MBA 605: Project Management

Atikur Rahman,
MBA (HRM), BBA (Mgts), RU
Senior Lecturer of Business Administration
Faculty of Business Studies, PCIU
Email: atikur.rahman@portcity.edu.bd

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 Forecasting

Forecasting means assessment of future event based on experience.

According to William J. Stevenson “A statement about the future value of a

variable of interest”.

According to Lee J. Krajewshi and Larry Ritzman “A forecast is a

reproduction of future events used for planning purposes”.

Forecasting is essential for valuable managerial decision. Forecasting is a

basis of long term planning of an organization. Forecast also basis of cost
control and budgetary control.

Forecasting enables organization to produce the required quantities at the

right time and arrange well in advance for the various factors of production.
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 Features of Forecasting

Forecasting is the assessment of future events based on past experience.

Forecasting should be information based. General feature of forecast are as
follows:

(i) It reflects past experience: What happened in past may happen in future.
(ii) Forecasting is not 100% correct: Forecasting is assumption, correctness of
forecasting depending on proper judgment of information.
(iii) Forecasting provides some expectation: Assessment of future provides
some expectation, how market can be served, by which opportunities can be
captured, planning to be educated.
(iv) Planning is very much depending on forecasting: Forecast is basis of
planning, Forecasting assess future event and planning is promulgated and
executed on the basis of forecasting. So planning is very much depending on
forecasting.
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 Elements/qualities of Forecasting

Forecasting should be made timely, not in advance, not in late. It should be

accurate and reliable. Qualities of good forecasting are as follows:

(i) Timely forecasting: Forecasting should be made timely not in advance,

not in late. Advanced forecasting leads to high degree of uncertainty.
(ii) Forecasting should be accurate: Relevant information is necessary for
accurate forecasting.
(iii) Forecasting should be reliable: Reliability of forecasting depends on
agencies, which provide relevant information.
(iv) Forecasting should be expressed in meaningful units: Financial
forecasting should be expressed in Tk and production forecasting in unit.

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 Elements/qualities of Forecasting

(v) Forecasting should be in written: Written forecasting accountable person

who forecast and organization for which forecasting is made.
(vi) Methods applied for making forecasting should be easy and
understandable.
(vii) Forecasting should be cost effective: Forecasting should not make
excessive cost, it should be cost effective.

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 Demand

In general sense, the desire to have a commodity or service is called

demand. But in economics more desire is not called demand. The desire of
the buyer, who has the ability and willingness to fulfill it, is call demand.
There are, therefore, factors of demand such as:

(i) Desire expectation to have a commodity

(ii) Necessary money to purchase the commodity and
(iii) Willingness to spend the money for the commodity.

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 Law of Demand

The demand for a commodity depends on its price other things remaining the
same, when the price of a commodity increases at a particular time, its
demand decreases, again when price falls demand increases.

A relationship can therefore be observed between price and quantity

demanded. This very relationship of dependence of demand on the price of a
commodity is called law of demand.

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 Assumptions of Demand

It is presumed at the beginning of the law of demand that other things

remaining the same. That is there will be no change in any factor which can
influence price and quantity demanded. Among other things are including:

1. Income of the buyer.

2. Testes, habits, and choice of the buyers.
3. Prices of other relevant goods.
4. The number of buyers.
5. Normal behavior of consumer

If these conditions remain unchanged, only then the law of demand will be
operative.

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 The key steps in Market & Demand Analysis

Market and demand analysis should be carried out in an orderly and

systematic manner. The key steps in such analysis are as follows:

• Situational analysis and specification of objectives.

• Collection of secondary information
• Conduct of market survey.
• Characterization of the market.
• Demand forecasting
• Market planning.

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The key steps in Market & Demand Analysis

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 The key steps in Market & Demand Analysis

1. Situational analysis and specification of objectives:

Situational analysis generates enough data to measure the market and get a
reliable handle over projected demand and revenues. To carry out such a
study, it is necessary to spell out its objectives clearly and comprehensively.
A helpful approach to spell out objectives is to structure them in the form of
questions.

• Who are the buyers?

• What is total current demand?
• What price and warranty will ensure its acceptance?
• What channel of distribution is most suited?

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 The key steps in Market & Demand Analysis
2. Collection of secondary information:
In order to answer the questions listed, while delineating the objectives of
the market study, information may be obtained from secondary and primary
source. Secondary information provides the base and the starting point for
market and demand analysis. It indicates what is known and often provides
leads and cues for generating primary information required for further
analysis.

3. Conduct of market survey:

Secondary information often does not provide a comprehensive basis for
market and demand analysis. It needs to be supplemented with primary
information generated through a market survey, specific to the project being
appraised. The market survey may be a census survey or a sample survey. In
a census survey the entire population is covered. The market survey is
typically as sample survey.
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 The key steps in Market & Demand Analysis
4. Characterization of the market:
Based on the information gathered from secondary sources and through the
market survey the market for the product/service may be described in terms
of the following:

• Effective demand in the past and present;

• Breakdown of demand;
• Price;
• Methods of distribution and sales promotion;
• Consumers;
• Supply & Competition;
• Government policy.

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 The key steps in Market & Demand Analysis
5. Demand forecasting:
After gathering information about various aspects of the market demand
from primary and secondary sources, an attempt may be made to esteem ate
future demand.

6. Market planning:
To enable the product to reach a desired lever of market perform a suitable
marketing plan should be developed. Broadly, it cover pricing, distribution,
promotion and, service.

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 Determinants of Demand
The demand for a product or its sales depends upon number of factors.
Number of factors that determinate demands of a particular product are as
follows:

1. Price of particular product: Demand for a particular product depends upon

price of its. There is an adverse relation between price and the quantity
demanded, lower the price the greater is the quantity demanded and vice
versa.

2. Price of a substitute and completive product: If the price of a commodity

remains same the demand for this commodity may change if the prices of
substitutes and complementary goods change. For example, gur is a
substitute of sugar. Assume that the price of sugar increases, in that case if
the price of gur remain unchanged, its demand will increase.

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 Determinants of Demand
3. Income of buyers: Demand of a particular product also depends upon
income of demanders. If the purchasing power of money increases or real
income increases than demand of a particular product will go up. Again
demand for a commodity will not increase with a fall in price if the income
of the consumer decreases substantially.

4. Advertising: Demand for a particular product can be increased through

advertising. As increase in advertisement will lead to a more than
proportionate increase in sales.

5. Population: Composition of the population or size of the population which

affects demand for certain commodities or service.

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 Determinants of Demand
6. Season of the year: It is obvious that demand for a commodity must
change with the change in season. In winter, there is a greater demand for
worm clothing for certain types of torics and for coal of fuel. In summer,
there is a great demand for electric fans room coolers and cooling drinks etc.

7. Availability of credit: Availability of credit facilities in terms of payment

and service increase buyer’s ability to purchase a particular product.

8. Geographical location of buyer: Geographical location of buyers also

influence in determining demand of a particular product. Demand per a
product very due to change in geographical location of buyers.

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 Determinants of Demand
9. Expected future in market: Expected future trend in market also
determinate demand of a particular product. If price of a product may seem
to increase in future than demand for that product may increase and vice
versa.

10. Change in consumer taste: If with the change in habits and taste,
consumer begin to take coffee instead of tea and even if two price of tea the
demand for tea to that person will not increase.

11. Needs and preferences: If is quite obvious that if a consumer dustups

market liquidity prudence, his demand for goods will decrease, because he
prefers to keep with him ready cash instead of buying things.

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