Demand for any product in any industry is not deterministic in nature. It is aff

Question

Demand for any product in any industry is not deterministic in nature. It is affected by a whole lot of exogenous and internal factors. A manager, projecting demand, must always consider the influence of these factors while making an educated guess or forecast for the demand. Among exogenous factors, most important is the growth/ decline of the economy itself. The national growth of the economy, through GDP and GNP, can be well predicted but most corporations may not sell their products on a national scale and may find specific target markets. These specific markets may suffer different growth curves depending on the economic conditions of the participants. It is very difficult to determine the exact economic growth curves for this target markets in the future. Another crucial exogenous factor is the position and moves by the competition. The demand for a product may be seriously affected if competitors come up with products which give same value proposition at a lower price level. Other important aspects are the effect of seasons, weathers, political stability, the income level of the citizens, regulations, and so forth which have their own way to affect the demand pattern of a product.

Demand is also affected by the internal factors associated with the firms. Some of the important parameters affecting demand are Promotions, New product introductions, Reacting to competitors’ activities, Pricing decisions, Advertising, Service levels and so on. Note that though nature and the way these factors may affect demand for a product may be known, the exact interaction pattern may be complex and the factors are also not independent of each other. For example, reading competitors’ activities may, in turn, calls for new product introductions and heavy promotion and the effect on demand will be mixed. Promotions and other advertisement efforts have a positive effect on demand but determining the exact relationship between the dollar value invested and the sales volume derived may require considering historical data and interaction of present exogenous factors with the present effort by the corporations.

The complexity may be multiplied for the case of new products because the unpredictability of demand is more due to the unknown response of the target market. The marketing research and survey can give us information regarding the future projections but ultimately they will give us sample information which may actually vary in the context of the population. Sometimes, the product life cycles of the products may be such short that the validity of all these studies done prior to launch can be doubted. This type of complexity is common for products demanding high responsiveness e.g. apparels, electronics, fashion products, and so on. In order to take care all these situations described above, a manager must consider the effect of the factors simultaneously on demand projections by assigning an appropriate distribution to each factor and finally letting the factors interact with each other in a simulation exercise in order to get a more realistic distribution of projected demand.

Explanation / Answer

The simulation course is designed to expose the student to managing an integrated multifunctional business. Write 3-4 paragraphs detailing and discussing all the challenges a person can face in projecting demand

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