Impact of demand factors

Prepared by :
Dr. K. BARANIDHARAN
PROF.MBA
SRI SAIRAM INSTITUTE OF TECHNOLOGY
CHENNAI

Sri Sairam Institute of Technology 2
Engineering
Economics& Financial
Accounting
3 10 August 2014
Meaning
Demand forecasting is an
estimate of sales in
dollars(rupees) or physical
units for a specified
future period under a
proposed marketing plan.

Forecasting is essentially
an operations research
technique of planning and
decision making: it refers
to making prediction of
any future event.
Categorisation by Time
a.Short-term: period not exceeding a
year.st production decisions of any firm
to avoid over or under production.
Exam: inventory, cost on variable factors,
sales target
b. Long-term: 5 to 7 year may extended 10
to 20 years. LTF example: manpower
planning, capital requirement,
investment decisions.

Categorisation by Level
a.Firm(Micro)level:product by
individual firm, manager view point
to take various important decisions
related to production and
marketing.
b.Economy(Macro) level:forecasting of
aggregate demand (or output) in the
economy as a whole. This helps in various
policy formulations at govt level.

Categorisation by Nature of Goods
a.Consumer Goods:Demand forecasting is
indispensable for cg.for durable cg
demand forecasting can be new
demand or replacement demand for
which longterm demand forecasting
may be more useful.
Non-durable g demand would vary with
income level, age, gender, occupation.

B.capital goods: commodity is
demanded for using it either as
a raw material or as
intermediary for value addition
in any other good or in the
same good.
Demand Forecasting
Accurate demand forecasting is essential for a firm
to enable it to produce the required quantities at
the right time and arrange well in advance for the
various factors of production, viz., raw materials,
equipment, machine accessories, labour, buildings,
etc.
In a developing economy like India, supply
forecasting seems more important. However, the
situation is changing rapidly.
The National Council of Applied Economic
Research.


Purposes of forecasting
Purposes of short-term forecasting
a. Appropriate production scheduling.
b. Reducing costs of purchasing raw materials.
c. Determining appropriate price policy
d. Setting sales targets and establishing controls and incentives.
e. Evolving a suitable advertising and promotional campaign.
f. Forecasting short term financial requirements.
Purposes of long-term forecasting
a. Planning of a new unit or expansion of an existing unit.
b. Planning long term financial requirements.
c. Planning man-power requirements.

Demand forecasts of particular products form guidelines for
related industries (eg., cotton and textiles). Also helpful at the
macro level.


Forecasting demand for new products Joel Dean

1. Project the demand for a new product as an outgrowth
of an existing old product.
2. Analyse the new product as a substitute for some
existing product or service.
3. Estimate the rate of growth and the ultimate level of
demand for the new product on the basis of the pattern
of growth of established products.
4. Estimate the demand by making direct enquiries from the
ultimate purchasers, either by the use of samples or on
a full scale.
5. Offer the new product for sale in a sample market, eg., by
direct mail or through one multiple shop organisation.
6. Survey consumers reactions to a new product indirectly
through the eyes of specialised dealers who are
supposed to be informed about consumers need and
alternative opportunities.


Scientific approach to Forecasting
1. Identify and state the objectives of forecasting
clearly.
2. Select appropriate method of forecasting .
3. Identifying the variable affecting the demand
for the given product or service.
4. Express these variable in appropriate forms.
5. Collect the relevant data.
6. Relationship between dependent and
independent variable, using statics
techniques.
7. Make appropriate assumption to forecast and
interpret results in terms of market share,
turnover, size, brands