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Introduction
There are several aspects and questions that start-ups and businesses need to consider before releasing new products or services. In order to succeed, businesses need to fulfill customers’ needs and meet the current requirements of the market. A standard method that helps to evaluate business opportunities is a feasibility study. This paper will discuss what is needed to complete a feasibility study for a new start-up or a product line within an existing firm and its importance for business development.
Introduction to Feasibility Study
A feasibility study, in general, is an assessment of a plan or a project that evaluates its practicality. Feasibility studies are widely used in the organizational process of different projects that do not necessarily involve business. The study analyzes the practical application of the idea to existing conditions, which helps evaluate the opportunity for pursuing the idea. In a narrow sense, a feasibility study helps in decision-making and provides an objective opinion to yes or no questions. Businesses use the wide possibilities of application of feasibility study in different areas and its ability to fit several levels of requirements and considerations.
In business, feasibility studies help to objectively evaluate business opportunities and write a business plan. As a feasibility study explores different organizational and operational levels, it also allows for estimating financial aspects of future business such as required costs, resources, income, and profit. Unlike a business plan, a feasibility study could also be used to identify the potential negative sides of the business, such as vulnerabilities and obstacles, which could be addressed or improved later in the business plan.
Another significant point why a feasibility study is essential for a business is that it allows estimating the business opportunity’s potential before committing a significant amount of financial resources and determining the scale of business opportunities. Moreover, it introduces time frames for the business ideas and values their practicality in the designated time frame, clarifying possible plans for the business. As for the marketing activities and competitiveness of products or services, feasibility studies are needed to conduct market research and distinguish the product from its alternatives.
The Business Problem and Opportunity Statement
In order to provide a close examination of what is needed to complete a feasibility study for a new start-up, this paper will focus on the example of a disposable camera start-up. To start the feasibility study process, first, the study requires identifying and composing an opportunity statement. In the case of the disposable camera business, there is a rise in customer need for photography device that offers an authentic experience of the photography process.
The last decades marked a significant increase in digital photography devices; people mainly used digital photos and abandoned film photo cameras in favor of the quality offered by digital cameras. The introduction of phones with camera features with exceptional photo quality that allowed capturing any minor detail led to an increased number of photo manipulating apps. The apps could be used to change the lighting of a photo, delete unwanted objects, apply color filters to add specific mood or emotional context to the photo, or cover minor imperfections on a person’s face. As the current young generation embraces imperfections and perceives them as unique, they are more drawn to authentic ways to take photos and prefer disposable cameras (Spillman, 2019). Thus, in the case of a disposable camera start-up, the business opportunity statement would feature the following points:
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What is the problem that needs solving or improvement?
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Which group of people is most affected by this?
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What are some of the issues that the current users struggle with?
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What motivates the start-up to solve its problem?
The problem that needs improvement is that user experience with digital photography has become overly artificial due to the introduction of different photo manipulating mobile applications and lacks connection with the real world. The group affected by this problem is the young generation who feels pressure to fit the unrealistic standards of social media and altered digital photos. Current users struggle with finding a disposable camera option with a modern minimalistic design that fits existing customer preferences and trends in the design of mobile devices. The start-up is motivated to produce disposable cameras with contemporary neat minimalistic designs to promote film cameras as an alternative to digital cameras and reduce photo alterations.
The Feasibility Study Requirements
Depending on the business activities, several aspects could be required for a business feasibility study, such as geopolitical and environmental conditions. However, in most businesses, four predominant factors determining business feasibility are the product or service itself, the current industry or target market situation, organizational factors, and financial factors. The following segment of the paper will explore each category of factors required for the feasibility study and make assumptions about their influence on the development of start-ups.
Product/Service Feasibility
Product/Service Feasibility is a primary category of feasibility assessment that features information that focuses on the product or service and costs required for development and production to fit the customers’ demand. This stage helps shape the concept of products, estimate the target audience, identify potential flaws, and terminate them before the initial production of products or services. Completing a product/service feasibility, in general, includes several main steps that present an assessment of different aspects of future or existing products.
The first step of Product/Service Feasibility requires forming a description of a future product or service and vital information about the product or service. The information required for this stage includes the product or service’s target audience, its value proposition, distribution methods, and information on its founders. This step is crucial to the overall feasibility study because it reveals the product’s potential and helps to fit the initial concept or idea into the real world by connecting the product to its target market. Making simple research on the target market helps improve the visual and technical components of the product to make it more attractive to the target group.
Further steps include developing a product prototype and adjusting the sample to improve the products’ usability and customer experience. This step helps estimate the financial component of product development and identify concerns on additional costs and financial sources needed for further development of products. If needed, the stage could also include a legal side of product development that consists of acquiring a patent or copyright for the product.
Industry/Target Market Feasibility
The Industry/Target Market Feasibility includes research of the target market and assessing the product’s attractiveness for the target group of customers. As the previous stage of the feasibility study addressed the product’s target audience and focused on improving the customer’s experience with the product, the next stage provides a perspective of the products from the side of the market. Completing his feasibility analysis stage requires investigating existing competitor products and in-depth research of potential customers. This step is designed to help estimate the market share of the product to identify the possible income of the start-up and its financial feasibility.
The primary information assessed at this feasibility analysis stage includes information on the industry and key competitor companies, their products, and what makes the new product different from its existing alternatives. Next, identifying the number of potential customers needs to incorporate the target audience with population demographic and socioeconomic data. Combining both results will provide information on the market share that the product could gain and estimate its financial potential.
Organizational Feasibility
The stage of organizational feasibility focuses on the assessment of the start-up’s management potential. In other words, the stage focuses on whether the company carries a level of business and management skills and resources necessary to deliver the products from production to its target market. Organizational feasibility could define and help choose the business model that suits the company and the product. Moreover, it helps to estimate the needs in the human resource area and make predictions on skills and experience required for the management of the start-up.
Financial Feasibility
The Financial feasibility analysis presents a logical conclusion to previous steps of the feasibility study and assembles the financial aspects of decisions taken earlier in the study. Although it does not provide an accurate forecast of a start-up’s success, it helps organize financial information, defines needs in additional financial sources, and provides an opportunity for investors to evaluate the business’s attractiveness. Compared to the business plan, financial feasibility features a less in-depth financial assessment but helps estimate the start-up investment’s overall attractiveness. Completing the Financial Feasibility analysis is necessary for a start-up before developing of a business plan.
Conclusion
The feasibility study is a necessary procedure for start-ups or new products developed in existing firms. Feasibility helps assess the business idea or concept by connecting it with actual numbers of the industry market and consumers’ demand. The study provides an objective perception of business opportunity and allows evaluating the business idea and its timeliness and success in current market conditions. Feasibility analysis also forms a foundation for the future business plan and helps to address different organizational aspects, such as choosing a suitable business model.
Even though feasibility analysis does not provide accurate predictions for the success of a business idea, it helps to evaluate the required financial sources and address potential problems. In the example of the disposable camera start-up used in the paper, the feasibility study helped make a favorable decision and continue further development of that business idea because the study determined a solid financial potential of the business idea.
References
Ferreira, L. (2021). Fujifilm FY2020 Q3 results: Camera sales rebound while cinema, broadcast, and printing shrinks. FujiAddict.
Kmia, O. (2018). Why Kodak died and Fujifilm thrived: A tale of two film companies. PetaPixel.
Spillman, S. (2019). Disposable cameras: A ’90s favorite makes a comeback among millennials and Gen Z. Los Angeles Times.
Statista Research Department. (2021). Resident population of the United States by sex and age as of July 1, 2020. Statista.
Appendix A
Feasibility Study: Disposable Cameras Start-up
Product/Service Feasibility
The disposable camera start-up will provide a visually pleasing photography experience with a minimalistic contemporary approach to the camera design. The target market includes teenagers and young people who are willing to capture important moments on film with a camera that suits the modern aesthetic of lifestyle accessories. In the future, the business may produce limited amounts of cameras designed in collaboration with modern illustrators to support contemporary artists. The products will be distributed through digital marketplaces such as Amazon in the United States and AliExpress for worldwide distribution.
Industry/Target Market Feasibility
Currently, there is no available research for the existing market of disposable cameras; however, the market share could be estimated from the financial records of major key players in the industry. There are three major companies that produce film cameras, disposable cameras, and related accessories: are Fujifilm, Kodak, and Rollei. While recently Kodak experienced a state of financial distress, almost facing bankruptcy with a fall in its share price, Fujifilm’s diversification of activities helped the company survive the crisis of the film photography industry (Kmia, 2018). Thus, to define a market for the start-up product, the study will use Fujifilm’s operating income in photo imaging, which comprised 104.7 billion yen, converted into 939 million United States dollars (Ferreira, 2021).
The target consumer group of male and female teenagers aged from 15 to 19 (20.96 million) and adults from 20 to 29 (44,83 million) in the United States counts for 65.79 million potential customers (Statista, 2021). Almost none of the existing companies utilize contemporary trends in the design of their products. As the current start-up plans to provide a hundred thousand customers with disposable cameras monthly, the company’s sales will cover 1.8 percent of the market share.
Organizational Feasibility
The majority of the company’s operations will be performed through outsourcing companies. Both development and manufacturing of the products will take place in China to minimize the additional production costs and then be delivered directly to digital marketplace warehouses. There, the products will be stored and later shipped to the customers with the help of the shopping platform’s employees. Thus, the human resources required for the start-up will include several managers, the minimum number of operational employees, accountants, marketers, and technical support specialists.
Financial Feasibility
The start-up is planning to produce 12 million disposable cameras yearly with $10 for a piece. Additional costs of packaging and shipping the products to the warehouses would add another $10 to the production price of a single camera. Costs of annual personnel salary for 20 employees add a million United States dollars into the start-up’s spending. The start-up plans to set the selling price for each camera at $25. Yearly production and production-associated costs of 1.2 million cameras are estimated to count for 24 million dollars. Potential revenue from sales is 30 million dollars; the start-up’s yearly revenue is six million dollars with an initial investment of 24 million dollars.
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