MM ZG523 MBA 523 QM 523 CM 523 QMJ 523 MMVA 523-L3

BITS PilaniPilani Campus

MMZG 523 PROJECT MANAGEMENT

Dr. ARUN MAITY

BITS PilaniPilani Campus

MARKET AND DEMAND ANALYSISLECTURE NO 3 CH 5

BITS Pilani, Pilani Campus

• What Is The Aggregate Demand For The Product / Service?

• What Share Of The Market Will The Proposed Project Enjoy?

3.1 MARKET ANALYSIS: NEW PRODUCT INTRODUCTION


• Situational Analysis And Specification Of Objectives• Collection Of Secondary Information• Conduct Market Survey• Characterization Of The Market• Demand Forecasting• Market Forecasting

STEPS


• Talk To Customers, Competitors, Middlemen And Others In The Industry

• Learn About The Preferences And Purchasing Power Of Customers, Actions And Strategies Of Competitors And Practices Of The Middlemen

3.1.1. SITUATIONAL ANALYSIS AND SPECIFICATIONS OF OBJECTIVES


• Who Are The Buyers Of Air Coolers?• What Is The Total Current Demand Of Air Coolers?• How Is The Demand Distributed Temporally And

Geographically?• What Is The Break Up Of Demand For Air Coolers Of

Different Sizes?• What Price Will The Customers Be Willing To Pay For

The Improved Air-cooler?• How Can Potential Customers Be Convinced About The

Superiority Of The New Cooler?

EXAMPLE: INTRODUCTION OF AIR COOLER


• What Price And Warranty Will Ensure Its Acceptance?• What Channels Of Distribution Are Most Suited For The

Air Cooler?• What Are The Prospects Of Immediate Sales?


• Census Of India: Population, Demographic Characteristics, Household Size And Composition And Maps

• National Sample Survey Records: Economic And Social Aspects Like Pattern Of Consumption, Distribution Of Households By The Size Of Consumer Expenditure, Distribution Of Industries

• Plan Reports: Plan Proposals, Agricultural And Industrial Statistics

3.1.2 COLLECTION OF SECONDARY INFORMATION


• Statistical Year Book: World Statistics Regarding Population, Demography, Gross Domestic Production, Industrial Production, International Trade Etc.

• Economic Survey: Data On Industrial Production, Wholesale Prices, Consumer Prices, Exports, Agricultural Production, National Income Etc.

• Guidelines To Industries• Annual Survey Of Industries: No. Of Units And State-

wise Distribution, Employment Etc.


• Annual Reports Of Development Wing: About New Products Manufactured For The First Time In India

• Annual Reports Of Statistics Of Exports And Imports: Data On Exports And Imports For Large Number Of Items

• Techno-economic Surveys• Industry Potential Surveys• The Stock Exchange Directory: Performance And

Financial Statements Of All Listed Companies• Other Publications By Advertising Agency


• Automobiles: Annual Reports Of Association Of Indian Automobile Manufacturers : Indian Automobile Manufactures Association

• Automobile Ancillary Industry: All-India Automobile And Ancillary Industries Association

• Fertilizers: Fertilizers Association Of Industry

INDUSTRY SPECIFIC SOURCES OF SECONDARY INFORMATION


• Who Gathered The Information? What Was The Objective?• When Was The Information Gathered? When Was It

Published?• How Representative Was The Period For Which The

Information Was Gathered?• What Was The Target Population?• How Was The Sample Chosen?• How Representative Was The Process Of Information

Gathering?• How Accurately Was The Information Edited, Tabulated And

Analyzed?• Was Statistical Analysis Properly Applied?

EVALUATION OF SECONDARY INFORMATION


• Census Survey: Entire Population Is Covered

• Sample Survey: A Sample Of Population Is Contacted Or Observed Or Relevant Information Is Gathered

3.1.3 CONDUCT OF MARKET SURVEY


• Total Demand And Rate Of Growth Of Demand• Demand In Different Segments Of The Market• Income And Price Elastisities Of Demand• Motives Of Buying• Purchasing Plans And Intentions• Satisfaction With Existing Products• Unsatisfied Needs• Attitudes Towards Various Products• Distributive Trade Practices And Preferences• Socio – Economic Characteristics Of Buyers

INFORMATION SOUGHT IN A MARKET SURVEY


• Define THE TARGET POPULATION• Select The Sampling Scheme And Sample Size• Develop The Questionnaire• Recruit And Train The Investigators• Obtain Information As Per The Questionnaire From The

Sample Of Respondents• Scrutinize The Information Gathered• Analyze And Interpret The Information• Statistical Analysis Of Data

STEPS IN SAMPLE SURVEY


• Effective Demand In The Past And Present• Breakdown Of Demand• Price• Methods Of Distribution And Sales Promotion• Consumers• Supply And Competition• Government Policy

CHARACTERISATION OF THE MARKET


• Effective Demand: Production + Imports – Exports – Changes In Stock Level

• BREAKDOWN OF DEMAND: NATURE OF Product(rolled Products, Semi-finished Products), CONSUMER GROUPS (Industrial /Domestic), GEOGRAPHICAL DIVISION

• Price: Price Statistics Must Be Gathered: Free On Board (Fob); Cost Insurance And Freight Price (Cif), Landed Price For Imported Goods, Average Wholesale Price, Average Retail Price


• Methods Of Distribution And Sales Promotion: Capital Goods, Industrial Raw Materials And Consumer Products Tend To Have Different Distribution Channels

• Sales Promotion May Vary From Product To Product• Supply And Competition: Existing Sources Of Supply:

Domestic Or Foreign• Government Policy: Government Plans, Policies,

Legislations Have Bearing On The Market And Demand For The Product


TO ESTIMATE FUTURE DEMAND USING FORECASTING TECHNIQUES

– EXECUTIVE OPINION METHOD– DELPHI METHOD– TREND PROJECTION METHOD– EXPONENTIAL SMOOTHING METHOD– MOVING AVERAGE METHOD

3.2. DEMAND FORECASTING


• Soliciting The Opinions Of A Group Of Managers On Expected Future Sales And Combining Them Into A Sales Estimate

– Fast– Consideration Of A Variety Of Factors Like Economic Climate, Competitive

Environment, Consumer Preferences, Technological Developments– Subjective Estimates

EXECUTIVE OPINION METHOD


• Eliciting The Opinions Of A Group Of Experts With The Help Of Mail Survey

• A Group Of Experts Is Sent A Questionnaire By Mail And Asked To Express Their Views

• Responses Are Summarised Without Disclosing The Identity Of The Experts And Sent Back To Experts

• Process Continued For One Or More Rounds Till A Reasonable Agreement Emerges In The Views Of The Experts

DELPHI METHOD


• Determining The Trend Of Consumption By Analysing Past Consumption Statistics

• Projecting Future Consumption By Extrapolating The Trend

• Use Of Least Square Method

• Exponential Smoothing Method• Moving Average Method

3.2.1 TREND PROJECTION METHOD


• LINEAR RELATIONSHIP : Yt = a + b t

Where t is the time variable

Yt is the demand for the year t

Intercept : a

Slope : b

b= ∑ TY – n (mean T) (mean Y)

∑T2 – n (mean T) 2

a = (mean Y) – b (mean T)

LEAST SQUARE METHOD


• Exponential Relationship: Y = a ebt

• Polynomial Relationship• Cobb Douglas relationship : Y = a tb

• Logarithmic relationship : log Y = log a + b log t

Other Relationships


• Forecasts are made in the light of observed errors

• If the forecast value for year t is Ft

• If the actual value for year t is St

• If Ft < St , Ft+1is set higher that Ft

• If Ft > St , Ft+1is set lower that Ft

• Ft+1 = Ft + α (St - Ft )

3.2.2 Exponential Smoothing Method


T St Ft St-Ft Ft+1

1 28 29 -1 F2= 29 + 0.2 (-1) = 28.8

2 29 28.8 0.2 F3 = 28.8 + 0.2(0.2) = 29.2

3 28.5 29.2 -0.7 F4= 29.2 + 0.2(-0.7) = 29.06


• FORECAST FOR THE NEXT PERIOD IS EQUAL TO THE AVERAGE OF THE SALES FOR SEVERAL PRECEDING PERIODS

• Ft+1is the forecast for the next period

• St is the sales for the current period

• n is the period over which averaging is done

MOVING AVERAGE METHOD


• IT MEASURES THE RESPONSIVENESS OF DEMAND TO VARIATIONS IN PRICE

EP = Q2 – Q1 X (P1 + P2)

P2 – P1 Q2 + Q1

If P1 = Rs. 600 Q1= 10000 P2 = 800 Q2= 9000

Then E = (9000 – 10000) x (600 + 800) = -0.37

800 – 600 9000 + 10000

PRICE ELASTICITY OF DEMAND


• RESPONSIVENESS OF DEMAND TO VARIATIONS IN INCOME

• EI = Q2 – Q1 X I1 + I2

I2 – I1 Q2 + Q1• IF Q1 = 30 Q2=55 I1 = 1000 I2 = 1020• THEN Ei = 4.81

INCOME ELASTICITY OF DEMAND


• Current Marketing Situation: – Market Situation: Size, Growth, Consumer Aspirations, Buying

Behavior – Competitive Situation: Major Competitors-objectives, Strategies,

Strengths– Distribution Situation: Distribution Capabilities Of The Competitors– Macro Environment: Effect Of Social, Political, Economic,

Technological And Other External Variables On The Market

MARKET PLAN


• Opportunity And Situation Analysis: Swot Analysis• Objectives: Clear-cut, Specific And Achievable• Marketing Strategy: Target Segment, Positioning,

Product Line, Price, Distribution, Sales Force, Sales Promotion And Advertising

• Action Programme


• To Ensure That The Project Is Technically Feasible• To Facilitate Most Optimal Formulation Of The Project In

Terms Of Technology, Size, Location Etc.• To Select The Best Technology Available

3.3 TECHNICAL ANALYSIS


• Plant Capacity• Principal Inputs• Investment Outlay And Production Cost• Use By Other Units• Product Mix• Latest Developments• Ease Of Absorption

3.3.1 MANUFACTURING PROCESS /

TECHNOLOGY: CHOICE OF TECHNOLOGY


• Utilises Local Raw Material• Utilises Local Manpower• Cater To Basic Needs Of Society• Protects Ecological Balance• Harmonious With Social And Cultural Conditions

APPROPRIATENESS OF TECHNOLOGY


• To Obtain Technical Know-how Needed For The Proposed Manufacturing Process

• Nature Of Support To Be Provided By Collaborators• Process And Performance Guarantees In Terms Of Plant

Capacity, Product Quality And Consumption Of Raw Materials And Utilities

• Period Of Collaboration Agreement• Assistance To Be Provided And Restrictions To Be

Provided By The Collaborator

TECHNICAL ARRANGEMENTS


• Level Of Equity Participation And The Manner Of Sharing Of Management Control

• Assignment Of The Agreement By Either Side In Case Of Change Of Ownership

• Termination Of The Agreement Or Other Remedies When Either Party Fails To Meet Its Obligations

• Approach To Be Adopted In For Majeure Situations


• Defining The Materials And Utilities Required• Specifying Their Properties In Some Detail And Setting

Up Their Supply Programme• Classification: Raw Materials, Processed Industrial

Materials And Components, Auxiliary Materials And Factory Supplies, Utilities

MATERIAL INPUTS AND UTILITIES


• Raw Materials:– Agricultural Products– Mineral Products– Livestock And Forest Products– Marine Products

• Processed Industrial Materials And Components– Base Metals, Semi-processed Materials, Manufactured Parts, Components And

Sub Assemblies


• Auxiliary Materials And Factory Supplies– Chemicals, Additives, Packaging Materials, Paints, Oil, Grease Etc.

• Utilities: Power, Water, Steam, Fuel • Product – Mix: Variation In Quality Can Enable A

Company To Expand Its Market And Enjoy Higher Profitability


• Volume Or Number Of Units That Can Be Manufactured During The Given Period

– Feasible Normal Capacity: Capacity Attainable Under Normal Working Conditions

– Nominal Maximum Capacity: Which Is Technically Attainable , Installed Capacity Guaranteed By The Supplier Of The Plant

PRODUCT CAPACITY


• Technological Requirement• Input Constraints• Investment Cost• Market Conditions• Resources Of The Firm• Government Policy

FACTORS AFFECTING CAPACITY


• Choice Of Location: – Proximity To Raw Materials And Markets– Availability Of Infrastructure– Labor Situation– Governmental Policies– Land Acquisiton– Environmental Factors– Forest Clearance

LOCATION AND SITE


• To Determine The Kind Of Machinery And Equipment Required For Manufacturing Industry

– Estimate The Likely Levels Of Production Over Time– Define The Various Machining And Other Operations– Calculate The Machine Hours Required For Each Type Of Operation– Select Of Machinery And Equipment Required For Each Function

MACHINERY AND EQUIPMENT


• Site Preparation And Development– Grading And Leveling Of The Site– Demolition And Removal Of Existing Structures– Relocation Of Existing Pipelines, Cables Etc.

• Buildings And Structures– Factory Or Process Buildings– Stores And Warehouses– Maintenance Services And Utility Supply Centres– Residential Buildings

• Outdoor Works– Supply And Distribution Of Utilities– Handling And Treatment Of Effluents– Transportation And Traffic Signals– Outdoor Lightings Etc.

STRUCTURE AND CIVIL WORKS


• Types Of Effluents And Emissions• Proper Disposal Of Effluents And Treatment Emissions• Environmental And Forest Clearances

ENVIRONMENTAL FACTORS


• General Functional Layout• Material Flow Diagram• Production Line Diagram• Transport Layout• Utility Consumption Layout• Communication Layout• Organizational Layout• Plant Layout

PROJECT CHARTS AND LAYOUTS


• List Of All Possible Activities• Activity Relationship• Time Required To Perform Various Activities• Resource Requirement• Use Of Cpm/Pert/Ms Project

SCHEDULE OF PROJECT IMPLEMENTATION


• Nature Of Project• Production Process• Product Quality• Scale Of Operation And Time Phasing• Location

NEED FOR CONSIDERING ALTERNATIVES

Documents

MM ZG523 MBA 523 QM 523 CM 523 QMJ 523 MMVA 523-L3