MARKET & DEMAND

ANALYSIS
PRESENTED BY:
MONIKA WALIA,MEENA
JAIN &
KAPIL SOIN

INTRODUCTION
THE FIRST STEP IN THE PROJECT
ANALYSIS IS TO ESTIMATE THE
POTENTIAL SIZE OF THE MARKET FOR
THE PRODUCT PROPOSED TO BE
MANUFACTURED AND GET AN IDEA
ABOUT THE MARKET SHARE THAT IS
LIKELY TO BE CAPTURED.
GIVEN THE IMPORTANCE OF MARKET
AND DEMAND ANALYSIS, IT SHOULD BE
CARRIED OUT IN AN ORDERLY AND
SYSTEMATIC MANNER.
THE KEY STEPS INVOLVED IN MARKET
AND DEMAND ANALYSIS

 SITUATIONAL ANALYSIS AND

SPECIFIOCATION OF OBJECTIVES
COLLECTION OF SECONDARY
INFORMATION
CONDUCT OF MARKET SURVEY
CHARACTERISATION OF THE MARKET
DEMAND FORECASTING
UNCERTAINTIES IN DEMAND
FORECASTING
MARKET PLANNING

1. SITUATIONAL ANALYSIS &

SPECIFICATION OF
OBJECTIVES

Situational analysis refer to the

relationship b/w the product and its
market is identified. The project analyst
may informally talk to customer,
competitors, middlemen, and others in the
industry.
He look at the experience of the company
to learn about the preferences and
purchasing power of customer ,actions and
strategies of competitors, and practices of
the middlemen.
To carry out such a study, it is necessary to
spell out its objectives clearly and
comprehensively

2. COLLECTION OF
SECONDARY INFORMATION
The information may be obtained
from secondary and/or primary
sources.
Secondary information is
information that has been already
available.
Primary information is the
information that is collected for
the first time to meet the specific
purpose on hand.

GENERAL SOURCES OF
SECONDARY
INFORMATION
1. Census of India
2. National sample survey reports
3. Plan reports
4. Statistical abstract of the Indian union
5. India year book
6. Economic survey
7. Guidelines to industries
8. Annual survey of industries
9. Techno economic survey
10.The stock exchange directory

EVALUATION OF
SECONDARY
INFORMATION
While secondary
information is available economically

and readily, its reliability, accuracy, and relevance for

the purpose under consideration must be carefully
examined. The market analysis should seek to know:
1.Who gathered the information? What was the objective?
2.When was the information gathered? When was it
published?
3.What was the target population?
4.How was the sample chosen?
5.How representative was the sample?
6.How satisfactory was the process of information
gathering?
7.What was the degree of misrepresentation by
respondents?
8.Was statistical analysis properly applied?

CONDUCT OF MARKET
SURVEY
The market survey may be a census
survey or a sample survey . In
the census survey ,the entire
population is covered. Census
survey are employed principally
for intermediate goods and
investments goods.
On the other hand, in the sample
survey a sample if population is
contacted
or
observed
and
relevant information is gathered.

The information may relate to one or more of

the following.
1. Total demand
and rate of growth of
demand.
2. Demand in different segments of the
market.
3. Income and price elasticity's of demand.
4. Motives of buying.
5. Satisfaction with existing products.
6. Unsatisfied needs.
7. Attitudes toward various products.
8. Socio-economic characteristics of buyers.

STEPS IN 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. Scrutinize the information gathered.
7. Analysis and interpret the information.

PROBLEMS
Heterogeneity of country
Multiplicity of languages
Design of questionnaire

Characterization Of The
Market
1. Effective Demand in the Past &
Present:
Consumption = Production + Imports
exports Change in stock level
2. Breakdown Of Demand: Aggregate
demand of product may be broken
down into different segments of
market. Market segments may be
defined by
i. Nature of product
ii. Consumer Group
iii. Geographical Division

3. Price: Price statistics must be

gathered along with statistics
pertaining to physical quantities.
It may be helpful to distinguish the
following types of prices:
i. Manufacturers price
ii. Landed price of imported goods
iii. Average wholesale price
iv. Average Retail price

4. Method of Distribution & Sales

Promotion:
The method of distribution may vary
with the nature of the product. The
methods of distribution & sales
promotion employed presently & their
rationale must be specified.
5. Consumers: Consumers may be
characterized along two dimensions as
follows:

 Demographic &
Sociological
a. Age
b. Sex
c. Income
d. Profession
e. Residence
f. Social
background

Attitudinal
a. Preferences
b. Intentions
c. Habits
d. Attitudes
e. Responses

6. Supply & Consumption: It is

necessary to know the source of
supply, whether it is domestic or
foreign. And the information
regarding present production
capacity, planned expansion, capacity
utilization levels, cost structure etc.
Competition from substitutes should
also be specified. Which may due to
quality, price, availability,
promotional efforts & so on.

7. Government Policy: Govt. plans,

policies & legislation which have
their impact on market &
demand must be stated out.

Demand Forecasting
After collecting the information
from various primary &
secondary information, an
attempt is made to analyse the
future demand. Various methods
can be used for demand
forecasting. These methods are:

1. Qualitative Methods: These methods

rely essentially on the judgment of
experts to translate qualitative
information into quantitative estimates.
The important qualitative methods are:
a. Jury of executive method: This method
is very popular & involves soliciting the
opinions of a group of managers on
expected future sales & combining
them into a sales estimate.

Advantages:
It is an expeditious method for
developing a demand forecast.
It permits a variety of factors like
economic climate, competitive
environment, consumer preferences
etc.
It has immense appeal to manage rs
who tend to prefer their judgment to
mechanistic forecasting procedures.

Disadvantages:
It includes biasness.
The reliability of this technique
is questionable.

b. Delphi Method: This method is used for

eliciting the opinion of a group of experts

with the help of a mail survey. It includes
the following steps:
i. A group of experts is sent a questionnaire
by mail & asked to express their views.
ii. The responses received from the experts
are summarized & sent back to the
expertsalong with a questionnaire.
iii. The process may be continued till a
resonable agreement emerges in the view
of the experts.

Advantages:
It is intelligible to users.
It is accurate & less expensive
method.
Disadvantages:
What is the value of experts?
What is the contribution of
additional rounds & feedback to
accuracy?

2. Time Series Projection Method:

These methods forecast on the
basis of an analysis of the
historical time series. The
important methods are:

a. Trend Projection Method: It invoves

Determining the trend consumption by
analyzing past consumption statistics
Projecting future consumption by
extrapolating the trend.
Yt = a + bT
where
Yt = demand for the year t
T = time variable
a = intercept of the relationship
b = slope of the relationship

Advantages:
It uses all the observations.
A measures of goodness of fit is
available.
Disadvantages:
It is more complicated method.
The result are valid only if
certain conditions are satisfied.

b. Exponential Smoothing Method: In this

forecasts are modified in the light of
observed errors.
Ft + 1 = Ft + et
Where:
Ft + 1 = forecast for year t + 1
= smoothing parameter (which lies
between 0 & 1)
et = error in the forecast for year t = S t - Ft

c. Moving Average Method: Acc. To this

method of sales forecasting, the forecast
for the next period is equal to the average
of the sales for several preceding periods.
Ft+1 = St + St-1 + + St-n+1
________________
n
Ft+1 = forecast for the next period
St = sales for the current period
n = period over which averaging is done.

3. Causal Methods: Acc. To this

method demand is forecasting
on the basis of cause effect
relationship specified in an
explicit, quantitative manner.
The important causal methods
are:

a. Chain ratio method: The

potential sales of a product may
be estimated by applying a
series of factors to a measure
of aggregate demand.

b. Consumption Level method:

i. Income Elasticity of Demand: The
income elasticity of demand reflects
the responsiveness of demand to
variations in income. It is measured
by:
Et = Q 2 Q 1
I1 + I2
______ * _____
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

ii) Price Elasticity of Demand: The

price elasticity of demand
measures the responsiveness of
demand to variations in price. It
is defined as:
EP = Q2 Q1
P1 + P 2
_____
*
P2 P 1

_______
Q2 + Q1

Where:
EP = price elasticity in the base year
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

c. End Use Method: It involves the

following steps:
i. Identify the possible uses of the
products
ii. Define the consumption coefficient
of the products for various uses
iii. Project the output levels for the
consuming industries
iv. Derive the demand for the product

d. Leading Indicators Method:

Leading indicators are variables
which change ahead of other
variables, the lagging variables.
Eg. The change in the level of
urbanisaton(a leading indicators)
may be used to predict the
change in the demand for air
conditioners ( a lagging variables)

It includes the two following steps:

i. Identify the appropriate leading
indicators
ii. Establish the relationship between the
leading indicators & the variable to be
forecast.
It is not require a forecast of an explanatory
variables.
It is very difficult to find appropriate leading
indicator & the lead-lag relationship may
not be stable over time.

e) Econometric Method: An
econometric model is a
mathematical representation of
economic relationship derived
from economic theory. The main
obj. of econometric analysis is to
forecast the future behaviour of
the economic variables
incorporated in the model.

Two type of econometric model are

employed:
The single equation model: It is assume
that one dependent variable is influenced
by one or more independent vaiable.
D t = a o + a 1P t + a 2 N t
where:
Dt = demand for a certain product in year t
Pt = price for the product in year t
Nt = income in year t

b. The simultaneous equation

model: It portrays economic
relationship in terms of two or
more equations
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

It involves the following steps:

i. Specification: It refers to the
expression of an economic
relationship in a mathematical form.
ii. Estimation: It involves the
determination of the parameters
value.
iii. Verification: It concerned with
accepting or rejecting the
specification

iv. Prediction: It involves projection of

the value of the explained variables.
Advantages:
i. It helps in understanding the
complex cause & effect relationship
ii. It provides a basis for testing
assumptions & for judging how
sensitive the results are to change
in assumptions.

Disadvantages:
i. It is expensive & datademanding.
ii. To forecast the behaviour of the
dependent variable, one need
the projected values of the
independent variables.

Uncertainties in Demand
forecasting
Demand forecasting are subject
to error uncertainty which arise
from three principle sources:Data about past and
present market
Methods of forecasting
Environmental change

 A) Data about Past and Present Markets:The data analysis of past and present market
may serve from inadequacies due to
following reasons:Lack of standardization
Few observations
Influence of abnormal factors
(B) Methods of forecasting:- Methods use for
forecasting may have the following
limitations:Inability to handle unquantifiable factors.

 Unrealistic assumptions
Excessive data requirement
(C) Environmental changes:-The environment in
which a business function is characterized by
numerous uncertainties like:Technological change
Shift in governmental policy
Developments on the international
scene
Discovery of new sources of raw
material
Vagaries of monsoon

 Unrealistic assumptions
Excessive data requirement
(C) Environmental changes:-The environment in
which a business function is characterized by
numerous uncertainties like:Technological change
Shift in governmental policy
Developments on the international
scene
Discovery of new sources of raw
material
Vagaries of monsoon

 Coping with Uncertainties:Conduct analysis with data based on uniform

and standard definitions.
Ignore the abnormal or out of the ordinary
observations.
Critically evaluate the assumptions.
Adjust the projections in the light of
significant influences which are
unquantifiable.
monitor the environmental change
Consider likely alternative scenario.
Conduct sensitivity analysis.

Market Planning
CURRENT MARKET SITUATION
OPPORTUNITY AND ISSUE
ANALYSIS
OBJECTIVES
MARKETING STRATEGY
ACTION PROGRAMME

Current Market Situation:- This part of the

marketing plan deals with the different
dimensions of the current situations. It
covers the following.
1. Market Situation:- This deal with size
growth, Consumer aspirations and buying
behaviour in the market under
consideration.
2. Competitive Situation:- This dwells on
the major competitors, their objectives
strategies, strengths etc.
3. Distribution Situation:- This compares
the distribution capabilities of the
competitors.

Current Market Situation:- This part of the

marketing plan deals with the different
dimensions of the current situations. It
covers the following.
1. Market Situation:- This deal with size
growth, Consumer aspirations and buying
behaviour in the market under
consideration.
2. Competitive Situation:- This dwells on
the major competitors, their objectives
strategies, strengths etc.
3. Distribution Situation:- This compares
the distribution capabilities of the
competitors

Current Market Situation:- This part of the

marketing plan deals with the different
dimensions of the current situations. It
covers the following.
1. Market Situation:- This deal with size
growth, Consumer aspirations and buying
behaviour in the market under
consideration.
2. Competitive Situation:- This dwells on
the major competitors, their objectives
strategies, strengths etc.
3. Distribution Situation:- This compares
the distribution capabilities of the
competitors

(c)

Objectives:- Objectives should be clear cut, specific

and achievable.
(d) Marketing Strategy:- The Marketing Strategy
covers the following.
Target Segment
Product Line
Price
Distribution
Sales Force
Sales Promotion
Advertising
(e) Action Programme:- Action Programme
operationalise the strategy.

THANKS