Economics of Pharmaceutical Sector

Lecture 2: introduction to Feasibility

study

Dr. Heba soliman

 What is feasibility study?

What is the word ‘feasibility’ means?

❖ When you consider making a purchase, for
example a new car, house, or even a phone, what
is the first thing that you do?
➢ You ask your self several question, such as for
example:
➢ What type do I want?
➢ What specifications/ features do I want?
➢ How much will it cost?
➢ What are the maintenance requirements and how
much will they cost?
 What is feasibility study?
➢ What are the short-term and long-term
implications on my budget?
➢ Can I buy it now or should I wait fore a
while? If I have to wait for how long?
➢ If I can’t buy exactly what I want, What are
the alternatives, and will the alternatives be
acceptable?
➢ You are basically asking yourself, is it
feasible for me to make this purchase? You
are doing a mini feasibility study! 3
 What is feasibility study?

➢ Narrow and wrong meaning of feasibility:

revenues, costs, profits.
➢ wide and right meaning: including
achievable, capable, doable, possible, viable,
well suited, and workable.
➢ General meaning, a feasibility study is ‘ an
evaluation and analysis of the potential of the
proposed project that is based on extensive
investigation and research to give full comfort
to those making decisions on the study’.
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 What is feasibility study?

Feasibility study: is A comprehensive

study of all aspects of the project that
seeks to determine the viability of the
project from several aspects and legal,
marketing, financial, environmental,
productivity, economic, social, and
administrative aspects to achieve
specific goals.

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 When we need feasibility study
➢ Create a new project.
➢ Expand an existing project.
➢ Maintenance of an existing project.
➢ Changing production technology or
production volume.
➢ Introducing new products.
➢ Change production field.
➢ Comparison of a number of projects.

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 Why feasibility study?
1. A feasibility study will help you to determine
the profitability of the business venture. Before
starting a business, seasoned entrepreneurs
and investors would want to know if the
business would be worth their time, effort and
resources.
2. A feasibility study will help prove to the
entrepreneur, venture capitalists, lenders and
inventors the existence of the market, the
liquidity of the business venture and the
expected return on investment. 7
 Why feasibility study?
3. A feasibility study will help you identify the flaws,
business challenges, strengths, weaknesses,
opportunities, threats and unforeseen circumstances
that might affect the success and sustainability of the
business venture.
4. before starting a business, a feasibility study will
enable you estimate the financial, human and
technological resources that will be needed to ensure
the successful launching of the business.
5. feasibility study will help you to determine the
amount of capital required to start the business. It will
also help you in establishing the budget plan, working
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capital and cash flow projections of the business.
 Objectives of feasibility study

The worth noting objectives of feasibility study

are shown in the following ways:
1. To evaluate worthiness of the investment.
2. To evaluate marketing, financing and
operational effectiveness.
3. To forecast problems in implementation and
operational phase.
4. To help final decision making.
5. To evaluate environmental aspects with
regard to present and future. 9
 Objectives of feasibility study

6. Reduce the possibility of project failure if

the investment decision is correct.
7. Determine the conditions for the success of
the project that, if achieved, the project will
succeed.
8. Reduce the waste of capital.
9. Helps differentiate between projects.
10. Support the development process.
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 The difference between feasibility
study and business plan
A business plan is carried out after the feasibility
study is completed and once the decision has been
made to proceed. It details the steps needed to
achieve the objectives as set out the feasibility study.
The business plan is built upon information extracted
from the feasibility study.

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 The difference between feasibility
study and business plan
Assuming positive feasibility study result, and
management decided to proceed a business plan is
then prepared for implementation of the project.
If the result of feasibility study was negative, there is
no need to create a business plan.
Both the feasibility study and business plan give the
opportunity to find any weaknesses and reveal any
hidden problems ahead of time.

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