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MARKET FEASIBILITY

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The project appraisal exercise, in general, begins with an
estimation of the size of the market. Before undertaking a
detailed exercise of finding out the technical and financial
feasibility of the project, it is important to know the
approximate size of the market. This is necessary because
the viability of the project depends critically on whether or
not the estimated sales satisfy the demand for that
product or services. To conduct the market feasibility of a
project, we must be clear in the first place what data is
required for market analysis and the sources of such data.
Many times it also becomes necessary to collect the data
from primary sources through market survey. From these
primary and secondary sources of data, demand
forecasting is made

.

Data Required For
Market Analysis
The relevant data for market analysis consists of i. Effective demand in the previous years and at
present,
ii. Classification by product type, consumer category,
or geographical area,
iii. Price,
iv. The distribution and sales promotion methods
v. Consumer profile,
vi. Government policy,
vii. Current sources of supply and competitors

the apparent consumption has to be adjusted for market imperfections which are not an easy task.• In the determining the previous and present effective demand. In countries where competitive markets do not exist for a variety of products due to exchange restrictions and controls on production and distribution. exports. the production levels imports. the effective demand is the same as apparent consumption. and changes in stock levels are taken into account. In a free market economy. The apparent consumption is adjusted for productions and the effect of abnormal factors if any. .

religion. and geographic area. A generic consumer profile data is of two types —demographic and sociological information. income.• • In order to understand the total market or demand for the product. responses. sex. etc . and attitudinal information. social back ground. it is divided into several segments by product type consumer category. etc. occupation. likes and dislikes habits. Demographic and sociological data includes age. Data pertaining to attitudes include preferences.

excise duties.• Government can influence the demand for a product through its policies. sales tax. plans. . financial regulations. credit controls. export incentives. import and customs duties. industrial licensing. legislation etc. import and export trade controls. etc. These are reflected in production capacities.

Secondary data is data which has been collected in some other context. . Secondary data provides the base and the starting point for market analysis.SOURCES OF DATA FOR MARKET ANALYSIS : • The various types of data required can be obtained from two sources-primary and secondary. It indicates what is already known and offers clues and leads for further investigation. The primary data is collected by conducting market survey: it refers to the data which is collected for the first time to meet the specific purpose on hand.

Methods of collecting primary data • Interview Method • Observation Method • Questionnaire .

accomplishments etc. (iii) Planning Commission reports containing data on plan. actual outlays. household size and composition. (ii) National Sample Survey reports containing data on various economic and social aspects.Methods of collecting Secondary data (i) Census data published every ten years containing demographic characteristic. . proposals physical and financial targets.

. agricultural and industrial statistics. agricultural production.(iv) Statistical Abstracts published by Central Statistical Organisation which contain data on demographic characteristics. exports. national income estimates. (v) India Year Book containing wide ranging data on economic and other aspects. world trade etc. gross domestic production. (vii) Annual Economic Survey data on wholesale prices. industrial production. (viii) Central Statistical Organisation’s Annual Survey of Industries. national income etc. (vi) UN Statistical Year Book giving statistical data relating to population. industrial production.

exchange rates. etc . (xii) Industrial Potential Surveys conducted by all India Financial Institutions under the leadership of IDBI giving data on several backward areas. balance of payment. of Indian Government. (x) Exports and Imports Annual Bulletin of Statistics. production indices. (xi) Techno economic surveys conducted and published by the National Council of Applied Economic Research.(ix) Annual reports published by Commerce and Trade dept. (xiii) Stock Exchange Directory containing data on financial performance of various companies classified industry wise. (xiv) Monthly Bulletin of Reserve Bank of India containing data on prices.

(xv) Monthly studies of production of selected industries published by Central Statistical Organisation containing data on production. test markets etc. their capacities etc. number of units installed. which is valuable for understanding Indian markets. for selected industries. . (xvi) Publications of Advertising Agencies containing data on consumer index of market.

there are industry specific data which are also available. textile industry. provide useful information. Apart from these. those of State Trading Corporation of India. cement industry. Indian Institute f Foreign Trade etc. reliability and relevance of such data must be studied carefully . chemicals. But the accuracy. For example. and so on.• There are several other publications. The advantage of secondary sources of data is that it is readily and economically available. and electrical industry. heavy machinery industry. Indian Automobile Manufacturers Association publishes annual reports on automobile manufacturers and also on auto ancillary data on such industries as metallurgical industry.

For these reasons. The primary data is collected through market survey. Census surveys are generally done for intermediate goods and investment goods because of the small size of the population. a market survey generally is a sample survey. The data collected from a market survey includes one or more of the following: . 2. A sample of the total population is selected and data collected for that sample. Census survey covers all the members of the population and it is very expensive. specific for the project being appraised. There are two types or market survey-census survey and sample survey. The data collected from the sample is used as the basis for drawing conclusions about the population. Secondary data has to be supplemented by primary data for a comprehensive market and demand analysis.1.

• (ii) Market segment wise demand • (iii) Income and price elasticity's of demand • (iv) Motivation for purchase • (v) Procurement plans .MARKET SURVEY : • (i) Total demand and demand growth rate.

• (vi) Satisfaction with existing products • (vii) Unsatisfied demand • (viii) Attitude towards various products • (ix) Distributive trade practices and preferences • (x) Socio-economic characteristics of buyers .

the choice of sample size is important . The target population may be divided into segments which may have different characteristics. stratified sampling. The second step is the choice of sample size and the sampling methods. Sampling method is several: random sampling. Each of these sampling methods has their own merits and demerits. Since the reliability of estimates is a function of sample size.• There are several steps in conducting a market survey. systematic sampling. sequential sampling. and non-probability sampling. cluster sampling. The first step is to identify the target population.

. insights into human behaviour. the design of the questionnaire requires thorough understanding of product and its usage.• The next step is the preparation of questionnaire. Mail surveys are cost effective. Since it is the effective instrument for electing data. telephone. It is important that these investigators selected have the proper background knowledge about the product. Response to questionnaire may be collected through personal interview. but it is very time consuming. Response rate tends to be high with personal interviews. imagination. Telephone interviews have not been widely used in view of telephone services in the country. sometimes. • After validating the survey questionnaire. The questionnaires. validated by trying initially with few respondents. or by mail. the response may also be biased. investigators are recruited and trained for conducting the survey. collect pilot survey and modified in the light of experiences gained in the pilot survey. but response rate is generally low. appreciation of subtle linguistic noises and familiarity with descriptive and inferential statistical analysis.

The final steps to analyze and interpret the validated dada. No such known distribution is assumed under non parametric methods. • The data analysis based on sample survey has to be extrapolated for the target population. several methods of statistical analysis are available: these are broadly divided into parametric and non-parametric methods. Parametric methods assume that the variable under study conform to known distribution. .Suitable adjustments have to be made for this purpose.• Data collected through questionnaires has to be validated to eliminate data which is inconsistent and validity dubious.

vii) Wrong application of statistical method and/or the wrong interpretation of analysis of results. .The results of market survey can be seriously affected due to one or more of the following factors: i) the sample being non representative ii) improper phrasing of the questions in the questionnaire iii) respondent’s inability to understand questions iv) incorrect answers given by respondents deliberately v) investigator’s improper handling of the interviews vi) not checking data for inconsistencies and biases.