MMZG 523 PROJECT

MANAGEMENT
BITS Pilani
Pilani Campus

Dr. ARUN MAITY

BITS Pilani
Pilani Campus

MARKET AND DEMAND ANALYSIS

LECTURE NO 3 CH 5

3.1 MARKET ANALYSIS: NEW

PRODUCT INTRODUCTION
What Is The Aggregate Demand For The Product /
Service?
What Share Of The Market Will The Proposed Project
Enjoy?

BITS Pilani, Pilani Campus

STEPS

Situational Analysis And Specification Of Objectives

Collection Of Secondary Information
Conduct Market Survey
Characterization Of The Market
Demand Forecasting
Market Forecasting

BITS Pilani, Pilani Campus

3.1.1. SITUATIONAL ANALYSIS AND

SPECIFICATIONS OF OBJECTIVES
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

BITS Pilani, Pilani Campus

EXAMPLE: INTRODUCTION
OF AIR COOLER
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?

BITS Pilani, Pilani Campus

 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?

BITS Pilani, Pilani Campus

3.1.2 COLLECTION OF
SECONDARY INFORMATION
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

BITS Pilani, Pilani Campus

 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 Statewise Distribution, Employment Etc.

BITS Pilani, Pilani Campus

 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

BITS Pilani, Pilani Campus

INDUSTRY SPECIFIC SOURCES

OF SECONDARY INFORMATION
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

BITS Pilani, Pilani Campus

EVALUATION 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?

BITS Pilani, Pilani Campus

3.1.3 CONDUCT OF
MARKET SURVEY
Census Survey: Entire Population Is Covered
Sample Survey: A Sample Of Population Is Contacted Or
Observed Or Relevant Information Is Gathered

BITS Pilani, Pilani Campus

INFORMATION SOUGHT IN
A 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
BITS Pilani, Pilani Campus

STEPS IN SAMPLE 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

BITS Pilani, Pilani Campus

CHARACTERISATION OF
THE MARKET

Effective Demand In The Past And Present

Breakdown Of Demand
Price
Methods Of Distribution And Sales Promotion
Consumers
Supply And Competition
Government Policy

BITS Pilani, Pilani Campus

 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

BITS Pilani, Pilani Campus

 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

BITS Pilani, Pilani Campus

3.2. DEMAND
FORECASTING
TO ESTIMATE FUTURE DEMAND USING
FORECASTING TECHNIQUES

EXECUTIVE OPINION METHOD

DELPHI METHOD
TREND PROJECTION METHOD
EXPONENTIAL SMOOTHING METHOD
MOVING AVERAGE METHOD

BITS Pilani, Pilani Campus

EXECUTIVE OPINION
METHOD
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

BITS Pilani, Pilani Campus

DELPHI 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

BITS Pilani, Pilani Campus

3.2.1 TREND PROJECTION

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

BITS Pilani, Pilani Campus

LEAST SQUARE 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)

BITS Pilani, Pilani Campus

Other Relationships

Exponential Relationship: Y = a ebt

Polynomial Relationship
Cobb Douglas relationship : Y = a tb
Logarithmic relationship : log Y = log a + b log t

BITS Pilani, Pilani Campus

3.2.2 Exponential
Smoothing Method
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 + (St - Ft )

BITS Pilani, Pilani Campus

St

Ft

St-Ft

Ft+1

28

29

-1

F 2= 29 + 0.2 (-1)

29

28.8

0.2

F 3 = 28.8 + 0.2(0.2) = 29.2

28.5 29.2 -0.7

= 28.8

F4= 29.2 + 0.2(-0.7) = 29.06

BITS Pilani, Pilani Campus

MOVING AVERAGE
METHOD
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

BITS Pilani, Pilani Campus

PRICE ELASTICITY OF
DEMAND
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

BITS Pilani, Pilani Campus

INCOME 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
THEN Ei = 4.81

I2 = 1020

BITS Pilani, Pilani Campus

MARKET PLAN
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

BITS Pilani, Pilani Campus

 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

BITS Pilani, Pilani Campus

3.3 TECHNICAL ANALYSIS

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

BITS Pilani, Pilani Campus

3.3.1 MANUFACTURING PROCESS /

TECHNOLOGY: CHOICE OF TECHNOLOGY

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

BITS Pilani, Pilani Campus

APPROPRIATENESS OF
TECHNOLOGY

Utilises Local Raw Material

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

BITS Pilani, Pilani Campus

TECHNICAL
ARRANGEMENTS
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

BITS Pilani, Pilani Campus

 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

BITS Pilani, Pilani Campus

MATERIAL INPUTS AND

UTILITIES
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

BITS Pilani, Pilani Campus

 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

BITS Pilani, Pilani Campus

 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

BITS Pilani, Pilani Campus

PRODUCT CAPACITY
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

BITS Pilani, Pilani Campus

FACTORS AFFECTING
CAPACITY

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

BITS Pilani, Pilani Campus

LOCATION AND SITE

Choice Of Location:

Proximity To Raw Materials And Markets

Availability Of Infrastructure
Labor Situation
Governmental Policies
Land Acquisiton
Environmental Factors
Forest Clearance

BITS Pilani, Pilani Campus

MACHINERY AND
EQUIPMENT
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

BITS Pilani, Pilani Campus

STRUCTURE AND CIVIL

WORKS
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.

BITS Pilani, Pilani Campus

ENVIRONMENTAL
FACTORS
Types Of Effluents And Emissions
Proper Disposal Of Effluents And Treatment Emissions
Environmental And Forest Clearances

BITS Pilani, Pilani Campus

PROJECT CHARTS AND

LAYOUTS

General Functional Layout

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

BITS Pilani, Pilani Campus

SCHEDULE OF PROJECT
IMPLEMENTATION

List Of All Possible Activities

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

BITS Pilani, Pilani Campus

NEED FOR CONSIDERING

ALTERNATIVES

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

BITS Pilani, Pilani Campus