MARKET ANALYSIS Lecture 3 June 09, 2013, Market and Demand Analysis Situational Analysis and Specification of Objectives ‘ Accertain the relationship between the product and its market «Informal interviews with customers, competitors, middlemen, and others inthe industry ‘Identify preferences and purchasing power of customers # Actions and strategies of competitors * Practices of midalemenSituational Analysis and Specification of Objectives + Who are te buyers? + what i the total curent domand ofthe product? + How fe mand detibutas temporally are geocraphicaly? “nat the break up of demarc? + What peice wi customers De alin to pay? Hon can potential customers be convinced about procuc? ‘What pce and warranty will ensure is acceptance? What channel feletbution are mast stad tor product? What trace margins Wi induce dstrbuorsto cary I? What are the prospects of inert sales? Collection of Secondary Information ‘Census by the Government of Pakistan. «National Survey Reports ‘© Reports by the Planning Commission * Pakistan Year Book * Statistical Year Book * Economic Survey by State Bank of Pakistan * Stock Exchange Directory Evaluation of Secondary Information + Who gathered te infomation? What was the objective? ‘+ When was formation gathered? When was t published? iow representative asthe period for whic information was gathred? Hove. the terms. inthe sic) been carefly ond unanbiguousy defined? + What was the target population? «How war the sample chosen? How eatetacory wa process of infomation gatharing? lat was the degree of samping bas anc non-esponse asin the information gathered? + Vina wos degree of miseerpretation by ospondents? How accurately was information edited, tabulsted, and rated”Market Survey + Census Survey vs Sample Survey + Defnng the target population « Selecting sample schemes and sample size * Developing the questionnaire + Recrutting nd training the field investigators + obtaining information ftom the questionnaire « Scrutiniing the information colected ‘© Analysis of the data « Interpretation of the data Market Survey Total de 1d and rate of grant For demand * Demand in ferent segments of market ‘Income and price elasticities of demand ‘Motives for buying «+ Purchasing plans and intentions « Satisfaction with existing products * Unsatisfied needs + Attitudes towards various products * Distabutve trace practices and preferences * Socio-economic characteristics of buyers The Elasticity of Demand Consumers usually buy more of a good: = When its price is lover = When thei incomes are higher = When the prices of substitutes for good are higher — When the prices of complements ofthe ‘900d are lowerThe Elasticity of Demand + Elasticity ‘A measure of the responsiveness of quantity demanded of quantity supalied to one of its determinants * Price Elasticity of Demand ‘A measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as. the percentage change in quantity demanded divided by the percentage change in price | ity of Demand inants of Price Elasticity + Avalabity of cose subsuee: Goods wh ce Satie tend fo nave nar ease comand ~ fis easer for consumers to satch from tht eects emer | + Hecestes vrs Lunes: Necesstis eto have nda gomange, werose ures hve ties comand Defnton of Nok: Nay defrse markets {ena to have more easic cerard than broadly fetnad mato ~ ie certo fnd toe ‘ubstuta for acon tines gods. “me Horeon: Goods tre fo nave rere easte dean oe longer haan The Elasticity of Demand ‘+ Computing the price Elasticity of Demand Price elasticity of demand Percentage Change in Quantity Demanded Percentage Change in PriceThe Elasticity of Demand © Computing the price Elasticity of Demand Price elasticity of demand = (= 011/10, +0,1/21 (P= P)/ 2) 2) The Price Elasticity of Demand Perfectly Inelastic Demand: Elasticity = 0 The Price Elasticity of Demand Inelastic Demand: Elasticity < 1The Price Elasticity of Demand Unit Eastic Demand: Elasticity = 1 The Price Elasticity of Demand Elastic Demand: Elasticity > 4 The Price Elasticity of Demand Perfectly Elastic Dernand: Elasticity = ooCharacterization of the Market * Effective Demand in the past and present ‘Breakdown of Demand Nature of Product Consumer Groups = Geographical Division * Price = FOB Price or CIF Price ~ Landed Price fer Imported Goods ~ Average Wholesale Price = Average Retall Price Characterization of the Market ‘© Methods of Distribution and Sales Promation © Consumers + Demographic and Sociological Attitudnal * Supply and Competition. Domestic or Foreign ~ Substitutas and near Substrutes * Goverment Policies Demand Forecasting * Qualitative Methods + Jury of Executive Method - Delphi Method ‘Time Series Projection Method «Trend Projection Method = Exponential Soothing Method = Moving Average MethodDemand Forecasting ‘© Causal Method hain Ratio Method = Consumption Level Method - End Use Method Bass Diffusion Model Leading Indicator Method + Econometric Method Improving Forecasts * Check Assumptions * Stress Fundamentals, * Boware of History * Watch out for Euphoria * Dontt be Dazzied by Technology * Stay Flexible Uncertainties in Demand Forecasting * Data about Past and Present Markets Lack of Standardization Few Observations Influence of anormal Factors # Methods of Forecasting Inability to Handle Unquantifiable Factors ~ Unreaiste assumptions Excessive Data RequirementsUncertainties in Demand Forecasting * Environmental Change Technological Cheng Shin Government Policy Developments on the International Scene Discovery of New Sources of Raw Materia VVagaries of Monsoon Market Planning «Current Marketing Situation = Marke stuaton Competitive Stuaton Dstributon Stuation + maco-envronment + Opportunity and Tssue Analysis (SWOT) strength Weakness nporunty Trreot Market Planning * Objectives ~ Clear; Specie Actevable + Marketing Strategy = Target Seument; Pstioning + roc Lin; rice “isibaon; SalesForce “sales Promotion, Advertsing «Action ProgrammeTHANKS