Essay: Demand Estimation
According to Salvatore (2006), the actions within the global market can be evaluated in terms of the demand or supply. The individual actions in the industry determine the industry’s efficiency. One the new key management tools employed by firms that have been successful in their operations are the demand estimation. For the managers to be able to estimate the precise market demand, it is imperative to know the consumer spending. The level of consumer spending is dictated by the level of disposable income. Market research plays a key role in ensuring that the demand estimated is very close to the actual demand realized by the sales personnel.
Demand estimation is a management tool that when accurately calculated enables a firm to achieve high level of efficiency since the firm can plan its operations to achieve the best results (Salvatore 2006). The firm plans its level of production and minimizes the costs hence increasing the profitability. When planning the level of production, there is no over production or under production since it is the estimated demand that dictates the estimated optimal products to be produced. In order to guarantee that efficiency is achieved, the market research results guides the management to plan effectively. Planning ensures that the firm orders raw materials in time. Depending with the locations of a firm’s different plants, managers decide whether sits accost effective to produce at a central location or at the different location. This is because producing at a centralized location enables a firm to employ the scale of economies while taking into consideration the transport cost.
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