bba 1 be 1 u-2.2 demand forecasting
TRANSCRIPT
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Demand forecasting Demand forecasting
Course: BBASubject: Business Economics
Unit: 2.2
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• Meaning • Importance• Methods
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Why demand forecasting?
• Planning and scheduling production
• Acquiring inputs• Making provision for finances• Formulating pricing strategy• Planning advertisement
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Steps • Specifying the objective• Determining the time perspective• Making choice of method• Collection of data• Estimation and interpretation of
results
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Techniques
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CLASSIFICATION OF DEMAND FORECASTING
QUALTITATIVE TECHNIQUES
1)EXPERT OPINIONDelphi method.
2)SURVEY3)MARKET EXPERIMENT
Test marketingControlled experiments.
QUANTITATIVETECHNIQUES
1)Time Series Analysis.2)Barometric Analysis.
a) leading indicatorsb)Coincident indicatorsc) Taste indicators.
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Expert Opinion• The expert opinion method, also known as “EXPERT
CONSENSUS METHOD”, is being widely used for demand forecasting.
• This method utilizes the findings of market research and the opinions of management executives, consultants, and trade association officials, trade journal editors and sector analysts. When done by
• An expert, qualitative techniques provide reasonably good forecasts for a short term because of the expert’s familiarity with the issues and the problems involved.
• DELPH I METHOD:- The Delphi method is primarily used to forecast the demand for “NEW PRODUCTS”.
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SURVEYA firm can determine the demand for its products through a market survey. It may launch a new products, if the survey indicates that there is a demand for that particular product in the
market.
For example, Coke in India expanded its product range beyond carbonated drinks, after the company conducted a nationwidesurvey. The survey revealed that about 80% of the youthpreferred to drink tea or coffee rather than carbonated drinks atregular intervals. The remaining 20% preferred to have milkproducts while only 2% preferred to drink carbonated drinks likecoffee.
The company is now trying to bring tea and coffee brands to India by installing vending machines. It is also planning to introduce a coconut flavored drink in Kerala and a black currant in Tamilnadu named portello.
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Market Experiment
• Market Experiment can help to overcome the survey problems as they generate data before introducing a product or implementing a policy.
• Market Experiments are two types:-1) Test marketing:-2) Controlled experiments:-
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Controlled experiments• Controlled experiments are conducted to the test
demand for a new product launched or to test the demands for various brands of a product.
• They are selected some consumers.
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Time Series Analysis• The time series analysis is one of the most
common quantitative method used to predict the future demand for a product. Here the past sales and demand are taken into considerations.
• TIME SERIES ANALYSIS IS DIVIDED INTO FOUR CATEGORIES:
1)TREND2)SEASONAL VARIATIONS.3)CYCLICAL VARIATIONS.4)RANDOM FLUCTUATIONS.
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METHODS OF TIME SERIES ANALYSIS•
1)TREND:- Past data is used to predict the future sales of firm trend is a long term increase or decrease in the variable.
2)SEASONAL VARIATIONS:- It is taken into account the Variations in demand during different seasons.
Eg:- The sale of cotton dresses increases in summer. The sale of Woolen clothes increases in winter.
3)CYCLICAL VARIATIONS:- This variations in demand due to the fluctuations in the business cycle – Boom, recession and depression.
4) RANDOM FLUCTUATIONS:- It may happen due to Natural calamities like flood, earthquake, etc. Which cannot be predicted accurately.
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Conclusion • Accurate demand forecasting
requires– Product knowledge– Knowledge about the customer– Knowledge about the environment
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