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Market and Demand AnalysisMarket and Demand Analysis
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Demand Analysis Of ProductDemand Analysis Of Product
The success of any project depends on thedemand for the output produced by it.
Catering an unfulfilled need should the
ultimate objective of commercialprojects, if they should succeed .the
Identifying the need , or the potential
demand for the product is the main issue
involved.
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Market and Demand Analysis is concerned
with two broad issues:-
What is the likely aggregate demand for the
product / services?
What share of the market will the proposed
project enjoy?
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Steps involved in demand andSteps involved in demand and
market analysismarket analysis
1) Situational analysis and specification of
objectives
2) Collection of secondary information
3) Conduct of market survey
4) Characterisation of the market
5) Demand forecasting
6) Uncertainties in demand forecasting
7) Market planning
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5
Collectionof
SecondaryInformatio
n
SituationalAnalysis
andSpecificati
on ofObjectives
Conduct ofMarketSurvey
Characterisation of theMarket
DemandForecasti
ng
MarketPlanning
Key Steps in Market and Demand Analysis and their Inter-relationships
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1) Situational analysis and specification1) Situational analysis and specification
of objectivesof objectives
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 themiddlemen .
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If situational analysis generates enough and reliable
data to measure the market and projected demand,
a formal study need not be carried out.
For eg:- a small but technologically competent
firm has developed an improved air cooler
based on new principle that offers various
advantages.
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2)2) 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
the starting point for the market and demand
analysis.It indicates what is known and oftenprovides leads and cues for gathering primary
information required for further analysis.
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General sources of secondaryGeneral sources of secondary
informationinformation
Census of India:- provides information on
population, demographic characteristics etc.
Economic survey:-provides information on
industrial production ,wholesale prices, exports,national income, agricultural production etc.
Plan reports:-provides a wealth of information
on plan proposals, physical and financial
targets(five-year plans)Stock exchange directory:-provides ten-year
picture of performance & financial statements
for all listed cos.
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3)Conduct of market survey3)Conduct of 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
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Information Sought in a Market SurveyInformation Sought in a Market Survey
Demand and rate of growth of demand
Demand in different segments of the market
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
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Steps in a Sample SurveySteps in a Sample Survey
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
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4)4) Characterisation of the MarketCharacterisation of the Market
Based on the information gathered from secondarysources and through the market survey, the market
for the product/service may be described as:-
Effective demand in the past and presentBreakdown of demand
Price
Methods of distribution & sales promotion
Consumers
Supply & competition
Government policy
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1)Effective demand in the past & present1)Effective demand in the past & present
Its defined as :-
Production +imports-exports-changes in
stock level
2) Breakdown of demand:- total demand maybe broken down into demand for different
segments of market.
Nature of product
Consumer groups
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3) Price :- Manufacturers price quoted as cost,insurance & freight ;average wholesale price;
average retail price.4) Methods of distribution & sales promotion:-
5) Consumers :-
age,income,profession,residence,preferences
habits, attitude.
6) Supply and competition :-
7 ) Government policy
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55) Demand forecasting) Demand forecasting
I Qualitative Methods : These methods relyessentially on the judgment of experts to translatequalitative information into quantitativeestimates.
The important qualitative methods are :
Jury of executive method
Delphi method
II Time Series Projection Methods : These
methods generate forecasts on the basis of ananalysis of the historical time series . Theimportant time series projection methods are :
Trend projection method
Moving average method
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Jury of Executive Opinion Method
This method involves soliciting the opinion of a group ofmanagers 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 beconsidered
It appeals to managers
Cons
Its reliability is questionable
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Delphi MethodDelphi 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 bymail and asked to express their views.
2. The responses received from the experts aresummarised without disclosing the identity of theexperts, and sent back to the experts, along with aquestionnaire meant to probe further the reasons
for extreme views expressed in the first round.3. The process may be continued for one or morerounds till a reasonable agreement emerges in theview of the experts.
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Pros
It is intelligible to users
It seems to be more accurate and less expensivethan 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?
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Trend Projection Method
The trend projection method involves (a)determining the
trend of consumption by analyzing past consumption
statistics and
(b) projecting future consumption by extrapolating the trend.
Linear relationship : Yc = a + bx
Yc = Trend Value X = Unit of Time
a = Constant Value b = Slope of the Trend
N = Number of Years
y = Na + b X XY = a X + b X2
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Moving Average MethodMoving Average Method
As per the moving average method of salesforecasting, the forecast for the next period is
equal to the average of the sales for several
preceding periods.
In symbols,
where Ft+1 = forecast for the next periodS
t= sales for the current period
n = period over which averaging is done
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6) Uncertainties in Demand Forecasting6) Uncertainties in Demand Forecasting
Demand forecasts are subject to error & uncertaintywhich arise from three principal sources.
Data about past and present market. Methods of forecasting.
Environmental change.
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1. Data about past & present markets :-
b) Lack of standardisation
c) Few observationd) Influence of abnormal factors
2. Methods of forecasting
a) Unrealistic assumptions
b) Excessive data requirement
3. Environmental changes
a) Technological changes
b) Shift in government policy
c) monsoon
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7) Market Planning7) Market Planning
A marketing plan usually has the followingcomponents:
Current marketing situation
Opportunity and issue analysis
Objectives
Marketing strategy
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