Monday, September 7, 2020

COMMERCIAL APPRAISAL /MARKETING APPRAISAL

 

  • COMMERCIAL APPRAISAL/MARKETING APPRAISAL

  • COMMERCIAL APPRAISAL

1.       CONCERNED WITH MARKET FOR THE PRODUCT OR SERVICE

2.       PROJECT IS SET UP TO PRODUCE SOME GOODS OR SERVICES AND MARKET THE SAME TO THE CONSUMERS AND EARNING A  PROFIT

3.       MARKET APPRAISAL HAS  PRIME PLACE IN THE PROJECT APPRAISAL

4.       VERY SURVIVAL AND SUCCESS OF ANY PROJECT DEPENDS THE QUESTION AS TO WHETHER THE PRODUCT OR SERVICES OFFERED BY THE PROJECT IS SUCCESSFUL COMMERCIALLY

   COMMERCIAL APPRAISAL/MARKETING APPRAISAL

   DONE FROM THE FOLLOWING ANGLES :

1.       DEMAND FOR THE PRODUCT

2.       SUPPLY POSITION  FOR THE PRODUCT

3.       DISTRIBUTION CHANNELS

4.       PRICING OF THE PRODUCT

5.       GOVERNMENT POLICIES

   DEMAND

1.       ECONOMICS DEFINE DEMAND FOR A COMMODITY AS THE DESIRE BACKED BY THE PURCHASING POWER

2.       MOST IMPORTANT DETERMINANTS OF A FIRM’S PROFITABILITY IS THE DEMAND FOR ITS PRODUCTS

3.       DEMAND ANALYSIS FORMS A MAJOR PART OF PROJECT APPRAISAL

4.       DEMAND CAN BE DEFINED AS THE NUMBER OF UNITS OF A PARTICULAR GOOD OR SERVICE THAT CONSUMERS ARE WILLING TO PURCHASE DURING A SPECIFIED UNDER A GIVEN SET OF CONDITIONS

   DEMAND FORECASTING

   DEMAND FORECASTING FOR A PRODUCT IS THE TECHNIQUE OF ESTIMATING ITS DEMAND IN THE IMMEDIATE OR DISTANT FUTURE.

   DEFINITION:-

   ACCORDING TO EVAN J. DOUGLAS:- ,” DEMAND FORECASTING WILL TAKEN TO MEANS THE PROCESS OF FINDING THE VALUE FOR DEMAND IN FUTURE TIME PERIODS.”

   DEMAND FORECASTING TECHNIQUES

   TWO APPROACHES :

1.       TO OBTAIN INFORMATION ABOUT THE INTENTION OF CONSUMERS THROUGH COLLECTING VIEWS AND OPINIONS OF EXPERTS IN THE FIELD OF CONDUCTING INTERVIEW WITH THE CONSUMERS. IT IS CALLED SURVEY APPROACH

2.       ANOTHER APPROACH IS CALLED STATISTICAL APPROACH. BASED ON THE PAST EXPERIENCE AS A GUIDE AND TO ARRIVE THE FUTURE DEMAND BY EXTRAPOLATING THE  PAST STATISTICAL DATA

   DETERMINANTS OF DEMAND

   NON –DURABLE GOODS :- D = F( Y,S,P)

1.       DISPOSABLE INCOME

2.       PRICE

3.       POPULATION

                            DURABLE GOODS:-

1.       REPLACEMENT OF DURABLE GOOD

2.       AVAILABILITY OF ALLIED FACILITIES

3.       CREDIT FACILITIES

   CAPITAL GOODS:-

1.       GROWTH PROSPECTS OF THE INDUSTRIES USING THE CAPITAL GOODS

2.       THE NORMS OF CONSUMPTION

   METHODS

    QUALITATIVE METHODS/SURVEY METHODS

1.       CONSUMERS SURVEY MEHTOD

2.       EXPERT METHODS

3.       DELPHI METHOD

   QUANTITATIVE METHODS

•                  TREND PROJECTION METHODS

•                  REGRESSION METHOD

•                  ECONOMETRIC METHOD

   OPINION POLL METHODS

  CONSUMER’S SURVEY METHOD:- APPROACH BUYER TO KNOW THEIR VIEWS ABOUT THE PRODUCT AND THEIR INTENTION TO PURCHASE A PRODUCT

•              COMPLETE ENUMERATION SURVEY:-PROBABLE DEMAND OF ALL THE CONSUMERS ARE ADDED. BUT IT HAS CERTAIN LIMITATION:COSTLY,TIME CONSUMING,NOT REALISTIC INTENTIONS

   CONSUMER’S SURVEY METHOD

   SAMPLE SURVEY :-SOME REPRESENTATIVES HOUSEHOLD ARE SELECTED ON SOME BASIS. ASSUMPTION IS SAMPLE REPRESENT THE UNIVERSE.

   A VARIANT OF SAMPLE SURVEY TECHNIQUE IS TEST MARKETING WHERE SALES IS FORECAST ED IN FEW REPRESENTATIVE MARKETS

   ADVANTAGES:- SHORT TERM PROJECTIONS,SIMPLE,THE RISK OF ERRONEOUS DATA IS REDUCED

   DISADVANTAGES:-SAMPLE MAY NOT BE TRULY REPRESENTATIVE

   JURY OF EXPERT’S OPINION METHOD

  1. EXPERTS IN THE PARTICULAR FILED ARE REQUESTED TO GIVE THEIR VIEW ON THE LIKELY DEMAND FOR THE PRODUCT IN FUTURE.
  2. ALSO CALLED HUNCH METHOD SINCE EXPERTS GIVE THEIR OPINIONS AFTER WEIGHING PROS AND CONS OF ALL FACTORS AFFECTING THE PRODUCT DEMAND AND ARRIVE AT THE ESTIMATE.
  3. HUNCH IT IS BACKED BY KNOWLEDGE AND EXPERIENCE OF THE EXPERT
  4. BUT IF THE EXPERTS ARE HUGE IF THEIR VIEW POINTS DIFFER THEN AVERAGE OF EXPERT'S PREDICTION IS TAKEN
  5. METHOD  IS VERY SIMPLE  AS NO STATISTICAL DATA IS TAKEN. BUT IT SUFFERS FROM PERSONAL BIAS.
  6. ALTERNATIVE APPROACH IS TO ASK THE EXPERTS TO REACH CONSENSUS IN FACE TO FACE DELIBERATION AND EXPERTS CAN OFFER THEIR VIEW POINTS ORALLY AND ARRIVE AT A CONSENSUS AFTER OBSERVING AND DELIBERATING THE RATIONALE BEHIND IT

   END USE METHOD
( INPUT-OUTPUT ) SURVEY

    DEMAND  FOR THE FINAL PRODUCT IS THE END USE DEMAND OF THE INTERMEDIATE PRODUCTS USED IN THE PRODUCT OF FINAL PRODUCT.

1.       INTERMEDIATE PRODUCT MAY HAVE MANY END USE LIKE STEEL CAN BE USED FOR CONSTRUCTION,TRANSPORTATION,FOR AGRICULTURAL AND INDUSTRIAL MACHINERY

2.       MAY HAVE DEMAND FOR BOTH IN THE DOMESTIC AS WELL AS INTERNATIONAL PRODUCT

  MERITS

1.       YIELD ACCURATE PREDICTION

2.       SECTOR WISE DEMAND

3.       USEFUL FOR PRODUCER’S GOODS

   DEMERITS

1.       REQUIRES COMPLEX AND DIVERSE CALCULATION

2.       COSTLIER

3.       MAY NOT BE AVAILABLE

   DELPHI’S TECHNIQUE

1.       BASED ON A DISCUSSION BY GROUP OF EXPERTS

2.       THE TECHNIQUE CONSISTS OF SEVERAL ROUNDS OF INDIVIDUAL AND ANONYMOUS QUESTION TO EACH EXPERT FOLLOWED BY A GROUP DISCUSSION AFTER EVERY ROUND. AND PARTICIPANTS TO REFLECT AND ADJUST THEIR OPINION. PROCESS IS USUALLY REPEATED UNTIL A CONSENSUS IS ACHIEVED

3.       AN ALTERNATIVE IS TO SEND OUT A SERIES OF QUESTIONNAIRE. A WRITTEN SUMMARY OF ALL RESPONSES IS DISTRIBUTED TO EVERY ONE AFTER EACH ROUND

   STEPS

1.       CHOOSE A FACILITATOR

2.       IDENTIFY YOUR EXPERTS

3.       DEFINE THE PROBLEM

4.       ROUND ONE QUESTION

5.       ROUND TWO QUESTIONS

6.       ROUND THREE

7.       ACT ON YOUR FINDING

   MERITS

1.       SIMPLE TO CONDUCT

2.       USED WHERE QUANTITATIVE DATA IS NOT POSSIBLE

3.       RELIABLE FORECAST

4.       INEXPENSIVE

 

   DEMERITS

1.       NOT SCIENTIFIC

2.       BIASED

3.       SUBJECTIVE

   END USE METHOD
( INPUT-OUTPUT ) SURVEY

    DEMAND  FOR THE FINAL PRODUCT IS THE END USE DEMAND OF THE INTERMEDIATE PRODUCTS USED IN THE PRODUCT OF FINAL PRODUCT.

1.       INTERMEDIATE PRODUCT MAY HAVE MANY END USE LIKE STEEL CAN BE USED FOR CONSTRUCTION,TRANSPORTATION,FOR AGRICULTURAL AND INDUSTRIAL MACHINERY

2.       MAY HAVE DEMAND FOR BOTH IN THE DOMESTIC AS WELL AS INTERNATIONAL PRODUCT

3.       THE DEMAND FOR THE VARIOUS POSSIBLE FINAL PRODUCTS ARE PROJECTED

4.       THE LIKELY CONSUMPTION LEVEL AT EACH OF THE FINAL PRODUCT IS DETERMINED BY CONSUMPTION COEFFICIENT FOR THE VARIOUS USES

   END USE METHOD
( INPUT-OUTPUT ) SURVEY

    PROJECT DEMAND FOR THE INTERMEDIATE PRODUCT===

   ====∑1n  CONSUMPTION COEFFICIENT X PROJECTED OUTPUT FOR THE FINAL PRODUCT

   n= number of final product in which the intermediate product find its uses

   TWO WHEELER AUTOMOBILE HORN IS AN INTERMEDIATE PRODUCT

   BECOMES USEFUL WHEN IT IS ATTACHED TO FINAL PRODUCT

   USES IN MOPED,SCOOTERS,MOTORBIKES

  MERITS

1.       YIELD ACCURATE PREDICTION

2.       SECTOR WISE DEMAND

3.       USEFUL FOR PRODUCER’S GOODS

   DEMERITS

1.       REQUIRES COMPLEX AND DIVERSE CALCULATION

2.       COSTLIER

3.       MAY NOT BE AVAILABLE

   LEADING INDICATOR METHOD

  1. MANY FACTORS OR VARIABLES ARE INTERRELATED AND INTER DEPENDENT
  2. CHANGE IN ONE VARIABLE AFFECTS THE OTHER INTERDEPENDENT VARIABLE
  3. THOSE VARIABLE CHANGE A HEAD OF DEPENDENT VARIABLE ARE CALLED LEADING INDICATORS
  4. THE VARIABLE THAT CHANGE IN RESPONSE TO CHANGE IN THEIR LEADING INDICATORS ARE CALLED LAGGED VARIABLE
  5. IF THE PERSONAL INCOME INCREASES OF THE SOCIETY THEN DEMAND FOR THE CONSUMER GOODS WILL ALSO INCREASE
  6. PERSONAL INCOME IS THE LEADING INDICATOR
  7. IF THE PERSONAL INCOME INCREASES OF THE SOCIETY THEN DEMAND FOR THE CONSUMER GOODS WILL ALSO INCREASE
  8. PERSONAL INCOME IS THE LEADING INDICATOR
  9. CHANGE IN C CONSUMER DEMAND IS LAGGING INDICATOR
  10. LIKE DEMAND FOR EDUCATIONAL BOOKS ( LAGGING INDICATOR) DEPENDS UPON THE GROWTH OF EDUCATIONAL INSTITUTES ( LEADING INDICATOR)
  11. IDENTIFICATION OF THE APPROPRIATE LEADING INDICATOR FOR A VARIABLE ( LAGGING INDICATOR ) WHOSE  DEMAND IS TO BE FORECAST ED
  12. ESTABLISHING A RELATIONSHIP BETWEEN THE LEADING AND LAGGING INDICATOR AND REDUCING THE RELATIONSHIP IN THE FORM OF REGRESSION EQUATION

13.   MERIT : DOES NOT REQUIRE DETAILED MARKET SURVEY AND GIVES THE TREND AND MAGNITUDE

14.   LIMITATION : FINDING OUT THE APPROPRIATE LEADING INDICATOR

   STATISTICAL METHODS

1.       MAKES USE OF PAST DATA

2.       PAST DATA ARE ARRANGED IN A CHRONOLOGICAL ORDER AND SOME STATISTICAL METHOD IS USED TO IDENTIFY THE TREND INDICATED BY THE PAST DATA

3.       TREND IS EXTENDED TO THE FUTURE PERIOD

   STATISTICAL METHODS

1.       TREND ANALYSIS

2.       REGRESSION EQUATION

   TREND ANALYSIS

1.       CURVE FITTING

2.       MOVING AVERAGE

3.       WEIGHTED MOVING AVERAGE

4.       EXPONENTIAL SMOOTHING METHOD

BASIC ASSUMPTION OF TREND ANALYSIS IS THAT IN FUTURE ALL THE FACTORS THAT WERE RESPONSIBLE FOR THE PAST MOVEMENT WILL BE PRESENT AND WILL EXERT THE INFLUENCE IN THE SAME WAY

   GRAPHIC METHODS



   LEAST SQUARE METHODS

   WITH THE HELP OF TREND LINE IS FITTED TO THE DATA. KNOWN AS THE LINE OF BEST FIT. IT DOES NOT EXPLAIN THE REASONS OF CHANGE.

   Linear trend:- Y =a + b X

    a and b are intercept and slope and T is the number of years The following two normal equation are to be solved to find out the value of a and b

   εy =Na + b ε x--------i

 

   ε xy = aεT + b ε   x2  -------ii

 

 

   TIME SERIES METHODS

   MOVING AVERAGE METHODS: MOVING AVERAGES CONSISTS OF A SERIES OF ARITHMETIC MEANS CALCULATED FROM OVERLAPPING GROUPS OF SUCCESSIVE VALUES OF A TIME SERIES.

   First value of moving average =1/n(a+b+c)

   Second value of moving average=1/n( b+c+d)

   Third value of moving average =1/n( c+d+e)

   EXPONENTIAL SMOOTHING

   Popular approach for short term forecasting.  This method determines the values by computing exponentially weighted system. The Weight assigned to each value reflect the degree of importance of value.

   St =wYt + (1-w) St-1

   Where St  = Current Smoothened value

   Yt = Current observed Value

    St-1 =Previous Smoothened value

   W =smoothing constant

 

   REGRESSION TECHNIQUES

    REGRESSION MODEL IS AN EQUATION RELATING  A DEPENDENT VARIABLE TO MANY INDPENDENT VARIABLES

   Y= a +b1  x1 +b2  x2+b3  x3 +-----bn  xn

 

   OTHER ASPECTS

  1.  THERE MAY BE CERTAIN PRODUCTS THAT ARE ENTIRELY IMPORTED  AND DEMAND PATTERN CAN BE IDENTIFIED BY STUDYING THE PAST TRENDS IN IMPORTS.
  2.  IF THE PROPOSED PRODUCT : IS TO BE EXPORTED AND DEMAND IN THE DOMESTIC MARKET AND  DEMAND FOR INTERNATIONAL LEVEL HAS TO BE STUDIED

 

 

   INDUSTRY DEMAND VS FIRM DEMAND

  1.  INDUSTRY DEMAND REFERS TO THE DEMAND FOR THE WHOLE INDUSTRY
  2.  FIRM DEMAND DERIVED FROM INDUSTRY DEMAND

 

 

 

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