Feasibility & Viability Study PDF

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Summary

This document discusses feasibility and viability in project planning, particularly in architecture. It explores the key components of both concepts, highlighting the differences in scope and decision-making stages. The document also covers application in architectural projects and general questions related to feasibility and viability

Full Transcript

FEASIBILITY & VIABILITY PR- TOPIC-02 INTRODUCTION Feasibility and viability are critical concepts in project planning and development, particularly in architecture. Though often used interchangeably, they have distinct meanings and roles in determining the success of a project. FEASIBILITY Defi...

FEASIBILITY & VIABILITY PR- TOPIC-02 INTRODUCTION Feasibility and viability are critical concepts in project planning and development, particularly in architecture. Though often used interchangeably, they have distinct meanings and roles in determining the success of a project. FEASIBILITY Definition: Feasibility refers to the assessment of how practical and achievable a project is. It answers the question: Can we do this? Purpose: The main purpose is to objectively and rationally uncover the strengths and weaknesses of an existing business or proposed venture, opportunities, and threats present in the environment, the resources required to carry through, and ultimately the prospects for success. (Pinto, J. K. (2013). Project Management: Achieving Competitive Advantage. Pearson Education.) FEASIBILITY: KEY COMPONENTS a. Technical Feasibility: Evaluates whether the project can be technically executed using available resources, technology, and skills. b. Economic Feasibility: Assesses the costs and economic benefits to determine if the project can be funded and remain within budget. c. Legal Feasibility: Ensures the project complies with legal regulations, including zoning laws, environmental regulations, and building codes. d. Operational Feasibility: Assesses whether the project can be implemented within the existing operational framework. This includes evaluating the human resources available, management capability, maintenance & logistics. e. Schedule Feasibility: Analyzes whether the project timeline is realistic, given the constraints and deadlines. Gido, J., & Clements, J.P. (2014). Successful Project Management. Cengage Learning. Ratcliffe, J., Stubbs, M., & Shepherd, M. (2004). Urban Planning and Real Estate Development. Routledge. VIABILITY Definition: Viability refers to the long-term sustainability and profitability of a project. It answers the question: Should we do this? VIABILITY: KEY COMPONENTS a. Market Viability: Examines the market demand for the project, potential customer base, and competitive landscape. b. Financial Viability: Evaluates whether the project will generate sufficient revenue to justify the investment and continue to be profitable over time. c. Social and Environmental Viability: Considers the project's impact on the community and environment, ensuring it contributes positively to the surroundings and aligns with sustainable practices. d. Risk management: Identifies potential risks early in the project, allowing for mitigation strategies to be developed. How well can potential risks be identified and mitigated? Ross, S.A., Westerfield, R.W., & Jaffe, J. (2012). Corporate Finance. McGraw-Hill. Brueggeman, W.B., & Fisher, J.D. (2008). Real Estate Finance and Investments. McGraw-Hill. 4 KEY DIFFERENCES BETWEEN FEASIBILITY & VIABILITY 1. Scope Feasibility: Focuses on the short-term ability to execute the project. Viability: Concentrates on the long-term success and sustainability of the project. 2. Decision-Making Stage Feasibility: Often conducted early in the project to determine if it can proceed. Viability: Assessed continuously throughout the project life cycle to ensure it remains profitable and sustainable. 3. Outcomes Feasibility: Results in a go/no-go decision based on practical and operational factors. Viability: Results in a decision to invest based on potential profitability and long-term success. 4. Evaluation Criteria Feasibility: Includes technical, legal, and operational aspects. Viability: Focuses on market demand, financial returns, and broader social impact. Kerzner, H. (2017). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. Wiley. Walker, A. (2007). Project Management in Construction. Wiley-Blackwell. APPLICATION IN ARCHITECTURAL PROJECTS Feasibility Study: Conducted to determine if a new building can be constructed on a given site. This includes technical assessments, cost estimation, and legal compliance checks. Example: Evaluating whether an old factory building can be repurposed into residential units, considering structural integrity and zoning laws. Viability Analysis: Performed to assess whether the same project will attract buyers or tenants and generate sufficient revenue to be profitable over time. Example: Analyzing the market demand for residential units in the area, forecasting sales, and considering the long-term economic outlook for the neighborhood. Levy, S.M. (2007). Project Management in Construction. McGraw-Hill. Law, C.M. (1993). Urban Tourism: Attracting Visitors to Large Cities. Mansell. SUMMARY & CONCLUSION Feasibility ensures that a project can be executed, while viability ensures that it is worth executing from a long-term perspective. Both feasibility and viability are essential for the success of any architectural project. Understanding the distinction and interrelation between these concepts helps architects and stakeholders make informed decisions, mitigating risks and maximizing project success. CONDUCTING FEASIBILITY STUDY & VIABILITY ANALYSIS IN ARCHITECTURAL PROJECTS CONDUCTING FEASIBILITY STUDY Step 1: Preliminary Assessment Objective: To identify if the project has any obvious barriers or potential obstacles. Actions: Define the project scope, objectives, and deliverables. Perform a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats). Identify key stakeholders and their expectations. CONDUCTING FEASIBILITY STUDY Step 2: Technical Feasibility Objective: To assess the technical resources and capabilities required for the project. Actions: Conduct site analysis, including soil testing, topography, and environmental impact. Evaluate the availability and suitability of construction materials and methods. Assess the technical expertise required for design, construction, and operation. Example: Assessing if a high-rise building can be constructed on a site with challenging soil conditions. CONDUCTING FEASIBILITY STUDY Step 3: Legal and Regulatory Feasibility Objective: To ensure the project complies with all relevant laws and regulations. Actions: Review zoning laws, building codes, and environmental regulations. Identify any permits or approvals required. Consider potential legal challenges or community opposition. Example: Ensuring a commercial project complies with local zoning ordinances. CONDUCTING FEASIBILITY STUDY Step 4: Economic Feasibility Objective: To determine if the project can be completed within budget. To examine the project's impact on the broader economy. Actions: Estimate project costs, including land acquisition, design, construction, and operational costs. Analyze job creation or loss, environmental impact, funding sources, resource utilization and financial constraints. Perform cost-benefit analysis to evaluate economic viability. Examples: Determining if the projected costs of converting an old factory into loft apartments are within budget and financially sound. CONDUCTING FEASIBILITY STUDY Step 5: Operational Feasibility Objective: To assess if the project can be operated and maintained effectively. Actions: Develop an operational plan detailing staffing, logistics, and maintenance. Evaluate the availability of necessary human resources and expertise. Consider long-term sustainability and operational challenges. Example: Evaluating if a proposed community center has the necessary resources for long-term operation and maintenance. CONDUCTING VIABILITY ANALYSIS Step 1: Market Viability Objective: To assess the demand for the project and its potential success in the market. Actions: Conduct market research to identify target customers and understand their needs. Analyze the competitive landscape and potential market share. Forecast demand and potential sales or occupancy rates. Example: In an architectural project, such as converting an old residential building into a commercial restaurant, market feasibility would involve assessing the demand for dining options in the area, understanding the target market, analyzing competing restaurants, projecting sales, and determining the best marketing strategies to attract customers CONDUCTING VIABILITY ANALYSIS Step 2: Financial Viability Objective: To ensure the project/business will be profitable and generate sufficient returns over time. Actions: Develop detailed financial projections, including revenue forecasts and cost estimates. Calculate key financial metrics such as Cash Flow, ROI (Return on Investment), NPV (Net Present Value), IRR (Internal Rate of Return), Break-even analysis. Assess the risk of financial losses and develop contingency plans. Example: Evaluating the long-term profitability of a mixed-use development in a downtown area. CONDUCTING VIABILITY ANALYSIS Step 3: Social and Environmental Viability Objective: To evaluate the project's impact on the community and environment, ensuring it is sustainable and socially responsible. Actions: Conduct an environmental impact assessment to identify potential ecological risks. Engage with the community to understand their concerns and gain support. Develop strategies to mitigate negative social or environmental impacts. Example: Ensuring that a new shopping mall development incorporates green spaces and sustainable building practices. CONDUCTING VIABILITY ANALYSIS Step 4: Long-Term Viability Objective: To determine whether the project will remain viable over the long term. Actions: Assess long-term market trends and their potential impact on the project. Evaluate the project's adaptability to future changes, such as technological advancements or demographic shifts. Plan for future expansions or modifications as needed. Example: Analyzing if a new technology park will continue to attract tenants as the tech industry evolves. INTEGRATING FEASIBILITY AND VIABILITY ANALYSES Sequential vs. Simultaneous Approach: While feasibility and viability analyses can be conducted sequentially, it is often beneficial to perform them simultaneously to ensure a comprehensive understanding of both short-term feasibility and long-term viability. Decision-Making: The results of these analyses guide critical decisions, including project approval, modifications, or even abandonment if the analyses reveal insurmountable challenges. Five Conditions That Make a Business Opportunity Feasible 1. Real demand - The business idea or opportunity must have real market demand. The business opportunity must either satisfy a need or solve a problem. 2. Good return on investment - Any business opportunity which a business minded individual intend to pursue must show a strong possibility of yielding a good return on investment. Moreover, all a business is meant to do is to either satisfy a need or solve a problem for a profit. 3. Competitive - Except that the business idea is the first of its kind, there is bound to be competition. If the business idea or opportunity is not competitive, just forget it because it will never stand a chance. Five Conditions That Make a Business Opportunity Feasible 4. Meet the objectives of the entrepreneur - Before ever starting a business, there are certain aims and objectives a business minded individual intend to achieve using that business as leverage. For a business opportunity to be viable, it must meet his objective 5. The competence of the entrepreneur and his team - A business opportunity will only be feasible if it is backed by a strong business team. There are good and solid business opportunities which fail to breakthrough because of the incompetence of the team. Evaluating the Profit Potential of the Business Ideas or Opportunities 1. Is there a market for it? A customer base beyond the would-be-business owner must be identified. There is a need to conduct extensive market research in order to assess the marketability of the business idea, and find out if people would be interested in the proposed product or service. a. How large is the existing market for the proposed business idea? b. Is it a promising market or a mature one? c. Is it in a fresh or mature category? d. Who are the prospective customers? e. Do they actually need the proposed product or service? f. What is the status of the competition like? Evaluating the Profit Potential of the Business Ideas or Opportunities 2. Does the business idea solve a problem? Chances are high that if a problem has an effect on the would-be- business owner himself, his friends, relatives and co-workers, then many other people that the entrepreneur don't know could also be affected. If the business idea in his mind can help solve the problem, then it can solve the same problem for others as well. This is an essential technique of checking the bearing of the business idea. Evaluating the Profit Potential of the Business Ideas or Opportunities 3. Is the business idea unique? A unique business idea is a concept that nobody else has ever done it. If the idea is distinctive, a lot of customers would willingly jump at the product/service offer, and no challenges from the competition will be faced. However, the uniqueness of the business idea may not automatically indicate towering chances of success. The business doesn't have to be very unique. The new offer must have a unique touch which could be an improvement/s of the competitors' weaknesses. This could be done by means of adding more value for the similar price, offering a finest version of their product, or some other strategy. If the would-be-business owner cannot distinguish his business idea this way, he won't survive the rigor of competition. The most essential thing is discovering an exceptional angle to the product idea and flavoring it with unique selling tips that can threaten the competition. Evaluating the Profit Potential of the Business Ideas or Opportunities 4. What is the price point? Great and promising business ideas that try to find solution to certain problems must be sold less pricey than what the market will tolerate. If the proposed offering is poorly priced, customers will be definitely unresponsive about buying the offer. It is important also to know the potential customers' spending habits and earning power to decide how much money these customers will be willing to pay and how frequent they will buy. Evaluating the Profit Potential of the Business Ideas or Opportunities 5. Will investors be interested? If the business idea would create interest with other individuals and businesses then rest assured that the offer would probably turn into a lucrative venture. Investors need to know the profitability chance of the new business concept so that they invest on the idea. Evaluating the Profit Potential of the Business Ideas or Opportunities 6. Is the business idea hard to replicate? If the great business idea has low entry barriers, imitators will soon flock in, and the new venture will face huge competition. A good business idea should have strong barriers or differentiators to threaten the competition. Evaluating the Profit Potential of the Business Ideas or Opportunities 7. Can the business idea last? Is it scalable? The product or service must still be relevant over a long period of time. If the business idea will continue to be relevant, will remain to be the best answer to the customers' problems, and will continue to bring in more revenue for the business in the years to come, the there is a great chance of survival. Never go after trends and fads because they will surely disappear overnight. Evaluating the Profit Potential of the Business Ideas or Opportunities 8. What is the driving force of the business? The willpower to solve the customer's problems should be the driving force. While it's just normal for any would-be-business owner to create a business with profit in mind, one shouldn't start a business merely to make money. There must be an absolute passion about the business proposition and commitment to continue it through the good and bad times. If the owner's focus is on profit alone, then there's a good chance that business idea will be unsuccessful. General Questions 1. What are the main differences between a feasibility study and a viability analysis? 2. Why is it important to conduct a feasibility study before starting a design project? 3. How can a project’s location influence its feasibility and viability? 4. What are the key components of a feasibility study in architectural projects? 5. What role does market research play in determining the viability of a project? 6. How do legal and regulatory factors impact the feasibility of an architectural project? 7. What challenges might arise during the feasibility study of an adaptive reuse project? 8. How does the availability of funding sources impact the feasibility of a project? 9. How can an architectural project be positioned to meet market trends and demands?

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