Demand

Forecasting

DEMAND
FORECASTING:
A demand forecast is the prediction of
what will happen to your company's
existing product sales.
Demand forecasting is the activity of
estimating the quantity of a product
or service that consumers will
purchase.
Demand
forecasting
involves
techniques including both informal
methods, such as educated guesses,
and quantitative methods, such as
the use of historical sales data or
current data from test markets. It may

Determination of the demand

forecasts is done through the
following steps:
1 Determine the use of the forecast
2 Select the items to be forecast
3 Determine the time horizon of the
forecast
4 Select the forecasting model(s)
5 Gather the data
6 Make the forecast
7 Validate and implement results.

Methods of forecasting
1. Too much emphasis should not be placed on

mathematical or statistical techniques of

forecasting. Though statistical techniques are
essential in clarifying relationships and
providing techniques of analysis, they are not
substitutes for judgment.

2. Forecasting also should not be left entirely to

the judgment of the so-called experts.

What is needed is some commonsense mean
between pure guessing and too much
mathematics.

Various Methods of
Forecasting
Survey of Buyers Intentions
Market Survey Studies.

1. Delphi Method
2. The Collective Opinion also called as Sales
Force Polling
or Expert Opinion polls.
3. Analysis of Time Series and Trend Projections
4. Use of Economic Indicators Regression
Analysis and
Economic Model Building.
5. Controlled Experiments Test Marketing.
6. Judgmental Approach

Forecasting
- Cadbury

Origin of Cadbury
Cadbury is the brain

child of John Cadbury

Starting in form of
grocery business in
Birmingham in 1824
In 1853, Cadbury
became the
confectioner to the
British Crown.
Today Cadbury operate
Globally

years and has

participated and been a
part of every Indian's
moments of happiness,
joy and celebration.
CadburyIndia ltd. began
its operations in India
1948byimporting
chocolates. After 62 years
of existence in
IndiaCadburyenjoys a
value market share of
over 70%- the
highestCadburybrand
share in the world.

owned subsidy of Kraft Foods

Inc. with approximately $50
billion, on 2nd February 2010
Kraft foods has sealed its
takeover overCadbury and have
operations in more than 70
countries.(bbc,2010)
In India, it began its operation in
the year 1948byimporting
chocolates initially. Today the
company has five company
owned manufacturing facilities
at Thane, Induri (Pune) and
Malanpur (Gwalior), Bangalore
and Baddi (Himachal Pradesh)
and four sales units spread
across the country.

Cadbury plan their production process by using a time series

method as this helps Cadbury to accurately produce the
needed amount of chocolate at the correct period of time.
A time series shows historical data that can be used and
analysed to predict future trends.
Festive Seasons are peak selling times for all chocolate
manufactures including Cadbury, this is obviously because
chocolate products make good gifts for these occasions.

Time series analysis does not explain the casual

relationship between variables & how they will be in
future also. It simply assumes that past behavior of
the variable will continue in future also.
Hence time series analysis tries to find out the factors
which affect the behavior of the variable. The
changes in the variable over a period of time are
divided into 4components.
They are: TRENDS
SEASONAL VARIATIONS
CYCLICAL VARIATIONS
RANDOM FLUCTUATIONS.

ADVANTAGES

DISADVANTAGES

The data helps Cadbury to

reduce wastage and

produce the amount of
products that customers
would purchase
The data is reliable if
collected accurately.
The forecast helps Cadbury
to make products efficiently
as it helps Cadbury to set a
target of the amount of
products needed; there are
always enough products to
supply to customers.

Cadbury need to have a lot of past

data in order for the time series

method to be used accurately to
predict sales figures.
If the external environment doesnt
stay stable then there will be
problems with the forecast for
example if the prices of the raw
materials used to produce Cadbury
products increases then the price
of the product has to increase in
order for Cadbury to make a profit
from the product produced.
This may affect the customers
purchasing trends. The data may
be biased or representative.

Independent variables affecting Demand of Cadbury Dairy Milk:

Price: This product is a brand loyal product, so if there is a

slight increase in the price, the demand of the product will

remain unaffected. But if there is a decrease in the price, the
demand of the product may slightly increase.
Income: If the income of the people increases, the demand of
the product also increases and if the income of the people
decreases, the demand of the product decreases because then
people will go for lower price chocolate like clair or melody of
Rs.1 or Rs. 2. So, there is a positive relationship between
income and the product demand.
Consumers taste and preferences: Cadbury produced milk
chocolates by using the high quality of cocoa bean and the
taste has still remained the same which has touched the heart
of the consumers. So, they will not like to go for any other
product.
Competition: There are many competitors like Cadbury 5star, Nestle Kit-Kat, Parle Chox, foreign chocolates (Chinese),
Lot etc. In the market so if the price of the competitors
increases, the demand of the dairy milk also increases. But if
the price of the competitors decrease, the demand of the dairy

 Price of Complementary Goods: Cadbury dairy milk is made from

the milk, sugar, cocoa bean and cocoa powder. If the price of these
complementary goods increases then there will be no change in the
demand. Because Cadbury dairy milk is a brand loyal product so
there will not be any effect on the demand of the product.
Population & Age group: This product is meant for the children,
adults and also for the old people so the age groups are not much
affected the demand of the product so demand remain same and by
the increase in the population, the demand of the product also
increases.
Advertisement campaign: Advertisement campaign has played a
vital role in attracting the major part of the population towards the
Cadbury dairy milk.
Celebrations & Occasions: During the festivals and occasions, the
consumption of Cadbury increases because its a product for enjoying
the taste of each and every moment with harmony.
Brand Image: The brand image of the Cadbury plays an important
role in the demand of the Cadbury. This product has built such a
brand image that it has much attracted the mind of the consumers
so they will not like to switch over to the other brand.

Conclusion & Recommendations

Demand forecasting is widely used by business firms to

estimate the future demand of their products &

services. Business firms use historical or past date to
explain future demand.
The estimation of future demand helps the business
firms to analyze their production, distribution, selling,
advertisement &promotional activities & the cost
involved in covering these activities.
Recommendations can be considered by business firms
to enhance their performance in serving its customers
the best.
Customers complaints should be welcomed & handled
effectively. A quick response to customer complaint
can bring a positive impact on part of business firms.
Suggestions from customers should be taken into
consideration.

THANK YOU