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Calculating market demand

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Reference no: EM132903495

Calculating Market Demand

The Industry Demand Analysis will help the Marketing and Production Departments understand future demand. Marketing can use the total demand for each segment as it creates a sales forecast. Production can use the results when making capacity buy and sell decisions.

  • You will need:The Segment Analysis reports (pages 5-6) of the Foundation FastTrack for Round 0
  • The Industry Conditions Report.

On the Segment Analysis page you will find each segment's statistics. The top line is the total demand for the segment for last year (the FastTrack reports last year's data). The fourth line tells you next years growth rate for the segment.

To find out the coming years total demand, simply apply the growth rate to last years total demand.

Low Tech Segment AnalysisLow Tech StatisticsTotal Industry Unit Demand5,040Actual Industry Unit Sales5,040Segment % of Total Industry70.0%Next Year's Segment Growth Rate10.0%

* The above growth and demand figures are for example only. Your industry growth rates and demand may differ, but the process to calculate next years total segment demand is identical.

For example, in the Low Tech segment analysis, Total Demand is 5040 and next years growth rate is 10.0%.

Next years demand is calculated as follows (see Total Segment Demand table).

Total Segment DemandTotal demand5040+Growth (Total Demand x 10.0%)504Total Segment Demand next year (rounded to nearest whole number)5544

Industry Demand Activity

For your purposes, complete the form with the "average" scenario. Assume the Round 1 growth rates will continue into the future unchanged. This will give you some idea for potential market size. If you have time, try a worst case and best case scenario for Rounds 2 through 8. For worst case, assume, say, half the growth rate. For best case assume, say, 1.5 times the growth rate.

Use the information in the FastTrack to calculate the Round 1 demand for each of the segments. Once you have successfully entered the correct demand for Rounds 0 and 1, then the rest of the table will fill automatically.

Incomplete

Low TechRndDemandRate (%)0Incorrect value entered

1Incorrect value entered

2345678

High TechRndDemandRate (%)012345678

The Round 0 Foundation FastTrackWhile you can calculate the demand for Round 1 from the information on hand, future growth rates are unknown. Can you predict the market size for Rounds 2 to 8? No. On the other hand, you need something for planning purposes to address critical questions like:

How much production capacity will we need in the future?

How much money do we need to raise?

Which segments are most attractive for investment?

Planners address this type of issue with scenarios. Typically there are three: worst case, average case, and best case. The average case assumes that the current growth continues indefinitely into the future.

Worst case assumes a lower growth rate. Best case a higher growth rate. The truth will unfold as the simulation progresses. Next year's growth rate is published in the Foundation FastTrack on each Segment page in the Statistics Box.

Reference no: EM132903495

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