Four Steps to Forecast Total Market Demand - 3832 Words

Four Steps to Forecast Total Market Demand F. William Barnett Harvard Business Review No. 88401 HBR JULY–AUGUST 1988 Four Steps to Forecast Total Market Demand F. William Barnett Recent history is filled with stories of companies and sometimes even entire industries that have made grave strategic errors because of inaccurate industrywide demand forecasts. For example: ââ€" « In 1974, U.S. electric utilities made plans to double generating capacity by the mid-1980s based on forecasts of a 7% annual growth in demand. Such forecasts are crucial since companies must begin building new generating plants five to ten years before they are to come on line. But during the 1975–1985 period, load actually grew at only a 2% rate.†¦show more content†¦Defining the Market At the outset, it’s best to be overly inclusive in defining the total market. Define it broadly enough to include all potential end users so that you can both identify the appropriate drivers of demand and reduce the risk of surprise product substitutions. The factors that drive forecasts of total-market size differ markedly from those that determine a particular product’s market share or product-category share. For example, total-market demand for office telecommunications products nationally depends in part on the number of people in offices and their needs and habits, while total demand for PBX systems depends on how they compare on price and benefits with substitute products like the local telephone company’s central office switching service. Beyond this, demand for a particular PBX is a function of price and benefit comparisons with other PBXs. In defining the market, an understanding of product substitution is critical. Customers might behave differently if the price or performance of potential substitute products changes. One company studying total demand for industrial paper tubes had to consider closely related uses of metal and plastic tubes 4 to prevent customer switching among tubes from biasing the results. Understand, too, that a completely new product could displace one that hitherto had comprised the entire market—like the electronic calculator,Show MoreRelatedIkea Supply Chain1259 Words   |  6 Pagesoverall sales forecast made by the corporate management (Group Management, GM) at IKEA. The forecast is made on an aggregate level in terms of total sales volumes in monetary units for IKEA in total. The forecast is related to the strategic business plan, involving business cycle and market intelligence issues, and includes the remaining part of the current fiscal year plus five years into the future. 2) Demand Planning: Some 32 Demand Planners are active in the tactical demand planning processRead MoreCapacity and Demand Planning in Coca- Cola678 Words   |  3 Pagesmake- to -stock enviroment. 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