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MARKET FEASIBILITY :

The project appraisal exercise, in general, begins with an


estimation of the size of the market. Before undertaking a
detailed exercise of finding out the technical and financial
feasibility of the project, it is important to know the
approximate size of the market. This is necessary because
the viability of the project depends critically on whether or
not the estimated sales satisfy the demand for that
product or services. To conduct the market feasibility of a
project, we must be clear in the first place what data is
required for market analysis and the sources of such data.
Many times it also becomes necessary to collect the data
from primary sources through market survey. From these
primary and secondary sources of data, demand
forecasting is made

Data Required For


Market Analysis
The relevant data for market analysis consists of i. Effective demand in the previous years and at
present,
ii. Classification by product type, consumer category,
or geographical area,
iii. Price,
iv. The distribution and sales promotion methods
v. Consumer profile,
vi. Government policy,
vii. Current sources of supply and competitors

In the determining the previous and present


effective demand, the production levels imports,
exports, and changes in stock levels are taken into
account. The apparent consumption is adjusted for
productions and the effect of abnormal factors if any.
In a free market economy, the effective demand is
the same as apparent consumption. In countries
where competitive markets do not exist for a variety
of products due to exchange restrictions and
controls on production and distribution, the
apparent consumption has to be adjusted for market
imperfections which are not an easy task.

In order to understand the total market or demand


for the product, it is divided into several segments
by product type consumer category, and geographic
area. A generic consumer profile data is of two types
demographic and sociological information, and
attitudinal information.
Demographic and sociological data includes age,
sex, income, occupation, social back ground,
religion, etc. Data pertaining to attitudes include
preferences, likes and dislikes habits, responses, etc

Government can influence the demand for a product


through its policies, plans, legislation etc. These are
reflected in production capacities, import and export
trade controls, import and customs duties, export
incentives, excise duties, sales tax, industrial
licensing, credit controls, financial regulations, etc.

SOURCES OF DATA FOR MARKET


ANALYSIS :

The various types of data required can be obtained


from two sources-primary and secondary. The
primary data is collected by conducting market
survey: it refers to the data which is collected for the
first time to meet the specific purpose on hand.
Secondary data is data which has been collected in
some other context. Secondary data provides the
base and the starting point for market analysis. It
indicates what is already known and offers clues and
leads for further investigation.

Methods of collecting
primary data
Interview Method
Observation Method
Questionnaire

Methods of collecting Secondary


data
(i) Census data published every ten years containing
demographic characteristic, household size and
composition.
(ii) National Sample Survey reports containing data on
various economic and social aspects.
(iii) Planning Commission reports containing data on
plan, proposals physical and financial targets, actual
outlays, accomplishments etc.

(iv) Statistical Abstracts published by Central Statistical


Organisation which contain data on demographic characteristics,
national income estimates, agricultural and industrial statistics.
(v) India Year Book containing wide ranging data on economic and
other aspects.
(vi) UN Statistical Year Book giving statistical data relating to
population, gross domestic production, industrial production,
world trade etc.
(vii) Annual Economic Survey data on wholesale prices, industrial
production, exports, agricultural production, national income etc.
(viii) Central Statistical Organisations Annual Survey of Industries.

(ix) Annual reports published by Commerce and Trade dept. of


Indian Government.
(x) Exports and Imports Annual Bulletin of Statistics.
(xi) Techno economic surveys conducted and published by the
National Council of Applied Economic Research.
(xii) Industrial Potential Surveys conducted by all India
Financial Institutions under the leadership of IDBI giving data
on several backward areas.
(xiii) Stock Exchange Directory containing data on financial
performance of various companies classified industry wise.
(xiv) Monthly Bulletin of Reserve Bank of India containing data
on prices, production indices,exchange rates, balance of
payment, etc

(xv) Monthly studies of production of


selected industries published by Central
Statistical Organisation containing data on
production, number of units installed, their
capacities etc. for selected industries.
(xvi) Publications of Advertising Agencies
containing data on consumer index of
market, test markets etc. which is valuable
for understanding Indian markets.

There are several other publications; those of State


Trading Corporation of India, Indian Institute f
Foreign Trade etc. provide useful information. Apart
from these, there are industry specific data which
are also available. For example, Indian Automobile
Manufacturers Association publishes annual reports
on automobile manufacturers and also on auto
ancillary data on such industries as metallurgical
industry, heavy machinery industry, textile industry,
cement industry, chemicals, and electrical industry,
and so on. The advantage of secondary sources of
data is that it is readily and economically available.
But the accuracy, reliability and relevance of such
data must be studied carefully

1.

Secondary data has to be supplemented by primary data for


a comprehensive market and demand analysis. The primary data
is collected through market survey, specific for the project being
appraised. There are two types or market survey-census survey
and sample survey.

2.

Census survey covers all the members of the population and


it is very expensive. Census surveys are generally done for
intermediate goods and investment goods because of the small
size of the population. For these reasons, a market survey
generally is a sample survey. A sample of the total population is
selected and data collected for that sample. The data collected
from the sample is used as the basis for drawing conclusions
about the population. The data collected from a market survey
includes one or more of the following:

MARKET SURVEY :
(i) Total demand and demand growth
rate.
(ii) Market segment wise demand
(iii) Income and price elasticity's of
demand
(iv) Motivation for purchase
(v) Procurement plans

(vi) Satisfaction with existing


products
(vii) Unsatisfied demand
(viii) Attitude towards various
products
(ix) Distributive trade practices and
preferences
(x) Socio-economic characteristics of
buyers

There are several steps in conducting a market


survey. The first step is to identify the target
population. The target population may be divided
into
segments
which
may
have
different
characteristics. The second step is the choice of
sample size and the sampling methods. Sampling
method is several: random sampling, stratified
sampling, cluster sampling, sequential sampling,
systematic sampling, and non-probability sampling.
Each of these sampling methods has their own
merits and demerits. Since the reliability of
estimates is a function of sample size, the choice of
sample size is important

The next step is the preparation of questionnaire. Since it is the effective


instrument for electing data, the design of the questionnaire requires
thorough understanding of product and its usage, imagination, insights into
human behaviour, appreciation of subtle linguistic noises and familiarity
with descriptive and inferential statistical analysis. The questionnaires,
validated by trying initially with few respondents, collect pilot survey and
modified in the light of experiences gained in the pilot survey.
After validating the survey questionnaire, investigators are recruited and
trained for conducting the survey. It is important that these investigators
selected have the proper background knowledge about the product.
Response to questionnaire may be collected through personal interview,
telephone, or by mail. Response rate tends to be high with personal
interviews, but it is very time consuming. sometimes, the response may
also be biased. Mail surveys are cost effective, but response rate is
generally low. Telephone interviews have not been widely used in view of
telephone services in the country.

Data collected through questionnaires has to be


validated to eliminate data which is inconsistent and
validity dubious. The final steps to analyze and
interpret the validated dada, several methods of
statistical analysis are available: these are broadly
divided into parametric and non-parametric methods.
Parametric methods assume that the variable under
study conform to known distribution. No such known
distribution is assumed under non parametric methods.
The data analysis based on sample survey has to be
extrapolated
for the
target
population.Suitable
adjustments have to be made for this purpose.

The results of market survey can be seriously affected


due to one or more of the following factors:
i) the sample being non representative
ii) improper phrasing of the questions in the
questionnaire
iii) respondents inability to understand questions
iv) incorrect answers given by respondents deliberately
v) investigators improper handling of the interviews
vi) not checking data for inconsistencies and biases,
vii) Wrong application of statistical method and/or the
wrong interpretation of analysis of results.