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School of Engineering

FIAP 271

MA1 FEASIBILITY ANALYSES

GROUP 19

Completed by:
Mr. T van Greunen 24909319 (CEO)

Mr. TJ Visagie 27293645

Mr. W Snyman 27108813

Mrs. V Rousseau 27124819

Mrs. K Moeletsi 27322157

Mr. T Neve 24354767

Mr. JW Swanepoel 24163317

18th of July 2017


FIAP 271

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ABSTRACT
This report is an in-depth feasibility analysis of 5-product ideas, developed through various
idea generating methods. A group decision had then been made on the 5 best products. The
AHP table was used to compile the product hierarchy, listing them from most to least
desirable, the decision on which venture to pursue was then ascertained from this list.

The 3 key factors of feasibility analyses (technical, market and financial feasibility) were
applied to determine the best option to develop a business plan. This assignment tested and
developed our skills in economical engineering by way of feasibility analyses.

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TABLE OF CONTENTS

Contents
ABSTRACT III

TABLE OF CONTENTS IV

LIST OF FIGURES VI

1. 8

2. 8

Drones for crop insurance companies. 1


An alarm system linked to a cell phone. 1
Glow in the dark emergency markings. 1
Engineered breakfast shakes. 1
A medical diagnostic device. 1

3. 13

FEASIBILITY STUDY OF TOP 5 POSSIBLE VENTURES: 5


Best product. 5
tabulated technical and market feasibility comparison. 6

4. 14

5. 15

1. 15
2. 16
3. 16
4. 17
5. 17

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6. 19

6. 19
Cost effective production methods: 10
Facility: 10
Location: 10
Equipment: 10
Labour: 10
Future expansion: 11
Materials used: 11
Manufacturing: 11
7. 20
Target Market: 11
Consumer Buying Habits: 11
Product: 12
Consumer Reaction: 12
Competitor Analyses: 12
Market Factor and Trend: 12
Penetration of the market: 12
Market share: 12
Research and Studies: 13
Cost: 13
Sales volume and Growth: 13
Market Growth: 13
8. 22
Rate of return on investment (ROI) 14
Once off payments 14
Payback period (PBP) 15
Net return 15
Net Present Value (NPV) 15
Discounted cash flow rate of return (IRR) 16

7. 25

BIBLIOGRAPHY 17

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LIST OF FIGURES

Figure 1: AHP Analyses: best product. 5

Figure 2: Technical and Market feasibility representation. 6

Figure 3: Income Statement 14

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1. INTRODUCTION
The product that will be discussed in terms of financial, technical and market feasibility, is a
security application for your phone which is connected to your car tracking service provider.

The AHP is to be repeated in this assignment for the best of the seven products developed
by each group member. Thereafter they will be analysed from most to least feasible
accordingly to the AHP outcome.

Once a study on how technically achievable the products are, and how marketable the
concepts the most astute concept will be chosen and explored further.

An exhaustive feasibility analysis report will clarify the groups choice on which product idea
would be the most advantageous to the desired business successes.

2. PRODUCTS.
Five potential business ventures were generated. The proposed choices are as follows:

1. DRONES FOR CROP INSURANCE COMPANIES.

2. AN ALARM SYSTEM LINKED TO A CELL PHONE.

3. GLOW IN THE DARK EMERGENCY MARKINGS.

4. ENGINEERED BREAKFAST SHAKES.

5. A MEDICAL DIAGNOSTIC DEVICE.

6.

7. DRONES FOR CROP INSURANCE COMPANIES:

Crop insurance companies are struggling with a high expenditure rates, due to their need for
regular inspections on farmlands and products which are often widely spread from one
another.

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One of the major expenses are the assessment costs, where assessors are paid for their
travelling costs as well as their normal hourly rates when visiting farms to inspect insured
crops.

These assessments for leading crop insurance companies in South Africa can cost up to
R15 000 000 -R20 000 000 per year (Santam Agri, 2017; Tetragon valuers, 2017).

That is why a product to reduce some of these costs would be an intelligible business
enterprise.

Drones can be used for this. Drones will fly over the crop fields and take pictures which will
then be sent to the crop insurers. This would work in conjunction with the satellites
Normalized Difference Vegetation Index (NDVI) (phenology, 2015), which is a simple
graphical indicator that can be used to analyse remote sensing measurements and assess
whether the target being observed contains live green vegetation or not (Earth observatory,
2000)

These measurements will be compared to an NDVI index and the insurer will then determine
the drought damage. The goal is not to replace assessors; it is only to reduce cost by using
the drones instead of the assessors to do some of the inspections. The assessors will still do
the final assessments when the drones together with the satellites NDVI images indicate a
possible claim. The drones will also give warning the insurer of possible claims beforehand,
which will save the assessor a trip to the farm. The Insurers Area Managers will use the
drones to cover larger areas in less time which would in turn save the Insurers from
excessive disbursement.

8. THE ALARM SYSTEM LINKED TO A CELL PHONE:

Car alarm systems are designed to not only deter possible vehicle theft, or scare of vandals,
but also to notify the vehicle owner that his/her property is being tampered with.

However, in many cases, it is impossible for a potential victim to hear their car alarm as they
are not necessarily within ear-shot of the alarm.

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A system which would notify you when the alarm is activated would greatly improve the
effectiveness of a vehicles theft deterrence systems. A cell phone app could be created
which would notify the owner when their alarm had been triggered.

In many reported auto theft incidences, the car owner only realises the have been robbed
once the perpetrator had long since disappeared with their goods.

Having a messaging service or smart-phone app which would instantly notify the car owner
when their property is being tampered with, would a potential victim a lot of trouble and
money as they could immediately notify the authorities of the situation, resulting in a greatly
expedited response time.

By linking your car alarm with a smart-phone, the car owner could have a greater sense of
security because of their improved accessibility to their motor vehicle.

9. GLOW IN THE DARK EMERGENCY MARKINGS:

With the prevalent energy crisis South Africa experiences, it is essential to have safety
precautions in a workplace that suffers from insufficient lighting conditions in the event of a
power failure. These markings are designed to eliminate the hazards that are caused when
the electricity is out.

They will supply lighting to illuminate the workplace for an employee to navigate his way to
safety whilst waiting for the backup power to kick in (Briggs & Stratton, 2017)

The delay in start-up time for a backup generator could be up to two minutes long, which is
more than enough time for an injury to occur.

10. ENGINEERED BREAKFAST SHAKE:

For many early-risers, there is often little to no time in the morning to prepare a nutritious
breakfast which is necessary to keep an individual sufficiently energized throughout their
day.

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A proposed solution to this problem could come in the form of nutrition rich meal
replacement shake to supply the consumer with all the vitamins, minerals and fibre to keep
them active, alert and healthy.

The idea is to be able to get a quality, hearty meal to start the day off.

Because of the tight time constraints that come as result of the hurried modern world, the
time-consuming morning routine often leads to an under-nourished body which may lead to
a wide assortment of health issues.

Health issues associated with skipping breakfast has been linked to a 27% increase in risk of
coronary heart disease in adult males (Cahill, LE et al. 2017). The Harvard university school
of public health conducted a six-year study in 2002 with 46,289 participants, comparing their
eating habits and found that, specifically in woman, participants whom skipped breakfast had
a significantly increased risk in developing type-2 diabetes when compared to those who
had regularly eaten in the morning (Harvard, 2012).

Skipping breakfast has even been linked to triggering hair loss as it may lead to a protein
deficiency in the body, lowering keratin levels which could avert hair growth, eventually
leading to hair loss (medhelp, 2006).

Breakfast is a quintessential part of anyones day and as such there exists a gap in the
market for a good meal replacement which is quick to make and easy to eat, taking up as
little of your day as possible.

11. MEDICAL DIAGNOSTIC DEVICE:

This is a device that would be able to diagnose a patient before he/she is loaded into the
ambulance for transportation to the local hospital.

It will be a mobile size device which could be placed onto the body of the injured, the device
will scan the body using infrared wave length light to determine the affected area which need
medical attention.

This device will speed up the diagnostic period which means that by the time the patient
arrives at the hospital, he/she can be diagnosed immediately, they may then start receiving
treatment the minute the come through the hospital doors.
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3. ANALYTIC HIERARCHY PROCESS.


AHP RESULTS.

FEASIBILITY STUDY OF TOP 5 POSSIBLE VENTURES:

12. BEST PRODUCT.

Figure 1: AHP Analyses: best product.

The AHP (Analytic Hierarchy Process) is used to determine which of the 5 possible business
ventures would be the most sensible. Different criteria of comparison are set up whereby all
the suggested enterprises are measured against one another by means of feasibility studies.

The AHP outcome ranks the possible ventures and identifies the most favourable choice.

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13. TABULATED TECHNICAL AND MARKET FEASIBILITY COMPARISON.

Figure 2: Technical and Market feasibility representation.

From the tabulated illustration of how the marketability and technical feasibility of each of the
proposed products compare, it is evident that the cell phone car alarm system is the
favoured choice.

4. GROUP PRODUCT CHOICE.


As seen in figure 1, by means of comparing the operational, economic, market, financial,
legal, and technical feasibility, the smart-phone linked car alarm app. Would be the most
beneficial product idea to pursue.

The technical and market feasibility studies support this conclusion.

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5. AHP FEASIBILITY CRITERIA.

14. LEGAL FEASIBILITY.

The legal feasibility analysis is to ascertain whether a product or service might have a
conflicting name, purpose, design etc. with another product from a different manufacturer. It
is also incorporated to detect whether a proposed product might fail to meet with certain
legal health and safety requirements.

This segment of the analysis determines the adherence of a proposed business venture to
the legal and ethical guidelines as put forth by local governing laws.

Due to the nature of the proposed product, the company would have access to sensitive
information, such as the exact whereabouts of the vehicle and its passengers. The handling
and processing of such information must adhere to the Protection of Personal Information
Act 4 of 2013 (government gazette, 2013) as well as the data privacy and Promotion of
Access to Information Act 2 of 2000 (Law reform commission; Privacy and data protection,
2005)

The car alarm system does not breach the privacy of data act, as it allows no one
individual access to the location services accept for the owner of the vehicle. No
personal information is stored with the company, only the motor vehicle insurance
required vehicle tracking company has the vehicle owners information and as such,
the car alarm notification company is not responsible for the safeguarding thereof.
Because of this, the protection of personal information act is not applicable to the
company.

Possible copyright claims from companies offering similar services would not affect
the car alarm notification services offered by the company as it is a third-party
application which merely connects the individual with the car tracking company and
their car alarm.

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15.

16. OPERATIONAL FEASIBILITY

Operational feasibility is, in essence, the measurement of a products success. When


analyzing the operational feasibility, the implementation of the product is studied.

The purpose of this analysis criteria is to determine whether the proposed solution to a
problem will adequately satisfy the end user as well as meet with the requirements set out
for it to achieve.

In the case of the car alarm notification system, the user will gain access to information they
would otherwise have been oblivious to. The implementation of the service thus fulfills its
initial purpose in delivering exactly what it had promised to do.

Another aspect of operational feasibility is to determine if the proposed service deals with
the problem in an intelligible way; in other words, will it work? Can the service be used daily
and be sufficiently useful?

17. SCHEDULE FEASIBILITY

Schedule feasibility deals with milestone deadlines set forth by the requirements of the
product or service. The purpose of the inclusion of the schedule feasibility as an assessment
criterion in the AHP is to determine whether the proposal can be completed within a
reasonable time period.

If a proposal fails to meet the scheduling requirements, it would be a senseless endeavour


to pursue as it would fall out of favour before it is released into the market, almost
guaranteeing it as a failed venture.

A project that is unable to comply with scheduling deadlines run the risk of an inability to
grow, causing it to stagnate which ultimately leads to its failure, which could result in major
capital losses to investors as well as to management.

Because of the modest scale of the car alarm notification system, it is highly unlikely that it
would be unable to be completed within a reasonable amount of time.

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18. ECONOMIC FEASIBILITY

The economic feasibility of a project is effectively a comparison of in versus out from a


financial point of view. For a project to be economically feasible the amount of revenue,
effort and total production cost it consumes must be sensible.

A rational comparison must be made between the total potential cost and the total potential
capital gain.

It would be illogical to initiate a project that has been determined to be economically un-
feasible.

An exhaustive investigation has to be done into every aspect of the projects manufacturing
phase to have an accurate as possible estimate of the total production costs associated with
the project.

Because of the volatile nature of the current economic climate, the asking price of a product
or service must be scrutinized to ensure it is fair to the buyer as well as to the seller. The
production cost will heavily influence the asking price. This means that if a project has a
large production cost, it will have a high asking price.

If any discrepancies arise between a fair asking price and a fair purchasing cost, the project
cannot be economically viable.

19. RESOURCE FEASIBILITY

Resource feasibility encompasses physically everything that goes into a project. Extensive
research is to be done to ascertain exactly what tangible resources (building materials),
labour force, working space etc. will be required to complete a proposed project.

For a prospective project to be feasible in terms of resources, it must be able to come to


realization with a rational amount of resource consumption. If a prospective project where to
demand substantial amounts of working hours, considerable amounts of building materials,
and a vast labourer work force to bring to completion, without the guarantee of an equally
large financial gain, the project would not be deemed justifiable.
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It is insurmountable to exhaustively research exactly what is needed for the project, every
aspect of production and materials necessary for the manufacturing of the product needs to
be determined and specified.

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6. FEASIBILITY ANALYSES

20. TECHNICAL FEASIBILITY

21. COST EFFECTIVE PRODUCTION METHODS:

The production of the product has to be cost effective in order for it to be considered.
The product must be designed to be safe, durable and to offer a unique service. The
car alarm system would require extra programming and specialised people (IT
specialist) to do this programming. The product is cost-effective because the only
expense is the wage of the IT Programmer.

22. FACILITY:

A small working area will be hired with enough floor space to house computers,
desks and kitchen appliances for an environmentally friendly workplace. Our product
is an online product and therefor any location would be viable for the office.

23. LOCATION:

Our business is independent of its location, because it is an online product so it is


available anywhere. The office would require enough space for 12 workers with their
desks and a kitchen area. Property 24 listed an office in the central of Potchefstroom
which is available for hire. The office is situated in Evan Street, near Habitat and
include enough parking space and a bathroom. The rent would be R4000 per month.

24. EQUIPMENT:

Equipment required for the manufacturing of the product include:


Computer/Laptops
WIFI/ Internet access
Coding programme

25. LABOUR:

The labour for this product includes the programmer (IT specialist), who is
responsible for the programming and updates of the APP and a cleaning lady.

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26. FUTURE EXPANSION:

Although the product meets the necessary requirements it can be used in the future
for other purposes like the alarm system in a house or business. For phase 2 of the
product we could start producing our own GPS tracking chips and then sell them to
clients. The next part we are working on is a cut-off switch connected to the vehicles
ECU (Engine Control Unit), which will allow you to cut-off the engine when your
phone notifies you when there is suspicious activity around your vehicle.

27. MATERIALS USED:

The materials used are the Android phones, alarm systems and the service satellite,
but vehicles are manufactured with alarm systems and most people already owns an
Android or Apple phone. For the programming, they will need a computer or electrical
conducting material.

28. MANUFACTURING:

The programmer has to design a programme in order to work with a tracking


microchip. This chip will be coded to the APP on your phone, which will send out
signals notifying the APP on your phone that your vehicle is in trouble. This chip will
also be coded to the vehicles ECU controlling the cut-off switch.

29. MARKET FEASIBILITY

30. TARGET MARKET:

Any person that owns a licensed engine powered transport, as well as people who
tend to forget to lock their cars. The target market is very large due to so many
licensed vehicles on our roads and the high crime rate in South Africa.

31. CONSUMER BUYING HABITS:

This product qualifies as an improved and convenient product. Consumers prefer the
improved product at a higher price rate. If the quality is equal or superior to the
previous product. The improvement in accessibility between buyers and the service

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providers that put you in touch with the location of your vehicle, is an uncontested
service offered by none of our competitors.

Most insurance companies list transport tracking chips as a requirement to be


allegeable for lower insurance rates and because our improved product includes a
cut-off switch client will feel more secure with the service.

32. PRODUCT:

The tracker is connected to your alarm system and ECU. When activated a signal is
sent to your phone notifying you of the location and situation of your vehicle.

33. CONSUMER REACTION:

Knowing the client should be satisfied, they will react positively to a multi-function
product that makes life more comfortable for them. If the price seems fair to the
client, they would buy the product. The top quality of the product is another reason
for the positive reaction of the client. The fact that it is a South African product that
improves the economy of our country is another reason the client will react positively.

34. COMPETITOR ANALYSES:

This product is the first of its kind and therefore it does not have any competitors. The
closest competitor it has is MiWay, they offer a service that notifies medical
personnel if their vehicle had been involved in a heavy impact accident.

35. MARKET FACTOR AND TREND:

Vehicles has been used for a long time. This product will never go out of trend
because crime will always be around the corner. This product can only be improved.

36. PENETRATION OF THE MARKET:

The market will be more penetrable in South Africa due to the high crime rate and
therefore clients will support this local product. Clients would choose our product
above the future competitors because our product will be equal in price but at a
higher quality. We will emphasize the fact that they help build our economy for a
better and safer future for the vehicle owner.
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37. MARKET SHARE:

Pioneers establish a relationship with the market which makes it difficult for late
entrants to access that market. The pioneer becomes the standard of that market
and is able to shift the mind-set of the consumer to their advantage. Therefore, it will
be difficult to get a share of the market. If the product is an improvement the market
share can be estimated at two percent.

38. RESEARCH AND STUDIES:

An APP is required, for that no extra studies are required, only a person who would
design the APP.

39. COST:

The manufacturing cost will be high. The cost will consist out of programming,
because all advertising will be done on social media, which is basically free. No
excess costs will go for advertising. The start-up development of the product will also
be expensive, because electronic equipment is very pricey.

40. SALES VOLUME AND GROWTH:

Approximately 8000-8500 sales per year.

41. MARKET GROWTH:

The market growth of this product will be high. A lot of transport owners would want
this product, because it will be more convenient to know that they will be notified
immediately if something had to happen to their vehicles. With future improvements,
interest in this product will grow and so will the market growth.

42. FINANCIAL FEASIBILITY

The companys goal is to sell 8 000 car alarm systems on the first year, at R60 per month.
The second year 8 300 car alarm systems, the third year 8 500, fourth year 8 600 and fifth
year 8 900.

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Figure 3: Income Statement

Our company will not take out loans instead the 200 000 is from investments and sponsors.
The company will rely on this money for the first year and after we will start to rely on the
profit, we make per year.

43. RATE OF RETURN ON INVESTMENT (ROI)

The total costs of the company will include the following:

Rent for the office (R 48 000)


Electricity (R12 000)
Cleaner (R 30 000)
Advertising Cost (R 13 000)
Other possible expenses (R 24 000)
Total cost: (R 127 000)

44. ONCE OFF PAYMENTS

Work Laptop (R 10 000)


Table and chairs (R 10 000)
Software engineer once-off salary (R 23 000)
Total cost: (R 43 000)
Fixed capital Investments: R200 000

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Sales Price: R 14 400 000.

Assets (PriceCheck, 2017):

Tables and chairs: we are going to need seven chairs at the price of (R200) and
three or four tables (R750 each).
We will only need three new laptops for the business (R10 000 each)
Total profit per year:

Long-term loans: our company will not take any loans

3 602 102
= 200 000
100 = 18.011%.

45. PAYBACK PERIOD (PBP)

PBP=Fixed capital investments/annual cash flow

200 000
= 3 602 102 = 0.056 .

46. NET RETURN

5 760 000
= = = 28.8
200 000

= (28.8 28) 100 = 80%

47. NET PRESENT VALUE (NPV)

1 (1 + )
=

1 (1 + 0.18011)5
3 602 102 200 000 = 11 061 582.90
0.18011

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48. DISCOUNTED CASH FLOW RATE OF RETURN (IRR)

1 (1 + )5
3 602 102 200 000 = 0

= 18.011 %

7. CONCLUSION
The alarm system linked to a cell phone is a product that notifies the user when there is
suspicious activity around his vehicle.

The product will be manufactured locally, meaning it will be cost-effective as all the required
materials and equipment is readily available in South Africa.

There is no shortage in technically proficient individuals whose expertise will be needed in


the realization of this product, making this product technical feasible. There will be options
available for future expansion and growth, to keep our clients satisfied with its continued
improvement and increase in the compatibility of the buyers needs.

The product is market penetrable due to its cost effectiveness and aesthetically appealing
user interface as well as its user friendly design philosophy.

There are sufficient economic indicators from which makes it evident that South Africans will
continue to support this product.

The product is marketable as well as technically and financially feasible. It would therefore
be reasonable to assume the proposed business venture would be worth pursuing and could
deliver a fair capital gain.

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