TO OUR

PRESENTATION

Market and Demand

Analysis

Group- 02
Sl.
No.

Name

ID

Program

1.

Md. Samiul Islam Chowdhury

10105063

BSEEE

2.

Abul Kalam

10105019

BSEEE

3.

Md. Masud Rana

10105059

BSEEE

4.

Md. Ashraful Haque

10105033

BSEEE

5.

Md.Rezaul Karim

09105087

BSEEE

Overview
Situational Analysis & Specifications of Objective.
Collection of Secondary Information.
Conduct of Market Survey.
Characterization of the Market.
Demand Forecasting.
Uncertainties in Demand Forecasting.
Market planning.

Key Step in Market & Demand Analysis and

Their Inter-relationship
Collection of
Secondary
Information

Situational
Analysis and
Specificatio
ns of
Objectives

Demand
Forecasting

Characterizati
on of the
Market

Conduct of
Market
Survey

Market
Planning

SITUATIONAL ANALYSIS AND

SPECIFICATIONS OF OBJECTIVES
Get a feel for the relationship between the product and its market,
the project analyst may informally talk to customers, competitors,
middlemen and other in the industry.
Look at the experience of the company to learn about the purchasing
power of customer, action & strategies of competitors.
The objectives of market & Demand analysis, to answer the
following question : (for air coolers)
Who are the buyers of air cooler?
What is the total current demand for air coolers?
What price will the customer be willing to pay for the improved air
cooler.
What price & warranty will ensure its acceptance?
What are the prospects of immediate sales? etc.

Collection of Secondary Information

Secondary Information is information that has been gathered in

some other context and is already available.
Secondary information provides the base and starting point for the
market & Demand analysis.
Also discussed on :
General Sources of Secondary Information
Industry Specific Sources of Secondary Information
Evaluation of Secondary Information

Conduct of Market Survey

The market survey may be a census survey or a sample
survey.
Census survey are employed principally for intermediate
goods & investment goods when such goods are used by a
small number of firms.
Steps in a Sample Survey
Define the Target Population
Select the Sampling Scheme and Sample Size
Develop the Questionnaire
Recruit and Train the Field Investigators
Obtain Information as Per the Questionnaire from the
Sample of Respondents
Scrutinizes the Information Gathered
8
Analyze and interpret the Information

Conduct of Market Survey

Some Problems:
Heterogeneity of the Country
Multiplicity of the Languages
Design of Questionnaire

Characterization of the Market

Effective Demand in the Past and Present
Production + Imports Exports Change in stock level
Breakdown of Demand
Nature of Product
Consumer Groups
Geographical Division
Price
Methods of Distribution and Sales Promotion
Consumers
Supply and Competition
Government Policy
10

Forecasting
Predicting the future
Qualitative forecast methods
subjective

Quantitative forecast methods

based on mathematical formulas

Depend on
time frame
demand behavior
causes of behavior

Demand Forecasting
Qualitative Methods
These methods rely essentially on the judgment
of experts to translate qualitative information into
quantitative estimates
Used to generate forecasts if historical data are
not available (e.g., introduction of new product)
The important qualitative methods are:
Jury of Executive Method
Delphi Method

12

Jury of Executive Opinion Method

Rationale
Upper-level management has best information on latest
product developments and future product launches

Approach
Small group of upper-level managers collectively develop
forecasts Opinion of Group

Main advantages
Combine knowledge and expertise from various
functional areas
People who have best information on future
developments generate the forecasts
13

Jury of Executive Opinion Method

Main drawbacks
Expensive
No individual responsibility for forecast quality
Risk that few people dominate the group
Subjective
Reliability is questionable

Typical applications
Short-term and medium-term demand forecasting

14

Delphi Method
Rationale
Eliciting the opinions of a group of experts with
the help of mail survey
Anonymous written responses encourage honesty
and avoid that a group of experts are dominated by
only a few members

15

Delphi Method
Approach
Coordinator
Sends Initial
Questionnai
re

Each expert
writes
response
(anonymous)
Coordinator
sends
updated
questionnair
e

Coordinat
or
performs
analysis
No

Consensu
s
reached?

Yes

Coordinato
r
summarize
s
forecast

16

Delphi Method
Main advantages
Generate consensus
Can forecast long-term trend without availability of
historical data
Main drawbacks
Slow process
Experts are not accountable for their responses
Little evidence that reliable long-term forecasts can be
generated with Delphi or other methods
Typical application
Long-term forecasting
Technology forecasting
17

Time Series Projection Methods

These methods generate forecasts on the basis of an
analysis of the historical time series.
Assume that what has occurred in the past will
continue to occur in the future
Relate the forecast to only one factor - time
The important time series projection methods are:
Trend Projection Method
Exponential Smoothing Method
Moving Average Method
18

Trend Projection Method

Advantages
It uses all observations
The straight line is derived by statistical procedure
A measure of goodness fit is available
Disadvantages

More complicated
The results are valid only when certain conditions are
satisfied

19

Exponential Smoothing
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 ..
Ft + 1 = Ft + et
Where Ft + 1 = forecast for year )
= smoothing parameter
et = error in the forecast for year t = St = Ft

Solution of problem for Exponential

Smoothing

Moving Average
Naive forecast
demand in current period is used as next periods forecast

Simple moving average

uses average demand for a fixed sequence of periods
stable demand with no pronounced behavioral patterns

Weighted moving average

weights are assigned to most recent data

According to the moving average method

St + S t 1 ++ S t n +1
Ft + 1 =
n
where Ft + 1 = forecast for the next period
St = sales for the current period
n = period over which averaging is done

22

12-22

Weighted Moving Average

n

WMAn = Wi Di
Adjusts
i=1
moving
where
average
Wi = the weight for
method to
period i, between 0
more
and 100 percent
closely
reflect data
Wi = 1.00
fluctuations
23

12-23

Weighted Moving Average Example

MONTH
August
September
October
November
Forecast

WEIGHT

DATA

17%
33%
50%

130
110
390

= 1W D
WMA3 =i
i
i

= (0.50)(90) + (0.33)(110) + (0.17)(130)

= 103.4 orders
24

12-24

Causal Methods
Causal methods seek to develop forecasts on
the basis of cause-effects relationships
specified in an explicit, quantitative manner.
Chain Ratio Method
Consumption Level Method
End Use Method
Leading Indicator Method
Econometric Method
25

Chain Ratio Methods

Market Potential for heated coats in the U.S.:

Population (U) = 280,000,000

Proportion of U that are age over 16 (A) = 75%
Proportion of A that are men (M) = 50%
Proportion of M that have incomes over $65k (I) = 50%
Proportion of I that live in cold states (C) = 50%
Proportion of C that ski regularly (S) = 10%
Proportion of S that are fashion conscious (F) = 30%
Proportion of F that are early adopters (E) = 10%
Average number of ski coats purchased per year (Y) = .5
coats
Average price per coat (P) = $ 200
26

Chain Ratio Methods

Market Potential for heated coats in the U.S.:
Market Sales Potential =
U x Ax M x I x C x S x F x E x Y
= 280 Million x 0.75 x 0.50 x 0.50 x 0.50 x 0.10 x
0.30 x 0.10 x200
= $7.88 Million

27

Consumption Level Method

This method is used for those products that are
directly consumed. This method measures the
consumption level on the basis of elasticity
coefficients.

28

Consumption Level Method

Income Elasticity: This reflects the responsiveness
of demand to variations in income. It is calculated
as:
E1 = [Q2 - Q1/ I2- I1] * [I1+I2/ Q2 +Q1]
Where
E1 = 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
29

Consumption Level Method

Price Elasticity: This reflects the responsiveness of
demand to variations in price. It is calculated as:
EP = [Q2 - Q1/ P2- P1] * [P1+P2/ Q2 +Q1]
Where
EP = Price elasticity of demand
Q1 = quantity demanded in the base year
Q2 = quantity demanded in the following year
P1 = price level in the base year
P2 = price level in the following year
30

End Use Method

Suitable for estimating demand for intermediate
products
Also called as consumption coefficient method
Steps
1. Identify the possible uses of the products
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 project
31

End Use Method

This method forecasts the demand based on the
consumption coefficient of the various uses of the
product.
Projected Demand for Indchem
Alpha
Beta
Kappa
Gamma

Consumption
Coefficient

Projected Output
in Year X

Projected Demand for

Indchem in Year X

2.0
1.2
0.8
0.5

10,000
15,000
20,000
30,000
Total

20,000
18,000
16,000
15,000
69,000
32

Leading Indicator Method

This method uses the changes in the leading
indicators to predict the changes in the
lagging indicators.
Two basic steps:
1. Identify the appropriate leading indicator(s)
2. Establish the relationship between the leading
indicator(s) and the variable to forecast.

33

Econometric Method
An advanced forecasting tool, it is a mathematical
expression of economic relationships derived from
economic theory.
Economic variables incorporated in the model
1. Single Equation Model
Dt = a0 + a1 Pt + a2 Nt
Where
Dt = demand for a certain product in year t.
Pt = price of the product in year t.
Nt = income in year t.
34

Econometric Method
2. Simultaneous equation method
GNPt = Gt + It + Ct
It = a0 + a1 GNPt
Ct = b0 + b1 GNPt
Where
GNPt = gross national product for year t.
Gt = Governmental purchase for year t.
It = Gross investment for year t.

Ct= Consumption for year t.

35

Econometric Method
Advantages
The process sharpens the understanding of
complex cause effect relationships
This method provides basis for testing
assumptions
Disadvantages
It is expensive and data demanding
To forecast the behaviour of dependant
variable, one needs the projected values of
independent variables
36

Uncertainties in Demand Forecasting

Data about past and present markets.
Lack of standardization:- product, price, quantity,
cost, income.
Few observations
Influence of abnormal factors:- war, natural
calamity

Methods of forecasting
Inability to handle unquantifiable factors
Unrealistic assumptions
Excessive data requirement

37

Uncertainties in Demand Forecasting

Environmental changes
Technological changes
Shift in government policy
Developments on the international scene
Discovery of new source of raw material
Vagaries of monsoon

38

Coping With Uncertainties

Conduct analysis with data based on
uniform and standard definitions.
Ignore the abnormal or out-of-ordinary
observations.
Critically evaluate the assumptions
Adjust the projections.
Monitor the environment.
Consider likely alternative scenarios.
Conduct sensitivity analysis
39

Market planning
Current marketing situation
- Market, Competition, Distribution, PEST.
Opportunity and issue analysis - SWOT
Objectives- Break even, % market share
Marketing strategy- target segment,
positioning, 4 Ps
Action program- Quarter 1, Q2, Q3.

40

Thank You