ALLAMA IQBAL OPEN UNIVERSITY

Course Production & Operation ManagementCode (8509)Semester Spring, 2015Level MBA Marketing (3½ Years)Tutor Sir Waqas RazaName waQas ilYasRoll # BA 582702

Assignment # 02Topic =

Factors that Influence Demand

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ACKNOWLEDGEMENT

All gratitude and thanks to almighty “ALLAH” the gracious, the most merciful and beneficent who gave me courage to undertake and complete this task. I am very much obliged to my ever caring and loving parents whose prayers have enabled to reach this stage. I am grateful to almighty ALLAH who made me able to complete the work presented in this report. It is due to HIS unending mercy that this work moved towards success. I am highly indebted to my course instructor for providing me an opportunity to learn about the “which is vital ingredient” of MBA program. I am very grateful to my teacher (Sir Waqas Raza) for providing me guideline for the completion of this report. I feel great pride and pleasure on the accomplishment of this report.

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ABSTRACT

This report is the Practical part of the most vital practice of our MBA-Marketing program. The sole objective of my activity is to familiarize with the practical manipulation of business organization. This report has been written to know how big organizations like Bata Pakistan Limited manage their teams to achieve their common goals. In the first phase of the report there is the general introduction about the company and then different terms have been explained, then the mission, values, different services and different strategies of the organization have been explained. In the next part, SWOT analysis of the firm have been done by the help of which it is identified that what are the strong areas of the company and where it lacks so that it can improve, and then in the end most important my experience while visiting in the Bata Pakistan Limited.

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DEDICATION This report is dedicated to the greatest man in the world that shows us the right path. Who is the great patron of the mankind that is Holy Prophet Hazrat Muhammad (PBUH). I would also like to dedicate this small effort of extract to my Parents and Teachers. They have always been a shining star to look upon, to give light and to show me the directions whenever I am lost. May Allah give them more strength and long life to guide me forever. Ameen!

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Table of Contents

Introduction of Topic 06Practical Review of Company 12Vision Statement 13Mission Statement 13Application of Topic 14SWOT Analysis 15 Conclusion 16Recommendations 16References 16

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Introduction of Topic:

Factor That Influence Demand

Introduction : In economics, demand is the utility for a good or service of an economic agent, relative to his/her income. (This distinguishes "demand" from "quantity demanded", where demand is a listing or graphing of quantity demanded at each possible price. In contrast to demand, quantity demanded is the exact quantity demanded at a certain price. Changing the actual price will change the quantity demanded, but it will not change the demand, because demand is a listing of quantities that would be bought at various prices, not just the actual price.)

Demand is a buyer's willingness and ability to pay a price for a specific quantity of a good or service. Demand refers to how much (quantity) of a product or service is desired by buyers at various prices. The quantity demanded is the amount of a product people are willing or able to buy at a certain price; the relationship between price and quantity demanded is

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known as the demand. The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time, ceteris paribus. Utility preferences and choices underlying demand can be represented as functions of cost, benefit, odds and other variables.

Different types of Goods Demand Negative Demand

If the market response to a product is negative, it shows that people are not aware of the features of the service and the benefits offered. Under such circumstances, the marketing unit of a service firm has to understand the psyche of the potential buyers and find out the prime reason for the rejection of the service. For example: if passengers refuse a bus conductor's call to board the bus. The service firm has to come up with an appropriate strategy to remove the misunderstandings of the potential buyers. A strategy needs to be designed to transform the negative demand into a positive demand.

No Demand If people are unaware, have insufficient information about

a service or due to the consumer's indifference this type of a demand situation could occur. The marketing unit of the firm should focus on promotional campaigns and communicating reasons for potential customers to use the firm's services. Service differentiation is one of the popular strategies used to compete in a no demand situation in the market.

Latent DemandAt any given time it is impossible to have a set of services

that offer total satisfaction to all the needs and wants of society. In the market there exists a gap between desirables and the availables. There is always a search on for better and newer offers to fill the gap between desirability and availability. Latent demand is a phenomenon of any economy at any given time, it should be looked upon as a business opportunity by service firms and they should orient themselves to identify and exploit such opportunities at the right time. For example a passenger traveling in an ordinary bus dreams of traveling in a

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luxury bus. Therefore, latent demand is nothing but the gap between desirability and availability.

Seasonal DemandSome services do not have an all year round demand,

they might be required only at a certain period of time. Seasons all over the world are very diverse. Seasonal demands create many problems to service organizations, such as:- idling the capacity, fixed cost and excess expenditure on marketing and promotions. Strategies used by firms to overcome this hurdle are like - to nurture the service consumption habit of customers so as to make the demand unseasonal, or other than that firms recognize markets elsewhere in the world during the off-season period. Hence, this presents an opportunity to target different markets with the appropriate season in different parts of the world. For example the need for Christmas cards comes around once a year. Or the seasonal fruits in a country.

Demand patterns need to be studied in different segments of the market. Service organizations need to constantly study changing demands related to their service offerings over various time periods. They have to develop a system to chart these demand fluctuations, which helps them in predicting the demand cycles. Demands do fluctuate randomly, therefore, they should be followed on a daily, weekly or a monthly basis 

Other Types of Demand Effective Demand: This occurs when a consumers desire

to buy a good can be backed up by his ability to afford it. Derived Demand: This occurs when a good or factor of

production such as labour is demanded for another reason A Giffen good is a good where an increase in price of a

basic item leads to an increase in demand, because very poor people cannot afford any other luxury goods.

An ostentatious good, is a good where an increase in price leads to an increase in demand because people believe it is now better.

Composite Demand: A good which is demanded for multiple different uses

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Joint Demand: goods bought together e.g. printer and printer ink.

Important Factors That Influence the Demand of Goods

The demand changes as a result of changes in price, other factors determining it being held constant. We shall explain below in detail how these other factors determine market demand for a commodity. These other factors determine the position or level of demand curve of a commodity. It may be noted that when there is a change in these non-price factors, the whole curve shifts rightward or leftward as the case may be. The following factors determine market demand for a commodity.

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Tastes and Preferences of the ConsumersAn important factor which determines the demand for a good is the tastes and preferences of the consumers for it. A good for which consumers’ tastes and preferences are greater, its demand would be large and its demand curve will therefore lie at a higher level. People’s tastes and preferences for various goods often change and as a result there is change in demand for them. The changes in demand for various goods occur due to the changes in fashion and also due to the pressure of advertisements by the manufacturers and sellers of different products. On the contrary, when certain goods go out of fashion or people’s tastes and preferences no longer remain favorable to them, the demand for them decreases.Income of the People:The demand for goods also depends upon the incomes of the people. The greater the incomes of the people, the greater will be their demand for goods. In drawing the demand schedule or the demand curve for a good we take income of the people as given and constant. When as a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upward and vice versa. The greater income means the greater purchasing power. Therefore, when incomes of the people increase, they can afford to buy more. It is because of this reason that increase in income has a positive effect on the demand for a good. When the incomes of the people fall, they would demand less of a good and as a result the demand curve will shift downward. For instance, as a result of economic growth in India the incomes of the people have greatly increased owing to the large investment expenditure on the development schemes by the Government and the private sector. As a result of this increase in incomes, the demand for good grains and other consumer goods has greatly increased. Likewise, when because of drought in a year the agriculture production greatly falls, the incomes of the farmers decline. As a result of the decline in incomes of the farmers, they will demand less of the cotton cloth and other manufactured products.

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Changes in Prices of the Related GoodsThe demand for a good is also affected by the prices of other goods, especially those which are related to it as substitutes or Complements. When we draw the demand schedule or the demand curve for a good we take the prices of the related goods as remaining constant. Therefore, when the prices of the related goods, substitutes or complements, change, the whole demand curve would change its position; it will shift upward or downward as the case may be. When the price of a substitute for a good falls, the demand for that good will decline and when the price of the substitute rises, the demand for that good will increase.

For example, when price of tea and incomes of the people remain the same but the price of coffee falls, the consumers would demand less of tea than before. Tea and coffee are very close substitutes. Therefore, when coffee becomes cheaper, the consumers substitute coffee for tea and as a result the demand for tea declines. The goods which are complementary with each other, the fall in the price of any of them would favorably affect the demand for the other. For instance, if price of milk falls, the demand for sugar would also be favorably affected. When people would take more milk, the demand for sugar will also increase. Likewise, when the price of cars falls, the quantity demanded of them would increase which in turn will increase the demand for petrol.

Advertisement ExpenditureAdvertisement expenditure made by a firm to promote the sales of its product is an important factor determining demand for a product, especially of the product of the firm which gives advertisements. The purpose of advertisement is to influence the consumers in favor of a product. Advertisements are given in various media such as newspapers, radio, and television. Advertisements for goods are repeated several times so that consumers are convinced about their superior quality. When advertisements prove successful they cause an increase in the demand for the product.

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The Number of Consumers in the MarketThe market demand for a good is obtained by adding up

the individual demands of the present as well as prospective consumers of a good at various possible prices. The greater the number of consumers of a good, the greater the market demand for it. Now, the question arises on what factors the number of consumers for a good depends. If the consumers substitute one good for another, then the number of consumers for the good which has been substituted by the other will decline and for the good which has been used in place of the others, the number of consumers will increase. Besides, when the seller of a good succeeds in finding out new markets for his good and as a result the market for his good expands the number of consumers for that good will increase. Another important cause for the increase in the number of consumers is the growth in population. For instance, in India the demand for many essential goods, especially food grains, has increased because of the increase in the population of the country and the resultant increase in the number of consumers for them.

Consumer’s Expectations with Regard to Future Prices

Another factor which influences the demand for goods is consumers’ expectations with regard to future prices of the goods. If due to some reason, consumers expect that in the near future prices of the goods would rise, then in the present they would demand greater quantities of the goods so that in the future they should not have to pay higher prices. Similarly, when the consumers expect that in the future the prices of goods will fall, then in the present they will postpone a part of the consumption of goods with the result that their presentThis list is not exhaustive. All facts and circumstances that a buyer finds relevant to his willingness or ability to buy goods can affect demand. For example, a person caught in an unexpected storm is more likely to buy an umbrella than if the weather were bright and sunny.

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Bata Pakistan Limited

Since 1942 Bata Pakistan has been rendering its services to its valued customers by offering quality products. It was incorporated in Pakistan as Bata Shoe Company (Pakistan) Limited in 1951 and went public to become Bata Pakistan Limited in the year 1979.Since its inception, the company has not only maintained a good reputation of manufacturing high quality footwear for all segments but has also been designing shoes in accordance with the changing fashions and trends. Bata Pakistan is serving its valued customers through a strong retail network comprising of more than 400 retail outlets, 467 registered wholesale dealers, 13 wholesale depots, 28 wholesale distributors and 41 DSP wholesale franchise across the country. Besides catering local market, Bata Pakistan also shows its presence in an international footwear market through its export department which is constantly exploring new potential market in order to earn foreign exchange.

Being a multinational company Bata Pakistan has played a vital role in the economic progress of Pakistan. It has introduced sophisticated technology and business skills to the country and provided direct and indirect employment to about 10,000 people. Along with its own manufacturing capacity Bata Pakistan is also outsourcing its products nationally and internationally to meet the demands of its valued customers. As the corporate social responsibility is an integral part of every business and Bata Pakistan fulfills it’s CSR by patronizing various charitable organizations and also take part in rehabilitation of society during the natural disasters.

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Moreover Bata Pakistan is also operating an international program under the name of Bata Children program, which aims to create a brighter future for the children of the community in which we operate. Under this program Bata Pakistan encourages and supports under privileged children by providing shoes, donations and also arranging different healthy activities for them which add values in their lives. Bata has always been the market leader and in order to maintain its leadership it has invested millions of rupees in updating its systems and equipment during the last few years. This will enable the company to expand, modernize and develop its operations and in the process provide additional employment opportunities. Bata the market leader is well equipped to cater the customer’s demands and to meet future challenges. 

Vision of the Foundation To grow as a dynamic, innovative and market driven domestic manufacturer and distributor, with footwear as our core business, while maintaining a commitment to the country, culture and environment in which we operate.

Mission of the foundation To be successful as the most dynamic, flexible and market responsive organization, with footwear as its core business.

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Review of theoretical and practical situation with respect to topic Bata Industrials is a specialized division of Bata Pakistan Limited catering to footwear needs of various industries and institutions. Large industries and private/public institutions are sold safety footwear for their workers by Bata Industrials Division directly and through specialized distributors. Whilst comfort and durability are essential properties of our footwear, we provide special features like impact resistance, heat resistance, oil resistance, lightweight etc. depending upon specific industry requirements like steel, oil, cement etc. In addition, we provide excellent quality canvas PT shoes, miner's shoes etc. to meet specific requirements of army, police forces and mining industry. For corporate offices, we have a selected range of regular wear occupational shoes for management level people working in an industry or construction environment. The single overriding goal is: To guarantee the wearers of our shoes optimum safety, health and comfort. This philosophy has won Bata industrials an outstanding reputation in the better class of safety footwear.

When Bata entered in the market its low price. Consumers were demanding Bata as being multi-national company brand. The improvement adopted by management is liked by public and a good behavior of demanders towards Bata put a rightward shift in demand. Bata is most demanded in Pakistan for being an international product and giving their competitors tough challenge in the market. Bata always care for people’s want and according to demand they brings changes continuously in its products and make it better according to consumers’ expectations and sets a reasonable price which always match with demand. The price, as compare to of Bata with other competitors, is much high because management is not ready to compromise on quality and input costs that maintain it as Footwear. The management of Bata can apply such techniques to increase its demand and value all over the country, being as costly product than other substitutes, for this they have to introduce new product with its low cost of packing and quantity. If somewhere demand of competitors is high then it should promote high advertisement for awareness among people to take full advantage. The management has to continuously make changes in Designs.

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SWOT AnalysisStrength

Adequate financial resources Access to economies of scale Cost advantages Product innovation skills Superior technological skills

Weaknesses Weak market image Weak distribution network Below-average marketing skills Unable to finance needed changes in strategy Higher overall unit costs relative to key competitors

Threats

Ability to transfer skills or technological know-how to new productions and businesses

integrating forward Falling trade barriers in attractive foreign markets Complacency among rival firms Ability to grow rapidly because of strong increases in

market demand Emerging new technologies

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Opportunities

Entry of highly demanded foreign competitors Rising demand of substitute products Slower market growth Difference between foreign exchange rates and trade

policies of foreign governments Costly regulatory requirements Vulnerability to recession and business cycles Growing bargaining power of customers and suppliers

Conclusion & Recommendations Stock of capital goods in hand influence the investment demand in just the same way as the stock of consumer goods in hand affects the household consumption-savings decision. To the extent that a given industry is well equipped with productive facilities and inventory of finished goods, money remains blocked in that industry, thus affecting return on investment. Any industry with such a kind of problem would be forced to accept lesser profits. With lower rates of return, incremental investment into the industry would also be less. Thus an excess or inadequate availability of stock of capital determines investment demand in the economy.

References: www.bata.pk www.kse.com.pk www.lse.com.pk Personal observations Wikipedia Relevant text book of AIOU Discussion by Bata Branch Manager Teacher discussion

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