Market Analysis

Report Outline
I.

The Nature and Scope of Market Analysis Importance of Feasibility Studies to Market Analysis Definition of Terms Typologies or Approaches to Market Analysis

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III.

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V.

Points in Evaluating the Contents of Market Analysis

A. B.

General Applied to Clean Development Mechanism Project

VI.

General Technique/Method in Conducting Market Analysis

Market Analysis
It is done to determine the extent to which goods and services to be generated by the project are needed or demanded It is done to design the appropriate marketing strategies and plans that will help ensure that a projects target users are reached and will accept the projects outputs

A project study must define: - Types and nature of products or services to be generated by the projects - Specific uses - Geographic influence area

Market Study

"lifeblood" of every project feasibility study addresses the question of demand and profitability seeks to determine:

size, nature and growth of total demand for the product

description and price of the product to be sold

supply situation and the nature of competition different factors affecting the market of the product

appropriate marketing program

Objectives of a market study:

The Nature and Scope of Market Analysis

1) To determine the extent to which goods and services to be generated by the project are needed or demanded 2) To design the appropriate marketing strategies and plans that will help ensure that a project's target users are reached and will accept the project outputs

- project's expected outputs are analyzed in terms of their past and present demand-and-supply situations, expected future behaviors, and the resulting demand-supply situations, expected future behaviors, and the resulting demand-supply gaps as they relate to project outputs

The Nature and Scope of Market Analysis

A project study must clearly define the types and nature of products or services to be generated by the project, their specific uses, potential users, geographical influence area, and other characteristics.

When more than one type of output is expected, the expected product range should be described

Importance of Feasibility Studies to Market Analysis

The outcome of a feasibility study will indicate whether or not to proceed with a proposal

Time and money lost/waste can be avoided if feasibility study is conducted

The feasibility study is important because it forces the stakeholders to put its ideas on paper and to assess whether or not those ideas are realistic It also forces to begin formally evaluating which steps to take next.
Feasibility analysis is necessary in determining if there is an adequate level of demand for a product or service

Market Analysis and CDM

Market analysis can be applied to answer the following questions:
Demand for a climate change-mitigating measure in the host country Demand for carbon credits in Annex I countries Sources of supply to fulfill the project (e.g. search for a dumpsite, location for wind farm) How to address concerns by host communities regarding impact of the project

Definition of Terms

Market- refers to an arena for potential exchanges that may involve money; where demand-and-supply conditions for goods or services are taken into account, whether or not such goods or services carry a market selling price

Identifying demand determinants

Consumer demand demand for product for final consumption purposes Producer demand - demand for a product used as an input in the production of other goods Demand for social services (special case of consumer demand where services have no market price and the limiting factor is the governments ability to pay) Demand determinants:
Population Income Prices Substitution possibilities Changes in users taste Rate of investments Government policies and budget

Factors Affecting the Market

Demand

Population growth
income changes

tastes
urban/rural development

prices of substitute/complementary products

advertising and promotion

Estimating past and present demand

Sources of Data Historical Data Coverage Techniques for Demand Estimation
Standards or Coefficients Chain ratio method Market-buildup method

Projecting Demand
Survey of Peoples Intentions and Needs Assessment Experts Opinion Time Series Analysis Statistical Demand Analysis Use of planning standards Market testing Other demand considerations

Supply Analysis
Supply Analysis - evaluation of existing supply conditions Identifying supply sources Estimating past and present supply Projecting supply

Demand- Supply Consolidation

Past and present supply-demand gap Future supply-demand gap, without the project Future supply-demand gap, with project

Other market considerations

Competitiveness of product Government policies Marketing program

Parts of a Marketing Plan

Introduction General Business Condition Competitive Conditions Market Research Results Sales and Distributions Plan Advertising and Sales Promotion

Other related aspects (product formulation, packaging, legal clearance, raw material procurement, etc.)

Typologies/Approaches
Trend or Time Series Analysis
Graphical approach
Freehand drawing Two-point line

Average growth methods

Arithmetic average growth (straight line) Geometric and compound growth

Smoothing techniques
Moving average method Use of seasonal index

Curve fitting

Correlation and Regression Analysis

Can be used to find out if the outcome from one variable depends on the value of the other variable, which would mean a dependency from one variable on the other.

Regression and correlation analysis can be used to describe the nature and strength of the relationship between two continuous variables

Stages for Correlation and Regression Analysis

Create a scatterplot for the two variables and evaluate the quality of the relationship.

Stages for Correlation and Regression Analysis

If the scatterplot shows a reasonable linear relationship (straight line) calculate Pearson's correlation coefficient to evaluate the strength of the linear relationship.

Pearsons Correlation Coefficient can be calculated as:

Pearson's correlation coefficient (named after Karl Pearson, 1857-1936) is a number between -1 and 1, that measures the strength of a linear relationship between two continuous variables. The absolute value of the coefficient measures how closely the variables are related. The closer it is to 1 the closer the relationship. A correlation coefficient over 0.8 indicates a strong correlation between the variables.

Stages for Correlation and Regression Analysis

If we want to use a variable x to draw conclusions concerning a variable y: y is called dependent or response variable. x is called independent, predictor, os explanatory variable. If the relationship between two variables is linear is can be summarized by a straight line. A straight line can be described by an equation:

y=a+bx
a is called the intercept and b the slope of the equation. The slope is the amount by which y increases when x increases by 1 unit.

Limitations of Regression and correlation analyses

Forecasts are obtained by extrapolating data from established relationships of the variables being studies whose behavior may not necessarily hold at other times or places The methodology assumes that no linear dependence exists among the independent variables so that a high degree of interdependence among the independent variables will affect the precision of estimation It is not recommended for analyzing small projects where the cost and effort in obtaining needed date are not commensurate to the project cost.

 Planning standards
Illustration of Demand projections Illustration of Supply projections

Other statistical techniques

Statistical Demand/Supply Analysis
Regression
Used to examine the type of relationship that exists between demand/supply and its determinants Help the analyst establish the type of association between two or more variables

Correlation analyses