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Chapter: Civil : Engineering Economics and Cost analysis : Cost And Break Even Analyses

Economic Feasibility Analysis

Businesses, governmental entities, and other organizations face great uncertainty and risks when making decisions about major investments in new manufacturing facilities, new products, new markets, new technologies, new programs, and when acquiring other companies.


Economic Feasibility Analysis

 

Businesses, governmental entities, and other organizations face great uncertainty and risks when making decisions about major investments in new manufacturing facilities, new products, new markets, new technologies, new programs, and when acquiring other companies. Economic feasibility studies provide the facts and analytical rigor to improve these types of strategic decisions.

 

The linchpin of any economic feasibility study is the accuracy of the demand forecast. What are the relevant economic patterns and trends? What are the fundamental economic drivers of demand? Will consumers buy the new product, visit the new amusement, rent the new apartment, or enroll in the new university? What prices will consumers pay? What's the slope of the price - demand curve? Will consumers be loyal or fickle? Decision Analyst, as one of the leading marketing research firms in the world, understands how to answer these 'demand' questions and develop accurate sales revenue forecasts. Decision Analyst uses its own econometric models and algorithms, and proprietary research methods, to forecast demand for new products, new services, and new initiatives.

 

Once the demand side of the equation is understood, the supply variables must be analyzed. What are the essential ingredients, components, human resources and skills, and materials on the supply side? What will be the long-term cost trends for these supply components? As these supply variables are identified and projected into the future, Decision Analyst builds a simulation model of the business venture, or the new attraction or amusement, or the new product, or the new real estate development. The demand forecast and the supply analyses come together in the form of a DecisionSimulatorô that permits 'what if' games to be played. What happens if the price of a critical ingredient soars? What happens if demand is 10% below forecast? What happens if a major competitor reduces prices by 5%?

 

The economic feasibility analysis often includes a comprehensive analysis of competitive firms and competitive threats. Who and what constitutes the competition? What are the capabilities and tendencies of these competitors? How are they likely to respond to a competitive threat? Can the subject firm defend itself against competitive counterattack?


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Civil : Engineering Economics and Cost analysis : Cost And Break Even Analyses : Economic Feasibility Analysis |


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