Marketing Management Chapter 6: Estimating the Market Demand

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Chapter 6: Summary

Forecasts predict what may happen, all other things being equal. Budgets go beyond these forecasts to incorporate the effects of an organization’s planned actions. Both may be

•     Short term—For capacity loading, information transmission, and control

•     Medium term—For the traditional annual planning process

•     Long term—For strategic planning, resource planning, and communication

Forecasts need to be dynamic. In other words, changes in the environment require modification of forecasts. From them, budgets may be derived at the sales, production, and profit levels.

Forecasting is based on, and derived from, some other data sources; and it is conducted at three different levels. Macroforecasts look at total markets and may be derived from national or global data available from the OECD or the U.S. government. However, the most important aggregate forecast for business is at the market or industry level. Microforecasts build on the predictions of individual or group (customer) behavior. Product forecasts may then be split into forecasts by product type and over time.

There are both qualitative and quantitative forecasting methods. Qualitative forecasting is normally employed for long-term forecasts. Techniques include expert opinion, expert panel method, technological forecasting, Delphi technique, decision tree, and scenario.

Quantitative forecasting techniques for short- and medium-term typically try to isolate the trend, cyclical, seasonal, and random fluctuations. The specific techniques used may be period actuals and percent changes, exponential smoothing, time-series analyses, multiple regression analysis, and more complex econometric modeling. Various leading indicators are also readily available from government sources to forecast the short- to medium-term conditions of the market. Although most forecasting techniques ignore the competitors’ possible reaction to one company’s competitive move, game theory is gaining popularity in recent years to address the likely impact of the competitors’ moves in forecasting.

With the widespread use of personal computers, spreadsheets have become a useful forecasting tool to model many hypothetical “what if” scenarios. By developing many scenarios, you can determine which factors are sensitive to changes in the conditions under investigation.

The primary role of forecasting is risk reduction. You should note that risk can also be reduced by purchasing insurance against unfavorable events, diversifying into a portfolio of different products and markets, or adopting flexible manufacturing to better cope with unexpected changes in the market. Finally, thanks to Internet use, many companies, emphasizing the needs of the customers with an ability to satisfy and serve them quickly and efficiently, have begun to adopt the “build to order” model of sales fulfillment with no forecasting error rather than the traditional “build to forecast” model.

British Manufacturers Remain in Favor of EU membership Despite Sluggish Demand

By Duncan Tift – Deputy Editor, West Midlands for BusinessDesk.com

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BRITAIN’S manufacturers remain overwhelmingly in favour of staying in the EU, according to new research published today.

Read also: U.K. Unemployment Falls While China Growth Cools: Global Economy

EEF, the manufacturers’ organisation, said the findings of its research showed that 85% of manufacturers in the UK would vote to remain within the EU.
In stark contrast, just 7% would vote to pull out.
The most positive support for staying in the EU comes from companies with more than 250 employees, where 90% would opt to stay in and not a single company would vote to come out.
The figures are in line with the last poll EEF carried out in September 2013 and come in spite of the continued economic problems of the Eurozone.
The current economic climate within the EU remains sluggish and despite recent hopes of recovery, orders placed with British manufacturers is a cause of concern for many SMEs.

Boeing Sees China Demand Up As Budget Airlines Grow

By GILLIAN RICH, INVESTOR’S BUSINESS DAILY

Boeing predicted Thursday that China will be the largest buyer of passenger planes in the Asia Pacific region over the next 20 years.

Boeing sees a demand of 6,020 new planes, valued at $870 billion, over the next two decades for China, accounting for 45% of total demand for airplanes in the region.

“China’s aviation market is going through dynamic changes,” said Randy Tinseth, Boeing commercial airplanes VP of marketing, in the release. “New business models like low-cost carriers and airplane leasing companies, a new generation of fuel-efficient airplanes and evolving consumer needs are driving demand for more direct flights to more destinations.”

Boeing sees demand for 1,480 new wide-body aircraft like its 777 and 787 Dreamliner as the long-haul segment grows and more international flights arrive in smaller cities outside Beijing, Shanghai and Guangzhou.

“To compete in the tough long-haul international market, our Chinese customers are focused on evolving new business models, adding new destinations, increasing their capacity and resources,” Tinseth said in the release.

More than half of all the commercial planes in China are from Boeing, according to the company.

China is also the home to many budding low-cost carriers, as Beijing lifted restrictions on creating new airlines earlier this year. The new guidelines make it easier for budget carriers to get approval.

In July, China Eastern Airlines announced it would convert China United Airlines into a low-cost airline. Spring Airlines is the largest budget carrier in the country.

Worldwide, Boeing sees the delivery of 36,770 new commercial airplanes during the next 20 years.

Boeing shares were flat at 126.23 in the stock market today.

Boeing is dominating the skies in other markets as well. Europe’s Airbus said Thursday that it has more than 1,000 orders for new aircraft in the first eight months of the year, but cancellations continue to hit net orders, which are only at 722, far behind Boeing’s, at 918.

The Aerospace/ Defense group is ranked No. 115 out of the 197 industry groups IBD tracks.

Follow Gillian Rich on Twitter: @IBD_GRich.
Read More At Investor’s Business Daily: http://news.investors.com/business/090414-715963-boeing-sees-china-demand-up-budget-airlines-grow.htm#ixzz3CkwvAJmF
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Germany’s Imports Rebound in January

U.S. exports may be ready to recover after a downturn in the Fall.  German imports have rebounded in January 2013. There is hope that increased trade will shrink Germany’s trade surplus. From October 2012 to December 2012, Germany’s economy shrank by 0.6%.

German domestic demand is anticipated to play a large role in boosting the Germany and Eurozone economy this year. Since currently borrowing costs for businesses are purposefully low, perhaps German demand will increase.