The method compares the cost of the total expected benefits from the project with the total costs of its implementation. The analysis has two goals: 1) at the project justification stage, determine whether the benefits from the project exceed the costs and, if they exceed, by how much; 2) create a cost basis for comparing different projects and justifying investments in them both as a whole and for individual investors (Anderson, 2021). Such an analysis is possible only if all the parameters involved can be represented in monetary terms. This is usually impossible regarding ethical, internal, temporal, and aesthetic components. Feasibility analysis is a procedure that aims to determine the probability of success of a given project and its profitability (Drury, 2021). Cost-benefit analysis is inextricably linked to the feasibility study, which covers technical issues related to the production capabilities of a particular company and economic aspects related to the actual benefits of a particular solution. Feasibility analysis in the manufacturing process of parts facilitates further procedures related to the analysis of the technical condition of components. It is also a way to reduce the cost of developing a modern solution.
It is an excellent practice to start the manufacturing and new product establishment process with the feasibility analysis. This guarantees that cooperation will bring the expected results, and the process will go smoothly. Conducting a feasibility study at the initial stage of cooperation provides another significant advantage – the ability to redesign and adapt the product, considering both customer expectations and production capabilities (Drury, 2021). Feasibility and cost-benefit analysis provide valuable data about the parameters of the desired component (Vaidya, 2022). Employees conduct it with sufficient experience and knowledge. In that case, specific adjustments can be made that will significantly improve the production process without adversely affecting the behavior of the final product.
In conducting a cost-benefit analysis for an e-commerce company, several factors should be considered that determine the company’s dependence on implementing its software. In this case, the costs will be the price of the software, for consultants to install and implement the software, and for training employees to use it. However, the benefits, in this case, will be the following aspects:
- improving the efficiency of business processes due to the better quality of information,
- the company will be able to make better decisions (leading to additional cash flows)
- convenience and comfort of employees who will be able to work easier and more efficiently.
References
Anderson, S. (2021). How Cost-Benefit analysis (CBA) process is performed. Investopedia. Web.
Drury, A. (2021). Considering a new venture? Consider a feasibility study. Investopedia. Web.
Vaidya, D. (2022). Feasibility study. WallStreetMojo. Web.