Demand Analysis
MARKET AND DEMAND ANALYSIS
What is the first question you ask yourself if you have an acceptable project idea? What is the demand for the product or service I am going to provide?
Sanjeev Bajaj Reader, Finance Area 1
Demand Analysis Instead of having answers like ‘market is attractive’ or ‘there is a huge demand and supply gap’ try to quantify the demand for the product or service you are going to offer. You should try to find out consumption patterns, substitutes, distribution channels, elasticity of demand, composition of market, nature of competition, etc.
Situational Analysis and Specification of Objectives
Talk to customers, competitors, distributors, suppliers and others to get a ‘feel’ about the product/service and its demand. Find answers to questions like
Who are the buyers? What is the demand for various sizes and quality? What is the price I can offer? What is the price the customers are looking for? What is the best channel for distribution? What are the alternative channels of distribution?
In short try to find answers to all ‘Ws’ and ‘H’
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Situational Analysis and Specification of Objectives Collection of Secondary Information
Situational Analysis and Specification of Objectives
Demand Forecasting
Sources of Secondary Data General Sources Industry Specific
Evaluation of Secondary Data Conduct of Market Survey for Primary Data Census Survey Sample Survey
Market Planning
Characterization of Market Data collection helps in describing Effective demand in the past and present Breakdown of demand Price Methods of distribution and sales promotion Consumers Supply and competition Government policy Special issues/characteristics of market for the product/service
Characterization of Market
Conduct of Market Survey
Collection of Data
Demand Forecasting
As per the convenience, availability of resources, time and cost any one or more of the following methods can be used for demand forecasting
Qualitative –
Time Series Projection –
• Jury of executives or • Trend projection, • Exponential smoothing or
Delphi
Moving average
Causal – • Chain ratio, • End use, • Econometric Methods
Consumption level, Leading indicator
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Improving Forecasts By following some guidelines you can improve forecasts Check assumptions Stress fundamentals Beware of history Watch out for euphoria Don’t be dazzled by technology Stay flexible
Uncertainties in Demand …contd. Forecasting
Environmental changes Technological Change Shift in governmental policy Developments in the international scene Discovery of new sources of raw material Vagaries of monsoon
Uncertainties in Demand Forecasting Due to following reasons demand forecasts are subject to error and uncertainties Data about past and present market Lack of standardization, Few observations Influence of abnormal factors
Methods of forecasting Inability to handle unquantifiable factors Unrealistic assumptions Excessive data requirement
So …
So, after all this exercise if you feel there is good demand or potential for the product or service and it has a viable market and it can be marketed
… Go ahead with next step.
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