This document outlines key steps and methods for market and demand analysis:
1. Secondary information is collected to provide context, while primary data from market surveys supplements this.
2. Demand is characterized based on past and present effective demand, demand breakdowns, price trends, distribution methods, consumer profiles, and competition.
3. Common demand forecasting methods include qualitative approaches like expert panels, time series models like trend projection and exponential smoothing, and causal models like chain ratios and consumption levels based on income/price elasticities.
Market demand analysis helps companies understand consumer demand for products and services. This allows management to determine if they can successfully enter a market and generate profits. The first step is identifying the target market through surveys. Companies also assess what stage the business cycle is in - emerging, plateau, or declining. They develop products that meet specific consumer needs. Competition levels are analyzed to determine potential market share and profits.
noorulhadi Lecturer at Govt College of Management Sciences, noorulhadi99@yahoo.com
i have prepared these slides and still using in mylectures, Reference: Portfolio management by S kevin and onlin.
The Efficient Market Hypothesis (EMH) states that current stock prices fully reflect all available public information such that it is impossible to consistently outperform the market through analysis of historical prices or public information alone. There are three forms of the EMH: weak, semi-strong, and strong. The weak form suggests past prices cannot predict future performance, while the semi-strong form incorporates all public information like earnings reports. The strong form suggests even private information cannot be used to outperform, though some studies contradict this. Overall, the EMH implies that markets are rational and prices adjust quickly to new information, making consistent outperformance difficult without private information.
Demand forecasting involves anticipating future demand for a company's products and services under uncertain competitive conditions. It is essential for production planning, purchasing raw materials, and other business decisions. Demand can be forecasted qualitatively using opinion surveys of consumers, salespeople, and experts, or quantitatively using statistical techniques like trend projection, regression analysis, and econometrics that analyze historical demand data and its relationships to economic indicators. Accurate demand forecasting is important for production planning, inventory control, sales forecasting, budgeting, and long-term growth strategies.
The document discusses various pricing strategies and concepts, including new product pricing strategies like market skimming and market penetration pricing. It also covers product mix pricing strategies, price adjustment strategies such as discounts and segmented pricing, and factors to consider when making price changes. Public policy concerns related to pricing such as predatory pricing and unfair trade practices are also summarized.
The document discusses various tools and methods for analyzing industries, including qualitative and quantitative approaches. Qualitative approaches include analyzing the strengths, weaknesses, opportunities, and threats (SWOT) of an industry and its competitive landscape over the industry life cycle. Quantitative approaches include analyzing employment data, emolument (pay) data, and input-output relationships to understand industry performance and risk over time. The goal of industry analysis is to identify investment opportunities and understand how industries will perform in the future economic environment.
This document summarizes Michael Porter's Five Forces model of competition. It was developed by Michael Porter to analyze industry structure and competition. The five competitive forces are: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and competitive rivalry between existing competitors. The document explains each of these forces and factors that influence the degree of each force within an industry.
The document discusses various methods for conducting market and demand analysis. It outlines key steps like situational analysis, collecting secondary information, conducting market surveys, characterizing the market, and forecasting demand. It then provides details on qualitative forecasting methods like jury of executive opinion and Delphi method. It also explains quantitative time series projection methods like trend projection, exponential smoothing, and moving average. Finally, it mentions causal methods for demand forecasting.
Market demand analysis helps companies understand consumer demand for products and services. This allows management to determine if they can successfully enter a market and generate profits. The first step is identifying the target market through surveys. Companies also assess what stage the business cycle is in - emerging, plateau, or declining. They develop products that meet specific consumer needs. Competition levels are analyzed to determine potential market share and profits.
noorulhadi Lecturer at Govt College of Management Sciences, noorulhadi99@yahoo.com
i have prepared these slides and still using in mylectures, Reference: Portfolio management by S kevin and onlin.
The Efficient Market Hypothesis (EMH) states that current stock prices fully reflect all available public information such that it is impossible to consistently outperform the market through analysis of historical prices or public information alone. There are three forms of the EMH: weak, semi-strong, and strong. The weak form suggests past prices cannot predict future performance, while the semi-strong form incorporates all public information like earnings reports. The strong form suggests even private information cannot be used to outperform, though some studies contradict this. Overall, the EMH implies that markets are rational and prices adjust quickly to new information, making consistent outperformance difficult without private information.
Demand forecasting involves anticipating future demand for a company's products and services under uncertain competitive conditions. It is essential for production planning, purchasing raw materials, and other business decisions. Demand can be forecasted qualitatively using opinion surveys of consumers, salespeople, and experts, or quantitatively using statistical techniques like trend projection, regression analysis, and econometrics that analyze historical demand data and its relationships to economic indicators. Accurate demand forecasting is important for production planning, inventory control, sales forecasting, budgeting, and long-term growth strategies.
The document discusses various pricing strategies and concepts, including new product pricing strategies like market skimming and market penetration pricing. It also covers product mix pricing strategies, price adjustment strategies such as discounts and segmented pricing, and factors to consider when making price changes. Public policy concerns related to pricing such as predatory pricing and unfair trade practices are also summarized.
The document discusses various tools and methods for analyzing industries, including qualitative and quantitative approaches. Qualitative approaches include analyzing the strengths, weaknesses, opportunities, and threats (SWOT) of an industry and its competitive landscape over the industry life cycle. Quantitative approaches include analyzing employment data, emolument (pay) data, and input-output relationships to understand industry performance and risk over time. The goal of industry analysis is to identify investment opportunities and understand how industries will perform in the future economic environment.
This document summarizes Michael Porter's Five Forces model of competition. It was developed by Michael Porter to analyze industry structure and competition. The five competitive forces are: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and competitive rivalry between existing competitors. The document explains each of these forces and factors that influence the degree of each force within an industry.
The document discusses various methods for conducting market and demand analysis. It outlines key steps like situational analysis, collecting secondary information, conducting market surveys, characterizing the market, and forecasting demand. It then provides details on qualitative forecasting methods like jury of executive opinion and Delphi method. It also explains quantitative time series projection methods like trend projection, exponential smoothing, and moving average. Finally, it mentions causal methods for demand forecasting.
This document discusses hedging strategies used by participants in commodity markets to reduce price risk. It describes how hedgers use derivatives contracts like futures to lock in prices for transactions that will occur in the future. There are two main types of hedges - short hedges where the hedger sells an asset, used by producers worried about falling prices, and long hedges where the hedger buys an asset, used by buyers concerned about rising prices. The optimal hedge ratio, which minimizes risk, depends on the correlation between the underlying asset price and futures price as well as their standard deviations. An example calculates the optimal number of cotton futures contracts a company should purchase to hedge its need to buy 11,
This document discusses different levels of strategy, including corporate strategy, business strategy, and functional strategy.
Corporate strategy involves top-level decisions about the overall scope and direction of a corporation. It occupies the highest decision-making level. Corporate strategies include stability, expansion, retrenchment, and combinations of those. Expansion strategies involve concentrating resources, diversifying, integrating operations, cooperating with competitors, and internationalization. Retrenchment strategies are turnaround, divestment, and liquidation.
Business strategy details how a firm provides value to customers within a specific industry. Common business strategies are cost leadership, differentiation, focused low cost, focused differentiation, and integrated low cost/differentiation.
Functional
Industry analysis is used to understand the competitive dynamics of an industry. It examines factors like demand, competition, and future prospects considering technology. Conducting industry analysis allows businesses to retain customers, attract new ones, ensure sustainability, align strategy, attract and retain talent, and create a holistic view of the business environment. Common tools for industry analysis include Porter's 5 Forces, PEST analysis, and SWOT analysis, which examine political, economic, social, and technological factors both internally and externally.
The document provides an overview of fundamental analysis with a focus on economy analysis. It discusses [1] analyzing key macroeconomic indicators like GDP, inflation, interest rates to evaluate the overall economic environment; [2] assessing specific industries based on factors like demand, competition and government policy; and [3] examining individual companies considering internal issues like management and operations. It also outlines several techniques for economic forecasting, including anticipatory surveys, indicator approaches, econometric modeling and opportunistic modeling.
Fundamental analysis and technical analysisMohammed Umair
This document discusses fundamental analysis techniques for evaluating securities. It defines fundamental analysis as focusing on underlying business factors like financials, management, and prospects to determine a security's value. The document outlines different levels of analysis, including analyzing the overall economy, individual industries, and specific companies. It provides examples of analyzing economic indicators, using Porter's Five Forces for industry analysis, evaluating competitors, and assessing profitability metrics. The goal of fundamental analysis is to answer questions about a company's growth, profits, competitive positioning, debt repayment ability, and accounting practices.
The document discusses various pricing strategies that can be used including penetration pricing, market skimming, value pricing, loss leader pricing, psychological pricing, price leadership, tender pricing, price discrimination, predatory pricing, absorption cost pricing, marginal cost pricing, contribution pricing, target pricing, and cost-plus pricing. It provides examples and explanations of when each strategy may be suitable.
This document discusses speculation, hedging, futures trading and compares forward and futures trading. It defines speculation as purchasing or selling commodities with the intent to profit from future price movements. Hedging is defined as offsetting cash market positions with futures positions to reduce price risk. Futures trading involves both hedging and speculation and allows for price discovery and hedging of commodity price risk. The key differences between forward and futures trading are that futures contracts are standardized and exchange-traded, involve daily settlement, have low default risk and require initial margin.
The document discusses Porter's generic competitive strategies framework, which identifies three strategies for achieving competitive advantage: cost leadership, differentiation, and market segmentation/focus. Cost leadership involves having the lowest production and distribution costs to offer the lowest prices. Differentiation involves making products unique in some way to appeal to customers who are less price-sensitive. Market segmentation/focus involves tailoring offerings to serve specific market segments. Examples are provided of companies that employ each strategy successfully. Criticisms of the framework are noted, but it is still viewed as providing a useful model for understanding sources of competitive advantage.
This document discusses monetary policy and fiscal policy in India. It defines monetary policy as steps taken by the Reserve Bank of India to regulate money supply, credit availability, and interest rates. The objectives of monetary policy include full employment, price stability, economic growth, and balance of payments stability. Tools of monetary policy discussed include bank rate, cash reserve ratio, open market operations, and selective credit controls. Fiscal policy is defined as the government's tax and spending policies. The objectives of fiscal policy are to influence aggregate demand and achieve economic goals like employment and investment. Types of fiscal policy tools covered are tax policy, government expenditure, and public borrowing.
The document discusses the Arbitrage Pricing Theory (APT), which assumes an asset's return depends on various macroeconomic, market, and security-specific factors. The APT model estimates the expected return of an asset based on its sensitivity to common risk factors like inflation, interest rates, and market indices. It was developed by Stephen Ross in 1976 as an alternative to the Capital Asset Pricing Model. The APT formula predicts an asset's return based on factor risk premiums and the asset's sensitivity to each factor.
The Sharpe model provides a simpler approach to portfolio optimization compared to the Markowitz model. It assumes the return of individual securities is linearly related to a single market index. This allows estimation of systematic and unsystematic risk for individual stocks based on their beta coefficient. An optimal portfolio is constructed by selecting stocks with the highest excess returns over the risk-free rate relative to their beta, up to the cutoff point where this ratio begins declining. The percentage invested in each stock is based on its beta and unsystematic risk. This results in a portfolio with the highest expected return for a given level of risk.
This document discusses various methods for classifying and forecasting demand. It categorizes demand based on whether goods are for consumers or producers, whether they are perishable or durable, and whether demand is derived, autonomous, for a firm or industry, or for total markets versus market segments. It then discusses demand forecasting and different quantitative and qualitative techniques for forecasting, including expert opinion methods, complete/sample consumer enumeration surveys, sales force opinion surveys, and consumer end use surveys. Each technique is described along with its advantages and disadvantages.
This document discusses different types of fundamental analysis used to evaluate investments including economic analysis, industry analysis, and company analysis. It outlines factors considered in each type of analysis such as macroeconomic factors for economic analysis, the industry life cycle and competitive conditions for industry analysis, and financial and non-financial internal and external factors for company analysis. The goal of fundamental analysis is to evaluate the past and expected future performance of economies, industries, and companies to inform investment decisions.
Requirements for effective segmentationSameer Mathur
This document discusses market segmentation strategies for businesses. It identifies key criteria for effective segmentation, including segments being measurable, accessible, substantial, and differentiable in their responses. It then outlines approaches for segmenting business markets based on demographics, operating variables, purchasing behaviors, and personal characteristics. Segmenting international markets may also consider geographic, economic, political/legal, and cultural factors. The requirements for effective segmentation are that segments are measurable in size/profile, accessible to reach/serve, large/profitable enough, and will respond differently to marketing approaches. The target market consists of buyers sharing needs/characteristics that the company chooses to serve, and segments should be evaluated based on size/growth, level of competition, substitutes
The document discusses strategic choice in building a multicultural organization. It defines strategic choice as the decision that determines a firm's future strategy and addresses which path it will take. A SWOT analysis is conducted to examine strengths, weaknesses, opportunities, and threats, and the best applicable strategy is selected to achieve organizational objectives. The process of strategic choice involves focusing on alternatives, analyzing them, evaluating strategies, and making a strategic choice. Gap analysis is used to narrow alternatives and selection factors like objective and subjective criteria are used to evaluate strategies.
This document provides an overview of the Capital Asset Pricing Model (CAPM). It was developed by Sharpe and Linter based on Markowitz's portfolio theory. CAPM assumes investors will create a portfolio using risky assets and risk-free assets, such as treasury bills. It can be used to analyze the risk and return of individual securities. The model relates the expected return of securities to market risk using the security market line formula.
This document summarizes the efficient market hypothesis (EMH) in three sentences:
The EMH states that market prices fully reflect all available public information and adjust instantly to new information. It has three forms - weak, semi-strong, and strong - with each form incorporating more types of information. Most research supports the weak and semi-strong forms, finding that historical data and public information are reflected in prices, but the strong form is not supported as non-public information can be used to earn excess returns.
This document provides an overview of key concepts in behavioral finance. It discusses cognitive psychology and how it studies mental processes like thoughts, feelings, and behavior. It also outlines advantages like being scientific but disadvantages like ignoring biology. The document then covers limits to arbitrage, defining arbitrageurs as investors who exploit mispricings. It distinguishes between long-term and short-term trades, and how transaction costs, short-selling costs, fundamental risk, and noise-trader risk can impact arbitrage. It also discusses professional arbitrage, positive feedback, predation, and expected utility theory.
Demand for a product requires three factors: desire, ability to pay, and willingness to pay. Forecasting is predicting future situations under given conditions. There are different types of demand forecasting including passive, active, micro, long-term, and short-term. The objectives of demand forecasting include planning, production analysis, sales forecasting, inventory control, and supporting long-term investment programs. Common demand forecasting methods include the survey method using census or samples, collective opinion techniques like the Delphi method, and methods based on past trends like time series analysis and moving averages.
Demand forecasting involves using statistical data and analysis to predict future demand for a product. There are different types of forecasts including short term (less than 1 year), long term, and passive vs active. Short term forecasts help with sales, pricing, and target policies while long term helps with planning. Demand can be forecast at the macro, industry, or firm level. Statistical methods include time series analysis, regression analysis, and smoothing techniques like moving averages and exponential smoothing. Accurate demand forecasting is important for production, inventory, investment, and economic planning.
This document discusses project market forecasting and demand analysis. It defines forecasting as assessing future events based on past data in order to aid managerial decision making and long-term planning. The document outlines different forecasting techniques, elements of good forecasting like timeliness and accuracy, and the steps in the forecasting process including determining purpose, selecting a technique, analyzing data, making the forecast, and monitoring results. It also discusses types of forecasting, determinants of demand for a product or service, and key steps in conducting market and demand analysis for a new project.
This document discusses hedging strategies used by participants in commodity markets to reduce price risk. It describes how hedgers use derivatives contracts like futures to lock in prices for transactions that will occur in the future. There are two main types of hedges - short hedges where the hedger sells an asset, used by producers worried about falling prices, and long hedges where the hedger buys an asset, used by buyers concerned about rising prices. The optimal hedge ratio, which minimizes risk, depends on the correlation between the underlying asset price and futures price as well as their standard deviations. An example calculates the optimal number of cotton futures contracts a company should purchase to hedge its need to buy 11,
This document discusses different levels of strategy, including corporate strategy, business strategy, and functional strategy.
Corporate strategy involves top-level decisions about the overall scope and direction of a corporation. It occupies the highest decision-making level. Corporate strategies include stability, expansion, retrenchment, and combinations of those. Expansion strategies involve concentrating resources, diversifying, integrating operations, cooperating with competitors, and internationalization. Retrenchment strategies are turnaround, divestment, and liquidation.
Business strategy details how a firm provides value to customers within a specific industry. Common business strategies are cost leadership, differentiation, focused low cost, focused differentiation, and integrated low cost/differentiation.
Functional
Industry analysis is used to understand the competitive dynamics of an industry. It examines factors like demand, competition, and future prospects considering technology. Conducting industry analysis allows businesses to retain customers, attract new ones, ensure sustainability, align strategy, attract and retain talent, and create a holistic view of the business environment. Common tools for industry analysis include Porter's 5 Forces, PEST analysis, and SWOT analysis, which examine political, economic, social, and technological factors both internally and externally.
The document provides an overview of fundamental analysis with a focus on economy analysis. It discusses [1] analyzing key macroeconomic indicators like GDP, inflation, interest rates to evaluate the overall economic environment; [2] assessing specific industries based on factors like demand, competition and government policy; and [3] examining individual companies considering internal issues like management and operations. It also outlines several techniques for economic forecasting, including anticipatory surveys, indicator approaches, econometric modeling and opportunistic modeling.
Fundamental analysis and technical analysisMohammed Umair
This document discusses fundamental analysis techniques for evaluating securities. It defines fundamental analysis as focusing on underlying business factors like financials, management, and prospects to determine a security's value. The document outlines different levels of analysis, including analyzing the overall economy, individual industries, and specific companies. It provides examples of analyzing economic indicators, using Porter's Five Forces for industry analysis, evaluating competitors, and assessing profitability metrics. The goal of fundamental analysis is to answer questions about a company's growth, profits, competitive positioning, debt repayment ability, and accounting practices.
The document discusses various pricing strategies that can be used including penetration pricing, market skimming, value pricing, loss leader pricing, psychological pricing, price leadership, tender pricing, price discrimination, predatory pricing, absorption cost pricing, marginal cost pricing, contribution pricing, target pricing, and cost-plus pricing. It provides examples and explanations of when each strategy may be suitable.
This document discusses speculation, hedging, futures trading and compares forward and futures trading. It defines speculation as purchasing or selling commodities with the intent to profit from future price movements. Hedging is defined as offsetting cash market positions with futures positions to reduce price risk. Futures trading involves both hedging and speculation and allows for price discovery and hedging of commodity price risk. The key differences between forward and futures trading are that futures contracts are standardized and exchange-traded, involve daily settlement, have low default risk and require initial margin.
The document discusses Porter's generic competitive strategies framework, which identifies three strategies for achieving competitive advantage: cost leadership, differentiation, and market segmentation/focus. Cost leadership involves having the lowest production and distribution costs to offer the lowest prices. Differentiation involves making products unique in some way to appeal to customers who are less price-sensitive. Market segmentation/focus involves tailoring offerings to serve specific market segments. Examples are provided of companies that employ each strategy successfully. Criticisms of the framework are noted, but it is still viewed as providing a useful model for understanding sources of competitive advantage.
This document discusses monetary policy and fiscal policy in India. It defines monetary policy as steps taken by the Reserve Bank of India to regulate money supply, credit availability, and interest rates. The objectives of monetary policy include full employment, price stability, economic growth, and balance of payments stability. Tools of monetary policy discussed include bank rate, cash reserve ratio, open market operations, and selective credit controls. Fiscal policy is defined as the government's tax and spending policies. The objectives of fiscal policy are to influence aggregate demand and achieve economic goals like employment and investment. Types of fiscal policy tools covered are tax policy, government expenditure, and public borrowing.
The document discusses the Arbitrage Pricing Theory (APT), which assumes an asset's return depends on various macroeconomic, market, and security-specific factors. The APT model estimates the expected return of an asset based on its sensitivity to common risk factors like inflation, interest rates, and market indices. It was developed by Stephen Ross in 1976 as an alternative to the Capital Asset Pricing Model. The APT formula predicts an asset's return based on factor risk premiums and the asset's sensitivity to each factor.
The Sharpe model provides a simpler approach to portfolio optimization compared to the Markowitz model. It assumes the return of individual securities is linearly related to a single market index. This allows estimation of systematic and unsystematic risk for individual stocks based on their beta coefficient. An optimal portfolio is constructed by selecting stocks with the highest excess returns over the risk-free rate relative to their beta, up to the cutoff point where this ratio begins declining. The percentage invested in each stock is based on its beta and unsystematic risk. This results in a portfolio with the highest expected return for a given level of risk.
This document discusses various methods for classifying and forecasting demand. It categorizes demand based on whether goods are for consumers or producers, whether they are perishable or durable, and whether demand is derived, autonomous, for a firm or industry, or for total markets versus market segments. It then discusses demand forecasting and different quantitative and qualitative techniques for forecasting, including expert opinion methods, complete/sample consumer enumeration surveys, sales force opinion surveys, and consumer end use surveys. Each technique is described along with its advantages and disadvantages.
This document discusses different types of fundamental analysis used to evaluate investments including economic analysis, industry analysis, and company analysis. It outlines factors considered in each type of analysis such as macroeconomic factors for economic analysis, the industry life cycle and competitive conditions for industry analysis, and financial and non-financial internal and external factors for company analysis. The goal of fundamental analysis is to evaluate the past and expected future performance of economies, industries, and companies to inform investment decisions.
Requirements for effective segmentationSameer Mathur
This document discusses market segmentation strategies for businesses. It identifies key criteria for effective segmentation, including segments being measurable, accessible, substantial, and differentiable in their responses. It then outlines approaches for segmenting business markets based on demographics, operating variables, purchasing behaviors, and personal characteristics. Segmenting international markets may also consider geographic, economic, political/legal, and cultural factors. The requirements for effective segmentation are that segments are measurable in size/profile, accessible to reach/serve, large/profitable enough, and will respond differently to marketing approaches. The target market consists of buyers sharing needs/characteristics that the company chooses to serve, and segments should be evaluated based on size/growth, level of competition, substitutes
The document discusses strategic choice in building a multicultural organization. It defines strategic choice as the decision that determines a firm's future strategy and addresses which path it will take. A SWOT analysis is conducted to examine strengths, weaknesses, opportunities, and threats, and the best applicable strategy is selected to achieve organizational objectives. The process of strategic choice involves focusing on alternatives, analyzing them, evaluating strategies, and making a strategic choice. Gap analysis is used to narrow alternatives and selection factors like objective and subjective criteria are used to evaluate strategies.
This document provides an overview of the Capital Asset Pricing Model (CAPM). It was developed by Sharpe and Linter based on Markowitz's portfolio theory. CAPM assumes investors will create a portfolio using risky assets and risk-free assets, such as treasury bills. It can be used to analyze the risk and return of individual securities. The model relates the expected return of securities to market risk using the security market line formula.
This document summarizes the efficient market hypothesis (EMH) in three sentences:
The EMH states that market prices fully reflect all available public information and adjust instantly to new information. It has three forms - weak, semi-strong, and strong - with each form incorporating more types of information. Most research supports the weak and semi-strong forms, finding that historical data and public information are reflected in prices, but the strong form is not supported as non-public information can be used to earn excess returns.
This document provides an overview of key concepts in behavioral finance. It discusses cognitive psychology and how it studies mental processes like thoughts, feelings, and behavior. It also outlines advantages like being scientific but disadvantages like ignoring biology. The document then covers limits to arbitrage, defining arbitrageurs as investors who exploit mispricings. It distinguishes between long-term and short-term trades, and how transaction costs, short-selling costs, fundamental risk, and noise-trader risk can impact arbitrage. It also discusses professional arbitrage, positive feedback, predation, and expected utility theory.
Demand for a product requires three factors: desire, ability to pay, and willingness to pay. Forecasting is predicting future situations under given conditions. There are different types of demand forecasting including passive, active, micro, long-term, and short-term. The objectives of demand forecasting include planning, production analysis, sales forecasting, inventory control, and supporting long-term investment programs. Common demand forecasting methods include the survey method using census or samples, collective opinion techniques like the Delphi method, and methods based on past trends like time series analysis and moving averages.
Demand forecasting involves using statistical data and analysis to predict future demand for a product. There are different types of forecasts including short term (less than 1 year), long term, and passive vs active. Short term forecasts help with sales, pricing, and target policies while long term helps with planning. Demand can be forecast at the macro, industry, or firm level. Statistical methods include time series analysis, regression analysis, and smoothing techniques like moving averages and exponential smoothing. Accurate demand forecasting is important for production, inventory, investment, and economic planning.
This document discusses project market forecasting and demand analysis. It defines forecasting as assessing future events based on past data in order to aid managerial decision making and long-term planning. The document outlines different forecasting techniques, elements of good forecasting like timeliness and accuracy, and the steps in the forecasting process including determining purpose, selecting a technique, analyzing data, making the forecast, and monitoring results. It also discusses types of forecasting, determinants of demand for a product or service, and key steps in conducting market and demand analysis for a new project.
Demand forecasting is predicting future demand for a firm's products. It helps with production planning and scheduling, acquiring inputs, financial planning, pricing strategies, and advertising planning. The key steps involve specifying objectives, determining timelines, choosing forecasting methods, collecting and adjusting data, estimating results, and interpreting them. Common techniques include surveys, statistical methods, opinion polls, trend projection methods, barometric methods, and econometric methods. Consumer survey techniques involve complete enumeration, sample surveys, and end-use methods. Expert opinion, Delphi methods, and managerial surveys are also used. Statistical techniques include trend projections, barometric indicators, and econometric regression and simultaneous equation models.
The document discusses demand forecasting, including its meaning, objectives in the short and long term, types including short, medium and long term forecasting, determinants for different goods, requirements for good forecasting, techniques like consumer surveys and opinion methods, and steps involved in the forecasting process. It provides details on objectives like arranging labor, finances and production, as well as factors that influence demand for different goods and methods for collecting information and opinions to forecast future demand.
This document discusses demand forecasting techniques used by product managers. It defines demand forecasting as using statistical data and market determinants to predict future demand. There are two types of forecasts: passive, which assume no changes to company actions, and active, which account for likely changes. Short term forecasts relate to periods under a year and are used for production, sales, pricing and target policies. Long term forecasts cover multiple years and are used for business, workforce and financial planning. The document outlines various demand forecasting techniques including consumer and opinion polls, market experiments, and analytical methods.
The document discusses steps in the marketing research process and key concepts in marketing research. It provides examples of:
1) The five steps in the marketing research process: define the problem, develop a research plan, collect information, analyze information, and present findings.
2) Types of marketing metrics like market size, market share, and customer satisfaction that can be measured.
3) Common sampling techniques in marketing research like probability, non-probability, cluster, and quota samples.
Demand forecasting can be done using two approaches - obtaining information from experts or consumers, or using past sales data through statistical techniques. [1] Expert surveys include opinion polls and the Delphi technique. [2] Consumer surveys can be a complete enumeration or sample survey. [3] Complex statistical methods include time series analysis, correlation/regression analysis, and simultaneous equation models. Demand forecasting helps with production, financial, and workforce planning as well as decision making.
Demand forecasting is used to estimate future demand for a product. There are two main approaches: survey methods that collect consumer information, and statistical methods that analyze past sales data. Survey methods include consumer surveys, expert opinions, and market experiments. Statistical methods include trend projection, analysis of economic indicators, and econometric modeling using regression analysis. Accurately forecasting demand is challenging due to uncertainties, but these techniques provide systematic ways to anticipate customer needs.
Cahpet iv Project Preparation and Analysis.pptxtadegebreyesus
This document discusses project preparation and analysis, with a focus on market and demand analysis. It outlines the key steps in conducting a market and demand analysis: situational analysis to understand the market context, collecting primary and secondary data, characterizing the market by segmenting demand and examining prices/distribution, and forecasting future demand using qualitative and statistical methods. The overall goal of market analysis is to estimate potential market size and a project's expected market share to inform feasibility.
Demand forecasting involves anticipating future demand for an organization's products and services under uncertain competitive conditions. Accurate forecasts are essential for production planning, purchasing inputs, and other business decisions. There are qualitative and quantitative forecasting methods. Qualitative methods include consumer surveys, salesforce opinions, and expert panels. Quantitative methods use historical sales data and statistical analysis, such as time series analysis, regression analysis, and econometric modeling of economic factors. Accurate demand forecasting is important for production planning, sales forecasting, inventory control, and long-term strategic planning.
This document discusses demand forecasting techniques. It describes short term and long term demand forecasting and their objectives. Short term forecasting relates to periods under a year and is used for production, sales, pricing and target policies. Long term forecasting refers to forecasts over longer periods for business, manpower and financial planning. Demand forecasting requires market research, data analysis, coordination and management decisions. Key techniques include surveys, opinion polls, market studies and experiments.
Demand forecasting refers to predicting future demand for a company's products using controllable and uncontrollable factors. It involves determining objectives, important sales factors, an appropriate forecasting method, collecting and analyzing data, making assumptions, specific forecasts, and periodic reviews. Common methods include survey methods for short-term forecasts and statistical methods using historical and cross-sectional data for long-term forecasts.
This document discusses demand forecasting. It defines demand forecasting as predicting future demand. The objectives of demand forecasting are to aid both short-term planning like production scheduling, and long-term planning like capacity expansion. Common techniques for demand forecasting include surveys of consumers to predict future consumption, opinion polls of industry experts, and statistical methods that analyze historical demand trends. The document also discusses factors that influence demand and the various competitive forces that impact businesses according to Porter's five forces model.
This document discusses various demand forecasting methods and facility planning concepts. It begins by explaining the need for demand forecasting and some common forecasting methods like time series analysis, simple moving average, exponential smoothing, and regression analysis. It also discusses qualitative forecasting techniques like market research, focus groups, and historical analogy. The document then covers factors that influence facility location according to various theories. Finally, it provides a brief overview of capacity planning and the key steps involved.
The document discusses using customer insight to drive performance for a large wireless communication company. It describes implementing a phased approach including developing tactical targeting tools, identifying growth opportunities, and establishing an infrastructure to capture value. Case studies demonstrate segmenting the customer base to understand needs, prioritize initiatives, and maximize revenue and retention through targeted campaigns.
The document discusses various considerations and methods for demand forecasting, including factors that influence demand forecasting, different levels and types of forecasts, historical and statistical analysis techniques, and Engle's Law on consumption patterns relative to income levels. Demand forecasting is important for organizations and economies to function efficiently, and there are multiple approaches that can be taken depending on the specific product, time horizon, and other contextual factors.
Student Assessment Guide
BSBMKG507
Interpret Market Trends and Developments
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Table of Contents
Assessment Information 1
Assessment Event 1 – Knowledge Questions 3
Question 1 3
Question 2 4
Question 3 4
Question 4 4
Question 5 4
Assessment Event 2: A & A Coffee Simulation 6
Task 1: Interpret Trends and Market Developments 6
1.1 Use statistical analysis of market data to interpret market trends and developments 6
1.2 Analyse market trends and developments for their potential impact on the business 6
1.3 Use quantitative data analysis to interpret comparative market data 7
1.4 Perform data analysis to review business performance 7
1.5 Analyse competitors to identify potential opportunities and threats 7
Task 2: Analyse Qualitative Results 8
2.1 Analyse performance data from all areas of the business 8
2.2 Identify over-performing and under-performing products 9
2.3 Forecast market needs using qualita.
This document provides an overview of market and demand analysis for a new project. It discusses the key steps in analyzing market and demand, including specifying objectives to understand customer needs, collecting primary and secondary market information, conducting market surveys, characterizing the market segments and competitors, forecasting demand using various quantitative and qualitative methods, and developing a marketing plan. The overall aim is to estimate the total market demand and the project's potential market share to evaluate its profitability.
This document provides an overview of demand forecasting. It defines demand forecasting as estimating future sales based on marketing plans and external forces. It discusses different categories (passive vs active) and timeframes (short vs long term) of forecasts. The key components and methods of demand forecasting are also outlined, including opinion polling, statistical/analytical techniques like trend projection, regression, and econometric analysis. The importance of demand forecasting is emphasized for production planning, sales forecasting, inventory control, economic policymaking, and long-term growth.
Research Marketing Ch3 Edited.powerpointcjoypingaron
The document outlines the steps of the marketing research process. It discusses 8 key steps: 1) determining the need for research, 2) defining the problem/opportunity, 3) establishing research objectives, 4) determining the research design, 5) identifying information sources and types, 6) determining data collection methods, 7) designing data collection forms, and 8) determining sample size and developing a sampling plan. The goal of marketing research is to gather and analyze data relevant to a specific marketing situation to help organizations make better business decisions.
This document outlines a swot analysis for an individual. Their strengths include being positive, a quick learner, having creative thinking, being straightforward, good time management, and able to multi-task and manage multiple projects. Weaknesses are overthinking, anger, impatience, and being emotional. Opportunities exist to continue learning and expanding abilities, further improving business knowledge, and working abroad. Challenges include overcoming fears, getting a new job or promotion, and pursuing dream careers.
Performance appraisal involves evaluating an employee's overall contribution in the past, while performance management is an ongoing process of planning, monitoring, and evaluating employee objectives and contributions. Performance appraisal focuses on individual performance and mistakes, has an individualistic perspective, and is rigid, while performance management focuses on growth, has a holistic perspective, and is flexible.
An unsuccessful performance management system lacks structure, communication, and recognition/rewards. Goals are not considered and recent performances are overemphasized. It relies solely on annual evaluations. A successful system is accurate, fair, efficient, elevates performance, uses multiple data sources, includes coaching skills development, and links compensation decisions to performance rather than using them as the main purpose
The document analyzes non-performing assets (NPAs) at State Bank of India over 5 years using ratio analysis of secondary data. Gross NPAs peaked at 11% in 2018 while net NPAs peaked at 6% that year. Suggestions include SBI taking more care in granting advances and addressing its high net NPA ratio. The conclusion is that NPAs are a major problem for Indian banks and banks should focus on good assets by considering internal and external factors.
The document discusses various aspects of project review and administration for capital budgeting such as controlling in-progress projects, conducting post-completion audits, evaluating economic versus book rates of return, guidelines for project abandonment analysis, addressing agency problems, and disciplining the capital budgeting process for small expenditures. It also provides details on evaluating capital budgeting systems, classification of investment proposals, and overcoming resistance to abandoning failing projects.
This document provides an overview of network techniques for project management, including PERT and CPM models. Key points covered include: developing a project network diagram; determining critical paths and calculating floats; time and cost estimation; scheduling activities based on available resources; and using the network to project costs and monitor project progress. PERT uses probabilistic analysis while CPM is deterministic, focusing on time-cost tradeoffs when crashing activities. The network allows visualization of activity relationships and quantitative analysis of schedule options and resource constraints.
The document discusses project management and outlines several key aspects:
1. It describes three forms of project organization: line and staff, divisional, and matrix.
2. It covers various aspects of project planning including work breakdown structure, project life cycle, planning tools like bar charts and network techniques, and hierarchy of plans.
3. It discusses project control through performance analysis using terms like budgeted cost for work scheduled and actual cost of work performed.
Venture capital (VC) funds provide financing to young private companies that are not ready or willing to tap public financial markets. VC investments involve high-growth potential businesses with medium- to long-term horizons, high risks and returns, and active post-financing involvement. The VC appraisal process emphasizes management team assessment, strategic strengths, and liquidity potential. Valuation converts projected performance into equity stakes. Deal structuring chooses funding instruments and terms. Post-financing agreements define investor rights and controls. Current concerns in India include competition, valuations, economic uncertainty, contract enforcement, and manager shortages.
This document provides an overview of private financing of infrastructure projects in India. It discusses how infrastructure projects are typically structured, with a special purpose vehicle (SPV) established to implement the project. Key project parties and contractual agreements governing the project are described. Power and telecommunication projects are used as examples to illustrate typical financial structures and risks. Private-public partnerships (PPPs) are also discussed as a model for infrastructure development in India given the large funding needs and involvement of the private sector. The document emphasizes the importance of PPPs for meeting India's infrastructure gaps and expanding economic growth.
The document discusses various sources of financing for projects including internal accruals, equity capital, preference capital, debentures, term loans, working capital advances, and miscellaneous sources. It compares the differences between equity and debt financing and lists key factors for determining an appropriate debt-to-equity ratio. Specific financing methods like initial public offerings, rights issues, private placements, and bond offerings are outlined. International financing options through eurocurrency loans, eurobonds, and global depository receipts are also summarized.
Managerial decisions are often based on intuition and gut feelings rather than explicit analysis. Judgment is influenced by both quantifiable and intangible factors like information quality, reputation, politics, and even superstition. Strategic planning and capital budgeting processes can differ in their objectives, types of analysis used, and treatment of quantifiable vs intangible factors. Informational asymmetries between managers, shareholders, and bondholders can also lead to distortions in investment decisions. Efforts are needed to bridge the gaps between strategic planning and financial analysis.
The document discusses the valuation of real options. It begins by explaining that the discounted cash flow model does not fully capture the value of real projects due to embedded options like timing, expansion, contraction, and flexibility options. The strategic NPV of a project equals the conventional NPV plus the real option value. It then provides an overview of option valuation models like the binomial model and Black-Scholes model, and discusses how they can be applied to value different types of real options.
- Because of constraints like project dependencies, capital rationing, and project indivisibility, investment projects cannot be viewed in isolation. Two common approaches used to evaluate multiple projects are the method of ranking and mathematical programming.
- The method of ranking ranks projects by their NPV, IRR or BCR but has problems like conflict in rankings between criteria and inability to handle project indivisibility.
- Mathematical programming models like linear programming, integer linear programming and goal programming formulate the problem as an objective function subject to constraints, allowing complex project interdependencies and capital rationing to be incorporated.
The document discusses social cost benefit analysis (SCBA) and outlines the UNIDO and Little-Mirrlees approaches. The UNIDO approach involves 5 stages: 1) calculating financial profitability, 2) obtaining net benefits in economic prices, 3) adjusting for savings impact, 4) adjusting for income distribution impact, and 5) adjusting for merit and demerit goods. Shadow pricing is used to calculate economic prices and consider externalities, taxes, and subsidies. The Little-Mirrlees approach also uses shadow pricing and considers equity, with costs and benefits measured in uncommitted social income rather than rupees.
This chapter discusses special capital budgeting situations including choosing between projects of unequal life, optimal timing decisions, determining economic life, adjusting the cost of capital for financing effects, considering inflation, international capital budgeting, and investing in organizational capabilities. It provides formulas and examples for calculating uniform annual equivalents, adjusted present value, weighted average cost of capital, and the impact of inflation and foreign exchange rates. Key organizational capabilities mentioned are external integration, internal integration, flexibility, and capacity to experiment.
This document discusses project rate of return and capital budgeting techniques. It covers several topics in 3 paragraphs or less:
1) It discusses the pros and cons of using multiple discount rates versus a single discount rate for capital budgeting. While multiple rates are conceptually better, most firms use a single rate for simplicity and to reduce influence costs.
2) It provides steps for calculating a project's required rate of return, including determining comparable firm betas, adjusting for financial leverage, and calculating WACC.
3) It notes that firms often use a hurdle rate higher than WACC to provide incentives for better projects and account for overly optimistic forecasts. A survey found 51% use risk-adjusted rates and 59
This document discusses techniques for analyzing risk in project management, including sensitivity analysis, scenario analysis, break-even analysis, simulation analysis, decision tree analysis, and the Hillier model. It provides examples and explanations of how to perform each technique. Key steps include identifying uncertain variables, defining possible outcomes and assigning probabilities, calculating net present value under different scenarios, and evaluating decision alternatives based on expected monetary values. The goal of risk analysis is to assess how uncertainty may impact project objectives and determine the best course of action.
This document discusses methods for calculating the cost of capital, including the cost of debt, equity, and preference shares. It outlines the Capital Asset Pricing Model (CAPM) approach for estimating the cost of equity, as well as other methods like the dividend yield plus risk premium approach and the dividend discount model. It also discusses how to calculate the weighted average cost of capital (WACC) using target capital structure weights. Additionally, it notes some issues that companies face in estimating their cost of capital and common misconceptions about the concept.
The document discusses key concepts for estimating and analyzing project cash flows including: the elements of a cash flow stream; principles for cash flow estimation such as separation, incremental, post-tax, and consistency; perspectives to view cash flows from; and biases that can impact cash flow forecasting. Accurately estimating cash flows is important but difficult, and requires coordinating across departments while following principles and addressing inherent biases to produce reliable forecasts.
This document discusses various investment criteria used to evaluate capital budgeting projects. It covers net present value, benefit-cost ratio, internal rate of return, payback period, and accounting rate of return. Formulas are provided for calculating each method along with their pros and cons. The key steps in investment evaluation are estimating costs and benefits, assessing risk, calculating the cost of capital, and using these criteria to determine if a project is worthwhile.
The document discusses concepts related to the time value of money, including formulas for calculating future value and present value. Specifically, it provides formulas for calculating the future and present value of single amounts, annuities, perpetuities, and growing annuities. It also discusses concepts like effective interest rates, loan amortization schedules, and the relationship between nominal and effective rates for different compounding periods.
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2. OUTLINE
Situational analysis and specification of objectives
Collection of secondary information
Conduct of market survey
Characterisation of the market
Demand forecasting
Uncertainties in demand forecasting
Market planning
4. Situational Analysis
In order to get a “feel” of the relationship between the product and its
market, the project analyst may informally talk to customers,
competitors, middlemen, and others in the industry. Wherever possible,
he may look at the experience of the company to learn about the
preferences and purchasing power of customers, actions and strategies of
competitors, and practices of the middlemen.
5. Collection of Secondary Information
Secondary information is information that has been gathered in
some other context and is readily available.
Secondary information provides the base and the starting point
for the market and demand analysis. It indicates what is known
and often provides leads and cues for gathering primary
information required for further analysis.
6. Evaluation of Secondary Information
While secondary information is available economically and readily (provided the market
analyst is able to locate it), its reliability, accuracy, and relevance for the purpose under
consideration must be carefully examined. The market analyst should seek to know:
Who gathered the information? What was the objective?
When was the information gathered? When was it published?
How representative was the period for which the information was gathered?
Have the terms in the study been carefully and unambiguously defined?
What was the target population?
How was the sample chosen?
How representative was the sample?
How satisfactory was the process of information gathering?
What was the degree of sampling bias and non-response bias in the information
gathered?
What was the degree of misrepresentation by respondents?
7. Market Survey
Secondary information, though useful, often does not provide a
comprehensive basis for market and demand analysis. It needs to be
supplemented with primary information gathered through a market
survey.
The market survey may be a census survey or a sample survey;
typically it is the latter.
8. Information Sought in a Market Survey
The information sought in a market survey may relate to one or more of the
following:
Total demand and rate of growth of demand
Demand in different segments of the market
Income and price elasticities of demand
Motives for buying
Purchasing plans and intentions
Satisfaction with existing products
Unsatisfied needs
Attitudes toward various products
Distributive trade practices and preferences
Socio-economic characteristics of buyers
9. Steps in a Sample Survey
Typically, a sample survey involves the following steps:
1. Define the target population.
2. Select the sampling scheme and sample size.
3. Develop the questionnaire.
4. Recruit and train the field investigators.
5. Obtain information as per the questionnaire from the sample
of respondents.
6. Scrutinise the information gathered.
7. Analyse and interpret the information.
10. Characterisation 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 and competition
• Government policy
11. I Qualitative Methods : These methods rely essentially on the judgment of experts to
translate qualitative information into quantitative estimates. The important
qualitative methods are :
Jury of executive method
Delphi method
II Time Series Projection Methods : These methods generate forecasts on the basis of
an analysis of the historical time series . The important time series projection
methods are :
Trend projection –method
Exponential smoothing method
Moving average method
III Causal Methods : More analytical than the preceding methods, causal methods
seek to develop forecasts on the basis of cause-effect relationships specified in an
explicit, quantitative manner. The important causal methods are :
Chain ratio method
Consumption level method
End use method
Leading indicator method
Econometric method
Methods of Demand Forecasting
12. Jury of Executive Opinion Method
This method involves soliciting the opinion of a group of managers on
expected future sales and combining them into a sales estimate
Pros
• It is an expeditious method
• It permits a wide range of factors to be considered
• It appeals to managers
Cons
• The biases cannot be unearthed easily
• Its reliability is questionable
13. Delphi Method
This method is used for eliciting the opinions of a group of experts with the
help of a mail survey. The steps involved in this method are :
1. A group of experts is sent a questionnaire by mail and asked to express
their views.
2. The responses received from the experts are summarised without
disclosing the identity of the experts, and sent back to the experts, along
with a questionnaire meant to probe further the reasons for extreme views
expressed in the first round.
3. The process may be continued for one or more rounds till a reasonable
agreement emerges in the view of the experts.
14. Pros
• It is intelligible to users
• It seems to be more accurate and less expensive than the
traditional face-to-face group meetings
Cons
There are some question marks: What is the value of the expert opinion?
What is the contribution of additional rounds and feedback to accuracy?
15. Trend Projection Method
The trend projection method involves (a) determining the trend of
consumption by analysing past consumption statistics and (b)
projecting future consumption by extrapolating the trend.
Linear relationship : Yt = a + bT
Exponential relationship : Yt = aebt
Polynomial relationship : Yt = a0 + a1t + a2t2 …….an tn
Cobb Douglas relationship : Yt = atb
16. Exponential Smoothing Method
In exponential smoothing, forecasts are modified in the light of
observed errors. If the forecast value for year t, Ft , is less than the
actual value for year t, St, the forecast for the year t+1, Ft+1, is set higher
than Ft. If Ft> St , Ft+1 is set lower than Ft. In general
Ft+1 = Ft + a et (4.7)
where Ft + 1 = forecast for year t + 1
α = smoothing parameter (which lies between 0 and 1)
et = error in the forecast for year t = St - Ft
17. Moving Average Method
As per the moving average method of sales forecasting, the forecast for
the next period is equal to the average of the sales for several preceding
periods.
In symbols,
St + St-1 + … + St-n+1
Ft+1 = (4.8)
n
where Ft+1 = forecast for the next period
St = sales for the current period
n = period over which averaging is done
18. The potential sales of a product may be estimated by applying a series of factors to a
measure of aggregate demand. For example, the General Foods of the U. S estimated the
potential sales for a new product, a freeze-fried instant coffee (Maxim), in the following
manner :
Chain Ratio Method
Total amount of coffee sales : 174.5 million units
Proportion of coffee used at home : 0.835
Coffee used at home : 145.7 million units
Proportion of non-decaffeinated coffee used at home : 0.937
Non-decaffeinated coffee used at home : 136.5 million units
Proportion of instant coffee : 0.400
Instant non-decaffeinated coffee used at home : 54.6 million units
Estimated long-run market share for Maxim : 0.08
Potential sales of Maxim : 4.37 million units
19. Consumption Level Method
The method estimates consumption level on the basis of elasticity
coefficients, the important ones being the income elasticity of demand
and the price elasticity of demand.
20. Income Elasticity of Demand
The income elasticity of demand reflects the responsiveness of demand to variations
in income. It is measured as follows :
Q2-Q1 I1 + I2
EI = x (4.9)
I2 –I1 Q2 +Q1
where EI = income elasticity of demand
Q1 = quantity demanded in the base year
Q2 = quantity demanded in the following year
I1 = income level in the base year
I2 = income level in the following year.
Example The following information is available on quantity demanded and income
level: Q1 = 50 , Q2 = 55 , I1 = 1,000 and I2 = 1,020 . What is the income elasticity of
demand? The income elasticity of demand is :
55 – 50 1,000 + 1,020
EI = x = 4.81
1,020 –1,000 55 + 50
21. Price Elasticity of Demand
The price elasticity of demand measures the responsiveness of demand to variations
in price. It is defined as :
Q2 – Q1 P1 + P2
Ep = x (4.10)
P2 – P1 Q2 + Q1
where Ep = price elasticity of demand
Q1 = quantity demanded in the base year
Q2 = quantity demanded in the following year
P1 = price per unit in the base year
P2 = price per unit in the following year
Example The following information is available about a certain product :
P1= Rs.600, Q1 = 10,000, P2 = Rs. 800, Q2 = 9,000. What is the price elasticity of
demand? The price elasticity of demand is :
9,000 – 10,000 600 + 800
Ep = x = - 0.37
600 – 800 9,000 +10,000
22. End Use Method
Suitable for estimating the demand for intermediate products, the end use method, also
referred to as the consumption coefficient method, involves the following steps:
1. Identify the possible uses of the product.
2. Define the consumption coefficient of the product for various uses.
3. Project the output levels for the consuming industries.
4. Derive the demand for the product.
Project Demand for Indchem
This method may be illustrated with an example. A certain industrial chemical, Indchem
is used by four industries Alpha, Beta, Gamma, and Kappa.
The consumption coefficients for these industries, the projected output levels for these
industries for the year X, and the projected demand for Indchem as shown in the
following slide.
23. Consumption
Coefficient *
Projected Output
in year X
Projected Demand for
Indchem in year X
Alpha 2.0 10,000 20,000
Beta 1.2 15,000 18,000
Kappa 0.8 20,000 16,000
Gamma 0.5 30,000 15,000
Total 69,000
* This is expressed in tonnes of Indchem required per unit of output of the consuming
industry
24. Bass Diffusion Model - 1
Developed by Frank Bass, the Bass diffusion model seeks to estimate the pattern of
sales growth for new products, in terms of two factors:
p : The coefficient of innovation. It reflects the likelihood that a potential customer
would adopt the product because of its innovative features.
q : The coefficient of imitation. It reflects the tendency of a potential customer to
buy the product because many others have bought it. It can be regarded as a
network effect.
According to a linear approximation of the model:
nt = pN + ( q – p ) Nt-1 + ( q / N ) x ( Nt-1 )2
where nt, is the sales in period t, p is the coefficient of innovation, N is the potential size
of the market, q is the coefficient of imitation, and Nt is the accumulative sales made
until period.
25. Bass Diffusion Model - 2
A new product has a potential market size of 1,000,000. There is an older product that
is similar to the new product. p = 0.030 and q = 0.080 describe the industry sales of
this older product. The sales trend of the new product is expected to be similar to the
older product.
Applying the Bass diffusion model, we get the following estimates of sales in year 1
and year 2.
0.080
n1 = 0.03 x 1,000,000 + (0.08 – 0.03) x + x 02 = 30,000
1,000,000
n2 = 0.03 x 1,000,000 + (0.08 – 0.03) x 30,000 + (0.08 / 1,000,000) x (30,000)2
= 31,572
26. Leading Indicator Method
Leading indicators are variables which change ahead of other variables, the
lagging variables. Hence, observed changes in leading indicators may be used
to predict the changes in lagging variables. For example, the change in the level
of urbanisation ( a leading indicator) may be used to predict the change in the
demand for air conditioners (a lagging variable)
Two basic steps are involved in using the leading indicator method: (i)
First, identify the appropriate leading indicator(s).(ii) Second, establish the
relationship between the leading indicator(s) and the variable to be forecast.
The principal merit of this method is that it does not require a forecast of
an explanatory variable. Its limitations are that it may be difficult to find
appropriate leading indicator(s) and the lead-lag relationship may not be stable
over time.
27. Econometric Method
An econometric model is a mathematical representation of economic
relationship(s) derived from economic theory. The primary objective
of econometric analysis is to forecast the future behaviour of the
economic variables incorporated in the model.
Two types of econometric models are employed: the single equation
model and the simultaneous equation model
28. Single Equation Model
The single equation model assumes that one variable, the dependent
variable (also referred to as the explained variable), is influenced by one
or more independent variables (also referred to as the explanatory
variables). In other words, one-way causality is postulated. An example
of the single equation model is given below:
Dt = a0 + a1 Pt + a2 Nt (4.11)
where Dt = demand for a certain product in year t
Pt = price for the product in year t
Nt = income in year t
29. Simultaneous Equation Model
The simultaneous equation model portrays economic relationships in
terms of two or more equations. Consider a highly simplified three-
equation econometric model of Indian economy.
GNPt = Gt + It + Ct (4.12)
It = a0 + a1 GNPt (4.13)
Ct = b0 + b1 GNP1 (4.14)
where GNPt = gross national product for year t
Gt = governmental purchases for year t
It = gross investment for year t
Ct = consumption for year t
30. Improving Forecasts
You can improve forecasts by following some simple guidelines:
• Check assumptions
• Stress fundamentals
• Beware of history
• Watch out for euphoria
• Don’t be dazzled by technology
• Stay flexible
31. Uncertainties in Demand Forecasting
Demand forecasts are subject to error and uncertainty which arise from
three principal sources:
• Data about past and present market
• Methods of forecasting
• Environmental change
32. Coping with Uncertainties
Given the uncertainties in demand forecasting, adequate efforts, along the
following lines, may be made to cope with uncertainties.
Conduct analysis with data based on uniform and standard definitions.
In identifying trends, coefficients, and relationships, ignore the abnormal or out-of-
the- ordinary observations.
Critically evaluate the assumptions of the forecasting methods and choose a method
which is appropriate to the situation.
Adjust the projections derived from quantitative analysis in the light of
unquantifiable, but significant, influences.
Monitor the environment imaginatively to identify important changes.
Consider likely alternative scenarios and their impact on market and competition.
Conduct sensitivity analysis to assess the impact on the size of demand for
unfavourable and favourable variations of the determining factors from their most
likely levels.
33. Market Planning
A marketing plan usually has the following components:
• Current marketing situation
• Opportunity and issue analysis
• Objectives
• Marketing strategy
• Action programme
34. SUMMARY
Given the importance of market and demand analysis, it should be carried out in an
orderly and systematic manner. The key steps in such analysis are (i) situational
analysis and specification of objectives, (ii) collection of secondary information,
(iii) conduct of market survey, (iv) characterisation of the market, (v) demand
forecasting and (vi) market planning.
The project analyst may do an informal situational analysis which in turn may
provide the basis for a formal study.
For purposes of market study, information may be obtained from secondary and /or
primary sources.
Secondary information is information that has been gathered in some other context
and is already available. While secondary information is available economically, its
reliability, accuracy, and relevance for the purpose under consideration must be
carefully examined.
Secondary information, though useful, often does not provide a comprehensive
basis for market and demand analysis. It needs to be supplemented with primary
information gathered through a market survey, specific to the project being
appraised, that is likely to be a sample survey.
35. Typically, a sample survey consists of the following steps: (i) Define the target
population (ii) Select the sampling schemes and sample size. (iii) Develop the
questionnaire. (iv) Scrutinise the information gathered. (vii) Analyse and interpret
the information.
Based on the information gathered from secondary sources and through 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 and competition;
and government policy.
After gathering information about various aspects of the market and demand from
primary and secondary sources, an attempt may be made to estimate future demand.
A wide range of forecasting methods is available to the market analyst. These may
be divided into three broad categories, viz., qualitative methods, time series
projection methods, and causal methods.
Qualitative methods rely essentially on the judgment of experts to translate
qualitative information into quantitative estimates. The important qualitative
methods are : Jury of executive method and Delphi method.
36. Causal methods seek to develop forecasts on the basis of cause-effect relationships
specified in an explicit, quantitative manner. The important causal methods are:
chain ratio method, consumption level method, end use method, leading indicator
method, and econometric method.
To enable the product to reach a desired level of market penetration, a suitable
marketing plan, covering pricing, distribution, promotion, and service, needs to be
developed.