February 20, 2019 217
February 20, 2019 217
The market study is one of the most important aspects of a feasibility study since it is herein that the nature and the extent of the problem towards which the project is directed are identified and quantified.
The market study involves:
The approach to follow in carrying out a market study for a proposed project consists of the following steps:
Define the market envisaged for the project output both in the sectoral and geographical contents.
From the sectoral viewpoints, the two broad categories are the Consumers’ Demand and the Producers’ Demand.
The consumers’ demand for the project output is determined by the amount of the output needed by buyers who make direct use of the product for consumption purposes.
The producers’ demand is a derived demand derived in the sense that it is demand expressed by the extent and levels of use to which the project output is to make in producing another final product.
From the geographical viewpoint, the territorial boundary in terms of regions, provinces, municipalities or some other terms of reference must be delimited as precisely as possible so as to determine the size of the geographical area in which the project can exercise its influence. It is within such geographical boundaries that data will be collected for the project study.
Estimate the total demand (both satisfied and unsatisfied demand) for the project output. In achieving these objectives do the followings:
This is the principal determinants of demand for the particular goods/services under consideration, which can then be used to derive a reasonable approximation of the corresponding level of total requirements.
In the case of consumer demand the strongest determining factors will in general be:
The higher the levels of these two variables the greater the total requirements of the project output will tend to be:
In the case of producer (investment) demand, the producers will want the goods/services provided by the project only insofar as it is needed in the production/distribution of their output. Their demand for the output of the proposed project-exists because demand also exists for their own product.
Their demand for the project output thus depends:
Hence, a consideration of the ultimate sources of demand for these producers’ final output is important in achieving a correct assessment of the determinants of the producer’s demand for a proposed project output.
The next thing is to evaluate the determinants of demand identified in Stage I above. In order to aid evaluation of the determinants of demand for purposes of subsequent projections, we need to study the characteristics of past and present demand for the project output.
Quantitatively, the data to consider include:
The above should be supplemented by such qualitative data such as:
Project the current situation into the project’s lifetime.
The steps in projections include:
The first step in projection is usually that of forecasting. In making a forecast, future variables are derived under the assumption that the same forces operating on demand for the project will continue to operate and in exactly the same ways:
(ii) Projecting using entity’s production level, and
(iii) Deriving the demand for the project’s output on the basis of the coefficient.
(ii) Then projecting the values of the determinants and
(iii) Deriving the corresponding level of demand for the project’s output
The forecast thus derived above are then converted into projection by bringing in modifications that may result from consideration of the followings:
Evaluate the existing supply conditions of the proposed project output. The approach to adopt may be described in the following stages:
Investigate if in the first place there is any supply source at all.
If so examine such sources of supply, particularly:
As in the case of the study of demand, have these data, on a historical basis. Also, have some knowledge of the effects of economic policy on these variables.
Using the approach and considerations essentially similar to those relating to demand, project the supply of the project’s output into the projects lifetime. But, in the case of supply, make two sets of projections for each policy assumption, one with the project, and the other without the project.
In the case of demand, with and without projections are necessary only when the project itself is expected to generate changes in demand.
Measure the extent of the current gap in demand for proposed project output
The above may be achieved in stages.
Consolidate the information so far obtained in the past and current demand and supply conditions and obtain a measure of the current gap in the demand for the proposed project’s output.
Pinpoint, also, the underlying reasons for whatever bottlenecks may currently exist, to allow for achieving proper solutions to such problems.
Determine the extent of future need (net demand) and distribution of the project’s output. This can be achieved by consolidating the projected demand and supply levels without the project. This serves as a starting point for the identification of alternative sizes, locations, and specifications of the proposed project.
The additions to supply provided by the project’s operations is narrow and altogether close up the projected gap between demand and supply. Some additions, in turn, generate the benefits that would determine whether or not the costs that the project would involve would be justified.
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