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Factors Affecting Demand

Economic Factors: How much of a product people can buy, and which products they choose to buy are obviously influenced by their purchasing power. So a market researcher attempting to project a country’s demand for product must consider such factors as the general economic outlook, employment levels, the level and distribution of income and so on.

Climate and Geography: Consumption of many products is influenced by the climate. Geographic factors also affect consumption pattern within a country. Internal barriers to transport and communication and differences can result in great differences in the way people in different arts of a country their living, their life styles and the product they use.

Social and Cultural Factors: Certain people may have negative attitudes towards a certain country and its products. The frequency of their shopping can affect the size of packs they prefer to purchase. They may have a special liking or dislike for particular colors. They may be worried about how healthy a food product is, or be more concerned with its taste. Intangible factors like these can be more important than trade barriers or prices in deciding the fate of product in a market.

Competition: The market researcher must find out:

-    The structure and extent of competition.
-    The reasons for the success of major competitors.
-    The chances of competing against them.

In studying the structure and extent of competition, the researcher must try to answer the following questions:

-    Does direct competition exits, and if so who are the important suppliers, domestic and foreign?

-    What is the extent of indirect competition?

-    What share of the market does each important supplier have, and how have these market share been changing?

-    What particular cost advantages or disadvantages do important suppliers have (raw material supply, labour cost etc.)?

-    What are the plans for expansion of the competitors?

-    If foreign suppliers have significant share of the market, do they enjoy relative tariff, transport cost or similar advantages?

-    Do the main competitors have a strong enough grip on distribution channels to make entry difficult?

Activities of competitors need to be studies in terms of the products marketed presently or proposed to be introduced in the short, medium and long runs, by sizes, specification, standards etc. in terms of price quoted, discounts or commissions offered, distribution channels followed, packaging practiced and sales promotion undertaken. The information of competition helps in formulating vigilant packaging, pricing and promotional policies of an exporter.

Prices: Once of the key questions the market researcher must try to answers: “As what price must we sell our goods to ensure that they will be able to compete with similar offerings already in the market.

To sum-up the Research checklist for estimating market potential may be as follows:

1.    Your country’s trade regulations
-    Currency and tax regulations
-    Licensing and other documentary requirements

2.    Market access
-    Tariffs and quotas
-    Internal taxes
-    Health and safety regulations
-    Political factors affecting access

3.    Market size, pattern and growth
-    Imports (volume, value, sources, trends)
-    Consumption (volume, growth trends, geographic pattern, market segmentation)
-    Factor affecting demand (economic, climate and geographic, social and culture)

4.    Competition
-    Domestic production, volume and growth
-    Structure
-    Strength
-    Reasons for success

5.    Price Structure
-    Prices to end-users
-    Trade mark-ups
-    Transport cost
-    Ex-factory cost

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