas. They've recognized that not every country or
culture enjoys the same meals, and hence adjust their offerings to
each market into which they expand. In Japan, for instance, you can
get a Teriyaki burger. India offers a McSpicy Paneer burger made with
the traditional Indian cheese paneer, while New Zealand offers the
famous New Zealand Georgie Pie.
 Example: Geographic segmentation of McDonald's India McSpicy
Paneer

5. Language
 While English is the world's most widely spoken language, not every
country is bilingual or wishes to read advertisements in their second
language. As a result, language has an impact on things like labeling,
digital communication, and promotional material.
 It's critical for a global product to take linguistic differences carefully
and to ensure that the translation is precise and accurate.
 According to studies, language is the second most important way for
exporters to segment the world. Hurree is a platform for segmentation.
 Extensive geographic segmentation and research can undoubtedly be
the difference between brand success and a humiliating translation
failure.

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LESSON 3

MARKET ANALYSIS

Market Analysis

 A market analysis can assist you in determining ways to improve your

business's competitiveness and customer service.
 A market analysis is a comprehensive examination of a market within a
particular industry.
 There are numerous advantages to completing a market study, including
lowering your organization's risk and informing your business decisions more
effectively.
 Conducting a market analysis entails seven steps.
 Conducting a Market analysis can be very beneficial for business owners who
wish to understand why and how to perform a market study.
 Understanding your consumer base is a critical first step toward business
success. Without a clear understanding of who your customers are, what they
want, and how they want to purchase from you, your firm may struggle to
develop an effective marketing strategy. This is where market research
comes into play.

What does market analysis entail?

A market analysis is a comprehensive examination of a market within a particular

industry. This analysis will examine the market's dynamics, including volume and

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value, possible client segments, purchasing patterns, and competition, among other
aspects.

A comprehensive marketing analysis should address the following points:

 Who are my prospective clients?

 What are the purchasing habits of my customers?
 What is the size of my target market?
 What price range are my buyers prepared to pay for my product?
 Who are my primary rivals?
 What are the advantages and disadvantages of my competitors?
 A market analysis is a comprehensive examination of a market within an
industry.

Market Analysis should answer the following questions:

1. Desire: Is there interest in your product or service?

2. Market size: What is the estimated number of people who would be
interested in your offering?
3. Economic indicators: What is the income distribution and labor force
participation rate?
4. Location: Where do your clients live, and how far can your business travel?
5. Market Saturation: How saturated is the market? How many comparable
solutions are already available to consumers?
6. Pricing: What are potential buyers willing to pay for these alternatives?

Advantages of Conducting a Market Analysis

 A marketing study can assist mitigate risk, spot developing trends,

and forecast income. You can do a marketing study at various phases
of your organization, and it may even be helpful to conduct one annually
to stay current on any significant market developments.

 A thorough market study is typically included in a business plan, as it

helps you gain a better understanding of your audience and competitors,
allowing you to develop a more targeted marketing approach.

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1. Risk reduction: Understanding your market may help you mitigate risk in
your business by providing insight into major market trends, key industry
players, and what it takes to succeed, all of which will inform your business
decisions. Additionally, you can undertake a SWOT analysis to assist you in
further protecting your organization. A SWOT analysis evaluates a business's
strengths, weaknesses, opportunities, and threats.

2. Targeted products or services: When you have a strong grip on what your
clients want from you, you are in a much better position to serve them. When
you understand who your clients are, you can personalize your business's
services to their specific needs.

3. Emerging trends: Often, staying ahead in business requires being the first to
identify a new opportunity or trend, and employing a marketing analysis to
remain current on industry trends is an excellent method to position yourself
to capitalize on this information.

4. Revenue projections: A market prediction is a critical component of the

majority of marketing assessments, since it forecasts future market size,
characteristics, and trends. This provides an indication of the profits you can
anticipate, enabling you to change your business plan and budget
accordingly.

5. Benchmarks for evaluation: It can be tough to quantify your business's

success in terms of pure numbers. A market study establishes benchmarks
against which you can measure your company's performance and how well it
compares to competitors in your industry.

6. Context for prior errors: Marketing analytics can help you explain past
errors or industry oddities in your firm. For instance, in-depth analytics can
illuminate what factors influenced the sale of a particular product or why a
particular statistic behaved the way it did. This will assist you in avoiding
repeating those errors or encountering similar anomalies, since you will be
able to examine and define what went wrong and why.

7. Marketing optimization: This is where a yearly marketing analysis comes in

helpful – it can inform your continuing marketing efforts by revealing which

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elements of your marketing need improvement and which are functioning well
in compared to other companies in your industry.

How to Perform Market Research

The following are the seven steps necessary to do a market analysis:

1. Establish your objective.

 There are numerous reasons why you might do a market study, such as to
assess your competition or to gain a better understanding of a new industry.
Whatever the reason, it's critical to establish it immediately to ensure that you
stay on track throughout the process.
 Begin by determining whether your objective is internal – such as increasing
cash flow or streamlining business operations – or external, such as obtaining
a business loan.
 The type and extent of research you conduct will be determined by your aim.

2. Conduct market research on the sector.

 It is critical to offer a clear overview of your industry's present situation.

 Include a forecast of the industry's future direction, utilizing indicators such as
size, trends, and predicted growth, as well as ample data to back up your
findings.
 Additionally, you can do a comparative market research to assist you in
determining your competitive edge inside your target market.

3. Define your ideal consumer.

 Conduct a target market analysis to determine who is most likely to want your
product and concentrate your efforts there.
 During your study, you may wish to create a customer profile or persona that
accurately represents your ideal consumer and serves as a model for your
marketing activities.

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 You want to understand the size of your market, who your consumers are,
where they originate from, and what factors may impact their purchasing
decisions by examining elements such as the following:

 Age
 Gender
 Location
 Occupation
 Education
 Needs
 Interests

4. Gain an understanding of your competition.

 To succeed, you must have a thorough awareness of your competitors,

including their market saturation, what they do differently than you, and their
market strengths, shortcomings, and advantages.
 Begin by compiling a list of your primary rivals, then going through the list and
conducting a SWOT analysis of each.
 What advantages does that business possess that you do not? What would
convince a customer to patronize that establishment over yours? Put yourself
in the shoes of the customer.
 Then, prioritize your list of competitors from most to least dangerous, and
establish a schedule for conducting SWOT analysis on your most dangerous
competitors on a regular basis.

5. Compile further information.

 When it comes to marketing analyses, data is your friend - you can never
have too much.
 It is critical that the data you utilize is reputable and accurate, therefore
exercise caution while obtaining your figures.
 The following are some trustworthy sources of business data:

 Philippine Statistics Authority

 Department of Trade and Industry
 National Economic Development Council

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 International Organizations (e.g. FAO, UN)

 Journals of commerce
 Conduct your own SWOT analysis.
 Market research studies or questionnaires

6. Conduct an analysis of your data.

 After gathering as much information as possible and verifying its accuracy,

you must evaluate the data to make it valuable to you.
 Divide your study into categories that make sense to you, but make sure to
include sections on your objective, target market, and competition.

These are the primary components of your research that should be included:
 A snapshot of the size and growth rate of your industry
 The predicted market share percentage of your business
 A forecast for the industry
 Consumer purchasing patterns
 Your anticipated growth
 How much money are customers prepared to pay for your goods or service?

7. Apply your analysis.

 Once you've completed the research necessary to construct a market study,

it's time to put it to work for you. Internally, identify areas where your study
and insights can help you enhance your firm.
 Have you observed other organizations using practices that you wish to
replicate in your own? Are there ways to improve the effectiveness of your
marketing strategies?
 If your study was undertaken for external purposes, organize your research
and data into an easily readable and digestible document to make sharing
with lenders easier.
 Retain all of your data and research for future analyses, and consider creating
a calendar reminder each year to stay current with your market.

Read more on this topic

https://www.thebusinessplanshop.com/blog/en/entry/market_analysis_for_business_
plan

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LESSON 4

THE BUSINESS ENVIRONMENT

Image source: Business Jargons

Business Environment is the sum or collection of all internal and external factors
such as employees, customer needs and expectations, supply and demand,
management, clients, suppliers, and owners, government activities, technological
innovation, social and market trends, and economic changes, among others.

 These elements have an effect on the way a business functions and

operates, whether directly or indirectly. The sum of these factors has an effect
on the environment and situation of businesses or business organizations.
 The business environment aids in discovering business opportunities, utilizing
valuable resources, planning, and ultimately improving the business's overall
performance, growth, and profitability. There are several sorts of business
environments, including micro and macro environments.
 The term "Business Environment" refers to a collection of all individuals,
entities, and other elements that may or may not be controlled by the
organization but have an effect on its performance, profitability, growth, and
even existence.

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Image Source: EduRev

COMPETITIVE ANALYSIS

 Competitive analysis enables you to learn from organizations that are

vying for the same customers as you. This is critical for defining a durable
competitive advantage.
 Your comparative study should include a breakdown of your competitors'
product lines or services, as well as market segments.
 Evaluate the competitive landscape's following characteristics:

1. Share of the market

2. Strengths and flaws
3. Your window of entry into the market
4. Your target market's relevance to your competition
5. Any impediments you may encounter as you join the market
6. Direct or indirect competitors who may have an effect on your success

PORTER’S FIVE FORCES MODEL

 Michael Porter, a professor at Harvard Business School, developed the

technique to assess an industry's attractiveness and potential profitability.
Since its inception in 1979, it has grown to be one of the most widely used
and respected company strategy tools.

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 Porter acknowledged that firms are likely to keep a careful eye on their
competitors, but he urged them to go beyond their competitors' behavior
and consider other factors that could affect the business climate.

Image Source: ResearchGate

The five variables that shape the competitive landscape, and have the potential
to undermine profitability.

1. Rivalry in the marketplace.

 This section examines the quantity and strength of your opponents. How
many adversaries do you face? Who are they, and how do their products
and services compare to yours in terms of quality?
 Where competition is fierce, businesses can win clients through
aggressive price reductions and high-impact marketing campaigns.
Additionally, in marketplaces with a high number of competitors, your
suppliers and buyers may look elsewhere if they believe they are not
receiving a fair deal from you.
 On the other side, if there is no competitive rivalry and no one else doing
what you do, you will almost certainly have tremendous strength and a
healthy profit margin.

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2. Supplier Influence.
 This is contingent upon the ease with which your suppliers can increase
their prices. How many providers are you considering? How distinctive is
the product or service they offer, and how costly would it be to switch
suppliers?
 The more options you have, the easier it will be to switch to a less
expensive choice. However, the fewer providers there are and the more
your need on their assistance, the stronger their position and capacity to
charge you more. This can have an effect on your profit.

3. Buyer Influence.
 Here, you're determining how easy it is for purchasers to drive down your
prices. How many buyers are there, and what is the size of their
purchases? How much money would they save if they switched from your
products and services to those of a competitor? Are your buyers powerful
enough to impose their own terms on you?
 When you deal with a small number of intelligent clients, they have
greater clout, but your clout increases when you deal with a large number
of customers.

4. Substitution Threat.
 This refers to the probability that your clients may discover a better way to
accomplish what you do. For instance, if you provide a unique software
solution that automates a critical operation, users may opt to perform the
task personally or through outsourcing. A simple and inexpensive
substitute might erode your position and jeopardize your profits.

5. New Entry Threat.

 The ability of people to enter your market can have an effect on your
position. Consider how easy this could be accomplished. How difficult is it
to establish a presence in your business or market? How much would it
cost, and how closely regulated is your sector?
 If it costs little money and effort to enter and compete effectively in your
market, or if your essential technologies are not adequately protected,
rivals can swiftly enter and erode your position.

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DEMAND ANALYSIS

1. Historical Demand: States the demand situation of your

product(s)/service(s); presents the past 5 or 10 demand of your product(s)
indicating your sources/methods of information.
2. Projected Demand: States the demand projection for 5 to 10 years using
projection methods

Historical Demand or Trend Analysis

 Trend analysis is a technique for analyzing statistical data and observed

market behavior over a given time period and generating significant
insights for strategizing and projecting future company plans utilizing this
data.
 It assists in identifying the market's dominating characteristics and the
consumers associated with them.

Image Source: Question Pro

 One of the reasons companies or businesses perform trend analysis is to

have a better understanding of and insight into how the market
reacts, what consumers' major preferences are, and what strategies
an organization should implement.

How may trend analysis be used to improve market research?

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 This is a frequently used strategic tool for analyzing market behavior.

Additionally, it aids in projecting the future and enables a firm to
comprehend the importance of developing a certain product, as well as
improve strategic forecasting.
 This entails gathering pertinent data for pre-defined metrics and
evaluating it to obtain a clear picture of performance behavior over a
specified time period. The data's legitimacy dictates the projection's
accuracy. The greater the accuracy, the more accurate the prediction. an
illustration of trend analysis

The following things should be considered when doing an efficient trend

analysis:

1. What does the consumer require: A firm or organization that knows the
consumer's requirements is more likely to excel at providing the best product for
the consumer. Consumer behavior changes can be detected through periodic
surveys. To acquire reliable findings, the data must be examined.

2. Industry cost considerations: One of the most critical factors that any firm
should examine is market cost fluctuation. Cost becomes relevant if a
comparable product is available on the market at a cheaper price. Consumer
behavior analysis in relation to changing prices is critical for market research.

3. Changing market dynamics: Organizations must examine trends in

product innovation, market competitiveness, operational changes, and
delivery methods. For instance, if sales of a certain product have
decreased despite the fact that all other variables remain constant, it is
essential to do a situation analysis to review the packaging, competitor
products, and accessible alternatives, as well as a rapid innovation check

The advantages of trend analysis

1. Facilitates comparative analysis

 By employing market trend research, analysts can create a well-defined
comparison between two or more organizations over a certain time
period. Additionally, it can be used to compare the company's
performance to that of the industry as a whole.

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 Trend analysis techniques make it easier to determine a firm's strengths

and shortcomings in comparison to other relevant enterprises operating
in the industry. As a consequence, businesses can immediately identify
and address shortcomings.

2. Financial performance evaluation

 Trend analysis can be used to conduct a comparative assessment of the
firm's financial performance across time. This enables management to
make future judgments and adjust their procedures or activities
accordingly. When compared to absolute data, trend analysis is more
effective, assisting senior management in making more informed
decisions.

3. Recognize liquidity positions

 Trend analysis techniques assist analysts and management in
determining the company's short-term liquidity status. Additionally, it is an
excellent tool for determining a firm's long-term solvency condition over
time by utilizing associated financial trend ratios.

4. Measuring the profitability of a business

 Businesses can use market trend analysis to determine their profitability
positions over a specified time period. This can be accomplished through
the use of several commonly used financial trend ratios, such as the
operating ratio, the net profit ratio, and the gross profit ratio.

Projected Demand

Demand Forecasting
 these are the numerous approaches for forecasting future demand,
 Includes the following:
1. Are based on what potential clients say they will do, a)intentions surveys
and b)needs assessments
2. Are based on what clients are expected to do,
a. Expert opinions
b. Eime series analysis (trend projection)
c. Statistical demand analysis

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d. Use of planning standards (coefficients, international, or

interregional data comparisons), and e)market (pilot project)
testing.

Demand Forecasting Technique

1. Intentions and Needs of the populace Assessment

 the process of determining whether and how much the target population
desires the products of a proposed project. In general, it comprises the
collecting of data through field studies in which particular questions about
the outputs of the project under consideration are posed in direct contact
with a sample of the target population. The results of the requirements
assessment can also be utilized to validate the project designer's
assumptions about what the intended beneficiaries want.

2. Statistical Demand Analysis

 Quantifies the functional link between demand level and other demand
factors.

3. Utilization of Planning Standards

 The process of comparing market data from other areas or nations to that
of the project's output in circumstances when local data for the project's
product is limited. * Caution should be given in the region/country
selection process to ensure that the statistics are really similar. To
account for any disparities in demand determinants, levels of
development, terminology utilized, and statistics coverage, among other
things.

4. Market Testing
 More direct technique when potential beneficiaries are unsure of their
preferences, inconsistent in their statements or actions, or when experts
cannot make reasonable assumptions.
 For example, if the planner is interested in the potential demand for a
new rice hybrid that is being considered for national marketing, he may
attempt to undertake pilot marketing in chosen areas.
Source:
https://www.questionpro.com/blog/trend-analysis-vital-efficient-market-research/

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SUPPLY ANALYSIS

 An evaluation of existing supply conditions towards bridging the gap between

the level of supply and the level of demand for the proposed project’s output.

Image Source: Semantic Scholar

Supply Analysis Procedures

1. Identifying Supply Resources

 The analysis of supply resources in terms of output volume, capacity
distribution, service area, and other relevant features.

2. Estimating Past and Present Supply

 Using historical supply estimates and some knowledge of its historical
trends/ fluctuations that may be due to the influence of economic and
social policies, as well as technological changes, on supply
determinants (e.g. the effect of imports constraints, shortages of raw
materials, innovation in productions process, and changes in social
environment.)

3. Projecting Supply
 The approach and concepts are largely identical to those for demand
analysis. Forecasting methodology and factors should be cited. Two
distinct forecasts of supply are produced (with or without the project).
 Both sets should include rated capacity and assumed production
efficiency for the various producers. In the case of project predictions,
the anticipated market should be indicated.

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Demand and Supply Analysis

 Determines whether and to what extent there is a market for the project’s
output of goods and services.

How to Compute for Projected Demand Using Arithmetic Straight Line Method

Year Demand (Quantity)

2020 98,000
2019 72,000
2018 66,000
2017 51,000
2016 43,000

Take the actual demand for last year : 98,000

Less: Demand for 1st year (2016) : 43,000
Difference/Increase : 55,000

Take average increase/decrease over the same number of years in question:

55,000 / 5 = 11,000

Year Demand (Quantity)

2021 98,000+11,000= 109,000
2022 109,000+11,000= 120,000
2023 120,000+11,000=131,000
2024 131,000+11,000=142,000
2025 142,000+11,000= 153,000

How to Compute for Projected Supply Using Arithmetic Straight Line Method

Year Supply (Quantity)

2020 58,000
2019 52,000
2018 46,000
2017 41,000
2016 23,000

Take the actual demand for last year : 58,000

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Less: Demand for 1st year (2016) : 23,000

Difference/Increase : 35,000

Take average increase/decrease over the same number of years in question:

35,000 / 5 = 7,000

Year Supply (Quantity)

2021 58,000+7,000= 65,000
2022 65,000+7,000=72,000
2023 72,000+7,000=79,000
2024 79,000+7,000=86,000
2025 86,000+7,000=93,000

Demand and Supply Analysis

Year Demand Supply Demand- Share of

Supply Gap Unfilled
Demand
2021 109,000 65,000 44,000 40.36%
2022 120,000 72,000 48,000 40%
2023 131,000 79,000 52,000 39.69%
2024 142,000 86,000 56,000 39.43%
2025 153,000 93,000 60,000 39.21%

Column1

Direct Competitors 39%

Indirect Competitors 24%
Chuchu Bichu 26%
Unfilled Demand 11%

 Total Demand (100%) will be represented by the whole chart

 Available supply will be represented by 65,000
 65,000 will be divided into supply from direct and indirect competitors

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 A portion from the gap of 37,583 (100%) will be taken to represent the business’
market share (example: 70% of the gap which is equivalent to 26,308 and the
remaining will still be an unfilled demand)

LESSON 5

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MARKETING STRATEGIES

MARKETING STRATEGY

 Is a business's overarching game plan for attracting and converting

prospective customers to clients of their products or service.
 A marketing strategy includes the company's value proposition, key brand
message, demographic information about its target customers, and other
high-level elements.
 A thorough marketing strategy covers "the four Ps" of marketing: product,
price, place, and promotion

A. PRODUCT STRATEGIES

 A product strategy is derived from the product's ultimate vision. It specifies

the final destination of the product. By establishing a product strategy, you
may direct your product activities.

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Image Source: ProductPlan

Elements of a Product Strategy

1. Who are you trying to sell to?

 Define your ideal client or market. Determine who you are marketing to
and the characteristics of your market.

2. What are you trying to sell?

 Describe how your product will be seen by potential customers in
comparison to competitors' products. Recognize what distinguishes your
goods from the competition

3. What value do you add to the lives of your customers?

 Determine the issues that your product resolves for your clients. You
cannot be everything to everyone in a given market, but you may
contribute to the resolution of specific problems. Create a value
proposition to communicate the value you provide and the benefits your
clients will gain as a result of using your product.

4. How are you going to price your product?

 Indicate how you intend to price the product. Include a description of the
product's perceived value and a pricing model.

5. How will your product be distributed?

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 Describe how you intend to offer your product and how your target market
intends to buy it.

Developing a Product Strategy

 To begin developing your product strategy, identify the market challenges

you wish to answer. This involves:
 Conducting market research,
 Analysing the competition landscape, and
 Determining how you will differentiate yourself.
 Your product strategy will evolve over time as you gain a better
understanding of your market and (if) you decide to explore other
markets. The process of listening to your market and establishing your
product strategy is circular; as you learn more, your product strategy and
the challenges you answer will evolve.
 The following is a basic description of a product strategy. Your product
strategy will be unique and likely lengthier than the five questions above,
but it should adhere to the subject of the five questions.
 We manufacture high-quality kitchen hardware for consumers with
residential kitchens.
 Our consumers are young families in North America that require kitchen
hardware that can withstand the abuse of small children. They are looking
for materials that are both child and eco-friendly.
 Our items are distributed through a retail channel.

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 Our devices are sold individually and are classified as "high-end"

hardware solutions.

The product strategy's strength

 The strength of a product strategy is determined by both what you define

and what you exclude.
 By focusing your product approach on a specific target market, you are
also excluding other markets. This enables your organization to determine
whether projects fall beyond the scope of the product strategy and hence
detract from strategic objectives.

COMMON PRODUCT STRATEGIES

1. Product Image and Description

 The product image refers to the impressions and mental image
connected with the product. It is a collection of beliefs about a particular
product. It denotes the current meaning of the product.
 It may refer to an infinite collection of preceding historical facts, events,
advertising, and objectives that operate in concert to create a mental
image in the audience.
 The trick is to create an image that appeals to our target market. It cannot
be out of sync. For instance, if our image is economical and our target
segment is economical, the two are incompatible.
 Prior to developing a product image, it is critical to identify the facts with
which we want our business to be connected and proceed accordingly.
The product image communicates to the buyer a distinct character for the
product in comparison to its competitors.
 To create a suitable product image, we must properly arrange the
product, so producing an image of the product in the target customer's
head. This will result in appropriate product recognition
 Additionally, the term "product image" may apply to photographs of the
object being sold. These product photos are used by businesses to
promote their wares via posters, advertising, and e-commerce websites,
among other methods. This attracts clients and leaves a lasting
impression on them about the product.

B. ADVERTISING STRATEGIES

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Advertising Strategy
 A means of promoting your goods or service is through advertising.
 Advertising's goal is to reach people who are willing to pay money for
your goods or service. A strategy, on the other hand, is a step-by-step
plan for persuading your customers to select your product and service
over those of your competitors.
 A good advertising approach will give you the best return on your
money. As a result, selecting the best advertising plan to advertise your
products and services is critical. Because people's perceptions vary,
resulting in a change in requirement, the advertising plan that worked for
you in the past does not have to work for you now.

Steps in Creating Advertising Strategies

 The process of developing an advertising strategy is a creative one.
 To build an efficient advertising strategy that maximizes product sales,
you must first understand your business and your target demographic.

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1. Determine the advertising's purpose.

 The first step is to figure out why you're advertising. There are a variety of
reasons why you might want to advertise.
 For example, to enhance sales, advertise your freshly introduced product,
draw foot traffic in the store, increase internet traffic, and raise awareness
of the product's benefits.
 Having a clear understanding of the objective of advertising is a first step
in developing an effective advertising plan. You can choose which media
outlets you want to use to promote your products and services, as well as
how much money you want to spend on your advertising campaign.

2. Define your target market.

 The second, and perhaps most important, stage in developing an effective
advertising plan is to
identify th e audience
you want to reach with
your campaign.
 Knowing who you want
to target improves the
effectiveness of your
advertising campaign.
You'll generate content
that will pique your
target audience's interest.
 Identifying your target audience is more difficult than it appears.
Identifying your target audience is a difficult task. The person who will
eventually buy your product is your target customer.
 Create a profile of the client who will buy your goods to define your target
audience. Next, consider the influence of people in your target customer's
immediate environment, such as family members, coworkers, and friends
who will have an impact on your target customer's decision
 If you're selling vehicles, for example, your target market will be those
who have a steady income. People who have a steady work or manage a
profitable business. These individuals' decisions will be influenced by the
people with whom they work, their friends, their children, and their

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spouse. As a result, remember to target this set of people when

developing an advertising campaign.

3. Determine the magnitude of your advertising budget.

 The next crucial step is to figure out how much money you want to spend
on your advertising campaign.
 Prior to deciding on your advertising plan, you must first determine your
advertising budget. If your strategies don't fit your budget, they'll be
unproductive.
 If you find the perfect plan that matches your budget, low-budget
advertising can sometimes do wonders for your brand.

4. Choosing advertising medium and establishing a schedule

 Following the determination of your product and target audience, the
following stage is to select the medium via which you will communicate
with your audience.
 There are numerous advertising mediums available, including:
a. Newspapers, magazines, pamphlets, posters, banners, and other
print media
b. Website advertising, social media advertising, the internet, email
advertising, YouTube commercials, and television adverts are all
examples of digital media.
c. Use of direct mail
d. People's recommendation
e. Billboards, as well as advertising on public transit such as buses
and taxis.
f. Attend trade shows.
g. Radio commercials

 Each of these advertising channels has its own set of benefits and
drawbacks. You can apply your approach using one or more advertising
mediums.
 If your target demographic is older, for example, advertisement mediums
such as television ads and newspaper ads will be the best choice for
promoting your product.
 On the other hand, if you're targeting teenagers, you should use social
media advertising, YouTube commercials, and the internet to reach them.

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Because most teenagers nowadays choose to spend their time on these

platforms rather than watching television or reading newspapers.

5. Execution of the advertising campaign

 The next stage is to put your marketing strategy into action as planned.
An advertising campaign is the process of putting advertising tactics into
action.
 Although an advertising campaign is distinct from an advertising strategy,
the latter serves as a set of parameters for the creation of an advertising
campaign.
 As it is critical for achieving uniformity across the board. Everything in
your advertising campaign, including music, artwork, and imagery, should
be in accordance with the advertising plan. When you're advertising your
product across many platforms, it's critical to maintain consistency. Make
sure you use a single tagline, image, or music track to ensure that your
marketing is consistent across all platforms.

6. Evaluate the advertising's efficacy

 The final step is to assess the success of your marketing approach. The
return on investment that you get from implementing an advertising plan
will determine whether or not your advertising strategy was successful.
 Check to see whether your goal has been met. Check how successful
your advertising plan was in obtaining the desired figure, for example, if
you wanted to increase sales.

Different types of marketing tactics

1. Advertisement that is specific to the season

 This form of advertising approach is used to promote seasonal
products or to promote your company or products during a specific
season.
 Several large corporations swear by this marketing strategy and
promote their products right before the start of the season and
throughout the season.
 This advertising method is advantageous since it yields a high return
on investment. Because businesses invest money on advertisements

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only when there is a market need for their items, rather than spending
money on adverts all year.
 Companies like Amazon and Flipkart, for example, run significant
advertising during important festivals like Diwali, Dussehra, and
Christmas, resulting in millions of dollars in income. Seasonal
advertising is not just utilized by large corporations to attract clients,
but it is also often used by small enterprises.

2. Advertising via social media

 Companies employ social media advertising as one of their most
popular marketing tactics for promoting their products and services as
well as keeping in touch with their clients. Companies develop social
media handles on various social media platforms such as Facebook,
Instagram, and others, and use these platforms to disseminate
information about their businesses. People can use these platforms to
not only learn about firms' products and services, but also to interact
with the marketplace.
 Companies use these platforms to launch their advertising campaigns
and enlist the support of social media influencers to promote their
products. For example, Olay uses social media influencers to promote
their face cream, while mobile phone firms like Redmi and Oppo use
social media influencers to promote their current models of phones
 Small and large businesses alike have turned to social media as their
primary advertising platform. Businesses are not obliged to spend
millions of dollars on advertising when employing social media
advertising methods, as they are when using other advertising
platforms.
 Furthermore, they may use social media advertising to learn about
people's reactions to their advertising campaign and make
modifications based on their feedback.

3. Advertisement of ownership
 You make your customers engage in your marketing campaign when
you use an ownership advertising strategy. Coca-Cola, for example,
invited customers to post selfies with a coke bottle on social media
and to tag them in their photos.

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 In this way, they indirectly persuaded people to buy their product, and
by posting it on social media, they encouraged customers to tell their
friends and family about it.

4. Creating a model for the advertising approach

 When firms utilize celebrities or well-known people to promote their
products, this is known as the modeling advertising technique. It's a
good marketing tactic because the superstar's fans will be influenced
to buy your product.

5. Promotional strategy for utilities

 The utility advertising strategy is a one-of-a-kind marketing technique
in which you promote your goods by assisting people in achieving
their objectives.

6. Advertising approach for Evocation

 People's attention is drawn to this form of advertising by invoking
powerful emotions in them. By connecting with people, you can project
a positive image of your company and product.

C. PRICING STRATEGY

Pricing Strategy

 Is a method of determining a
product's or service's
competitive price.
 This method is used in
conjunction with the 4P
strategy (products, price,
place, and promotion), as well
as economic patterns,
competition, market demand,
and product characteristics.
 This strategy is one of the
most important components

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of the marketing mix because it focuses on creating and increasing revenue

for a firm, which eventually leads to profit.
 Understanding market conditions and unfulfilled consumer demands, as well
as the price that the consumer is ready to pay to meet those desires, is the
ultimate approach to succeed in a product or service pricing plan.
 Remember that the company's ultimate purpose is to maximize profit while
competing and maintaining the competitive market. However, in order to
maximize revenues while still keeping customers, you must select the
appropriate price plan. The right plan will aid you in achieving your company's
goals.

Pricing Strategies in Marketing

1. Penetration Pricing or Market Share Pricing

 These
techniques
are used by
a few
organizations
to join the
industry and
obtain
market
share. Some businesses either offer a few services for free or keep their
product prices low for a limited time, such as a few months.
 Companies choose this method just to establish their consumer base in a
specific market.
 For example, in order to capture or acquire the largest number of
customers in a specific market, France Telecom gave out free telephone
lines to consumers. Similarly, Sky TV provided fre e satellite dishes in
order to create a market for them. This provides the businesses with a
head start and a customer base.
 Similarly, a few organizations keep their product costs low as an
introductory offer, which is a technique of presenting themselves to the
market and building a customer base. Similarly, when businesses wish to
market a high-end product or service, they boost the pricing of those
items and services for a limited period of time.

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2. Low-cost price or no-frills pricing

 The costing These
products' strategies are
described as "no frills
low prices," in which a
product's promotion
and marketing costs
are kept to a
minimum.
 Economy pricing is set
for a period of time during which the corporation does not invest additional
resources in marketing the product and service.
 For example, on budget airlines, the first few seats are sold for extremely
low prices in order to fill the planes; the seats sold in the middle are
economy seats; and the seats sold at the end are priced very high as part
of the premium price strategy. During a recession, this tactic results in
more economy sales. Budget pricing of a product or service can also be
referred to as economy pricing.

3. Employing Psychological Pricing Techniques

 Psychological pricing strategies are a method of eliciting a customer's
emotional response rather than his intellectu al response.
 For example, instead of charging Php 100 for a product, a corporation
may charge Php 99. The product costs less than Php 100. This gives the
impression that the product is inexpensive.
 For most consumers, price is a deciding factor in whether or not to
purchase a product. They don't look at anything else that drives the
product's motivation.
 Even if the
consumer is
unfamiliar
with the
market, he
will consider
price while
making a
purchase. For

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example, if a 100 gm ice cream costs Php 100 and a 200 gm ice cream
costs Php 150, the consumer will choose the 200 gm ice cream for Php
150 because he perceives profit in buying the ice cream at a lower price,
regardless of the ice cream's quality. Consumers are unaware that pricing
is also a factor in determining quality.

4. Product Line Pricing Strategies

 Pricing a single product or service as well as a range of items is referred
to as product line pricing. Let's look at an example to assist us
comprehend this. Common example is the product line of Apple iPhone
Products.

  This strategy represents the strategic expense of making a product

popular and eaten by consumers with a reasonable increase over the
product's or service's range. In another example, if you buy a bag of chips
and a bag of chocolate separately, you will pay a different price for each
product; however, if you buy b oth in a combination pack, you will pay a
lower price for each, and if you buy both in a larger number, you will pay
even less.
 Larger pack production and marketing is more expensive for product
manufacturers because it does not yield a high profit margin; yet, they do
so to attract more customers and sustain their interest in their products.
Manufacturing smaller packs and lower quantities, on the other hand, is
more advantageous and generates more profit for the product's
manufacturer.

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5. Optional Product Pricing

 It is a general rule that whenever a company lowers the price of a product

or service, it will also raise the price of its other optional offerings.
 Let's look at a very basic and common example of a low-cost airline. Their
airfare prices are low, but they will charge you extra if you want to book a
window seat; if you want to travel with your family and want to book an
entire row together, you may have to pay extra charges according to their
guidelines; and if you have too much luggage to carry, you will have to
pay extra charges; in fact, you will have to pay extra charges even if you
have enough luggage to carry. You could argue that even if the air fee is
reasonable, you will wind up spending more for the additional but
necessary services that you will use while traveling.

6. Captive Product Pricing

 Captive products have components that complement the main product,

making it useless or ineffective without it.
 For example, an inkjet printer will not work and will be worthless without
its cartridge, and a plastic razor will be worthless without its blades. If a
corporation manufactures an inkjet printer, it must also produce cartridges
for it, and if it manufactures a plastic razor, it must also manufacture
blades for it. Because any other brand's cartridge will not fit into the inkjet
printer, and any other brand's blade will not fit into the plastic razor. The
consumer has little choice but to purchase complementary products from
the same manufacturer. In either case, this boosts the company's sales
and profit margin.

7. Promotional pricing
 These days, promotional pricing is
fairly common. It can be found
practically anywhere. Another
extremely important and be neficial
method for advertising a product is
pricing. These promotion offers
can include discounts, gift or
money coupons or vouchers, buy one, get one free, and so on.

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 Companies use these methods to market new and existing products.

Although it is an old concept, it has proven to be one of the most effective
pricing schemes to date. The consumer considers buying the goods and
service for the offer that the consumer receives, which is the reason for its
success.

8. Geographic Location-Based Pricing

 Companies adjust or change the price of a product for simple reasons
such as geographic location. Why does the location of the market
influence the product's price? There are a variety of causes for this,
including product scarcity or raw material shortages, shipping costs, tax
differences across nations, currency rate differences, and so on.
 Consider the following pricing strategies: when a few fruits are not
available in a country, they are imported from another country; these fruits
are exotic fruits, and they are also scarce, which raises their value in the
country they are imported to; scarcity, the shipping cost of the imported
product, as well as its quality, raise its price, whereas it is much cheaper
where it was originally gr Similarly, in order to increase income, the
government imposes high taxes on a select products, such as gasoline or
petroleum products, and alcohol; as a result, these products are more
expensive in a few countries or areas of the country than in others.
Geographic location has a significant impact on a product's pricing
strategy, since the corporation must evaluate all factors before setting a
price. As a result, the pricing must be precise and appropriate.

9. Product Value Pricing

 Let me first define value pricing: value
pricing is the practice of lowering a
product's price in response to external
variables that may effect sales, such as
competition or a recession; value pricing
does not imply that the company has
added something to the product or
enhanced its worth.
 When a corporation is concerned about
variables such as competition or the recession influencing sales and
profitability, value pricing is considered.

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 McDonald's, for example, has begun offering value meals to its customers
as a result of increased competition from rival fast food businesses. They
provide a meal or a bundle of a few things at a reduced price so that the
customer is emotionally satisfied and continues to purchase their
products.

10. Premium Product Pricing

 This method, on the other hand, operates in the opposite direction.
Because of their distinctive branding approach, premium products are
more expensive.
 A high price for premium products gives the producer a significant
competitive advantage because it ensures them that they are safe in the
market due to their relatively high price. Valuable jewelry, precious
stones, lavish services, cruises, luxurious hotel rooms, corporate air
travel, and other products and services can all be charged at a premium
price. The higher the price, the higher the perceived value of the goods
among that demographic.

D. PROPOSED MARKETING PROGRAM

Your proposed marketing program should be detailed and should include the
different strategies applicable to your product or topic of feasibility study. It should
state the strategy and discuss in details on how these will be carried over in the
actual marketing of the product.

TAKE NOTE: Marketing activities incur costs to the business, and that should be
considered in writing your marketing feasibility report.

Sample costs in Marketing:

 Hiring a marketing specialist
 Cost of flyers and other printed materials such as tarpaulin
 Payment for Radio or TV advertisement
 Paying for Search Engine Optimization (SEO) to take advantage of
product positioning in online searches
 Others

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Exercise 2

1. Why is it necessary to conduct a marketing feasibility when coming up with a new

business venture?
2. Why do you have to know, and study your target market?
3. Explain in your own words how important branding is for a new business?
Provide example based on your group’s chosen business idea
4. Discuss why is it important to come up with product strategies when you are
setting up a new business venture?
5. When you are new to the market and you are selling an existing product that
other businesses are selling, what pricing strategy will you suggest and why?
6. When you are new to the market and you are going to sell a new product, what
could be the best pricing strategy? Why?
7. As a consumer, what, for you, is the most effective medium for advertising?
Why?
8. If you are marketing to different segment of your target demographic, do you
need to come up with several strategies? Yes or no, why?
9. Why do you have to conduct market analysis when planning a new business?
10. Cite one example of conducting market analysis. Discuss its relevance to the
marketing feasibility study

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UNIT III
MANAGEMENT AND LEGAL STUDY

INTRODUCTION

The Management and Legal Study focuses on the organization provides the
evaluation standards associated with the establishment of any type of business.
This section discusses the various strategies and policies that must be designed
and implemented throughout the firm.
Effective organizational structure is designed to decide and define the roles
and responsibilities of each employee, as well as to delegate and define each
power in fulfilling their assigned tasks in order to ensure the business's success.

LEARNING OUTCOMES

After learning this module, you will be able to:

1. Design the management aspect of your feasibility study
2. Understand the legal compliance of a business
3. Set vision, mission, goals and objectives for a business idea
4. Create organizational structure for a start-up business
5. Relate to the different management protocols necessary in conducting a
management feasibility study
6. Determine the risks that could possibly be associated with the business
idea through applying risk assessment

LESSON 1 62
63

MANAGEMENT OF THE PROJECT

One of the most important aspects that a business needs to take into
consideration is the type of business organization and structure it will adapt. In
doing so, the objectives are streamlined according to the vision and mission of
the organization. However, before setting up the vision and mission of the
business, it should first have an idea of what type of business organization it shall
adopt

Types of Business Organizations in the Philippines, according to ownership:

1. Sole Proprietorship

 These businesses are typically owned by a single individual, typically the

individual who is responsible for the day-to-
day operations of the business.
 Sole proprietorships own the business's
assets and pr ofits. Additionally, they
assume full responsibility for any of the
company's liabilities or debts. In the eyes
of the law and the public, you and the
business are synonymous.

The Benefits of Sole Proprietorship

a. Organizationally, the simplest and least
expensive form of ownership.
b. Sole proprietors have complete control and, within the bounds of the law,
may make whatever decisions they wish.
c. Profits from the business are taxable on the owner's personal income tax
return.
d. If desired, the business can be easily dissolved.

The Advantages and Disadvantages of a Sole Proprietorship

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a. Sole proprietors are legally liable for all debts incurred by the business.
Their commercial and personal assets are jeopardized.
b. May face difficulties raising funds and are frequently forced to rely on
personal savings or consumer loans.
c. May struggle to attract high-caliber employees or those motivated by the
prospect of owning a piece of the business.
d. Certain employee benefits, such as the owner's medical insurance
premiums, are not directly tax deductible (only partially as an adjustment
to income).

2. Partnerships
 A partnership is formed when two or more individuals share ownership of
a single business.
 The law, like that governing
proprietorships, makes no distinction
between the business and its owners.
 The Partners should have a written
agreement outlining how decisions will
be made, how profits will be shared, how
disputes will be resolved, how new
partners will be admitted to the
partnership, how partners can be bought
out, and how the partnership will be
dissolved if necessary.
 Additionally, they must determine upfront how much time and capital each
will contribute, among other things.
 Partnerships are treated as corporations for income tax purposes.

The Benefits of Partnership

a. While partnerships are relatively simple to form, time should be spent
developing the partnership agreement.
b. With multiple owners, the capacity to raise capital may be increased.
c. Profits from the business are taxed directly on the partners' personal
returns.
d. Prospective employees may be enticed to join the business if they are
offered the opportunity to become partners.

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e. Generally, the business will benefit from partnering with individuals who
possess complementary skills.

The Disadvantages of Collaboration

a. Partners are jointly and severally liable for one another's actions.
b. Profits must be distributed.
c. Due to the fact that decisions are made collaboratively, disagreements
are possible.
d. Certain employee benefits are not tax deductible against business
income.
e. The partnership may have a finite duration; it may terminate upon a
partner's withdrawal or death.

Types of Partnerships

1. General Partnership
 Partners divide management and liability responsibilities, as well as
profit and loss sharing, in accordance with their internal agreement.
Unless a written agreement specifies otherwise, equal shares are
assumed.
 In a general partnership, the partners are jointly and severally liable
for their partners' obligations or debts.
2. Limited Partnership and Limited Liability Partnership
 The term "limited" refers to the fact that the majority of partners
have limited liability (up to the amount of their investment) and
limited input into management decisions, which generally
encourages investors to invest in short-term projects or capital assets.
 This ownership structure is not frequently used to operate retail or
service businesses. The process of forming a limited partnership is
more involved and formal than that of forming a general partnership.
 The liability of partners in a limited partnership is limited to the amount
of their capital contribution. If the capital of your partnership exceeds
P3,000, you must register it with the Securities and Exchange
Commission (SEC).
3. Cooperative venture
 Acts similarly to a general partnership, but is clearly limited in duration or
to a single project.

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 If the joint venture partners repeat the activity, they will be treated as an
ongoing partnership and will be required to file and distribute accumulated
partnership assets upon the entity's dissolution.

3. Corporations
 A corporation chartered by the state in which it is headquartered is
regarded by law as a distinct entity, distinct from it s owners.
 A corporation is taxable; it is
suable; and it is capable of
entering into contractual
agreements.
 A corporation's owners are called
shareholders. A board of
directors is elected by
shareholders to oversee the
company's major policies and
decisions.
 The corporation has a self-
contained existence and does not dissolve upon change of ownership.
 In the Philippines, corporations are classified as stock or non-stock.

 Capital stock in a stock corporation is divided into shares.

Dividends and profit allocations are distributed to shareholders in
proportion to their ownership.

 Non-stock corporations are formed solely for the purpose of

performing public functions as a legal entity and do not issue stock
to their members. Typically, these are not-for-profit organizations,
foundations, and cultural and educational institutions.

The Benefits of a Corporation

a. Shareholders are only liable for the corporation's debts or judgments.
b. In general, shareholders are only liable for their investment in the
company's stock. (It is worth noting, however, that officers may be held
personally liable for their actions, such as failing to withhold and pay
employment taxes.)
c. Corporations can raise additional capital by selling stock.

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d. A corporation may deduct the cost of executive and employee benefits.

e. Can elect to be a S Corporation if certain criteria are met. This election
enables the corporation to be taxed in the same manner as a partnership.

A Corporation's Disadvantages
a. Incorporation takes longer and costs more money than other forms of
organization.
b. Corporations are regulated by federal, state, and some local government
agencies, and as a result, they may have additional paperwork to
complete in order to comply with regulations.
c. Incorporation may result in an increase in total taxes. Dividends paid to
shareholders are not deductible against business income, which means
that this income may be taxed twice.

Corporation organized under the provisions of Subchapter S

 This is a tax election only; it enables the shareholder to treat earnings and
profits as distributions and have them pass through to their personal tax
return directly.
 The catch is that if the shareholder works for the company and there is
profit, the shareholder must pay himself/herself wages that meet
standards of "reasonable compensation."
 This varies by geographical region and occupation, but the general rule is
to pay yourself what you would pay someone else to do your job, provided
there is sufficient profit. If you do not, the IRS may reclassify all of your
earnings and profits as wages, in which case you will be liable for all
payroll taxes on the total amount.

Corporation with Limited Liability (LLC)

 LLCs are a relatively new hybrid business structure that is now permitted
in the majority of states.
 It combines the limited liability characteristics of a corporation with the tax
advantages and operational flexibility of a partnership.
 The formation of a limited liability company is more complicated and
formal than that of a general partnership.
 The members are the owners, and the LLC's duration is typically
determined at the time the organization papers are filed.

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 The time limit may be extended if members vote to do so at the time of

expiration. A limited liability company may possess no more than two of
the four characteristics that define corporations:
 Limited liability to the extent of assets; continuity of life; management
centralization; and freely transferable ownership interests.
Federal Tax Forms for Limited Liability Companies

 Generally taxed as a partnership; corporation forms must be used if more

than two of the four corporate characteristics described above exist.

Image Source: eLegal.ph

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LESSON 2

LEGAL COMPLIANCE OF THE BUSINESS

Image Source: Windobona

After the firm is formed, it must adhere to government regulations in order to be

legally founded and operational.

The following are some of the more common requirements and fees associated with
business formation.

1. Securities and Exchange Commission (SEC)

 The SEC is a Philippine state agency charged with enforcing securities
laws and supervising the securities industry. Registration with the SEC is
required prior to the municipal or city government issuing licenses.
 The prerequisites for SEC registration are as follows:
a. Affidavit of Verification of Name
b. Affidavit of Completion of Registration Data Sheet
c. Articles of Partnership

2. Trade and Industry Department (DTI)

 DTI is responsible for administering the registration of business names.
Registration of a business name is required and must be accomplished
prior to the business commencing operations.

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 By registering the business name with the DTI, the proprietor ensures that
the business name cannot be legally used by another individual or
organization elsewhere in the Philippines.
 The following conditions must be met:
a. Registration Fee
b. Securities and Exchange Commission (SEC) Certificate
c. Articles of partnership

3. Internal Revenue Service (BIR)

 Every business must register with the BIR prior to commencing operations
for tax purposes.
 Any business should get a company identification number and register
with the relevant Revenue District Office (RDO) that has authority over the
location of the primary office.
 The company tax identification number is permanent and may be used for
a variety of business purposes.
 The following are the registration procedures:
a. Obtain a permanent record file number for the Tax Identification
Number;
b. Register the business name with the Bureau of Internal Revenue
Revenue District Office; and
c. Comply with all applicable fees d. Submit a personal income tax return.

Image Source: PhilPad

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4. Permits or Licenses from Municipalities

 Every business must obtain a mayor's permit or municipal license from
the municipality or city in which it is located.
 Permits and licenses are required to start a business in the following
categories:
a. Mayor's Permit;
b. Business Tax;
c. Garbage Fee;
d. Sanitary Permit;
e. Signs/Billboards; and
f. Electric Permit.

 The processing of an application for a Mayor's Permit is required to

include the following:
a. Photocopy of partnership
articles
b. Photocopy of SEC
Registration Certificates
c. Photocopy of DTI Registration
d. Sanitary Permit obtained from
the municipal health office, which
includes sanitary and waste fees
e. Fire Safety Permit
f. Building Permit obtained from
the City Engineer's Office
g. Three (3) duplicates of the
application for a business license
Image Source: Carousell

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LESSON 3

VISION, MISSION, GOALS, and OBJECTIVES

VISION

 is a term that refers to a "description of something in the future." “mental

image of the type of environment an individual or organization wishes to
establish over a long time horizon, as well as the underlying conditions for its
realization”
 A vision lays the groundwork for the development of a thorough mission
statement
 What do we want to become?
 Clear vision provides the foundation for developing a comprehensive mission
statement.
 Should be established first and foremost
 Should be short, preferably one sentence.
 Managers should have input into developing the statement.

Example of Company Visions

Tyson Foods’ vision is to be the world’s first choice for protein solutions while
maximizing shareholder value.

General Motors’ vision is to be the world leader in transportation products and related
services.

Dells’ vision is to create a company culture where environmental excellence is

second nature.

VISION STATEMENT

 A vision statement addresses the question, "How will success manifest

itself?" Pursuing this vision of accomplishment is what drives people to
collaborate.

STRATEGIC VISION

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 Strategic vision answers the question, "Where are we going?" and

clarifies the course and direction charted by management.
 A strategic vision should convey a clear picture of how the firm should
operate and assist in making strategic decisions.
 Strategic vision should result in a desired outcome.
 That end is an organization's or an individual's vision.
 It is the ultimate goal of a business or an individual.
 Should be succinct and precise. •It should be based on the organization's
overarching mission.

Identifying Features of a Vision Statement

1. It serves as a blueprint for the type of business organization that management
is attempting to establish and the market position that organization will hold.
2. It should be forward-looking and outline the strategic course of action that
management will take to assist the organization in preparing for the future.
3. Specific and provide recommendations for managers' decision-making and
resource allocation
4. Adaptable to changing environmental conditions
5. Within the realm of what businesses seek to accomplish
6. Appeal to employees' emotions and motivate them
7. Narrow vision, capable of concentrating effort and energizing others
8. May not be appropriate in the present situation, but adds to the future.
Presents a vision of the future.
9. It should be simple to comprehend for all stakeholders and preferably brief.

The Advantages of Having a Vision

1. A good vision is invigorating and energizing. Contribute to the organization's

future planning.
2. Clarifies and crystallizes senior executives' perspectives on the long-term
direction of the company. A clear vision mitigates the need for risk-taking and
experimentation.
3. A compelling vision assists in motivating and raising employee morale.
Successful visions are competitive, original, and one-of-a-kind. A good vision
embodies integrity; it is truly genuine and may be used to benefit others.

Vision statement limitations

1. Vague and insufficient

2. Not forward-looking
3. Too broad

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4. Uninspiring
5. Not distinctive

Image Source: Fit Small Business

MISSION

 Organizations justify their existence by addressing a specific societal need.

They do so in accordance with their mission. Objectives are specific and
measurable

Mission Statement

 Enduring statement of purpose

 Distinguishes one firm from another
 Declares the firm’s reason for being
 A mission statement is a declaration that describes an organization's
function in society. It relates to a society's unique requirements, such as
its information requirements
 “A mission statement is an overarching statement of purpose that serves
to differentiate one business from comparable businesses. A mission
statement defines the product and market scope of a business.”
 Mission clarifies “the organization's fundamental purpose, including why it
exists, the nature of the business, and the consumers it aspires to serve.”
It is what it is, as well as the "purpose or justification for an organization's
existence." “A mission statement is an overarching statement of purpose
that separates one business from comparable businesses.”
 It differs from vision in that it is more focused on "what is our business"
than on "where are we going" or "what we wish to become" as vision is.

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Identifying Features of a Mission Statement

1. Attitude declaration
2. Customer orientation
3. Social policy declaration

1. Attitude declaration

 Not intended to be precise or to serve a specific purpose; rather, it is a

statement of attitude and outlook intended to provide motivation, broad
direction, an image, and a philosophy to govern the company.
 Should be adaptable, even ambiguous, to changing circumstances and
operational methods
 Broad in scope
 A good mission statement allows for the generation and consideration of a
range of feasible alternative objectives and strategies without unduly
stifling management creativity.
 Ex. Lenovo computer’s mission statement should not open the
possibility to diversification into pesticides
 Volkswagen’s into food processing

Characteristics of a Good Mission Statement

1. Less than 250 words in length
2. Inspiring
3. Identify the utility of firm’s products
4. Reveals that the firm is socially responsible
5. Include the nine components
6. Enduring

The following utility statements are relevant in developing a mission

statement:
 Do not offer me things
 Do not offer me clothes. Offer me attractive looks.
 Do not offer me shoes. Offer me comfort for my feet and the pleasure of
walking.
 Do not offer me house. Offer me security, comfort and place that is clean
and happy.

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 Do not offer me books. Offer me hours of pleasure and the benefit of

knowledge.
 Do not offer me records. Offer me leisure and the sound of music.
 Do not offer me tools. Offer me benefits and the pleasure that come from
making beautiful things.
 Do not offer me furniture. Offer me comfort and the quietness of a cozy
place.
 Do not offer me things. Offer me ideas, emotions, ambience, feelings,
and benefits.
 Please do not offer me things.

2. Customer Orientation
 A focus on the customer reflects the customer's eagerness. The
organization's working strategy is to first discover client needs and then
create a product or service to meet those demands. Should define: "what
the organization is and what it aspires to be. Have a distinct identity that
sets it apart from others
 Serves as a framework for evaluating both present and prospective
actions.

3. Social policy declaration

 A socially responsible policy implies that the corporation considers not just
the profit owed to shareholders and the obligations to major stakeholders,
but also the company's responsibilities to consumers, environmentalists,
and minorities.
 Broad in scope
 A good mission statement allows for the generation and consideration of a
range of feasible alternative objectives and strategies without unduly
stifling management creativity.
 Ex. Lenovo computer’s mission statement should not open the possibility
to diversification into pesticides
 Volkswagen’s into food processing

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Image Source: Prentice Hall

A mission statement for an organization is typically brief and succinct, and

includes the following elements:

1. Provides a concise statement of why the organization exists and what it seeks
to accomplish;
2. State the organization's purpose and identity;
3. Defining the institution's values and philosophy; and
4. Describes how the organization will serve those values and philosophy.

Mission formulation

1. What is your organization's primary objective?

2. What makes your organization unique?
3. What distinguishes your business from the competition?
4. Who are your primary customers, and who should they be?
5. What are your firm's fundamental values and philosophical priorities?

Components of a Mission Statement

1. Item or service
2. Customers
3. Technology
4. Sustaining, growing, and profiting
5. The company's philosophy;
6. The company's public image; and
7. Its personnel.

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Image Source: Prentice Hall

1. Customers

 The mission statement contains information about the customer profiles and
the organization it serves.
 Examples:
 We believe our first responsibility is to the doctors, nurses, patients,
mothers, and all others who use our products and services. (Johnson
& Johnson)
 to earn our customers’ loyalty, we listen to them, anticipate their
needs, and act to create value in their eyes. (Lexmark International)

2. Product or service
 Almost always contains a reference to the product or service offered by the
business to its clients.
 Examples:

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 AMAX’s principal products are molybdenum, coal, iron, ore, copper,

lead, zinc, petroleum and natural gas, potash, phosphates, nickel,
tungsten, silver, gold and magnesium. (AMAX Engineering Company)
 Standard Oil Company is in business to find and produce crude oil,
natural gas, and natural gas liquids; to manufacture high-quality
products useful to society from these raw materials; to distribute and
market those products and to provide dependable related services to
the consuming public at reasonable prices.

3. Markets

 The physical and virtual avenue for trading

 Examples:
 We are dedicated to the total success of Corning Glass Works as a
worldwide competitor. (Corning Glass Works)
 Our emphasis is on North American markets, although global
opportunities will be explored. (Blockway)

4. Technology
 Components of the mission statement refer to the means of production,
operations, and organizational functions, and include equipment, materials,
techniques, and processes.
 Examples:
 Control Data is in the business of applying micro-electronics and
computer technology in two general areas: computer-related
hardware; and computing-enhancing services, which include
computation, information, education, and finance. (Control Data)

 We will continually strive to meet the preferences of adult smokers by

developing technologies that have the potential to reduce the health
risks associated with smoking. (RJ Reynolds)

5. Concern for Survival, Growth, and Profitability

 Make a broad reference to the survival and healthy operation of the business,
which includes growth and profitability.
 Examples:
 We are dedicated to the total success of Corning Glass Works as a
worldwide competitor. (Corning Glass Works)
 Our emphasis is on North American markets, although global
opportunities will be explored. (Blockway)

6. Company Philosophy

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 It embodies the company's fundamental beliefs, values, aspirations, and

ethical priorities, which influence employees in shaping organizational
function.
 Examples:
 Our world-class leadership is dedicated to a management philosophy
that holds people above profits. (Kellogg)
 It’s all part of the Mary Kay philosophy- a philosophy based on the
golden rule. A spirit of sharing and caring where people give
cheerfully of their time, knowledge, and experience. (Mary Kay
Cosmetics)

7. Self-Concept
 How the company perceives itself
 Examples:
 Crown Zellerbach is committed to leapfrogging ongoing competition
within 1,000 days by unleashing the constructive and creative abilities
and energies of each of its employees. (Crown Zellerbach)

8. Public image
 This section discusses how the company desires to be perceived by external
constituents.  To foster a favorable public image, the mission statement
should include an explicit reference to the company's responsiveness to
public concerns about the company and society.
 Examples:
 To share the world’s obligation for the protection of the environment.
(Dow Chemical)
 To contribute to the economic strength of society and function as a
good corporate citizen on a local ,state and national basis in all
countries in which we do business. (Pfizer)

9. Personnel
 To foster a positive public image, a business could include concerns about
employee recognition in its mission statement.
 Examples:
 To recruit, develop, motivate, reward, and retain personnel of
exceptional ability, character, and dedication by providing good
working conditions, superior leadership, compensation on the basis of
performance, an attractive benefit program, opportunity for growth,
and a high degree of employment security. (The Wachovia
Corporation)

The Requirements for a Clear Mission

1. To guarantee that the organization's goal is unambiguous.

2. To establish a rationale for the organization's resource utilisation.
3. To establish a basis for distributing organizational resources, or a norm.
4. To establish a general tone or environment within the organization.

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5. To act as a focal point for those who can connect the organization's purpose
and mission.

Image Source: Visionary Business Person

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GOALS

 A goal is described as a "intermediate result that must be accomplished by a

specified date as part of the overall plan."
 As a result, a plan may contain numerous objectives.”
 A goal is a precise objective that a business wishes to achieve over time.
 A clearly defines the duties and responsibilities of an individual, a
department, or an organization. Goals should be quantifiable, demanding,
attainable, consistent, and prioritized.

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 Establish fundamentals for evaluating a business's performance and progress

toward its vision.
 Strategic goals assist managers in establishing the overall outcome of actions
without becoming mired down in minutiae such as measurement and timing

Two Types of Goals

1. Financial objectives
 These objectives are focused on reaching a given level of financial
success, as measured by return on investment or revenue growth

2. Strategic objectives
 The objectives are directed on gaining strategic or competitive
advantages within the sector, such as technological leadership,
creativity and innovation, and better customer service

According to M.D.Richards, the following characteristics of objectives are

necessary:

1) Specific: making goals exact and measurable would assist management in

monitoring progress toward goal achievement at each specified point in time

2) Issues of Goals: Short-term goals and objectives should be left to lower-level

managers to establish, plan, and accomplish. Middle-level managers' goals
should encompass issues such as cost reduction and quality improvement.

3) Should be well-crafted, practical, and challenging: Challenging goals

inspire managers to be imaginative, creative, and ambitious in their efforts to
improve operations, marketing, and sales, among other areas.

Examples of strategic goals in various operations include the following:

 Customer Service:
 Provide quality service to customers that is at least as good as
the industry standard;
 Maintain reliability of service to customers at a level greater
than 99 percent;
 Ensure that customers are educated about the safety aspects
of electricity use.

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 Community service:
 Promote economic growth and expansion of the company's
complete service area;
 create job opportunities and investment in the service region,
thereby raising the standard of living for all inhabitants.
 Cooperate with and serve educational institutions located
within the service region in a manner comparable with industry
leaders.

 Shareholders relations:
 Ensure that all expenditures are made in a manner that
protects and enhances shareholders' investment.
 Provide shareholders with a rate of return that is competitive
with other investments

 Employee-management responsibilities:
 Monitor and seek to enhance the quality of management and
supervision;
 recruit, develop, and retain capable and loyal employees; and
provide equal employment opportunities,
 a high level of training, and current, professional tools.

 Corporate communication:
 Make an affirmative effort to communicate pertinent company
information;
 keep senior management informed and educated on current
topics of interest; and enhance the company's community image
by being receptive to customer and community requirements.

OBJECTIVES

 The desired outcomes of planned activity

 Objectives specify what is to be completed by when and, if possible, should
be quantified.”
 objectives are more specific and focused

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 Objectives are usually quantifiable and specific.

 It varies according to the organization's hierarchical level, becoming more
focused and short-term as it descends to frontline managers.
 Objectives are critical for organizational effectiveness and efficiency, and it
has been demonstrated that managers who pursue objectives aggressively
outperform managers who are not motivated by them.

The significance of Objectives

1. Objectives assist in defining an organization's position in its surroundings.

2. Objectives aid in decision-making and decision-maker coordination.
3. Objectives assist in developing strategies.
4. Objectives serve as benchmarks for evaluating an organization's success.

Qualities of a Good Objective

1. Unambiguous and Specific

2. Horizontal time scale
3. Adaptable
4. Achievable
5. Quantifiable
6. Numerous objectives

1. Unambiguous and Precise

 Assist in dispelling confusion about the objective toward which efforts should
be directed Assist in establishing a reward structure that is fair and equitable
 For example, almost every business's objective should be increased
profitability, but this should be explicitly stated as a 10% increase in profit

2. Time Horizon
 Should be defined in terms of a time range for achieving them Without a
deadline, an objective is ineffectual and nearly meaningless.
 For example, a 10% increase in profit over a year is a different objective than
a 20% rise over two years; without a time horizon, this objective would be
meaningless.

3. Adaptable

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 Because targets are defined for the future, which cannot be predicted, there
should be some flexibility in case the environment changes.

4. Achievable
 Balanced objectives strike a compromise between being too simple and too
complex. Should be sufficiently difficult to inspire innovation and novel ideas,
but not so difficult as to necessitate a significant increase in resource
allocation.

5. Quantifiable/Measurable
 Should be quantifiable and quantitative Thus, everyone is clear on their
objectives, progress toward those targets can be tracked, and employee
morale can be related to numbers rather than people

6. Numerous objectives
 It is uncommon to have a single purpose toward which all employees strive.
For instance, increasing the number of consumers served would be directly
related to either cost maximization or quality enhancement. Even when
management unites seemingly disparate objectives, all efforts are directed in
the same direction.

Characteristics of a Good Objective

1. Assist in the accomplishment of mission and objectives

2. Establish a foundation for strategic decision-making
3. The organization's relationship with the environment is transparent;
4. The organization's members understand it.
5. Should be quantifiable and controllable•
6. Should be time-related
7. Should be difficult• Should be specific and concrete
8. Must conform to the limitations
9. Should inspire individuals.

Factors that May Influence the Objectives

1. Organizational size: A larger organization complicates the process of

objective formation.

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2. Management level : Managers establish organizational objectives. Managers

at various levels establish a variety of objectives.
3. Organizational culture: Culture is a set of shared values, beliefs, and
standards that govern behavior.

Objectives Areas

1. Market capitalization
2. Innovation and technological leadership
3. Productivity and quality of products
4. Availability of resources
5. Satisfaction of customers
6. Performance level
7. Responsiveness to social stimuli

1) Market Capitalization
 A healthy market share should persist even while a company attempts to
expand its market share. In stable marketplaces and competitive
environments, it is critical to maintain a sustainable market share.
2) Innovation and productivity
 leadership Success and, in some situations, survival require innovation.
Innovation must be converted into objectives that clearly define the
organization's goals.

3) Productivity and quality

 Designing and ensuring quality has been demonstrated to be a vital
competitive strength. Constant balancing between cost-cutting efficiency and
preserving quality.

4) Resource Level
 Resources include inventory, equipment, capital, and human capital. Because
resources are expensive, their utilization should be limited without sacrificing
quality or service.

5) Customer satisfaction
 It is vitally desirable to maintain consumer relationships and to develop
customer loyalty and goodwill.

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6) Performance level
 Related to productivity and effectiveness Performance objectives may also
include innovation and professional development 7) Social responsiveness
Businesses demonstrate their commitment to society and community by
establishing explicit goals for socially beneficial activities.

Examples of Objectives

 Minnesota Mining and Manufacturing Company's (3M) financial goals

1. To increase earnings per share by 10%.
2. To obtain a return on equity of 20% to 25%.
3. To obtain a return on capital employed of 27 percent.

 BSNL National Plan Objectives

1. The country's subscriber base should reach 500 million by December
2010.
2. By 2010, the country's broadband client base will reach 20 million, as per
the Broadband Policy 2004.

Objectives vs. Goals

 Objectives are the anticipated or desired outcome of a planning process.
Typically, goals are broad, overarching statements of an organization's
guiding values and aspirations.
 Objectives are specific targets that must be met in order to accomplish goals.
The objectives of a plan are precise explanations of the quantitative or
qualitative outcomes that the plan aspires to achieve.

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LESSON 4

ADMINISTRATIVE PERSONNEL & STRUCTURE

The Administrative Personnel manage a company's or organizations’ daily

operations by providing administrative and clerical support. They also coordinate
schedules, organize meetings, distribute memos and reports, and ensure that
everyone is informed of critical company news and information. In other words, they
are the people behind the success of every operation or undertaking of an enterprise
or organization.

In this aspect of your Feasibility study, you should be able to incorporate the
following:

1. Proposed Number of Administrative Personnel

2. Proposed Organizational Chart
3. Proposed job requirements
4. Availability and Source of Personnel

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Number of Administrative Personnel

 The number of personnel will depend on the type of business

organization, the extent and volume of production, the number of
functions in the organization and the necessary number of people to do
each job.
 For example: If you are proposing a start-up Printing business, you would
need 1 or 2 printer assistant and a cashier (or you may omit cashier since
the Manager can do the task of the cashier). In this example you may
need 3 people only for your business.
 You may present your Administrative Personnel in a tabular form, similar
to the format shown below

Personnel Qty Responsibilities

Manager 1  Supervises overall operation
 Conducts inventory,
 Prepares Financial Statements
 Conducts marketing activities
 Handles purchasing of materials
Printing Assistants 2  Performs printing job
 Other tasks related to the job

Organizational Chart

 An organizational chart is a diagram that visually depicts a business's internal

structure by outlining the roles, responsibilities, and interactions between the
many personnel within the organization.
 Organizational charts can depict an enterprise in its entirety or drill down to a
particular department or unit.
 Again, depending on the number of people needed for the job or functions,
the organizational may be as linear as a line organization
 A line organization typically shows the line of command and authority.
 Shown below is typical line organization of a company. If you notice properly,
this kind of organizational structure is intended for big companies with many
different functions/ level. As you see in the image, the President of the
Company has the power to oversee all the functions (Finance, Customer
Relations, HR), and that authority is cascaded going down to the next line of
authorities.

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Image Source: Smart Draw

To read more about Line Organization

https://www.toppr.com/guides/business-management-and-
entrepreneurship/organizing/formal-organization-line-organization/

Proposed Job Requirements

 Discusses the job description and duties/responsibilities of each the admin

personnel.
 The job requirement is apparent in the job description for each personnel/
employee or worker.
 Make sure to write in detail with consideration to specific tasks and
responsibilities for each job requirement.
 Example:
Manager of Printing Press
Main Responsibilities:
 Supervises overall operation of Printing Business
 Conducts inventory
 Prepares Financial Statements
 Conducts marketing activities
 Handles purchasing of materials
Other Responsibilities:

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 Staff monitoring
 Assisting production
 Handles bookings
 Other

Availability and Source of Personnel

 This part of your feasibility will discuss whether the personnel will be
outsourced or not; or whether the owners of the business will be the ones to
be employed in the business
 You may discuss in detail how you are going to do the hiring and recruitment.
 You may state what will be your mode of hiring and recruitment, whether you
will source from online or do in person interviews.

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Image Source: The Balance Careers

LESSON 5

MANAGEMENT PROTOCOLS

Image Source: Workzone

MANAGEMENT STYLE

Hay-McBer classifies leadership styles into six distinct categories:

1. Coercive
 If you use the directive style, you are the type of person that wants their
staff to comply. You tend to want employees to do things your way and
to coerce them into compliance by threats and discipline.
 This can be advantageous in high-pressure situations where you are
required to do tasks in a specific manner and any deviation from that

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could be a risk. It can, however, demotivate personnel who feel as

though you are scrutinizing their every move.

2. Visionary or Authoritative
 Bosses and supervisors that utilize an authoritative approach aim to
communicate an overarching vision to their personnel rather than
particular directions.
 If you employ this method, you will most likely motivate others through
persuasion and feedback. It’s excellent when you’re perceived as a
credible leader and when clear orders are required, but it’s less
effective when dealing with junior staff who require more explicit
guidance on what they should be doing.

3. Affiliative
 An affiliative supervisor makes a concerted effort to be everyone’s
buddy. They foster harmony and work to establish a positive rapport
between senior and junior workers. If this is your style, you are probably
not a fan of conflict and like to motivate others by keeping them happy.
 This works well while employees are conducting everyday activities and
might be beneficial when workplace conflict emerges. It is less
successful, however, when confronted with a crisis, when strong
leadership may be necessary, or when staff is incompetent in their jobs.

4. Participative
 If you adopt a participative style, you are more likely to lead by
consensus than to command employees. You solicit input from all
employees, valuing all perspectives, and you recognize team effort.
 As with the affiliative approach, it works effectively when everything is
stable, your personnel is seasoned and knowledgeable about their
professions, and there is no crisis to throw you off balance. It is less
effective when staff is not coordinated or when an issue emerges that
requires clear direction.

5. Pace-setting
 As a leader, you establish exceedingly high expectations and expect
others to follow suit. It’s fantastic when individuals are already skilled,

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driven, and knowledgeable. It is less successful when people require

development and may result in some employees feeling insufficient.

6. Guidance
 When you use the coaching method, you are more likely to focus on
your employees’ long-term professional development. This is beneficial
since you may assist your employees in developing their strengths and
ultimately increasing their performance.
 It’s less effective if you lack the experience necessary to coach them.
You may also continue in retaining someone despite the fact that their
talent gap is too great and they should be let go.
Management Policies and Procedures

Policies and Procedures

 Are critical components of businesses especially in corporate management
because they establish a foundation for internal control and ensure that
personnel understand their roles and duties within set boundaries.
 In essence, rules and procedures enable management to direct operations
without constant intervention.
 Certain situations are specific to an industry, and employees cannot be
expected to be aware of them unless management brings them to their
attention. Examples:
 Employees are required to devote their time and efforts to the
fulfilment of their given duties and obligations, which may change from
time to time.
 Commercial transactions unrelated to work are banned on company
property.
 All employees are entitled to a daily break of 60 minutes or one hour.
 Smoking is forbidden while on duty and in unauthorized locations.
 Properness and Consistency in Policy
 All personnel must adhere to the guidelines about proper attire. Every
Monday, Wednesday, and during field work, employees must wear the
corporate uniform. Every Tuesday and Thursday, employees must
dress casually. Employees may wear whatever they like as long as it
is respectable.

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 All employees' hands should be clean and their fingernails should be

kept short. Failure to Report/Failure to Call
 While employees may initially be hesitant to report infractions of
corporate policies and procedures, it is critical to remember that failing
to disclose violations can have serious consequences.
 Additionally to the prospect of being held personally accountable for
the legal or ethical infringement, they may face disciplinary action,
including termination, if they remain silent when in doubt.
 Employees are expected to follow directions and accomplish tasks as
assigned or required. Disciplinary action will be taken against anyone
who is insubordinate or fails to obey legitimate directions regarding
work and behavior.
 Employees are expected to respect the person, rights, and property of
others, particularly our customers. Attempts to cause physical or
psychological harm, injury, damage, loss, or conditions endangering
the safety or well-being of the above-mentioned individuals will result
in disciplinary action.
 Employees are not permitted to quit the job without authorization or to
engage in personal activities while on duty. Policies Concerning
Security To further safeguard the company's facilities and personnel,
the following guidelines have been established:
 All employees, whether on duty or not, must have their luggage
searched by security staff when entering and exiting.
 All objects removed from the corporate office or commercial premises
should be submitted to security officers. · All employees are required
to adhere to the building's rules and regulations.

These are just some of the common policies and procedures. However, you should
take into consideration the type of business that you have and the scope of your
organization. For smaller businesses, it is expected that policies and procedures may
differ from those of partnerships and corporations.

Safety and Security Concerns

 The organization places a premium on safety and security because it values

its employees and customers not only for their productivity but also for their
humanity.

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 The firm will adhere to various workplace safety and health standards and
initiatives prescribed by various government bodies.
 The establishment's various areas will be equipped with fire alarms,
extinguishers, and other safety precautions.
 Policy and Procedures for the Prevention of Drug Abuse Due to the
detrimental impact of drug misuse on an employee's physical and mental
health, the organization is committed to maintaining a drug-free workplace. In
keeping with this commitment, all forms of drug misuse are expressly
prohibited. The company's policy is to employ a workforce that is drug-free,
both on and off the workplace. As such, it is the corporate policy that any
employee found to be in possession of, using, selling, dealing, or offering for
sale harmful drugs during work hours or company-sponsored activities, or on
the company's premises, cars, or other property, may face disciplinary action.
 Confidential Data In exchange for giving the employee with confidential
information, the employee agrees to maintain the information in absolute
confidence and not to reveal it in any way, in whole or in part, or to use it
without the company's prior written agreement.

To read more on this topic

https://www.linkedin.com/pulse/10-policies-procedures-every-business-should-have-
kristine-daw

GENERAL POLICIES

 Set policies on how employees would work inside the organization and how
they would be compensated
 These policies should be included in the feasibility so that end users of the
study would have an idea of the policies that the employees/ workers should
adhere to.

Work Hours and Schedules

 May include discussions on rotating shifts (if applicable);

 Number of days the worker should be present.
 Discussions in overtime should also be stated
 Example:

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The Gicha Ressha Train Company's office will be open Monday through Friday from
8:00 a.m. to 5:00 p.m. Administrative personnel will have a 15-minute morning break
beginning at 10:00 a.m., a 30-minute lunch break beginning at 12:00 p.m., and
another 15-minute break beginning at 2:45 p.m. Due to the company's partnership
with the Philippine National Railway administration, employees are required to
perform field work and site inspections to monitor the project's progress. If an
employee is going on the field, he or she must submit an itinerary letter one day prior
to the appointment date. Monday through Sunday, the GRT Company trains will
operate from 5:00 AM to 11:00 PM. Station employees, such as security guards,
ticket operators, and maintenance people, are required to work a minimum of eight
(8) hours each day, including breaks. Lunch and break times are not excessively
constrained as long as they adhere to subject-specific norms and are capable of
completing prescribed tasks. Their schedules will change on a daily basis to ensure
that the station remains functioning throughout the day.

Source: https://www.slideshare.net/ChristianBacoy/feasibility-study-2014

Salaries and Compensations

 Monthly Salary Minimum wage is paid to direct and indirect employees

 Salaries are determined by the Department of Labor and Employment's
National Wages and Productivity Commission for businesses in the service
industry with 16 or more employees.
 Each classified position is assigned a salary range that includes the following:
minimum, mid-point, and maximum salary rates that are competitive with
external labor market rates consistent with the Enterprise's ability to pay; and
appropriate relationships within State government employment to maintain
internal equity.
 Compensation. The company's compensation philosophy is to compensate
employees at a level that encourages superior performance and maintains
the labor market competitiveness essential to recruit and retain competent
personnel.

Instructor’s Note: In your feasibility report, you should provide a breakdown of

the salaries and compensations. Example: Monthly, Quarterly or Annually

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Benefits

Extraordinary Benefits

1. One year after the business is created, employees are entitled to 13th
month pay and incentives.
2. Employees are entitled to separation compensation under Article 283-
284 of the Philippine labor code, depending on the grounds for
termination specified in the company's termination policy.
3. Promotion opportunity - this is available to employees who are high
performers, demonstrate initiative, and have a willingness to grow.
These additional obligations are compensated well.

Statutory Benefits

1. Registration with the Social Security System (SSS)

 All businesses must register with SSS and obtain an employer
identification number, which will be used as a reference for remitting their
monthly contributions.
 The following forms are required for SSS registration:
a. Employer Registration Application (R-1)
b. Employment Report Form (R-1A)
c. Registration with the Securities and Exchange Commission

2. Registration with Phil-Health

 The Philippine Health Insurance Corporation is known as Phil-Health.
 According to the New National Health Insurance Act (RA 7875/RA 9241),
all employers are obligated to register their employees with Phil-Health.
 This agency is responsible for the management and administration of the
Philippine government's health care system.
 Phil-Health requires the following documents, which are listed below:
a. Employer Information File (ER1)
b. Employee-Member Report (ER2) c. SEC Registration

3. Pag-IBIG (Mutual Fund for Home Development) Registration

 The Pag-IBIG Fund, commonly known as the Home Development Mutual
Fund, is mandatory for all Social Security System employees (SSS).

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 The Pag-IBIG Fund primarily provides members with various forms of

loans.

Instructor’s Note: You should be able to state properly the kind of benefits
employees are getting, depending on their position and status.

Timeline of Business

 Prior to the start of the business, it is required to satisfy the relevant pre-
operational requirements and duties. T
 o do this, the company established an organizational structure based on the
selection of a business and the subsequent company operations that would
support the company's legality, workforce requirements, safe and engineered
facility, competitiveness, and significant market impact.
 The proponents illustrate the scheduling of firm activities using a Gantt chart,
beginning with the selection of a business to develop and ending with the
typical start of operation.

Timeline of Business Activities Using a Gantt Chart

Image Source: Smartsheet

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 Gantt charts are a visual representation of a project's timeline, progress, and

deliverables. Each task is visualized using vertical lines or bars, and each
Gantt chart contains resources, milestones, tasks, and dependencies.
 A Gantt chart's primary purpose is to keep track of a project's timeframe
and completion. It's especially beneficial for project managers who need to
maintain team momentum during complex campaigns, such as product
launches or marketing events.
 Gantt charts may be created in a variety of software programs, including
Excel, PowerPoint, and Google Sheets, and this monitoring tool is widely
utilized in a variety of industries, from marketing to construction and even
design.

 The following are the important components of a Gantt Chart:

1. Resources: Project managers must have an understanding of the resources

required to perform activities indicated on a Gantt chart on time.
2. Milestones: Throughout your schedule, there are likely to be little and
significant milestones that must be met to keep your project on track.
3. Tasks: Throughout the course of your project, certain tasks must be done.
4. Dependencies: The tasks on your Gantt chart will be related. These are
interdependent relationships that should be noted in your chart.

ASSUMPTIONS REGARDING MANAGEMENT

 When it comes to your administrative expenses to be incurred in your

business, you have to make assumptions.
 Example:
To calculate administrative expenses, the following assumptions were made:
The proponents presume that a calendar year has 15 holidays: 12 ordinary
holidays and three special holidays as defined in Executive Order No. 292 as
amended by RA 9849. The proponents calculated the employees' SSS
contributions using the current SSS Contribution table. The proponents
calculated employees' contributions to PhilHealth using the current PhilHealth
Contribution Table. The proponents adopted a set P 100.00 HDMF
contribution rate for minimum wage earner-employees exclusively, and a 2%

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rate of basic income for everyone else. The proponents anticipate that three
stations will be built/completed and functioning within a year.

LESSON 6

ASSESSMENT OF RISK

Identifying Potential Risks

 Risk is defined in financial terms as the chance that an outcome or

investment's actual gains will differ from an expected outcome or return.
Risk includes the possibility of losing some or all of an original investment.
 If and when a risk materializes, a well-prepared firm can mitigate the
negative impact on earnings, missed time and productivity, and customer
relationships.
 Risk identification is a critical component of strategic business planning
for both startups and existing businesses.
 Numerous methods are used to identify risks. Identifying these risks
requires a thorough examination of a company's specific business activity.
Most businesses encounter preventable strategic and external dangers
that can be mitigated by accepting, transferring, reducing, or eliminating
them.

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Primary Types of Business Risks

1. Physical Risks
 Physical risks that is most frequently associated with buildings. Consider
the possibility of fires or explosions.
 To manage building risk and employee risk, it is critical for enterprises to
take the following steps:
 Ascertain that all personnel are familiar with the exact street address of
the building to provide to a 911 operator in the event of an emergency.
 Ascertain that all staff are aware of the location of all exits.
 Install smoke and fire alarms.
 Install a sprinkler system to safeguard the physical plant, its equipment,
papers, and, of course, its workers.
 Inform all employees that their personal safety takes precedence above
all other considerations in the event of an emergency. Employees should
be instructed to vacate the building and discard all documentation,
equipment, and/or products linked with their jobs.

2. Hazardous Material Risk

 Wherever spills or accidents are possible, hazardous material risk exists.
 Among the dangers posed by hazardous materials are the following:

 Acid
 Gas
 noxious fumes
 Contaminated dust or filings
 Toxic liquids or waste

 Hazardous material units within fire departments are prepared to respond

to these types of incidents. However, individuals who work with these
materials should be well equipped and taught to handle them safely.
 Businesses should have a plan to address the immediate consequences
of these risks. Government agencies and local fire departments provide
information to help avert these tragedies. Additionally, such authorities
can offer guidance on how to prevent them and lessen their damage if
they do occur.

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3. Location Risks
 Nearby fires, storm damage, flooding, hurricanes or tornadoes,
earthquakes, and other natural calamities are only some of the threats
that a business faces due to its location.
 Employees should be acquainted with the roadways that lead into and out
of the area on all sides of the business. Individuals should ensure that
their vehicles have enough fuel to get out of and away from the region.
 Insurance policies like as liability or property and casualty are frequently
utilized to shift the financial burden of location hazards to a third-party or a
business insurance provider.

4. Human Risks
 Alcohol and drug misuse are significant threats to workers. Employees
who are abusing alcohol or drugs should be encouraged to seek
treatment, counseling, and, if required, rehabilitation. Certain insurance
policies may pay a portion of the cost of therapy.
 While protecting against embezzlement, theft, and fraud may be
challenging, these are all typical workplace crimes.
 A system requiring two signatures on checks, invoices, and payables
verification can assist in preventing embezzlement and fraud. Strict
accounting practices may enable the detection of embezzlement or fraud.
 Prior to recruiting employees, a comprehensive background check can
reveal prior misdeeds committed by an applicant. While this is not a
reason to reject a candidate, it would assist HR in avoiding placing a new
recruit in a high-risk position where the employee is susceptible to
temptation.
 A potential issue is employee illness or injury. To avoid productivity loss,
designate and train backup people to handle important employees' job
when they are away due to a health issue.

5. Technological Risk
 Perhaps the most common technology danger is a power outage.
Auxiliary gas-powered power generators provide a stable backup system
for illumination and other essential tasks. Multiple huge auxiliary
generators are used to keep manufacturing plants functioning until utility
power is restored.

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 High-performance backup batteries can be used to keep computers

functioning. Because power surges can occur during a lightning storm (or
at random), enterprises should equip key business systems with surge
protection to minimize document loss and equipment destruction. Protect
essential documents by establishing offline and online data backup
methods.
 Although telephone and communications failures are unusual, risk
managers may consider providing emergency-use company cell phones
to employees whose ability to communicate by phone or internet is
important to their organization.

6. Strategic Risks
 Risks associated with strategy are not always undesirable.
 When financial institutions such as banks or credit unions lend to
consumers, they take on strategy risk, whereas pharmaceutical
companies take on strategy risk during the research and development
phase of a new treatment. Each of these strategy-related hazards is
inherent in the commercial objectives of a firm.
 Accepting strategy risks can result in extremely profitable operations
when structured properly
 Businesses that face significant strategic risk can limit the possibility of
negative repercussions by developing and maintaining infrastructures that
support high-risk ventures.
 A system in place to mitigate the financial hardship associated with the
failure of a risky venture frequently includes diversification of current
projects, healthy cash flow, the ability to finance new projects in an
affordable manner, and a comprehensive process for reviewing and
analyzing potential ventures based on their future return on investment.

Conducting a Risk Analysis

 After identifying hazards, they must be prioritized based on an estimate of
their probability.
 Create a probability scale for risk assessment purposes.
 For instance, hazards may include the following
 To be extremely probable to occur
 Possibility of occurrence
 Possess a remote possibility of occuring

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 Possess a negligible possibility of occuring

Instructor’s Note:
Make sure to include a risk assessment plan on the possible risks that your business
may potentially experience.

Exercise 3

1. Mission Statement Analysis

Direction: Analyze and assess the Mission Statement of ESSU based on the Mission
Statement Evaluation Matrix. Discuss the result of your analysis, and provide
recommendations on how to improve the current Mission Statement based on the
result of your analysis

MISSION STATEMENT

To provide quality education responsive to the national and global needs

focused on generating knowledge and technology that will improve the lives of

2. Discuss what type of business organization you would choose when starting a
small business? Provide credible and concrete reasons.

3. What do you think are the important consideration/s when designing an

organizational structure? What is its relevance to the organization?

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4. Organizational policies set the standard operation and conduct of a business,

discuss why it is necessary for a business to set policies and protocols?

5. Taking in context Eastern Samar as the business location, what could be the
possible risks that a business may potentially be confronted with? Enumerate and
discuss in details

6. Why is it important to include legal study on your feasibility report?

UNIT IV

PRODUCTION/TECHNICAL AND ENVIRONMENTAL

STUDY

INTRODUCTION

A Production/ technical feasibility is the analysis and evaluation of a

proposed project to determine if it is technically feasible to manufacture the product
to meet customer requirements
On the other hand, an Environmental Feasibility Study assesses the
viability of a proposed development from an environmental and social perspective,
identifying potential issues and threats to the successful completion of the proposed
development.

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Image Source: EJZ

LEARNING OBJECTIVES

After learning this module, you will be able to:

1. Identify the different components in making a production/ technical, and

environment feasibility study
2. Analyse then apply the different components of production/technical study as
to its applicability in the chosen topic for feasibility study
3. Conduct a proper environmental study

LESSON 1

PRODUCTION and TECHNICAL STUDY

 The production aspect of the feasibility study mentions about the product
or services, the area of production, production site or location
 The technical aspect includes the production process, operational flow,
equipment

A. PRODUCTS AND SERVICES

Products

 A product is described as "anything created by labor or effort" or as the

"outcome of an act or process."

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 The term "product" derives from the verb "produce," which comes from
the Latin produce(re), which means "(to) lead or bring forth." Since 1575,
the term "product" has been used to refer to anything manufactured.
 A product, in marketing, is anything that can be given to a market to
gratify a want or need.
 Products are referred to as goods in retail. In the industrial industry,
products are purchased in their raw state and sold as finished
commodities. Typically, commodities are unprocessed.

Image Source: Maintaingo

Three Different Types of Products

1. A good is a tangible item that may be supplied to a purchaser and entails the
transfer of ownership from the seller to the client.

2. A service is an intangible act that results in a quantifiable change of status for

the recipient caused by the provider.

3. Ideas (intellectual property)

 These are any intellectual creations with commercial value but is sold
or traded solely as an idea, not as a finished product or service. This
encompasses intellectual property protected by copyright, such as
literary or creative works, as well as ideational property, patents,
geographical indications of origin, business methods, and industrial
processes are a few examples.

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Classification of Products

1.

Tangible or Intangible
 Such as a building, is a physical thing that can be perceived through touc,
it could be a vehicle or a device.
 The majority of commodities are tangible.
 Foods, for example, are tangible products. Foods are considered to be
tangible commodity

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2. Intangible Product
 is one that can only be sensed indirectly, such as services or an intangible
asset, information, or a policy of insurance. Additionally, intangible data
items might be categorized as virtual digital goods ("VDG").
 These are virtually located on a computer's operating system and are
accessible to users in the same manner as normal JPG and MP3 files are
among the supported file types. Additional application of virtual digital
commodities is required. programmers' processing or transformational
activity, their use may be subject to license and/or digital transfer rights.
 On the other hand, authentic digital products ("RDG") may exist within the
presentational environment. These are parts of a data program that are
not associated with a particular file format. Genuinely digital goods are
frequently perceived as three-dimensional objects or presentational items
that may be controlled by the user, virtual transfer between visual media
programs on the same platform. The services or concepts are intangible.

Advantages and Solutions

1. The Core Benefit

 The core benefit is the underlying need or desire that is satisfied by the client
when they purchase the item.
 The fundamental benefit is what consumers perceive themselves to be
receiving when they purchase a product.
 For instance, a hotel's primary advantage is to provide a place to rest or sleep
while not at home.

3. Generic Product
 The generic product is a stripped-down version of the product that lacks
certain characteristics. It is required for it to function. This could include a bed,
towels, a bathroom, a mirror, and a television wardrobe.

3. Anticipated Product

 The expected product is the collection of attributes that customers anticipate

when they make a purchase the item. This would contain clean sheets, a few
clean towels, Wi-Fi, and a refrigerator, bathrooms that are spotless.

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4. Product Enhancement

 The term "augmented product" refers to any product that has been enhanced
with additional features, functions, or services which contribute to the
product's differentiation from its competitors.
 This may be the inclusion of a concierge service or a complimentary map of
the area in our hotel example. Each chamber contains a different aspect of
the town.

5. Potential Product

 The potential product encompasses all enhancements and transformations

made to the product. may go through in the future.
 In layman's terms, this suggests that to continue surprising to satisfy
customers, the product must be enhanced.
 Example: This may mean that each time a customer checks into our hotel, a
different present is placed in the room stays. For instance, it could be a box of
chocolates on one occasion and a piece of luxury on another with water. By
continuing to enhance its product in this manner, the hotel will maintain its
viability to surprise and please the customer.

Image Source: Expert

Program Management
Kotler's Five-Product
Level Model

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 Finally, the model enables firms to differentiate themselves from their

competitors in a way that is consistent with their customers' wants and needs.

Advantages of Five Product Levels

 The true benefit of the approach is that it enables a company to identify and
prioritize its needs customer desires. After that, the organization can:

1. Align the features they develop to the needs of the consumer.

2. Align operational procedures with customer desires. This would be the case
in our hotel scenario may imply stringent procedures for cleaning each room.
3. Align marketing activities with customer desires.

The Five Product model encompasses all of the factors that a buyer considers
prior to making a purchase.

These considerations may include the following:

1. Cost
2. The setting and/or surroundings of the store
3. Promise/value of the brand
4. Promotional and marketing efforts
5. The purchaser's prior experience
6. Convenience or accessibility
7. Brand image
8. Packing

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A Product's Features and Attributes

A product's features and qualities are a vital part of the product design process which
contributes to the development of new items.

Design of Products

 The process of developing a new product for a business to sell to its clients.
 It is the process of efficiently and effectively generating and developing ideas
which results in new products.
 The process of creating a new product (or improving the features of an
existing one) is called product design.
 Typically, a group of persons, either designers or subject matter experts in the
product, completes the task are either creators or specialists in a certain
component of the product. These individuals would essentially define all of
the product's features and properties. The procedure entails the following:

 focuses on determining what is required, brainstorming potential

solutions, and producing mock-ups
 creating prototypes and then manufacturing the final product.
Designers of products would continue to do so at this stage.
 must carry out the concept, transforming it into a tangible product and
then evaluating its viability.
 evaluating its success and determining whether any improvements are
necessary.

Product Designers

 Develop and analyze concepts, transforming them into concrete products.

 Their mission is to integrate art, science, and technology in order to develop
the characteristics and aspects of things, either current or new, that other
people can use. Their role has evolved over time assisted by digital tools that
now provide them with increased flexibility in communicating, visualizing, and
evaluate concepts.

The Process of Design

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 This follows a prescribed format and is divided into three major sections:
analysis, concept, and synthesis – via a feedback loop. All three involve the
use of attributes and features

 Products are designed using this analysis, concept, and synthesis approach.
These unique traits and characteristics introduced to increase the utility and
desirability of the final user of the product.

1. Analysis:
 This is where the designers decide whether or not to commit to the project
and discover a solution to the issue. They pool their resources to choose the
most efficient way to complete the assignment efficiently. Each member of the
team begins study into the aesthetics of the product to accomplish the
purpose.

2. Concept:
 The primary topic is defined. The problem's circumstances deteriorate.
 The situation's aims and constraints become the framework within which
the new design must be built.
 The concept phase is where new features are conceptualized considered.

3. Synthesis
 The designers generate alternative solutions to their design dilemma.
They can detail their plan to make once they have restricted their ideas to
a select few item. Prototypes are constructed, the strategy indicated in the
preceding phase is implemented, and the product begins to take on the
form of an actual object.

The evaluation stage involves testing the product and then making improvements.
Although this is the final stage, the procedure is not complete. The completed
prototype may not function as well as intended, necessitating the generation of fresh
concepts.

KEY TERMS

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Product: Any tangible or intangible good or service that is a result of a process and
that is intended for delivery to a customer or end user
Core Product: The core product identifies what the consumer feel they are getting
then they purchase the product.
Tangible Product: The tangible product is reflected in the quality, features, brand
name, styling, and packaging.
Augmented Product: The supporting services surrounding the product, such as
after-sales service for a machine, or parking spaces for a department store
Analysis: In product design, the analysis stage is where designers begin research
on how to find a solution to the problem at hand.
Feature creep: The tendency of a design project or product cycle to accumulate
more and more features or details, rather than to be completed and released at a
more basic level.
Attribute: a characteristic or quality of a thing

Instructor’s Note:
Now try to analyse your potential product for your feasibility study, make use of
Kotler’s Five Level Product Model

SERVICE
 The service business appears to be more complicated than
manufacturing.
 The services may be tangible or intangible; they may be focused toward
people or toward products. These are further divided into four broad
categories according to their applicability:

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Classification of Service

1. People Processing Services:

 This term refers to the customer's physical presence at the service system
or location in order to utilize the service. For instance, a person must be
physically present at the'salon' in order to receive a haircut.

2. Product/Possession Processing Services

 These are services that pertain to a single product or its possession with
little or no customer participation. For example, the services provided by
'packers and movers' are largely concerned with the safe relocation of
customers' goods, such as furniture and valuables.

3. Mental Stimulus Processing Services

 Mental stimulus processing services are those that have an effect on a
consumer's mental talents, religious beliefs, behavior, perception, lifestyle,
and attitude. For instance, educational institutions impart knowledge that
aids in the development of a person's mental capacity.

4. Information Processing Services

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 These are a type of intangible product that is distinctive in that information

is used as a product or information technology is utilized. Due to the
magnitude of the investment and the associated risk, such decisions are
deemed crucial; as a result, complete customer engagement is evident
here.

Characteristics of a Service

1. Dedicated to the customer

 In comparison to the manufacturing industry, customization of the product
offering becomes critical in the service industry. While conducting
business operations as a service provider, the customer's needs,
perceptions, and requirements are prioritized
2. Service is a one-time event
 This means that it cannot be recovered, remade, replaced, or exchanged.
It is intangible and irrevocable; hence, it must be flawless and well-
delivered the first time.
3. Speed and accuracy.
 Consumers want ‘prompt” service As a result, an organization's
service delivery requires qualified and experienced staff, as a poor
consumer experience can result in unfavorable press, affecting the
brand's name and equity.

Service as a Method
 Process is critical in the service business. The term "process" refers to the
procedures taken by the consumer to obtain the service.
 Each of these procedures must be closely monitored by an organization. It
must assure the humility, honesty, and sincerity of all workers participating in
consumer interactions across each of these processes.

Rapidity and Accuracy

 Consumers prefer uninterrupted service. As a result, the rate at which a
service is given is considered a measure of its efficiency. It is also responsible
for consumers choosing one service provider over another.

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B. PROJECT SITE
 The project site is where you will conduct your production process—if
manufacturing of product is the main activity of the business.
 If it is a restaurant or other service oriented business, your project site may be
your location and diagram of your location or place of business.

What is expected in this part of the feasibility study:

1. Location of the Project Area

 You will have to indicate the exact address, road, and other landmarks
closest to it.
 One important factor is that the location is feasible for business or
production. Meaning if it’s a service oriented business, it should be
accessible to people.
 You could use a site analysis for this.

2. Diagram/Layout of your site

 Here is an example of your project site layout. It shows the access from
the main road

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Image Source: Research Gate

3. Diagram of your working area/ production area

 Here is an example of a production or working area. It should clearly indicate
the labels

Image Source: Research Gate

Five (5) Phases of Site Analysis

 The site analysis is separated into five parts, beginning with an examination
of the site's parameters and ending with governmental permissions.

1. Parameters of the Site

 What is permissible – outright or through special permissions or variances?
What are the parameters for zoning?
 Which additional regulatory agencies oversee the property's development?
 This information is critical at the start of any project since it indicates where
you can build on the site, what limits apply, and what, if any, permits are
required.
 This stage of the process will often inform you whether your proposed project
is possible on the site.

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2. Systems Programming
 What things are required based on your objectives and the limitations of the
property?
 These are both site and building programming (parking, circulation, building
size, utilities, and landscaping) (number and size of main rooms, circulation
and egress, common spaces, amenities, etc).
 Once the program is complete, your architect will have a clearer sense of the
project's overall size and scope, and will be able to determine if the project
can expand in size or scope, remain on track with the current program, or
need to cut down.

3. Layouts of the Site and Buildings

 Numerous conceptual sketches of the location and building components are
created. Following this conversation, a conceptual site plan and architectural
drawings are created for submission to Town/City or State regulatory bodies.
 These are the foundational drawings that depict the building's orientation,
layout, occupancy, relationship to the site, circulation, utilities, and parking, as
well as any other notable architectural characteristics unique to the project.

4. Authenticity of Applications
 Early on, your architect will decide which approvals are required and will also
aid in the drafting of applications. These may include Planning and Zoning,
the Zoning Board of Appeals, a Historic or Design Review Board, the
Department of Environmental Protection, Inland Wetlands, or Coastal Area
Management. Your architect will prepare the relevant drawings for each
application based on the requirements.

5. Certifications
 This may include informal discussions, public hearings, or a simple
assessment of the regulatory framework. To gain permissions, your architect
will present, discuss, and change as necessary

Source:
http://www.patriquinarchitects.com/what-you-need-to-know-about-site-analysis-and-
feasibility/

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C. BUILDINGS & FACILITIES

 Discuss how the building will be designed
 How much it would cost to construct the building. Create a diagram/layout if
building is to be constructed
 In case the building will only be rented, the author should also discuss the
how it will be carried out.
 Will you need to construct your own facility or will you be able to purchase an
existing one? How far away will the facility be from your customers? Who will
be accountable for freight transportation between the facility and the market?
What are the associated costs?
 The site, type, and costs of the building and land, as defined in the project,
should be accurately presented.
 The building and facilities construction costs should be presented in
accordance with the machinery and equipment that will be used in the project.
Land improvements such as roads, drainage facilities, etc. Should be
computed and included.

D. OPERATIONAL FLOW
 It shows the process of how a product is made or a service is delivered to the
customer
 The operational flow will depend on what kind of business you are doing. If it
involves shipments and supply chains, your flowchart would expectedly be
more complicated and precise.

Production Flow
 Shows the process undertaken to produce a product.
 Shown below is the process of making a sesame flour

Image Source: Research Gat

Service Flow

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 Shows the process on how a service is delivered to the customer

 Use your prior knowledge in operations management
 Think of the process specific to your Service-oriented business
 Example: if it’s a restaurant, you have to create a flowchart similar to the one
on the next page.
Service Flowchart for a Restaurant

Image Source: Research Gate

Instructor’s Note:
Now try to create your project site, production area diagram as well as your
operational flowchat
E. UTILITIES

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 Discuss the basic utilities that will be needed in the business including
their monthly and annual cost.
 This section details the amount, cost, and sources of electricity, fuel,
water, and/or steam that will be required.
 This must be determined in accordance with the defined production
schedule and capacity utilization. Alternative sources for these utilities
must also be described, as well as the feasibility of their use.

F. RAW MATERIALS & SUPPLIES

 In their natural state the essential raw materials should be listed and the
justification for their selection should be presented.
 Descriptions and specifications of their physical, mechanical, and
chemical properties are required as well.
 Current and prospective costs of raw materials, availability and continuity
of supply, and current and prospective sources should also be included.
The volume required at difficult phases of operations must be displayed
clearly.

G. EQUIPMENT
 Shows details of the cost of equipment needed in the business including
their cost and suppliers

H. Furniture and Fixtures

 Shows the furniture and fixtures needed in the business including the
quantity and estimated cost.

I. PRODUCTION COST
 The monetary aspect of all theproduction plans is put into perspective.
 How much does it cost to produce oneunit of output? to arrive at this,
the ff must bedetermined:
1. Raw material costs
2. Labor cost
3. Overhead cost( fixed cost), operating costs(variable costs) other
pertinent costs

J. LABOR REQUIREMENT

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 The various jobs and functions necessary for the operational stage must
be described.
 For costing, labor is generally classified into three types:
1. direct
2. indirect
3. administrative
 The number of workers to be employed for each job classification
 The pay scales
 Employees development programs
 The organization set-up
 The aggregate labor costs

Instructor’s Note:

It is important to make write in details the costing estimations for labor. Include
schedule and terms of payment. In doing so, you are ready to include these
information in your financial report, as this will reflect in your salaries and wages
expense.

Exercise 4
Instruction: Use the worksheet provided in the exercise folder in Google Classroom

1. As a future business consultant, why do you have to discuss in detail the

different components under the production/ technical study? What is its
bearing and relevance to your feasibility report?
2. Dream Business Idea
Provide the following:
a. Product (Goods or Service)
 Describe in details
 analyse through Kotler’s Five Product Model
b. Create a diagram of your production area

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LESSON 2

ENVIRONMENTAL STUDY

 The environment aspect to the feasibility study is one important component in

the Management Study.
 This part of the study will provide information as to how feasible could the
business be running without potentially harming the environment or without
depleting available resources
 This part of the study can be conducted through an Environmental Impact
Assessment

Environmental Impact Assessment

 Assesses the Impact of the business operation the immediate environment
 Some common concerns include the following
1. Will the environment be able to withstand business activity?
2. Will constructing a factory may require extensive research? Particularly to
assess the facility's operation's impact on the environment?
3. Will there be a possible negative impact on the environment?

Possible Harmful Effects on the Environment

1. Environmental Stress
 Excessive pressure on the environment as a result of factory activities
such as pollution generation and impact on those who are not involved
in the activities (nearby residents)

2. Environmental Risk
 Actual or potential threat of adverse effect on living organisms as a
result of effluents, emissions, wastes, and resource depletion resulting
from factory operation activity

WASTE DISPOSAL
 Discusses how proper waste management will be observed and practiced in the
business. Discussion shall be in narrative form and through charts.

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UNIT 5

FINANCIAL FEASIBILITY

A financial feasibility study is a technique for introducing people to your business

strategy or idea, especially when applying for loans and in looking for possible
investors and funding to your business. The analysis outlines the amount of money
required to fund your project, as well as where it will come from and how it will be
used after it is obtained.

Online Source: Urban tactics

Learning Objectives:
After learning this module, you should be able to:

1. Learn how to draw assumptions in the financial aspect of feasibility study

2. Understand the concept of capital contribution
3. Compute for total project cost
4. Create pre-operating financial statements
5. Project financial statements
6. Analyse financial statements through several measures
7. Understand the business feasibility through the break-even analysis

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LESSON 1

MAJOR ASSUMPTIONS

 All projects are considered viable only if they are expected to be profitable, to
meet short-term obligations, to be liquid & to remain liquid during adversities,
to grow in their ability to finance their operations primarily through net-worth
sources, rather than credit
 Important assurances like total project costs, initial working capital
requirements, alternative sources of financing are considered, if any sources
of financing for the project beginning & pro-forma financial statements
financial analyses
 Assumptions are important in the formulation of financial projections because
they form the base for estimating the project's future expenditures, expenses,
and revenues as accurately as possible.
 As a result, these assumptions must be based on well-considered, realistic,
and workable facts.

Some of the major business assumptions would come from the following:

1. Existing business practices in the industry to which the project applies may
provide important information & insights on:
 credit terms;
 credit extension;
 bad-debt allocations;
 bad-debt write-off;
 quality-control costs;
 dividend policies;
 sales returns,
 allowances, & discounts,
 labor & management compensation,
 overhead accounts,
 inventory costing, operating accounts,
 fixed- asset requirements,
 method of depreciation & amortization,

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 intangible asset pre-requisite

2. Prior feasibility studies directly related to the project may contribute additional
factors to be considered, which confirm or contradict findings in industry
standards, particularly those items involved in the computations of:
 selling price,
 sales forecasts,
 unforeseen costs,
 production volume, and
 product mix

3. Governmental regulations and incentives affect the project directly or

indirectly, such as:
 import and export policies,
 tax rates,
 tax exemptions,
 price ceilings, and
 Applicable presidential decrees or loi.

7. Additional data that can be used to justify the study's assumptions, such as:
 industry policies,
 pre-feasibility studies,
 symposium and conferences, and
 material outputs of industry associations.

8. Estimates of the project's initial cost/asset requirements, based on the

following:
 materials,
 supplies,
 equipment,
 physical plant, and
 manpower requirements specified in the technical portion.

9. Land & land improvements

 cost of land,
 notary fees,
 registration duties, and other related costs

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 buildings, including electric & water utilities,

 furniture & fixtures,
 building cost,
 wells,
 water pipes,
 electrical connections,
 gas supply,
 telephone Equipment, plus installation costs purchase & installation of
machinery
 purchase taxes,
 freight & insurance expenses,
 customs duties trial-run associated with electric utilities,
 equipment & machinery
 electricity & telephone lines,
 electrical equipment

10. Inventory investments purchases of materials and supplies freight expenses

inventory-related costs indirect & direct labor with corresponding fringe benefits heat,
light, & power maintenance warehousing expenses for raw materials in process
materials in process (cost of initial investigations, pre-feasibility studies, research &
technical studies, economic & marketing studies, financial & profitability studies,
design studies, &consulting- engineering fees). Intangible assets (patents, licenses,
goodwill, and reproduction rights) operating salaries & fringe benefits engineering
costs operating taxes office supplies communication facilities office utilities billing
costs transportation costs advertising costs borrowing cost

Instructor’s Note:

Make assumptions aligned to your project.

Example: Assume that prices of raw materials will increase by 2 % the following year.

Read more on making assumptions for your business

https://www.alberta.ca/preparing-financial-projections-and-monitoring-results.aspx

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LESSON 2

PROPOSED CAPITAL CONTRIBUTION

 Shows how capital contribution would be divided among the members/owners

of the business.
 Capital contributions are common in partnerships and corporation.
 For sole ownership type of business, the owner may source capital through
bank loans, micro-lending corporations or from personal savings
 A capital contribution is a financial investment made by a shareholder to a
business in some way.
 A capital contribution may be a cash or other assets transferred to an entity in
exchange for an equity stake or as part of an on-going obligation or capital
commitment to finance the entity. For instance, capital contributions are
frequently made in exchange for an entity's additional common stock,
partnership interests, or limited liability company interests.
 The shareholder does not receive additional shares in exchange for the
donation, but as a result of the contribution, the shareholder gains equity in
the company. Additionally, the base value of previously held shares
increases. In most circumstances, the capital contribution is not recognized
as part of the company's income, although tax treatment varies by region and
regulation.
 Capital can take on a variety of FORMS. While money is the most obvious
example, capital contributions can also include property, services, or future
pledges to perform services.
 The shareholder who makes the capital contribution does so to grow the
company's equity and to support the business. For instance, if two siblings
operate a business, one sibling may choose to make a capital contribution to
infuse the business with funds to enable it to complete a development project.
Similarly, a business may collect property contributions from co-owners in
order to finish a planned project.

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 Example for Partnership type of business ownership

Image Source: Finance Strategists

 Example for Corporation type of business ownership

Image Source: Fit Small Business

 For sole ownership type of business

Mr. Chao Proposed Capital

Source Value/ Amount
Personal Savings Php 5,000,000.00
Bank Loan (payable for 3 years with 3.25% Php 3,000,000.00
interest per annum)
Fixed Assets Php 2,000,000.00
Total Proposed Capital Php 10,000,000.00
Take note: This is not how it should appear in your financial statement, this table
shows only the presentation of proposed capital as shown in the table above

Instructor’s Note:
For Corporation, take note that each contribution shall appear in the financial
statements, same with partnership

LESSON 3

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TOTAL PROJECT COST

 Shows the computation of the total cost of the project

 In some financial plans, like in start-up businesses, this is shown as the total
start-up funding or the initial
 The term "project costs" refers to the total amount of money required to cover
and complete a commercial transaction or work project.

COST ESTIMATION
 Cost estimation is the process of projecting the cost of executing a defined-
scope project. It is the major component of project cost management, a body
of knowledge that entails planning, monitoring, and controlling the monetary
expenses of a project.

Key Components of Cost Estimating a Project Cost

 A cost estimate is a total of all the costs associated with effectively

completing a project, from start to finish (project duration).
 These project expenses can be classified in a variety of ways and with
varying degrees of detail, but the most straightforward classification separates
costs into two broad categories: direct costs and indirect costs.

1. Direct Costs
 These are typically defined as those that are directly related to a specific
region (such as a department or a project).
 Direct costs are expenses that are invoiced specifically to a given project
in project management.
 They may include salaries for employees and workers, the cost of
resources used to create tangible products, the cost of fuel for equipment,
and money spent to mitigate any project-specific hazards.

Costs incurred directly include the following:

a. The project's professionals – whether business employees or
outsourced contractors and freelancers

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b. equipment – i.e. the tools and machines that workers, contractors, or

independent contractors utilize to complete the project
c. Materials – i.e. tangible items (that are not tools or machines) required to
complete the job
d. Project management duties – i.e. all tasks designed to expedite the
completion of a project within a certain timeframe and in accordance with
defined specification
e. Engineering duties (as required) - this includes the research, design,
and installation of equipment necessary to complete the project.
f. Transportation (if applicable) - i.e. customs fees, transporting the
finished product to retailers, and so forth.

2. Indirect Costs
 These cannot be assigned to a specific cost center and are instead incurred
concurrently by a number of projects, sometimes in varied quantities.
 Quality control, security, and utility costs are typically categorised as indirect
costs in project management since they are shared across multiple projects
and are not directly billable to any one project.

Indirect costs include those associated with:

a. Operations expenses, such as rent, utilities, insurance, and standard office

equipment and supplies
b. Annual target salary, i.e. the profit that the business or individual wishes to
earn, in addition to the funds required to cover overhead and other expenses.

A cost estimate, on the other hand, is more than a basic list of expenses; it also
details the assumptions that behind each cost. These assumptions (together with
cost accuracy estimates) are summarized in a report titled the basis of estimate,
which also contains cost exclusions and inclusions. The estimate report serves as a
guide for project stakeholders in interpreting project costs and determining how and
where real costs may differ from estimated prices.

Typical forms of expenses include the following:

1. Labor: The expense of human labor put forth to accomplish a project's goals.

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2. Materials: The cost of the raw materials used to manufacture items.

3. Costs associated with the acquisition and maintenance of equipment utilized
in project activities.
4. The cost of external work that a business seeks for a particular project
(vendors, contractors, etc.).
5. Software is a term that refers to non-physical computer resources.
6. Hardware refers to the physical components of a computer.
7. Costs associated with the rental or use of specialized equipment, services, or
locations.
8. Costs added to the project budget to cover certain risks.

Below is an example of Cost Estimate for Start-up business

Image Source: Bplans

Sources
https://clockify.me/blog/business/project-cost-management/
https://www.smartsheet.com/ultimate-guide-project-cost-estimating
https://www.smartcapitalmind.com/what-are-pre-operating-costs.htm

LESSON 4

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PRE-OPERATING CASH FLOW

 Shows the computation for the pre-operating cash flow of the business which
can be determined by getting the amount for:
a. Cash flow from operating activities
b. Cash flow from investing activities
c. Cash flow from financing activities

Pre-operating Cash Flow

 It is the amount of cash generated before the regular operating activities of a

business in a specific time period.
 In other words these are the flow of cash before the business operates

Image Source: Scribd

LESSON 5

PRE-OPERATING BALANCE SHEET

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 Pre-operating balance sheet shows the assets, non-current liabilities and

owner’s equity of a business prior to its operation
 It shows the starting financial position of the business for a certain period of
time

Image Source: Scribd

LESSON 6

PROJECTED INCOME STATEMENT

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 The projected income statement provides information about a business's

profitability. It summarizes a business's manufacturing and sales activity
during a certain time period, generally a month, quarter, or year.

Revenue – (Costs + Expenses) = Profit

Image Source: Pinterest

Important Considerations

 To begin, let us discuss sales. When a product is shipped or a service is

performed, you record sales on the income statement. It is critical to
understand that sales do not begin when the product or service is ordered or

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booked. The sales figure presented is the net sales figure; that is, the exact
price paid after reductions.
 Perhaps you're wondering why orders aren't reflected in the sales figure:
Orders build up a backlog, but they do not generate revenue until they are
converted into sales. Receipt of an order does not imply a sale.
 A sale occurs only once the product is shipped or the service is rendered.
Until then, it is merely an order – either a goods or a service order. Revenue
is a term frequently used by accountants to refer to sales.
 In comparison, costs are expenditures. They may include material costs,
employee salaries, contractor fees, and general overhead.
 Costs are essentially what you pay to acquire, manufacture, or perform a
service. With physical products, this value is deducted from inventory and
recorded as an expense on the income statement, where it is referred to as
cost of goods sold.
 This can be perplexing. The fundamental premise is that costs reduce cash
values while increasing balance sheet inventory. The aggregate value
remains constant, while the distribution of products changes.
 When inventory is sold, the balance sheet value is transferred to the income
statement. In other words, a potential sale has developed into a genuine
transaction. The customer received product from the inventory.
 At this point, let us define two concepts that are frequently used
interchangeably: cost and expense. Both are distinct from expenditures.
 Costs are incurred during the production process. This category includes the
items required to build up your inventory.
 Everything else is an expense. They can cover all aspects of your firm, from
the copy machine to the salesperson's mileage and income or commission.
Consultations with your accountant, for example, are considered expenses.
 Expenses have an effect on the income statement since they reduce the total
income. Costs and expenses are both types of expenditures.
 To add to the confusion, there is a subcategory of expenses called operating
expenses. These are the costs incurred by a business in order to create
revenue. They can include sales and marketing, research and development,
as well as general and administrative expenses. They are sometimes referred
to as SG&A expenses on sample financial statements, which stands for sales,
general, and administrative expenses.
 And now we come to the crux of the matter - income.

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 Income arises when the total of sales exceeds the total of expenditures and
expenses. You've now earned a profit! This is the objective of any business.
 You will incur a loss until you earn a profit.
 Income is also known as profit or earnings. As a result, the income statement
can also be referred to as the profit and loss statement, P&L, or earnings
statement.
 There are two methods for accounting for a business's books or records: cash
basis or accrual basis
 In a cash-based system, income is calculated as soon as cash is received,
and expenses are calculated as soon as cash is spent. This is a real-world
scenario.

Projecting Income Statement Line Items

 When developing a three-statement model, the practice of projecting income

statement line items becomes vital.
 Projecting the revenue statement's major line items should become second
nature. Each line item will have its own set of drivers that will affect its future
worth. Indeed, if the financial model you're using is similar to another
company you're modeling, you may be able to just duplicate the model and
replace the historical data.

Projecting the Major Line Items

When estimating revenue statement line items, the following major accounts must be
considered:

1. Revenue from Sales

2. The Price of Goods Sold (or Gross Revenue)
3. General Expenses, Total or Specific (SG&A)
4. Expense for Depreciation
5. Interest Charges
6. Taxes
7. Revenue from Sales

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Naturally, projections of income statement line items begin at the top of the income
statement. This is the revenue generated via sales. Typically, all subsequent line
items will be calculated using the sales revenue value.

Forecasting sales income can be accomplished in a variety of ways.

1. You can model sales revenue as a simple rate of growth based on prior
years. This means that the following year's sales revenue is equal to the
previous year's sales revenue multiplied by one plus the growth rate.
2. Second, you can model sales revenue as a percentage of GDP or another
macroeconomic indicator. This means that revenue for each year will be
determined using a regression algorithm that incorporates historical sales
revenue and the year's GDP (or other metric).
3. Finally, you can model sales income in terms of a straightforward dollar
amount. This forecasting technique is the least dynamic and, therefore, the
least accurate. However, it is available when quick and dirty projections of
sales revenue are required.

The Price of Goods Sold (or Gross Profit)

 The following stage will be to forecast the Cost of Goods Sold. Thus, we may
calculate Gross Profit by subtracting COGS from revenue. Alternatively, we
can forecast Gross Profit and then calculate Cost of Goods Sold numerically.
 Whichever line item we select to forecast, the procedure is straightforward.
Often, a basic % of sales revenue calculation may enough. We use historical
percentages of Cost of Goods Sold (or gross profit) over sales revenue to
forecast future percentages.
 Alternatively, a more robust model may exclude particular cost of goods
items. Depending on the business's operations, these may be classified as
raw materials, work in progress, finished goods, labor costs, direct material
costs, or other line items. These can also be anticipated as a percentage of
sales revenue or as whole dollar amounts.

Expenses associated with selling, general, and administrative functions

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 A simple and straightforward model will forecast all Selling, General, and
Administrative (SG&A) expenses as a single line item. This is simple to
accomplish using the % of sales method. However, a more robust model may
choose to break down SG&A into specific components, a more difficult
procedure. This is because each line item will have a unique set of drivers.
 For instance, because rent expenses are often constant each month, a fixed
dollar amount is more appropriate than a proportion of sales revenue.
However, because advertising expenses are often connected with sales
revenue, the proportion of sales may be more realistic in this scenario.
Additionally, there may be “one-time” line charges that do not appear on a
monthly basis. This topic is discussed in further detail in our article on
financial statement normalization.
 Additionally, there are two line items that occasionally emerge under SG&A
that require additional forecasting work. These are referred to as depreciation
and interest expenses.

Expense for Depreciation

 Depreciation expense connects the gradual use of machinery and personal

property and equipment to their ability to generate revenue. Due to the fact
that the economic benefit (revenue) of utilizing PP&E spans many accounting
periods, the matching principle requires that their expense be accrued across
multiple accounting periods as well.
 We forecast depreciation costs by employing a depreciation schedule. This
section contains the PP&E opening balances, any additional capital
expenditures, and the PP&E closing balance. We can determine historical
depreciation expense by examining historical balances and capital
expenditures. Following that, these data can be utilized to forecast future
depreciation and capital expenditures.
 The schedule can anticipate depreciation expense using a proportion of the
opening balance or any of the depreciation accounting techniques. If we know
the company's depreciation strategy, we can apply straight-line, units-of-
production, or accelerated depreciation directly to arrive at the appropriate
expenditure values

Different types of depreciation.

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1. Interest Charges
 Interest expense is calculated by referring to the debt schedule. This
schedule details each piece of debt separately and occasionally creates a
summary schedule that totals all balances and interest expense
 Interest expense is calculated by multiplying the period's opening balance by
the interest rate. This interest charge is then subtracted from the opening
balance and subtracted from any principle repayments to arrive at the closing
balance.
2. Taxes
 Finally, we reach the final line item to determine tax expense. Tax expense is
expressed as a proportion of pre-tax earnings (EBT). The effective tax rate, or
cash tax rate, is this percentage.
 EBT is calculated by deducting all preceding expense line items from
revenue. We can anticipate future tax expense by multiplying EBT by the
previous effective tax rate.

LESSON 7 143
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PROJECTED BALANCE SHEET

 Projections of balance sheet line items are typically made concurrently with
projections of income statement line items.
 Both of these abilities are required in order to master the art of financial
modeling. This article walks you through the process of calculating and
forecasting each line item required to forecast a comprehensive balance
sheet and construct a three-statement financial model.
 Below is the same example in the previous lesson (see Projected IS)

Image Source: Pinterest

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Items from the Projected Balance Sheet

 When projecting balance sheet line items, the following are the primary
accounts to consider:
1. Inventory Other Current Assets Assets Accounts Receivables
2. Other Long-Term Assets PP&E
3. Accounts Payables Liabilities
4. Long-term Debt\sEquity
5. Earnings Retained by Shareholders

These are the primary line components that comprise a balanced sheet.

Line Items for Working Capital

 Accounts Receivables, Inventory, and Accounts Payables are all unique in

their forecasting methods.
 Due to the fact that all of these accounts are involved in the operating and
cash cycles, forecasting "days outstanding" for all of these accounts is
beneficial.
 We can anticipate future accounts receivables, inventory, and accounts
payables using the formula for their respective days outstanding.

The following are the annual days outstanding formulas:

Inventory Days = Average Inventory / Sales Revenue x 365 Accounts

Receivable Days = Average Inventory / Cost of Goods Sold x 365

Average Accounts Payable Days = Average Accounts Payable / Cost of Goods

Sold (or Purchases) multiplied by 365

 After determining historical days outstanding values, we can utilize these

trends to reverse compute the days outstanding formulas in order to
determine the accounts receivables, inventory, and accounts payables for
that particular time.

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Working Capital Example

Consider accounts receivables. Accounts receivable days outstanding were 120 in

the prior year. If sales revenue is $100,000 for the year, accounts receivables are
calculated as follows:

Accounts Receivables = 120 times $100,000 divided by 365 is $32,876.

Additional Current and Long-Term Assets

 Other current assets can be anticipated as a single line item or as multiple

items. Projecting balance sheet line items using the latter method is a little
more complicated, but will result in a model with greater granularity and
dynamism.
 The quickest and simplest approach of projecting balance sheet line items for
current assets is to simply utilize a whole Peso value projection for these
accounts in the future or to simply follow an existing trend.

Proprietorship, Plant, and Machinery

 The process of forecasting PP&E is distinct from that of projecting other

current and long-term assets. This estimate necessitates the development of
a depreciation schedule for each category of PP&E. The closing balance is
the balance shown on the balance sheet.

Opening balance + Capital Expenditures – Depreciation Expense = Closing

Balance

 As you can see, the depreciation schedule is used in conjunction with both
the balance sheet and income statement. On the balance sheet, we use the
closing balance, and on the income statement, we utilize depreciation
expense.
 Example

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Debt on the Long Term

 As with PP&E and its depreciation schedule, long-term debt is anticipated

using a debt schedule. This schedule details each type of borrowing and the
interest expense associated with each period. The balance shown on the
balance sheet is also the long-term debt's closing balance or the sum of all
individual debt's closing balances.
 The closing balance is equal to the opening balance plus the interest expense
minus the repayments.
 It's critical to notice that interest expenditure is added back to the opening
balance in this case. In comparison, under PP&E, depreciation expense is
deducted from the beginning balance. Bear this in mind and don't forget to
utilize the proper signage.
 Example: Schedule for payment of Bank Loans

Capitalization of Shareholders (for Corporations)

 When projecting balance sheet line items, one of the simplest jobs is to
estimate shareholder capital. Because shareholder capital is frequently
consistent across time, predictions are typically made to equal the most
recent known period.
 The closing balance is the opening balance plus any new capital issued
minus any capital repurchased.


Earnings Retained

 Forecasting retained earnings entails forecasting net income and dividends in

addition to retained earnings.
 This means that before completing the balance sheet line item projections, it
is prudent to complete the income statement line item projections first, in

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order to have net income readily available. As is customary, the balance

shown on the balance sheet is the closing balance.
 The closing balance equals the opening amount plus net income minus
dividends.

The Most Appropriate Sequence for Projecting Balance Sheet Line Items

Because we require certain income statement items, this is the most accurate
method of predicting balance sheet line items:

1. Income statement for the project up to the point of depreciation and interest
costs
2. From the project's balance sheet to retained earnings
3. Complete the income statement projection by including depreciation, interest,
and tax expense.
4. Complete the projected financial sheet by adding retained earnings.

Instructor’s Note:

Now you are ready to prepare your projected balance sheet.

Kindly refer to Google Classroom for additional materials and example to help you
with this lesson.

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LESSON 8

PROJECTED STATEMENT OF CASH FLOW

 A projected cash flow statement is used to determine the inflows and

expenditures of cash in order to discourage.
 The best way to characterize a projected cash flow statement is as a listing of
anticipated cash inflows and outflows for a future period (usually a year).
Cash transactions that are anticipated to occur are entered for the subperiod
in which they are expected to occur.

Image Source: Pinterest

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The advantages of projecting the Cash Flow

 Estimating predicted cash flow estimates can aid in the growth of your
organization.
 Cash flow forecasting has a number of advantages. Among the advantages of
developing a cash flow estimate are the following:

1. Predict shortages and surpluses of cash

2. Analyze and analyze business expenses and revenue for certain time
periods.
3. Calculate the impact of business changes (e.g., hiring an employee)
4. Demonstrate to lenders your ability to make timely payments
5. Determine whether any revisions are necessary (e.g., cutting expenses)

 Cash flow forecasting is not appropriate for every firm. If done incorrectly,
your anticipated cash flow analysis can be time consuming and costly.
 Bear in mind that cash flow forecasts will almost certainly never be accurate.
However, you can use your predicted cash flow to assist in cash flow
management.
 The bottom line is that your cash projections provide a more accurate picture
of your business's future direction. Additionally, it can identify areas for
improvement and cost reduction.

Calculating expected cash flows

 If you're ready to begin calculating your business's future cash flow, acquire
some historical accounting data.
 You must obtain reports from your accountant, books, or accounting software
detailing your business's revenue and costs. Depending on the timeframe
you're attempting to forecast, you may need to acquire extra data.

STEPS

1. Determine your business's cash position at the start of the quarter.

 To determine your cash balance at the start of the period, subtract prior
period's expenses from revenue.

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 Cash at the start of the period

equals the previous period's income
less the previous period's expenses

2. Calculate the amount of cash that will

be received in the following period.

 Following that, you must forecast

how much cash will flow into your
organization over the next period
 Incoming cash includes revenue,
sales made on credit, and loans,
among other things.
 You can forecast future cash flow
by examining historical trends.
Make certain to account for any
differences in conditions or
circumstances from previous
periods (e.g., new products).

Image Source: Patriot

3. Make a forecast for the following period's expenses.
 Consider all the expenses you will incur in the coming time. Consider raw
supplies, rent, utilities, insurance, and other monthly expenses.

4. Subtract the projected expenses from the estimated revenue.

 Subtract your projected expenses from your estimated revenue to get your
business's cash flow.
Estimated Income – Estimated Expenses = Cash Flow

5. Increase the opening balance by adding cash flow.

 Following the cash flow calculation, you must add it to your opening balance.
Additionally, this will provide you with your closing balance. Your closing
balance will be carried forward and used as the starting balance for the
following period
.

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LESSON 9

FINANCIAL STATEMENT ANALYSIS

 Financial statement analysis is the practice of calculating a set of financial

ratios that are intended to highlight an enterprise's relative financial strengths
and shortcomings to ascertain their interrelationship with one another, with
the financial statement itself, or with the business's historical performance
and that of other industries, and providing context to their interpersonal
relationships.

As a result, the process is divided into two distinct phases:

1. the computation
2. interpretation

 Financial statement analysis (or financial analysis) is the procedure for

examining financial statements and analyzing a company's financial data in
order to make more informed economic decisions future earnings decisions.
 These statements include an income statement, balance sheet, cash flow
statement, notes to accounts, and a equity statement (if applicable).

Analytical Instruments

 A financial analyst can analyze financial statements using a variety of tools.

These analytical tools include the following:
1. Amounts in pesos in their whole
2. Ratios
3. Proportions
4. Indexes

Three Methods of Analysis

 In general, there are three basic approaches to financial statement analysis

that can be used to evaluate the

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 In general, the three major approaches to financial statement analysis to

assess the company’s performance and financial conditions are Vertical
analysis, Horizontal analysis, and Ratio analysis.

Vertical Analysis

 Vertical analysis is a technique used in accounting to illustrate the relative

sizes of several entities. a financial statement's accounts.
 For instance, when a vertical analysis is performed on an income statement, it
reveals the top-line sales figure will be 100%, while all other accounts will be
represented as a proportion of the total number of sales. On the balance
sheet, the company's entire assets will be shown as 100%, including all debt,
other accounts on both the asset and liability sides of the ledger, indicating as
a percentage of the number of total assets.
 For instance, take a look at ABC Company's income statement. The following
example illustrates the income statement of ABC Company during a three-
year period. This will serve as the beginning point for doing a vertical
analysis.

To begin, we need examine the income statements in their monetary form. While the
company's revenues have increased over this time period, net income has
decreased significantly in year three. Salaries and marketing expenses have soared,
as sales have climbed. However, these expenses do not appear to be significant
enough to account for the reduction in net income at first glance.

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We'll accomplish this by creating a "common size income statement" and conducting
a vertical analysis. Divide the supplied number by the company's sales for that year
for each account on the income statement. This will result in the creation of a new
income statement that shows each account as a proportion of the year's sales. As an
example, in year one, we'll split the company's $95,000 "Salaries" spend by its
$400,000 annual sales. This result, 24 percent, will display beside Salaries for year
one in the vertical analysis table.

This is how the completed table should look.

 The vertical analysis confirms what we already observed in our initial review of the
income statement, and it also reveals the missing driver in ABC Company's net
income decline: costs of goods sold.
 First, we can see that the company's marketing expenses increased not just in dollar
terms, but also as a percentage of sales. This implies that the new money invested in
marketing was not as effective in driving sales growth as in prior years. Salaries also
grew as a percentage of sales.
 The vertical analysis also shows that in years one and two, the company's product
cost 30% and 29% of sales, respectively, to produce. In year three, however, cost of
goods sold spikes to 40% of sales. That's driving a significant decrease in gross
profits.
 This change could be driven by higher expenses in the production process, or it
could represent lower prices. We can't know for sure without hearing from the

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company's management, but with this vertical analysis we can clearly and quickly
see that ABC Company's cost of goods sold and gross profits are a big issue.

Horizontal Analysis

 Horizontal analysis compares financial information over time, typically from

past quarters or years.
 Horizontal analysis is performed by comparing financial data from a past
statement, such as the income statement. When comparing this past
information one will want to look for variations such as higher or lower
earnings
 Horizontal analysis is used in financial statement analysis to compare
historical data, such as ratios, or line items, over a number of accounting
periods.
 Horizontal analysis can either use absolute comparisons or percentage
comparisons, where the numbers in each succeeding period are expressed
as a percentage of the amount in the baseline year, with the baseline amount
being listed as 100%. This is also known as base-year analysis. Dollar and
percentage changes are computed by using the following formulas:

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Interpretation: In above analysis, 2007 is the base year and 2008 is the comparison
year. All items on the balance sheet for the year 2008 have been compared with the
items of balance sheet for the year 2007.The actual changes in items are compared
with the expected changes. For example, if management expects a 20% decrease in
long-term liabilities but actual decrease is only 13.6%, it needs to be investigated.

Ratio Analysis

Financial ratios are very powerful tools to perform some quick analysis of financial
statements.

Ratio analysis is a quantitative method of gaining insight into a company's liquidity,

operational efficiency, and profitability by studying its financial statements such as
the balance sheet and income statement.

1. Liquidity Ratios
 Liquidity is the ability of the firm to meet its current obligations as they fall
due. It is an important ingredient to ensure the continuous operation of the
firm.
 A firm should determine the degree of its liquidity in order not to interrupt
its operation.
 In this instance, the financial manager analyzes not one but many pairs of
basic ratios which are known as
a. current ratio,
b. quick ratio,
c. inventory turnover and
d. receivable turnover

a. Current Ratio
 The current ratio is a liquidity ratio that measures whether a firm has
enough resources to meet its short-term obligations. It compares a firm's
current assets to its current liabilities, and is expressed as follows:
 The current ratio provides insight into a business's liquidity. Acceptable
current ratios vary by industry. In many circumstances, a creditor would
prefer a high current ratio to a low current ratio, because a high current
ratio demonstrates financial strength, which implies that the corporation
has a greater likelihood of repaying the creditor. Significant current


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 Ratios are not necessarily indicative of an investor's health. If the current

ratio of the business is excessive, it may signal that the business is not
making the best use of its current assets or any of its short-term funding
arrangements.
 Current liabilities surpass current assets, resulting in a current ratio of less
than one implies that the business may be experiencing difficulties in
ensuring that its short-term responsibilities are met. Certain sorts of
enterprises can function with it. However, the present ratio is less than
one.

b. Quick Ratio

 In finance, the quick ratio, also known as the acid-test ratio is a type of
liquidity ratio, which measures the ability of a company to use its near cash or
quick assets to extinguish or retire its current liabilities immediately.
 It is defined as the ratio between quickly available or liquid assets and current
liabilities. Quick assets are current assets that can presumably be quickly
converted to cash at close to their book values.
 A normal liquid ratio is considered to be 1:1.
 A company with a quick ratio of less than 1 cannot currently fully pay back its
current liabilities. The quick ratio is similar to the current ratio, but provides a
more conservative assessment of the liquidity position of firms as it excludes
inventory, which it does not consider as sufficiently liquid.

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Quick Ratio = [Cash & equivalents + marketable securities + accounts

receivable] / Current liabilities
Or, alternatively,
Quick Ratio = [Current Assets – Inventory – Prepaid expenses] / Current
Liabilities
Example
For example, let’s assume a company has:
 Cash: $10 Million
 Marketable Securities: $20 Million
 Accounts Receivable: $25 Million
 Accounts Payable: $10 Million

This company has a liquidity ratio of 5.5, which means that which means that it can
pay its current liabilities 5.5 times-over using its most liquid assets. A ratio above 1
indicates that a business has enough cash or cash equivalents to cover its short-term
financial obligations and sustain its operations.

c. Inventory Turnover
 Refers to the process of converting raw resources to completed items and
then to sales. A high inventory turnover rate indicates that a business is liquid,
as it can manufacture and sell its items without resorting to overstocking.
 In comparison, a low rate of turnover may indicate overstocking or slow-
moving merchandise, out-dated inventories or gross overestimation of sales,
resulting in revenue loss and inefficient utilization of working capital.
 The inventory turnover rate is determine, as follows:

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d. Receivable Turnover
 Receivable turnover indicates liquidity of receivables. In other words, it
measures how quickly receivables can be converted into cash.
 The formula of receivable turnover is:

Receivable turnover = Net credit sales / Average net receivable

 A complementary liquidity measure of receivable is the computation of

average collection period. It indicates a collection success of receivable
and is expressed in the formula as follows:

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LESSON 10

BREAK-EVEN ANALYSIS

Break-Even Analysis

 Break-even analysis involves estimating and assessing an entity's margin of

safety based on collected revenues and associated costs.
 The break-even analysis establishes what level of sales is required to cover
the company's total fixed costs by analyzing various pricing levels in relation
to various levels of demand. A demand-side study would provide a seller with
a lot of information about their selling ability
 Break-even analysis determines how many units of a product must be sold
in order to pay fixed and variable production expenses.
 The break-even point is a metric for determining the margin of safety.
 From stock and options trading to corporate planning for various initiatives,
break-even analysis is widely employed.

Image Source: CFI’s Budgeting & Forecasting Course

Formula for Break Even Analysis

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Example of Break Even Analysis

Colin is the managerial accountant in charge of Company A, which sells water

bottles. He previously determined that the fixed costs of Company A consist of
property taxes, a lease, and executive salaries, which add up to $100,000. The
variable cost associated with producing one water bottle is $2 per unit. The water
bottle is sold at a premium price of $12. To determine the break-even point of
Company A’s premium water bottle:

Break even quantity = $100,000 / ($12 – $2) = 10,000

Therefore, given the fixed costs, variable costs, and selling price of the water bottles,
Company A would need to sell 10,000 units of water bottles to break even.

Graphically Representing the Break Even Point

The graphical representation of unit sales and dollar sales needed to break even is
referred to as the break even chart or Cost Volume Profit (CVP) graph. Below is the
CVP graph of the example above:

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Image Source: Corporate Finance Institute

Explanation:

1. The number of units is on the X-axis (horizontal) and the dollar

amount is on the Y-axis (vertical).
2. The red line represents the total fixed costs of $100,000.
3. The blue line represents revenue per unit sold. For example, selling
10,000 units would generate 10,000 x $12 = $120,000 in revenue.
4. The yellow line represents total costs (fixed and variable costs). For
example, if the company sells 0 units, then the company would incur
$0 in variable costs but $100,000 in fixed costs for total costs of
$100,000. If the company sells 10,000 units, the company would incur
10,000 x $2 = $20,000 in variable costs and $100,000 in fixed costs
for total costs of $120,000.
5. The break even point is at 10,000 units. At this point, revenue would
be 10,000 x $12 = $120,000 and costs would be 10,000 x 2 = $20,000
in variable costs and $100,000 in fixed costs.
6. When the number of units exceeds 10,000, the company would be
making a profit on the units sold. Note that the blue revenue line is
greater than the yellow total costs line after 10,000 units are produced.
Likewise, if the number of units is below 10,000, the company would

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be incurring a loss. From 0-9,999 units, the total costs line is above
the revenue line.

Exercise 5

1. Why do you have to make assumptions in your financial feasibility study?

2. In your understanding, why do you have to conduct a financial feasibility study?
(provide 5 credible reasons)
3. Why do you have to analyse the financial statements in your financial feasibility
study?
4. In the event that the result of your financial feasibility study is considered to be
‘not feasible’, should you pursue with your feasibility study? Yes or no, Justify
your position.

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MODULE 6

SOCIO ECONOMIC FEASIBILITY STUDY

The socioeconomic study demonstrates the study's value to the government and
society. This part of the feasibility study demonstrates that the business existed not
only for profit, but also for the betterment of the people's wellbeing.

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Image Source: Chegg

LEARNING OBJECTIVES

After learning this module, you will be able to:

1. Identify the different aspects of a socio-economic feasibility study

2. Determine the impact of your feasibility study on the following aspects:
a. Income
b. Employment
c. Government
d. Social Benefit to the Community
3. Come up with a comprehensive socio-economic feasibility study

LESSON 1

COMPONENTS OF SOCIO-ECONOMIC FEASIBILITY

A. INCOME & EMPLOYMENT

 Income is a sum that includes any wage, salary, profit, interest payment, rent,
or other form of earnings received in a given period of time1
1
Case, K. & Fair, R. (2007). Principles of Economics. Upper Saddle River, NJ: Pearson Education. p. 54.

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 For a firm, gross income can be defined as sum of all revenue minus the
cost of goods sold. Net income nets out expenses: net income equals
revenue minus cost of goods sold, expenses, depreciation, interest, and
taxes2
 In socio-economic feasibility, income may be measured for the entire
business or through the income of the individual

Direct Labour
 Are labour that are provided by those employees with direct handling or
connection to the manufacture of a product or conduct of service

Indirect Labour

2
Barr, N. (2004). Problems and definition of measurement. In Economics of the welfare state. New
York: Oxford University Press. pp. 121–124

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 Are labour that are provided by those employees without direct handling or
connection to the manufacture of a product or conduct of service

Instructor’s Note:
1. Discuss the implication of your feasibility study in terms of income and
employment
2. Provide background information of the locale in terms of income and
employment

B. GOVERNMENT

 The government plays a major role in terms of providing permit and licences
as well as in implementing taxes

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C. SOCIAL IMPACT TO THE COMMUNITY

 You may be able to answer the following questions:

 What are the social implications to the community?
 Will the business idea advocate for ‘support local’?
 How will the business idea promote the locally-sourced materials and
resources?
 How will the business idea improve the condition of living of the people?
 What will be the social responsibility of the business?
 Will it support charities and other community organizations?

Module Assessment No. 6

Instruction: Refer to the Google Class Folder for the said activity for submission of
output

1. In your own words, what is the relevance of a socio-economic feasibility study?

2. Based on prior knowledge in economics, why do we have to take into
consideration the income of the employees, as well as labour?
 Explain using the Circular Flow Model
 Illustrate and describe the diagram to get maximum points
3. In your group’s topic of study, provide five (5) socio-economic benefits that may
be derived from the chosen business idea.

REFERENCES

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David, F. (1993). Strategic Management, 4th Ed. New York, NY:

Macmillan Publishing Company.
Jones, B. (1990). Neighborhood Planning: A Guide for Citizens
and Planners. Chicago and Washington, DC: Planners Press,
American Planning Association
McGrath, M. E. (2001). Product Strategy for High Technology
Companies. New York: McGraw-Hill.
Thomson, B. (2004). Creating a Strategic Product Plan. Retrieved June 30, 2010,
from http://www.pragmaticmarketing.com/publications/topics/08/how-to-make-
product-management-strategic
https://www.marketing91.com/advertising-strategy/

Strategic Management: Concepts & Cases. Fred David. 13th Edition

Strategic Management- A book on business policy / Corporate planning Francis

Cherunilam Strategic Management J. David Hunger & Thomas L Wheelen

Strategic Management Garth Salonee , Andrea Shepard & Joel Podolny Article
Vision, Mission and Objectives of Business Shanmuga Rao. Pandala Dr. N. V.S.
Suryanarayana

https://www.breathehr.com/en-gb/blog/topic/business-leadership/best-management-
styles-and-how-to-use-them
https://www.slideshare.net/ChristianBacoy/feasibility-study-2014
https://blog.hubspot.com/marketing/gantt-chart-example

https://www.investopedia.com/articles/financial-theory/09/risk-management-
business.asp

https://www.allbusiness.com/understanding-the-projected-income-statement-
4058167-1.html

https://prezi.com/paz337l-to2i/socio-economic-feasibility/

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Quality Policy

We commit to provide quality instruction, research, extension, and production

grounded on excellence, accountability and service as we move towards exceeding
stakeholders’ satisfaction in compliance with relevant requirements and well-defined
continual improvement measures

”De kalidad nga edukasyon

Kinabuhi nga mainuswagun”

CREDITS

Module Creator

Jude P. Picardal
BS Business Administration
College of Business Management and Accountancy

COURSE GUIDE

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Course: BA 413- Feasibility Study School Year: 2021-

Semester: 1st
BA 412- Feasibility Study 2022
Class Schedule:
Instructor:
Course Description

This course entails the development of analytical and conceptual skills required to test the
feasibility of a business concept in the market. It requires students to undertake field research,
develop and think critically about business concept, answer fundamental questions about
strategic, marketing, financial, operational, and human resource issues.

Course Outline
SCHEDULE TOPIC
VMGO and Subject Orientation

Vision
A technologically-advanced university producing professionals and
competitive leaders for local and national development

Mission
To provide quality education responsive to the national and global needs
Day 1
focused on generating knowledge and technology that will improve the lives of
the people

Core Values
 Excellence
 Accountability
 Service

INTRODUCTION TO FEASIBILITY STUDY

1. What is a Feasibility Study?
2. Parts of the Feasibility Study
MARKET FEASIBILITY
1. SWOT Analysis
Day 2-4 2. Market Demographics
3. Market Analysis
4. Business Environment
5. Business Strategies
MANAGEMENT FEASIBILITY
1. Management of the Business
2. Legal Compliance of the Business
Day 5-17 3. Vision, Mission, Goals and Objectives
4. Administrative Personnel and Structure
5. Management Protocols
6. Assessment of Risks

Preliminary Examination
Day 18
Written Exam

Day 19-23

PRODUCTION/ TECHNICAL FEASIBILITY

1. Production and Technical Study

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 Product
 Manufacturing Process
 Plant Size and Production
 Machinery
 Plant Location
 Plant Layout
 Structure
 Raw materials
 Utilities
2. Environmental Study
 Waste Disposal

FINANCIAL FEASIBILITY
1. Major Assumptions
2. Proposed Capital Contribution
3. Total Project Cost
4. Pre-operating Cash flow
Day 24-31 5. Pre-Operating Balance Sheet
6. Projected Income Statement
7. Projected Balance Sheet
8. Projected Statement of Cash Flow
9. Financial Statement Analysis
10. Break-Even Analysis
SOCIO-ECONOMIC FEASIBILITY
Day 32-35
1. Components of Socio-Economic Feasibility

MIDTERM EXAMINATION
Day 36
Presentation of Project Feasibility Proposal (Outline Report)

RESEARCH WORK/ FIELD WORK

FINAL EXAMINATION
Submission of Hard and Soft Copy of Feasibility Report
Virtual Presentation of Feasibility Report

Course Requirements

Course Learning Outcomes Required Output

CLO1. Understand what a Feasibility is, its importance and 1. Major Examinations
benefits 2. Quizzes
3. Group Output per
CLO2. Identify market and analyse the past, present and future Chapter
demand and supply situations of the particular product or 4. Outline Report
service. Use and apply the necessary and appropriate 5. Feasibility Report
business concepts and terminology in preparing the different
parts of a feasibility study.

CLO2. Determine appropriate business organization, the

people who will be involved both before and during operating

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periods of the enterprise, and their functions. Explain in details

the project product or service and how they will be produced or
raised using your choice of locations, buildings, facilities,
capacity and layout

CLO3. Identify and calculate salary projections, machineries

and equipment, raw materials, manpower requirements and
projects utilities, waste disposal management, and projection
management

CLO4. Develop start-up capital needed, sources of capital,

returns of investment, and other financial considerations

CLO5. Develop project feasibility study and identify the socio-

economic desirability of the study
Course Policies Grading System

1. Students enrolled in the course are expected to study Mid-term (40%)

the provided learning materials, as well as other 40% Midterm Exam (via
references (online guides, links, video clips) suggested Google Forms)
by the instructor in order to achieve course learning 30% Chapter Output
outcomes. 30% Quizzes
2. All students are expected to behave with academic 100% TOTAL
honesty. As such, students are discouraged in
participating any form of cheating and activities which
may disrespect instructor and classmates.
3. All students are expected to take major exams and
attend final output
Final Term (60%)presentation. While research work is
a per group activity, students’ performance will be
40% Feasibility Report
graded both by group and according to individual
40%contribution
Presentation
to thebyfinal output
Group
4. Chapter output should be submitted by instalment or at
20%the end
Individual
of midterm, while expected output for final term
shallContribution
be submitted to one time as required by the
Group Work
instructor
100% TOTAL outcome-based learning, an actual conduct
5. To facilitate
and output of feasibility study will be expected at the
end of semester.
6. Following the modalities for the new normal, students
are expected to attend online classes conducted via
Google Meet or Zoom (attendance not required
however imposed), submit exercises through
designated folder in Google Classroom (required), and
should take quizzes and midterm exam via Google
Forms (required)
7. Other course policies will be based on the student
handbook.
References
1.
Consultation Schedule

Online Consultations may be conducted through Facebook group chat, direct message or
through email at

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Learning Modality Flexible Learning (Modular & Online)

Modules available Printed (per request of student) & e-copy
Online Class Platforms Google Meet/ Zoom
Submission of Output Google Classroom
Email (optional, only when advised by Instructor)
Strictly no submission of output via Facebook Messenger
unless instructed
Exams/ Quizzes Google Forms

Prepared by: Approved:

DR. FILIPINA C. CARATAY

Instructor Program Head, BSBA

Noted by:

DR. DYMPHNA ANN C. CALUMPIANO

Dean, CBMA

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