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. Manufacturer’s 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 & • Attitudinal
Sociological a. Preferences
a. Age b. Intentions
b. Sex c. Habits
c. Income d. Attitudes
d. Profession e. Responses
e. Residence
f. Social background
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 + άet
Where:
Ft + 1 = forecast for year t + 1
ά = smoothing parameter (which lies between 0 & 1)
et = error in the forecast for year t = St - 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 = Q2 – Q1 I1 + I2
______ * _____
I2 – I 1 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 – Q 1 P1 + P2
_____ * _______
P2 – P1 Q2 + Q 1
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.
Dt = ao + a1Pt + a2 Nt
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 & data- demanding.
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