Session7-8 Demand Analysis

Project Appraisal Demand Analysis

Mona Iyer Asst. Professor, School of Planning CEPT University Ahmedabad

Project Development Cycle Preliminary Assessment

Preliminary Analysis/Planning Market /User demand

Project Appraisal

Detailed feasibility Analysis/ Project Appraisal/ Project Evaluation

Technical Economic/SCBA Environmental/Ecological Financial

Mobilization

Selection of Feasible Option/project Structuring Financing

Management

Implementation Review and Monitoring

Project Development Process Project Identification Demand and Technical Feasibility Evaluation Financial Viability Analysis Evaluation of Project Structuring Options Resolution of Project Implementation Issues Bid Documentation Bidding Process

Demand Assessment (Market Analysis) • Two important aspects of Demand – Aggregate Demand – Market Share

• How do we assess aggregate demand – Pattern of consumption/growth of service (product) – Variations in demand with variations in income

• How do we decide the market share – Composition of market (users) – Nature of competition/competing facilities

Demand Assessment Step 1

Situation Analysis and Specification of Objectives Stakeholder meetings/workshops Discussions with Client Discussions with Competitors

Reliable handle?

Yes

No Specification of Objectives What is the current demand

Detailed Study of Market Who are the users

Demand distribution –temporal and geographic Willingness to pay

Prospects of immediate use

No formal Study (also when time constraints)

Proceed with Technical Appraisal

Importance of Demand Assessment in a PPP (WorldBank Toolkit)

• Demand forecasts are the most fundamental data in the analysis from the planning stage onward.But these concerns have generally been addressed through more "macro" oriented modeling. • Gives an opportunity to the private operators to complain, soon after taking over a business, about over or underestimations of demand based on the initial information provided by governments. • It tends to result in an excuse for the private operators to try to renegotiate the contract to improve its terms. • It is quite common for both regulators and concessionaires or bidders to devote much more money to the construction cost studies than to the demand analysis.

Demand Assessment Step 2

Collection and Evaluation of Secondary Information Who collected (objectives clear?), how and when and from where Period and sample - representative

Step 3

Collection and Evaluation of Primary DataMarket Survey- Census or Sample Define Target Population/Users Sampling scheme and sample size Develop questionnaire Survey and Analysis- Generating pivots

Demand Assessment Step 4

Characterization of market Effective demand in past and present Demand breakdown-users (age, sex, income, geography etc… Preferred method of distribution and promotion Current market supply and competition Government policies influencing demand

Demand Assessment Step 5

Demand Forecasting Qualitative Methods – jury of executive opinion, delphi Quantitative time series projections-linear, exponential, moving average Causal Method- Econometric, leading indicator…etc.. Check uncertainties- extreme values, assumptions, sensitivity, adjustment

Demand Assessment Step 6

Market planning Current marketing situation demand, competition– and effect of macro environment SWOT analysis Objectives/targets Marketing strategy/expansion strategy Action programme to operationalize strategy