Project management

1. CHAPTER-3
PROJECT MARKET FORCASTING
&
DEMAND ANALYSIS

2. What is forecasting???
Forecasting means
assessment of future event
based on experience. It is a
projection based upon past
data or it is an estimate of an
event which will happen in
future.
Forecasting is essential for
valuable managerial decision.
Forecasting is a basis of long
term planning of an
organization.

3. Contd…
• According to William J. Stevenson -“A
statement about the future value of a variable
of interest”
• According to Lee J. Krajewshi and Larry
Ritzman-“A forecast is a reproduction of
future events used for planning purposes”.

4. General features of forecasting
• It reflects past experience: What happened in past may happen in
future.
• Forecasting are rarely perfect: Forecasting is assumption,
correctness of forecasting depending on proper judgment of
information.
• Forecasting provides some expectation: Assessment of future
provides some expectation, how market can be served, by which
opportunities can be captured, planning to be educated.
• Planning is very much depending on forecasting: Forecast is basis
of planning, Forecasting assess future event and planning is
promulgated and executed on the basis of forecasting. So planning
is very much depending on forecasting.

5. Elements of forecasting/qualities of good
forecasting:
• Timely forecasting: Forecasting should be made
timely not in advance, not in late. Advanced
forecasting leads to high degree of uncertainty.
• Forecasting should be accurate: Relevant
information is necessary for accurate forecasting.
• Forecasting should be reliable: Reliability of
forecasting depends on agencies, which provide
relevant information.
• Forecasting should be expressed in meaningful
units: Financial forecasting should be expressed
in Tk and production forecasting in unit.

6. Contd…
• Forecasting should be in written: Written
forecasting accountable person who forecast and
organization for which forecasting is made.
• Forecasting techniques should be simple to
understand and use: Users often lack confidence
in forecast based on sophisticated techniques. So
the techniques used in forecasting should be
simple as much as possible.
• Forecasting should be cost effective: Forecasting
should not make excessive cost, it should be cost
effective.

7. Need of forecasting
1. When there is a time lag between awareness of
an impending event or need and occurrence of
that event. This lead time is the main reason of
planning and forecasting.
2. Planning is the fundamental activity of
management. Forecasting forms the basis of
planning.
3. It is essential for the organization to know for
what level of activities one is planning before
investments in input

8. Types of Forecasting

9. Contd…
• Short Term forecasting is the forecasting that
made for short term objectives covering less than
one year. For example, Material Requirement
Planning (MRP), scheduling, sequencing,
budgeting etc.
• Long Term Forecasting is the forecasting that
made for long term objectives covering more
than five years. For example, Product
diversification, sales and advertisement.

10. Steps in the Forecasting Process
Step 1 Determine purpose of forecast
Step 2 Establish a time horizon
Step 3 Select a forecasting technique
Step 4 Gather and analyze data
Step 5 Make the forecast
Step 6 Monitor the forecast
“The forecast”

11. Key steps in market and demand analysis
1. Situational analysis and specification of objectives:
Situational analysis generates enough data to measure
the market and get a reliable handle over projected
demand and revenues. To carry out such a study, it is
necessary to spell out its objectives clearly and
comprehensively. A helpful approach to spell out
objectives is to structure them in the form of
questions.
– Who are the buyers?
– What is total current demand?
– What price and warranty will ensure its acceptance?
– What channel of distribution is most suited?

12. Contd…
2. Collection of secondary information: In order to answer the
questions listed, while delineating the objectives of the market
study, information may be obtained from secondary and primary
source. Secondary information provides the base and the starting
point for market and demand analysis. It indicates what is known
and often provides leads and cues for generating primary
information required for further analysis.
3. Conduct of market survey: Secondary information often does
not provide a comprehensive basis for market and demand analysis.
It needs to be supplemented with primary information generated
through a market survey, specific to the project being appraised.
The market survey may be a census survey or a sample survey. In a
census survey the entire population is covered. The market survey
is typically as sample survey.

13. Contd…
4.Characterization of the market: Based on the information
gathered from secondary sources and through the market
survey the market for the product/service may be
described in terms of the following:
– Effective demand in the past and present;
– Breakdown of demand;
– Price;
– Methods of distribution and sales promotion;
– Consumers;
– Supply & Competition;
– Government policy.

14. Contd…
5. Demand forecasting: After gathering information
about various aspects of the market demand from
primary and secondary sources, an attempt may be
made to esteem ate future demand.
6. Market planning: To enable the product to reach a
desired lever of market perform a suitable marketing
plan should be developed. Broadly, it cover pricing,
distribution, promotion and, service.

15. Contd…
• Obtain, clean, and analyze appropriate data:
Obtaining the data can involve significant effort. Once
obtained, the data may need to be “cleaned” to get rid
of outliers and obviously incorrect data before analysis.
• Make the forecast: After analyzing the obtained data,
in this stage, the forecasting is made.
• Monitor the forecast: A forecast has to be monitored
to determine whether it is performing in a satisfactory
manner or not. If it is not, reexamine the methods,
assumptions, validity of data, and so on; modify as
needed; and prepare a revised forecast.

16. Determinants of demand
1. Price of particular product: Demand for a particular product depends
upon price of its. There is an adverse relation between price and the
quantity demanded, lower the price the greater is the quantity demanded
and vice versa.
2. Price of a substitute and completive product: If the price of a
commodity remains same the demand for this commodity may change if
the prices of substitutes and complementary goods change. For example,
gur is a substitute of sugar. Assume that the price of sugar increases, in
that case if the price of gur remain unchanged, its demand will increase.
3. Income of buyers: Demand of a particular product also depends upon
income of demanders. If the purchasing power of money increases or real
income increases than demand of a particular product will go up. Again
demand for a commodity will not increase with a fall in price if the income
of the consumer decreases substantially.

17. Contd…
4. Advertising: Demand for a particular product can be increased through
advertising. As increase in advertisement will lead to a more than
proportionate increase in sales.
5. Population: Composition of the population or size of the population
which affects demand for certain commodities or service.
6. Season of the year: It is obvious that demand for a commodity must
change with the change in season. In winter, there is a greater demand for
worm clothing for certain types of torics and for coal of fuel. In summer,
there is a great demand for electric fans room coolers and cooling drinks
etc.
7. Availability of credit: Availability of credit facilities in terms of payment
and service increase buyer’s ability to purchase a particular product.

18. Contd…
8. Geographical location of buyer: Geographical location of buyers also
influence in determining demand of a particular product. Demand per a
product very due to change in geographical location of buyers.
9. Expected future in market: Expected future trend in market also
determinate demand of a particular product. If price of a product may
seem to increase in future than demand for that product may increase and
vice versa.
10. Change in consumer taste: If with the change in habits and taste,
consumer begin to take coffee instead of tea and even if two price of tea
the demand for tea to that person will not increase.
11. Needs and preferences: If is quite obvious that if a consumer dustups
market liquidity prudence, his demand for goods will decrease, because
he prefers to keep with him ready cash instead of buying things.

19. THANK YOU