Case Study
The market research department of M/s. Bengal Cable Company, Calcutta was entrusted with forecasting the demand for cables of the company. It was felt that the demand for cables is considerably influenced by the space of industrialization, power development transmission and industrial and house wiring. Bengal Cable Company is exclusively engaged in the manufacture of required by industry and housing.
While many factors such as the rate of building activity purchasing power, etc. are important in determining the demand for cables, it was felt that most of the demand for cables can be explained in terms of the growth of power consumption in the country. Since for industry and buildings, cables are a must, the price factor was not considered as significant variable in determining the demand for cables. After all this product has no substitute.
The market research department of M/s Bengal Cable Company, Calcutta, developed a model relating all India cable sales(Industrial and housing cables) to the peak demand for power in the country. The analysis based on the time series data has shown a strong positive correlation between all India cable sales and the peak demand for the corresponding year.
The estimating equation is as follows:-
Yt=1173+28.5 Xt
Where Yt=annual cable sales 9in thousand coils) for all India in year t
Xt=peak demand in million K.W. in year t
r2=0.94
The Central Electricity Authority of the Government of India has estimated the peak demand for the year 2004 as 98.5 million K.W., taking into account likely industrial and building growth and the availability of power on an all India basis. As there is no marked seasonal fluctuation, it is considered proper to assume uniform monthly cable sales throughout the year. It is estimated that Bengal Cables market share in 2004 will be about 20 percent.
QUESTIONS
1. Find out the all India cable demand for the year 2004 and monthly estimated sales of Bengal cables Company.
2. The price factor was not considered important in forecasting all India demand for cables. Will the same be true in estimated demand for the company's cables?
3. Suppose the market share of the company during the previous two years was 10 and 15 percent respectively. Was, therefore the company justified in assuring the market share as 20 percent?