Basavarajeswari Group of Institutions

BALLARI INSTITUTE OF TECHNOLOGY & MANAGEMENT,BELLARY.

(Formerly: Bellary Engineering College)

DEPARTMENT OF MANAGEMENT STUDIES

Assignment No: 1
Topic:“A Study on Demand Forecasting Methods
Used by Fruit Vendors”

Subject :Marketing Management

Submitted by

Basanagouda MBA I sem

Ballari Institute Of Technology & Management -Bellary

Submitted to
Prof: G.P. Dinesh MBA (Ph.d)
BITM – Bellary

Year: 2008-09

CONTENTS

Introduction

Theoretical Aspects of Demand Forecasting

Meaning
Types of Forecasting
Determinants for Demand Forecasting of
Non-Durable Consumer Goods
Methods of Demand Forecasting

Demand Forecasting Methods UsedByFruit Vendors

Fruit Vendor
List of Fruits
Market Survey
Methods Followed by Fruit Vendor for Demand Forecasting
Conclusion
 
Introduction

Forecasting is a prediction about a future event which is mostly likely to happen

under given conditions. Demand forecasting means estimate of expected future
demand conditions. Kotler remarked that `forecasting is like trying to drive car
blindfolded and following directions given by a person who is looking out of the
back window’. Looking into the future which is uncertain, is really a difficult
task. But it has been so in the experience mankind. Assuming that future would be
bright, every man takes some risks in life and tries to advance further. In the
business field, there was a lack of forecasting in the past. It was only after the
depression in 1930s, that systematic forecasting was realized as a tool of
management.
Theoretical Aspects in Demand Forecasting
Meaning of Demand forecasting:
Forecasting is defined as study with scientific prediction in regard to an event
which may have future demand goods, services either at micro level or at the macro
level. Forecasting deals with likely shape of future events. It is scientific
guesswork.
Demand forecasting refers to the prediction or estimation of a future situation
under given constraint.

Types of Forecasting:

Short term forecasting: Short term forecasting covers a periods up to one year.
It relates to policies regarding sales, purchases, pricing and finances.
Medium term forecasting: Medium term forecasting is intermediate between short-
term long term forecasting. This is usually followed by a firm which is subjected
to the medium term variation of the trade cycle.
Long term forecasting: Long term forecasting refers to refers to a period beyond
one year. The purposes of long term forecasting are: (i) Planning new unit or
expansion of existing unit. (ii) Planning long term financial requirements. (iii)
Planning manpower needs.

Determinants for Demand Forecasting of Non-Durable Consumer Goods

Non-durable goods are those commodities which are used in a single act of
consumption. They are food articles, beverages, tobacco, etc. Demand for such
goods is influenced by three basic fact ors such as: (A) Disposal income of the
people or purchasing power, (B) Price of the commodity, (C) Size and
characteristics of population. The formula used for estimating the demand for non-
durable goods is

d = f(Y.D.P)

Where: d = demand,
Y = disposal income,
D = size of the population and
P = the price

Purchasing power of the people: It depends upon the disposal income of the
people of the country. The disposal income is obtained from personal income after
making tax and other deductions. In a poor country like India, disposal income is
very low and consequently the purchasing power of the people also is very low. So
purchasing power of people is one of determinant of demand forecasting.

Size of the population and its characteristics: This refers to total

population, the different income groups, social status, age-sex composition, urban
and rural population, geographical characteristics, level of education, etc.
Demand for non-durable consumer goods depends upon all these factors.

Methods of Demand forecasting

Methods of demand forecasting are classified into two categories they are:
Survey Method
Survey of Buyer`s intentions or consumer`s survey
Survey of experts opinions
Controlled experiments
 Simulated market situation

Statistical Method
Trend projection or Time Series
Method of moving averages
Regression method
Barometric method
Economic Indicator

Demand forecasting method used by fruit vendors

Fruit Vendor
The individual / a firm involved in selling of fruits in the market, with an
intension to make profit.

List of Fruits

1. Orange
2. Apple
3. Banana
4. Watermelon
5. Sweet lime
6. Mango
7. Pineapple
8. Grape
9. Guava
10. Custard apple
11. Kiwi Fruit
12. Jack Fruit
13. Pomegranate
14. Pears
15. Sapota

Market Survey
Area Covered : Bellary City

Contact Method : Personal Interview.

Number of Shops / Stalls Visited : 10

Observations:

We have visited fruits vendors in various parts of the Bellary city with an
objective of knowing demand forecasting method used by fruits vendors in Bellary
city.

Most of the Fruits vendors are sole proprietors having small stalls in streets and
not keen on estimating demand for their business. They maintain stock of fruits in
different seasons on the basis of their experience & availability. They do not
maintain past data of sales to predict demand for the coming period but having
general idea of sales during the previous year. This helps the fruits vendors to
maintain stock for meeting the demand, at the same time if there is a sudden
increase in demand, it will be met by placing order immediately to the nearest
wholesaler and directly purchases from the farmers if possible.

Generally, demand will be more during festivals and marriage seasons apart from
the season sale of fruits. So, they maintain high level of stock.
Methods followed by fruit vendors for demand forecasting

It is evident from the survey that fruit vendors are not following any specific
methods of demand forecasting. But generally follow the below mentioned steps.

1.Forecasting on the basis of information collected regarding demand for fruits in

different time period / season from the wholesalers.

2.Forecasting on the basis of seasons: during the season of a particular fruit say
mango in summer, supply is more and price will be comparatively less this leads to
high level of demand.

3.Forecasting on the basis of economic conditions: during the recession people

spend very less amount on fruits, so, demand will be low & they maintain low stock
and vice-versa.

4.Forecasting on the basis of Natural calamities: Natural calamities such as

drought affects the yield of fruits in turn supply. This leads to rise in price
and fall in demand.

5.Forecasting on the basis of their own experience: They predict demand for very
short-term say 15 days to one month on the basis of sales during the same period
in the previous year and also from the sales data of the previous month.

Conclusion

Fruits vendors’ business is small in size and do not maintain facts & figures of
their previous year’s sales and they are least worried about following specific
method/s of demand forecasting for fruits. But, they are good at predicting demand
on the basis of their experience in the field & daily sales for the immediate
period. And any change in demand, increase will be adjusted by placing immediate
orders with nearest wholesaler or even buying it from farmers, decrease will be
adjusted by contracting the orders or reducing the order quantity. All this is
possible because they maintain very limited stock i.e. for a few days.
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