Assignment 1: Making Decisions Based on Demand and Forecasting
Managerial Economics and Globalization, ECO550
Making Decisions Based on Demand and Forecasting
A market demand analysis is used to help understand how much consumer demand there is for a given product or service. This type of analysis will help determine if a business can successfully enter a market and generate enough revenue and profit to maintain the business. One must identify the market and the growth potential. Domino’s Pizza was incorporated in 1963 and has been franchising since 1967. A traditional Domino’s store is located in shopping centers and/or strip malls with appropriate parking for delivery vehicles and walk-in customers for
…show more content…
The position coefficient shows that as the independent variable changes the quantity demanded changes in the same direction. Using the data collected on Morehead City in another example: | Domino’s Pizza = Growth Forecast based on Pizza Price | | | | | | | | | | | | | | | | Regression Statistics | | | | | | | | Multiple R | 0.996320672 | | | | | | | | R Square | 0.992654881 | | | | | | | | Adjusted R Square | 0.985309761 | | | | | | | | Standard Error | 328.6398738 | | | | | | | | Observations | 3 | | | | | | | | | | | | | | | | | ANOVA | | | | | | | | | | df | SS | MS | F | Significance F | | | | Regression | 1 | 14596204.5 | 14596204.5 | 135.144828 | 0.054627666 | | | | Residual | 1 | 108004.1667 | 108004.167 | | | | | | Total | 2 | 14704208.67 | | | | | | | | | | | | | | | | | Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% | Intercept | 28020.81833 | 1635.404715 | 17.133874 | 0.03711352 | 7241.031202 | 48800.6055 | 7241.0312 | 48800.6055 | X Variable 1 | -2701.5 | 232.3834833 | -11.6251808 | 0.05462767 | -5654.212117 | 251.212117 | -5654.21212 | 251.212117 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RESIDUAL OUTPUT | | | | | |
A market analysis, or market research, helps to understand the community an organization is working for, as well as come up with ideas for the future (Berkowitz, 2011). This is true for any organization, and even more important for smaller organizations, as that may not have a large amount of money to use for new ventures, services, and products. Not to mention the organization needs to determine the best plan of action for their consumers, as well as those that are not yet utilizing the services and products being offered.
The current demand forecasting method is based on qualitative techniques more than quantitative ones. If the forecast is not accurate, the company would carry both inventory and stock out costs. It might lose customers due to shortage of supply or carry additional holding costs due to excess production. If the actual demand doesn’t match the forecast ones, and the forecast was too high, this will result in high inventories, obsolescence, asset disposals, and increased carrying costs. When a forecast is too low, the customer resorts to a competitive product or retailer. A supplier could lose both sales and shelf space at that retail location forever if their predictions continue to be inaccurate. The tolerance level of the average consumer
This research paper was developed with the main purpose of presenting an overview that define and explain the importance of demand forecasting aligned with the Sales & Operations Planning. In addition, through the analysis of the content presented in this paper, readers will be able to understand each aspect involved with the topic in discussion as well as its application against the competitive business market faced by companies worldwide. More importantly, by analyzing the content presented in this research paper, readers will also be able to learn and comprehend that when well applied, forecasting methods within the sales & operations planning can be key business tools for companies in their path for success.
I based the population growth assumption by taking the 2011 estimation from the Census Bureau, which was 2.4% increase from 2010, and applied to each year (Census Bureau, 2012). For the median household income, I applied .78% increase for each year based on the average growth from 2006 to 2010. For 2011, I left the price of pizza the same and increase by .3% thereafter. The price of pizza over the years has not grown in comparison to population and income, however; I felt that the price should increase given basic inflation.
Papa John’s operates the world's #3 pizza chain (behind YUM! Brands' Pizza Hut brand and Domino's) with around 4,165 pizzerias across the US and in about 35 international markets. Domino’s, Little Caesars, and Pizza Hut are the major competitors when it comes to pizza.
The goal of market analysis is to characterize (both qualitative and quantitative) the supply and demand of a specific space market.
Market analysis, also known as a full market assessment delivers a wide variety of information to help plan a marketing strategy. Though much more similar date such as market size gives help deciding on whether the market is worth investment, there are also other details that an investor would need to find out like how the market works, for example the main distribution channels and the key market trends. Through a market analysis, one is able to find out these and will help make an investors decision of where to invest and help them figure out the advantages of investment in that sector.
Market demand is an aggregate of all the demands a consumer group of a given geographical area is willing to buy and is able to pay for in a given time period. While evaluating available opportunities in market the marketer must first try to estimate the demand. However market demand is not a permanent rather it is a combination of time, space and product level.
Blattberg and Hoch have stated that (forecasting) “remains an art with tenuous scientific superstructure.” Despite this claim, numerous time series models have been created that can provide significantly more accurate forecasts for future demand than simply ‘going with your best guess.’ If something is not measured, it will never improve, or stated otherwise, you ‘get what you inspect, not what you expect.’ Time series models seek to have an accurate and unbiased forecast. This forecast than can be used to both avoid the waste, in inventory and storage costs, of over-forecasting and the cost of lost sales and unhappy customers due to under-forecasting.
A demand analysis is a very vital tool when a company is starting a new venture in a new market or when it needs to introduce a new product in the market. It would indeed be impossible to forecast the profitability of any business venture without analyzing the demand and the sensitivity of the industry and more so based on the location that the company would wish to venture in. Many companies have failed to meet their goals after ignoring this vital
In order to predict and estimate values for purchasing activities of a certain product or service, demand forecasting is used. Demand forecasting uses
The study of demand analysis is very essential for any entrepreneur because their main objective is to maximise the profit with efficiently allocating the limited resources provided. The demand analysis supports in enhancing output with systematically utilizing the resources as well as selling the output for maximum profits (Chimoriya, 2015). It allows the entrepreneur to: forecast necessity and sales, determine prices, decisions relating to profit.
This involves the knowledge and experience of the Demand Planners and people from Sales & Marketing. Their
Market study is a process of collecting, analyzing and interpreting information about the market, about the products or services offered for sale on the market, and about the past, present and potential customers for your products or services, research into the characteristics, spending habits, location and target market needs of business, industry as a whole, and competitors.
Market analyze is very important to get customers feedback. By gathering market data , market growth the organization will get to know about the competitors.