The Marketplace

1
The Marketplace
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• Demand

2
Review

• Oil prices affect
• Input costs for manufacturers and transportation
  industries
• Supply of capital for international banking
  system
• Governments ability to borrow and pay debt
• All of the above

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3
Review

• Vertical integration refers to
• The number of levels in a supply chain
• The number of rival firms a company acquires
• The degree to which a firm owns its upstream
  suppliers and/or its downstream buyers
• Groups of supply chains

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4
Review

• Tertiary industries
• Provide services like banking and transportation
  to businesses and consumers
• Provide intellectual services such as research,
  development and information
• Create finished usable products via manufacturing
  and construction
• Provide services like agriculture and education
• There is no such industrial classification as
  Tertiary

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5
Review and Objectives

• Review of markets
• A mechanism for exchange between the buyers and
  sellers of a particular good or service
• Introduction of key market force demand
• To learn about managing demand and supply
• To apply demand concepts to an activity involving
  market data
• To prepare you for a part of your major project

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6
Market Forces

• Demand
• Demand is the amount that customers plan to buy
  (future) or did buy (past). Demand reflects a
  decision (choice) about which wants needs we
  plan to satisfy (as opposed to our unlimited
  wants).
• Demand is influenced by
• Preferences (needs and wants) of individual and
  society
• Competitive offerings
• Price (including expected future prices)
• Resources available and resource constraints
  (income and debts)
• Volume of demand (population, rival buyers)
• Regulations

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7
Market Forces

• Supply
• Supply is the markets ability and plan to satisfy
  demand.
• Supply is influenced by
• Scarce resources
• Competition and market segments (such as quality
  differentiation and price)
• Price, cost of production, competitors prices,
  expected future prices
• Volume of supply (number of domestic and foreign
  suppliers)
• Regulations

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8
Estimating Demand

• Who is the customer?
• Important to define what you mean by customers
• What type of customer(s) (individual, commercial,
  industrial, government) based on type of product
• Customer segments (geography, demography)
• Customer profile what is their purchase
  behaviour (Who? What? Why? Where? When?)
• Customer Demand
• Historic and Current data
• Number of customers (individuals, households)
• Number of purchases per unit, per time period,
  per volume (e.g. kg)
• Value of purchases dollar amount
• trends (is it growing? How fast?)
• Projections
• Number of customers, purchases, and dollar value
  market potential
• Optimistic, realistic, pessimistic estimates
  based on analyst projections, trends, and
  influences
• Market share what portion will your firm
  capture?

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9
Activity

• Read the following scenario and use the
  Statistics Canada data for Antigonish County
  provided to estimate demand in the market. Is
  the markets attractive? Support your answer with
  evidence.
• All Natural Skin Cream
• Lois Griffin decided that her love of health
  products would be a great opportunity. Lois
  developed an all natural skin cream using local,
  organic ingredients seaweed concentrate,
  blueberries, and oats. The cream fortifies cells
  to keep skin looking youth and healthy. She
  plans on selling her products in the local health
  food store and the health section of the local
  Sobeys and Superstore. Lois thought a 500 ml
  container (about 100 applications) at 50.00 was
  appropriate (the competitive offerings average
  about 20.00).
• Estimate demand potential for Skin Cream in
  Antigonish County for one segment of the
  population
• Number of customers
• Number of purchases
• value of purchases

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10
Estimating Demand

• Estimating demand focuses on groups of customers
  that reasonably would plan to buy product, based
  on assumptions and judgments involving
• Individual buyer behaviour
• Segment behaviour
• Primary sources like company research,
  consultants
• Secondary sources like Stats Canada, Industry
  Canada, Industry Associations, Company data.
• Demand is often an aggregation of multiple
  segments
• Numeric data is generally presented in tabular
  form
• Firms assess what share of the potential/total
  demand they could capture Market Share

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11
Presenting Demand

• Gauging Industry Demand and Market Share

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Source and unit demand based on data from
Stats Can, Industry Canada, Canadian Business
magazine
12
Managing Demand and Supply

• How do businesses manage demand?
• Marketing
• Identify who the customer is and collect
  information about demand
• Deliver a satisfying product/service
• How do businesses manage supply?
• Marketing
• Collect information about supply and competition
• Production Manage factors of production,
  transform inputs to satisfying outputs, manage
  inbound and outbound logistics
• Finance Evaluate long term and short financial
  needs and opportunities, arrange financing for
  production activities, manage inflows and
  outflows of money
• Management Plan, lead, organize, and evaluate
  people and resources via a competitive strategy

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13
Admin

• Next Class Wednesday October 10
• To introduce students to Competition
• Read Industry and Competitive Analysis

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