Analysis of Consumer Electronics Industry

Analysis of Consumer Electronics Industry
ANALYSIS OF
CONSUMER ELECTRONICS INDUSTRY
Nirmala Rachel (F08098)
Nita Teresa Jose (F08099)
Neha Dhir (F08097)
Neena Roby(F08096)
Praful Bodra(F08100)
1
Acknowledgement
We are extremely grateful to Dr.Thiagrajan

for giving us the necessary guidance to complete this project. The
whole experience of making the project was an extremely enriching
one.
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TABLE OF CONTENTS
TOPIC PAGE NO.
1. Basic Concepts of Demand and Supply 4
2. Basic Concept of Demand Forecasting 9
3. Overview of Consumer Electronics Industry 15
4. Calculation of Demand Forecasting 24
5. Future Vision 36
6. Bibliography 37
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BASIC CONCEPTS OF DEMAND AND SUPPLY

Supply and demand is perhaps one of the most fundamental concepts of economics and it is
the backbone of a market economy. Demand refers to how much (quantity) of a product or
service is desired by buyers. The quantity demanded is the amount of a product people are
willing to buy at a certain price; the relationship between price and quantity demanded is
known as the demand relationship. Supply represents how much the market can offer. The
quantity supplied refers to the amount of a certain good producers are willing to supply when
receiving a certain price. The correlation between price and how much of a good or service is
supplied to the market is known as the supply relationship. Price, therefore, is a reflection of
supply and demand. The relationship between demand and supply underlie the forces behind
the allocation of resources. In market economy theories, demand and supply theory will
allocate resources in the most efficient way possible.
THE LAW OF DEMAND

The law of demand states that, if all other factors remain equal, the higher the price of a good,
the less people will demand that good. In other words, the higher the price, the lower the
quantity demanded. The amount of a good that buyers purchase at a higher price is less
because as the price of a good goes up, so does the opportunity cost of buying that good. As a
result, people will naturally avoid buying a product that will force them to forgo the
consumption of something else they value more. The graph below shows that the curve is a
downward slope. A, B and C are points on the demand curve. Each point on the curve reflects
a direct correlation between quantity demanded (Q) and price (P). So, at point A, the quantity
demanded will be Q1 and the price will be P1, and so on. The demand relationship curve
illustrates the negative relationship between price and quantity demanded. The higher the
price of a good the lower the quantity demanded (A), and the lower the price, the more the
good will be in demand (C).
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THE LAW OF SUPPLY

Like the law of demand, the law of supply demonstrates the quantities that will be sold at a
certain price. But unlike the law of demand, the supply relationship shows an upward slope.
This means that the higher the price, the higher the quantity supplied. Producers supply more
at a higher price because selling a higher quantity at a higher price increases revenue. A, B
and C are points on the supply curve. Each point on the curve reflects a direct correlation
between quantity supplied (Q) and price (P). At point B, the quantity supplied will be Q2 .
Time and Supply

Unlike the demand relationship, however, the supply relationship is a factor of time. Time is
important to supply because suppliers must, but cannot always, react quickly to a change in
demand or price. So it is important to try and determine whether a price change that is caused
by demand will be temporary or permanent. Let's say there's a sudden increase in the demand
and price for umbrellas in an unexpected rainy season; suppliers may simply accommodate
demand by using their production equipment more intensively. If, however, there is a climate
change, and the population will need umbrellas year-round, the change in demand and price
will be expected to be long term; suppliers will have to change their equipment and
production facilities in order to meet the long-term levels of demand.
EQUILIBRIUM
When supply and demand are equal (i.e. when the supply function and demand function
intersect) the economy is said to be at equilibrium. At this point, the allocation of goods is at
its most efficient because the amount of goods being supplied is exactly the same as the
amount of goods being demanded. Thus, everyone (individuals, firms, or countries) is
satisfied with the current economic condition. At the given price, suppliers are selling all the
goods that they have produced and consumers are getting all the goods that they are
demanding. As you can see on the chart, equilibrium occurs at the intersection of the demand
and supply curve, which indicates no allocative inefficiency. At this point, the price of the
goods will be P* and the quantity will be Q*. These figures are referred to as equilibrium
price and quantity. In the real market place equilibrium can only ever be reached in theory, so
the prices of goods and services are constantly changing in relation to fluctuations in demand
and supply.
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ELASTICITY OF DEMAND
The law of demand states that a fall in price of a good raises the quantity demanded. The
elasticity of demand measures the degree of responsiveness of quantity demanded to a change
in price.
Demand for a good is said to be elastic if the quantity demanded responds substantially to
changes in the price. Demand is said to be inelastic if the quantity demanded responds only
slightly to changes in the price.
When the price elasticity of demand for a good is relatively inelastic (|Ed| < 1), the
percentage change in quantity demanded is smaller than that in price. Hence, when the price
is raised, the total revenue of producers rises, and vice versa.
When the price elasticity of demand for a good is relatively elastic (|Ed| > 1), the percentage
change in quantity demanded is greater than that in price. Hence, when the price is raised, the
total revenue of producers falls, and vice versa.
When the price elasticity of demand for a good is unit elastic (or unitary elastic) (|Ed| = 1),
the percentage change in quantity is equal to that in price.
When the price elasticity of demand for a good is perfectly elastic (Ed is undefined), any
increase in the price, no matter how small, will cause demand for the good to drop to zero.
Hence, when the price is raised, the total revenue of producers falls to zero. The demand
curve is a horizontal straight line. A banknote is the classic example of a perfectly elastic
good; nobody would pay £10.01 for a £10 note, yet everyone will pay £9.99 for it.
When the price elasticity of demand for a good is perfectly inelastic (Ed = 0), changes in the
price do not affect the quantity demanded for the good. The demand curve is a vertical
straight line; this violates the law of demand. An example of a perfectly inelastic good is a
human heart for someone who needs a transplant; neither increases nor decreases in price
affect the quantity demanded (no matter what the price, a person will pay for one heart but
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only one; nobody would buy more than the exact amount of hearts demanded, no matter how
low the price is).
Value Meaning
|Ed| = 0 Perfectly inelastic.
0 < |Ed| <
1 Relatively inelastic.
|Ed| = 1 Unitary elastic.
1 < |Ed| <
∞ Relatively elastic.
|Ed| = ∞ Perfectly elastic
TYPES OF ELASTICITY
1. Price elasticity of demand: Price elasticity of demand measures the percentage change in
quantity demanded resulting from one percentage change in price.
2. Income Elasticity of Demand: Income elasticity of demand measures the percentage

change in quantity demanded resulting from one percentage change in income.
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3. Cross price elasticity of demand:. Cross price elasticity of demand measures the
percentage change in quantity demanded of a good(x) resulting from one percentage change
in price of another good(y).
• If y is a substitute of x, the cross price elasticity of demand is positive.

• If y is a complement of x, the cross price elasticity of demand is negative.
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Demand Forecasting
Meaning of demand forecast
A demand forecast is the prediction of what will happen to your company's existing product
sales. It would be best to determine the demand forecast using a multi-functional approach.
The inputs from sales and marketing, finance, and production should be considered. The final
demand forecast is the consensus of all participating managers. You may also want to put up
a Sales and Operations Planning group composed of representatives from the different
departments that will be tasked to prepare the demand forecast.
Determination of the demand forecasts is done through the following steps:
• Determine the use of the forecast
• Select the items to be forecast
• Determine the time horizon of the forecast
• Select the forecasting model(s)
• Gather the data
• Make the forecast
• Validate and implement results
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Purpose of demand forecasting
The purpose of demand forecasting differs according to the type of forecasting.

(a)Short term forecasting
(b)Long term forecasting
(a) Purpose of short term forecasting.
It is difficult to define short run for a firm because its duration mat differ according to
the nature of the commodity. For a highly sophisticated automatic plant 3 months time
may be considered as short run while for another plant the duration may extend to 6
months or one year. Time duration may be set for demand forecasting depending upon
how frequent the fluctuations in demand are. Short term forecasting can be undertaken
by the firm for the following purposes:
(i) Appropriate scheduling of production to avoid problems of over production and

under-production.
(ii) Proper management of inventories, i.e, purchasing raw material at appropriate time
when their prices are low, and avoiding over-stocking.
(iii) Evolving suitable price strategy to maintain consistent sales.
(iv) Formulating a suitable sales strategy in accordance with the changing pattern of
demand and extent of competition among the firms.
(v) Forecasting financial requirement for the short period.
(b) Purpose of long term forecasting.
(i)Planning of a new project, expansion and modernization of an existing unit,

diversification and technological up gradation.
(ii)Planning long term financial requirement. As planning for raising funds requires
considerable advance notice, long term sales forecasts are quite essential to access long
term financial requirement.
(iii)Planning man power requirements.Tranining and personnel development are long

term propositions, taking considerable time to complete .They can be started well in
advance only on the basis of estimates of manpower requirement assessed according to
long term sales forecasts.
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Methods of Demand Forecasting
Qualitative Approach
Quantitative Approach
Consumer’s Sale force Jury of executive

survey Method composite opinion
Delphi
Method
Time Series
Forecasting
Method
Casual Model
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Quantitative Forecasting Methods
There are two forecasting models here – (1) the time series model and (2) the causal model. A
time series is a set of evenly spaced numerical data and is obtained by observing responses at
regular time periods. In the time series model, the forecast is based only on past values and
assumes that factors that influence the past, the present and the future sales of your products
will continue.
On the other hand, t he causal model uses a mathematical technique known as the regression
analysis that relates a dependent variable (for example, demand) to an independent variable
(for example, price, advertisement, etc.) in the form of a linear equation. The time series
forecasting methods are described below:
Time Series Description

Forecasting
Method
Naïve Approach Assumes that demand in the next period is the same as demand in
most recent period; demand pattern may not always be that stable
For example:
If July sales were 50, then Augusts sales will also be 50
Exponential The exponential smoothing is an averaging method that reacts

Smoothing more strongly to recent changes in demand by assigning a
smoothing constant to the most recent data more strongly; useful
if recent changes in data are the results of actual change (e.g.,
seasonal pattern) instead of just random fluctuations
F t + 1 = a D t + (1 - a ) F t
Where
F t + 1 = the forecast for the next period
D t = actual demand in the present period
F t = the previously determined forecast for the present period
• = a weighting factor referred to as the smoothing constant
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Time Series The time series decomposition adjusts the seasonality by

Decomposition multiplying the normal forecast by a seasonal factor.
The time horizon of the forecast is classified as follows:-

Description Forecast Horizon
Range Short-range Medium-range Long -range

Usually less than 3 3 months to 3 More than 3 years
months, maximum years
Duration of 1 year
Job scheduling, Sales and New product
worker production development,
Applicability assignments planning, budgeting facilities planning
Qualitative Forecasting Methods
A company may wish to try any of the qualitative forecasting methods below if they do not
have historical data on the products' sales.
Qualitative Method Description

Jury of executive The opinions of a small group of high-level managers are
opinion pooled and together they estimate demand. The group uses
their managerial experience, and in some cases, combines the
results of statistical models.
Sales force composite Each salesperson (for example for a territorial coverage) is
asked to project their sales. Since the salesperson is the one
closest to the marketplace, he has the capacity to know what
the customer wants. These projections are then combined at
the municipal, provincial and regional levels.
Delphi method A panel of experts is identified where an expert could be a
decision maker, an ordinary employee, or an industry expert.
Each of them will be asked individually for their estimate of
the demand. An iterative process is conducted until the
experts have reached a consensus.
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Consumer market The customers are asked about their purchasing plans and
survey their projected buying behaviour. A large number of
respondents is needed here to be able to generalize certain
results.
Trend Projection Method: Output and sales of a firm may increase or decrease over a
period of time .However, it has a distinct tendency either to increase or decrease in the long
run. Such long run tendency of a time series to increase or decrease over a period of time is
known as trend.
Graphic Method: This is the simplest technique to determine the trend. All the value s of
output or sales foe different years are plotted on a graph and a smooth freehand curve is
drawn passing through as many points as possible. The direction of this freehand curve –
upward or downward-shows the trend.
Year Sales(Rs core)

1995 1
1996 2
1997 3
1998 4
1999 5
2000 6
2001 7
AB is the trend line which has been drawn as a freehand curve passing through
the various points representing actual sale values.
4
actual line
3 Trend line
0
1995 1996 1997 1998 1999 2000 14
CONSUMER ELECTRONICS INDUSTRY
Market Definition
The consumer electronics market consists of the total revenues generated through the sale of
audio, video, and games console products designed primarily for domestic use. The audio sector
consists of hifi systems, cassette, CD, Minidisc and MP3recorders and players, personal stereos,
and radios. The video sector consists of CRT and flat-panel television sets, videocassette and
DVD players and recorders(standalone and integrated with TV sets), camcorders, digital
cameras, and set-top boxes. Games consoles consist of all hand-held and plug-in consoles. The
market is valued at retail selling price (RSP) with any currency conversions calculated using
constant 2006 annual average exchange rates.Asia-Pacific comprises Australia, China, Japan,
India, Singapore, South Korea and Taiwan.
Consumer electronics include electronic equipment intended for everyday use. Consumer
electronics are most often used in entertainment, communications and office productivity. Some
products classed as consumer electronics include personal computers, telephones, MP3 players,
audio equipment, televisions, calculators, GPS automotive navigation systems and playback and
recording of video media such as DVDs, VHSs or camcorders. The global consumer electronics
industry is dominated by Taiwanese, American, Japanese and Korean companies. Popular
brands include Sony, Panasonic, Toshiba, Acer, Asus, View Sonic, Apple, HP, Dell,
Samsung, LG and others.
One overriding characteristic of all consumer electronic products is the trend of ever-falling
prices. This is driven by gains in manufacturing efficiency and automation, lower labour costs as
manufacturing has moved to lower-wage countries, and improvements in semiconductor design.
Semiconductor components benefit from Moore's Law, an observed principle which states that,
for a given price, semiconductor functionality doubles every 18 months.
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Industry Trends in Consumer Electronics
The analogue-to-digital conversion has introduced many new standards in audio and video,
which greatly improves the quality and affordability of the multimedia digital experience.
Further, with the proliferation of broadband, accessing the media has become easy and
rewarding for consumers. With easy access and the rich quality enabled by the digital
revolution, the following consumer electronic trends are emerging:
 In-Home Entertainment—With prices of flat-panel TVs (LCD, Plasma, and DLP)

falling more than 30 percent a year, large screen HDTVs are showing up in more and more
homes. With homes equipped with HDTVs, and high-definition (HD) content available through
broadband, terrestrial, cable, and satellite, consumers now enjoy the complete theatre experience
in the convenience of their homes. HDTVs will become more main stream with the imminent
availability of HD content and DVD players.
 Staying Connected— Within a home and while travelling, consumers want to stay
connected. Historically, they used their laptops for accessing email and the Internet. However,
with terrestrial and mobile broadcast services for handheld devices becoming common and
broadband wireless connectivity ( WiFi and WiMAX) becoming ubiquitous, mobile devices
such as cell phones, PDAs, and portable media players are being used to access audio, video,
and data. Providers of these mobile devices are constantly updating their technology features to
keep up with consumer demand.
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 Media and Data Convergence— Traditionally, there were data-centric devices such as
PCs and PDAs and media-centric devices such as TVs and portable media players. However, the
line between them is becoming blurry because consumers are demanding products that can
handle both. The new generation of consumer gadgets must handle both media and data on the
same platform. Such convergence is driving many traditional data-centric companies such as
Microsoft and Cisco to enter the consumer market, creating fierce competition for traditional
consumer brands.
These trends indicate that the consumer electronics market is in a rapid evolution phase and the
manufacturers are under tremendous competitive pressure to be first-to-market with unique and
differentiated products. However, a successful product in the consumer market quickly attracts
copycat products from the competition, leading to rapid price erosion. To stay ahead of the
competition, consumer manufacturers are forced to constantly enhance their products or support
emerging technologies. For these reasons, we are seeing a dramatic reduction in the consumer
product life cycle.
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INDIAN CONSUMER ELECTRONIC INDUSTRY
The consumer electronics market is one of the largest segments in the electronics industry in
India. With a market size of Rs.15,897.13 crore ($3.89 billion) in 2006, catering to a population
of more than 100 crore people, the consumer electronics industry in India is poised for strong
growth in the years to come.
It is predicted that the Indian audio/video consumer electronics industry will grow to
Rs.26,931.13 crore ($6.59 billion) by 2011, rising at a Compound Annual Growth Rate (CAGR)
of 10.0 per cent from Rs.18,390 crore ($4.5 billion) in 2007.
The growth will be aided by a multitude of factors, including:
—Growing consumer confidence due to rising disposable incomes;
—Easy financing schemes that are making purchases possible;
—Increased local manufacturing;
—Expanding distribution networks;
—Sporting events, such as the Cricket World Cup.
Television continues to be the mainstay of the consumer electronics industry in India with the
transition slowly occurring to newer technologies such as LCD and PDP.
Increased customisation to suit domestic demand
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Companies are focusing on customising products to suit Indian tastes, thereby creating a niche
for themselves. Several companies are conducting market research in order to understand the
psyche of an Indian consumer. The inputs from this research are determining product attributes
and pricing and accordingly are achieving better acceptance among consumers.
By conducting consumer research, companies are trying to identify customer requirements,

thereby incorporating specific design elements into their products. For example, LG in 2006
launched a range of TVs from 21 inches to 29 inches in size that were designed based on the
company's research on consumer preferences for television sets.
Expanded distribution is critical
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In order to tap semi-urban and rural demand, companies are expanding their distribution
networks in these areas. The move has positively impacted sales for companies opting for rural
expansion.
However, rural consumers have not been as brand-conscious as their urban counterparts. Due to
the lower prices of unbranded products, rural consumers have been inclined to buy these
products, although they often have poor quality. As the awareness among rural consumers rises,
they are expected to show a preference for branded products. This is reflected by the fact that
established players are reporting higher sales of products in rural areas.
MARKET SEGMENTATION I
Sales of video equipment form the most lucrative segment of the Indian consumer
electronics market, accounting for 80.8% of total revenues.
Audio equipment sales generate further 14.9% of the market value.
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MARKET SEGMENTATION II
India accounts for 6.9% of the Asia-Pacific consumer electronics market's value.
The most lucrative market in the region is Japan, which generates 37.5% of the total
revenues.
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Domestic manufacturing to expand

Although electronics production has remained a miniscule portion of overall Indian
manufacturing for a long time, the trend is gradually changing. The government has been
focusing increasingly on developing the manufacturing sector by developing infrastructure,
rationalising duties and creating export-promotion zones. This is in alignment with India
figuring into the plans of several companies that want to cater to the domestic and export
markets.
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Consumer electronics industry market forecast 2006 - 2011

Domestic consumption is reaching significant size to trigger manufacturing in the electronics
sector. India also is assuming a significant place in the global plans of several major
electronics manufacturers, thereby positioning it also as an export base.
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Demand forecasting of consumer durables
Colour Television
Fig (i) shows the CTV sales in India from 2003 to 2008.The Sales
forecast for 2009 can be found by the following forecasting methods: Figures(in
Year million No’s)
 Moving Average 2003 8.5
2004 9.25
Moving Average = (Sum of the most recent n data values)/n 2005 10.25
To Illustrate the moving average method, consider the sales figures w.r.t Fig 2006 11.75
2007 14.5
(i). Here we take a two year moving average. The moving average calculation
for the first two years for the time series is 2008 16.5
Moving average = (8.5+9.25)/2
The moving average as the forecast for the third year i.e. 2005 is then taken. Because the actual
values observed in 2005 is 10.25, the forecast error for 2005 is obtained by finding the difference
between the observed value of the time series and the forecast.
The calculation for the second two year moving average is
Moving average= (9.25+10.25)/2 .Thus the calculated result is as follows:
Moving
Time Series Average Squared Forecast
Year Value Forecast Forecast Error Error
2003 8.5
2004 9.25
2005 10.25 8.875 1.375 1.890625
2006 11.75 9.75 2 4
2007 14.5 11 3.5 12.25
2008 16.5 13.125 3.375 11.390625
Total 29.53125
One variation to this method is the weighted moving averages which involves selecting a different
weight for each data value and the computing the weighted average of the most recent n values.
Forecast for 2009=((11.75*(1/6))+(14.5*(2/6))+(16.5*(3/6)))= 15.041
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 Exponential Smoothing
This is a special case of the weighted moving averages method in which we select only one
weight---the weight for the most recent observation. The basic exponential model is as
follows:
Ft+1= aY1 +( 1-a)F1

Where
Ft+1= forecast of the time series for the period t+1
Yt= actual value of the time series in period t
Ft= forecast of the time series for the period t
a = smoothing constant
To illustrate the forecast for 2006,

F4= 0.2 *10.25 + 0.8* 8.875
=8.97
Where 0.2 and 0.8 are smoothing constants and 10.25 and 8.875 is time series value and
moving average forecast for 2005.Similarly we calculate the remaning as:
Time Series Exponential Forecast Error(Yt-

Year(t) Value(Yt) Forecast(Ft) Ft)
2003 8.5
2004 9.25 8.5 0.75
2005 10.25 8.65 1.6
2006 11.75 8.97 2.78
2007 14.5 9.526 4.974
2008 16.5 10.5208 5.9792 Thus
the
forecast for 2009 = (0.2*16.5)+ (0.8*10.52) =11.71
 Trend Projection Method

Through trend projection method we can forecast a time series that has a long term trend.
The trend component should reflect the gradual shifting-in this case growth of the time
series values
Equation for linear trend
Tt = b0 + b1t
Tt = trend value of the time series in the period t

b0 = intercept of the trend line
b1 = slope of the trend line
25
t=time
Computing the slope (b1) and intercept (b0)
b1 = (∑tYt - (∑t∑Yt)/n )/((∑t2 –(∑t)2/n)
b0 = ∑Yt/n –b1∑t/n
Therefore the trend projection is done as:
Sales
Year (t) Value(Yt) Yt(t) t^2
1 8.5 8.5 1
Sum of t =21 ;Sum
2 9.25 18.5 4
of Sales Value Yt =70.75
3 10.25 30.75 9
; Yt *t = 4 11.75 47 16 276.25 ; t^2
=91 5 14.5 72.5 25
6 16.5 99 36
Therefore, µt
=3.5 µY =11.791
Applying the formula,
b1 =1.64 ; b0 = 6.05
Linear Trend,Tt=6.05+1.64*t
Therefore Trend for year 2009, T6=6.05+1.64*7=17.53
Similarly the demand for other consumer durables can also be predicted
Sales
Figures(in Refrigerator
2003 3.7
2004 3.9
2005 4.1 26
2006 4.4
2007 4.75
2008 5.5
 Moving Average Method
Time Series Moving Average Squared Forecast

Year Value Forecast Forecast Error Error
2003 3.7
2004 3.9
2005 4.1 3.8 0.3 0.09
2006 4.4 4 0.4 0.16
2007 4.75 4.25 0.5 0.25
2008 5.5 4.575 0.925 0.855625
Total 1.355625
Therefore, Forecast for 2009=((4.4*(1/6))+(4.75*(2/6))+(5.5*(3/6)))= 5.06
 Exponential Smoothening Method
Time
Year(t Series Exponential Forecast
) Value(Yt) Forecast(Ft) Error(Yt-Ft)
2003 3.7
2004 3.9 3.7 0.2
2005 4.1 3.74 0.36
2006 4.4 3.812 0.588
2007 4.75 3.9296 0.8204
2008 5.5 4.09368 1.40632
Thus the forecast for 2009 =
(0.2*5.5)+ (0.8*4.09) =4.372
Year Sales
(t) Value(Yt) Yt(t) t^2
1 3.7 3.7 1
2 3.9 7.8 4
27
3 4.1 12.3 9
4 4.4 17.6 16
5 4.75 23.75 25
6 5.5 33 36
Sum of t =21 ;Sum of Sales Value Yt =26.35 ; Yt *t = 98.15 ; t^2 =91
Therefore, µt =3.5 µY =4.39
b1 =.338; b0 = 3.209
Linear Trend,Tt= 3.209+0.338t
Therefore Trend for year 2009, T9=3.209+0.338*7=5.575
Air Conditioners
Sales Figures(in
2003 1
28
2004 1.25
2005 1.5
2006 1.85
2007 2.2
2008 Sales
2.75
Year (t) Value(Yt) Yt(t) t^2
 1 1 Method
Moving Average 1 1
2 1.25 2.5 4
3 1.5 4.5
Moving 9 Squared
4 1.85 Series
Time 7.4
Average 16 Forecast
5
Year 2.2
Value 11
Forecast 25 Forecast Error Error
6
2003 1 2.75 16.5 36
2004 1.25
2005 1.5 1.125 0.375 0.140625
2006 1.85 1.375 0.475 0.225625
2007 2.2 1.675 0.525 0.275625
2008 2.75 2.025 0.725 0.525625
Total 1.1675
Forecast for 2009=((1.85*(1/6))+(2.2*(2/6))+(2.75*(3/6))) =2.41

 Exponential Smoothening
Time Series Exponential Forecast Error(Yt-

Year(t) Value(Yt) Forecast(Ft) Ft)
2003 1
2004 1.25 1 0.25
2005 1.5 1.05 0.45
2006 1.85 1.14 0.71
2007 2.2 1.282 0.918
2008 2.75 1.4656 1.2844
Thus the Forecast for 2009 = (0.2*2.75)+ (0.8*1.46) =1.718
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b1 =.3413 ; b0 = .5633
Therefore Trend for year 2009, T6= 0.5633+0.3413*7=2.9524
DVD Players
Year Sales Figures

2003 1
2004 2.5
30
2005 4.5
2006 6
2007 7.25
2008 8
 Two Year Moving Average
Squared
Time Series Moving Average Forecas Forecast
Year Value Forecast t Error Error
2003 1
2004 2.5
2005 4.5 1.75 2.75 7.5625
2006 6 3.5 2.5 6.25
2007 7.25 5.25 2 4
2008 8 6.625 1.375 1.890625
Total 19.70313
Forecast for 2009=((6*(1/6))+(7.25*(2/6))+(8*(3/6))) =7.41
Year( Time Series Exponential Forecast

t) Value(Yt) Forecast(Ft) Error(Yt-Ft)
2003 1
2004 2.5 1 1.5
2005 4.5 1.3 3.2
2006 6 1.94 4.06
2007 7.25 2.752 4.498
2008 8 3.6516 4.3484
Thus the Forecast for 2009 = (0.2*8)+ (0.8*3.65) =4.52
Year (t) Sales Value(Yt) Yt(t) t^2

1 1 1 1
31
2 2.5 5 4
3 4.5 13.5 9
4 6 24 16
5 7.25 36.25 25
6 8 48 36
b1 =1.4214 ; b0 = .099
Therefore Trend for year 2009, T7= 0.099+1.4214*7=10.044
Washing Machines
Year Sales Figures

2003 1.4
2004 1.5
32
2005 1.7
2006 1.85
2007 2.1
2008 2.25
Moving
Average Squared
Time Series Forecas Forecas Forecast
Year Value t t Error Error
2003 1.4
2004 1.5
2005 1.7 1.45 0.25 0.0625
2006 1.85 1.6 0.25 0.0625
2007 2.1 1.775 0.325 0.105625
2008 2.25 1.975 0.275 0.075625
Total 0.30625
Forecast for 2009=((1.85*(1/6))+(2.1*(2/6))+(2.25*(3/6)))=2.13
Year(t Time Series Exponential Forecast

Thus ) Value(Yt) Forecast(Ft) Error(Yt-Ft) the Forecast for 2009 =
2003 1.4 (0.2*2.25)+ (0.8*1.66) =1.778
2004 1.5 1.4 0.1
2005 1.7 1.42 0.28
2006 1.85 1.476 0.374
2007 2.1 1.5508 0.5492
2008 2.25 1.66064 0.58936
Yea Sales
r (t) Value(Yt) Yt(t) t^2
1 1.4 1.4 1
2 1.5 3 4
3 1.7 5.1 9
4 1.85 7.4 16
5 2.1 10.5 25
6 2.25 13.5 36
33
b1 =0.177 ; b0 = 1.805
Therefore Trend for year 2009, T7= 1.1805+0.177*7= 2.42
Microwave Oven
Sales
Year Figures
2003 0.275
2004 0.37
2005 0.5
2006 0.65
2007 0.8
2008 1
Year Time Series Moving Forecas Squared
34
Averag
e
Forecas Forecast
Value t t Error Error
200
3 0.275
200
4 0.37
200 0.03150
5 0.5 0.3225 0.1775 6
200 0.04622
6 0.65 0.435 0.215 5
200 0.05062
7 0.8 0.575 0.225 5
200 0.07562
8 1 0.725 0.275 5
0.20398
Total 1
Forecast for 2009=((0.65*(1/6))+(.8*(2/6))+(1*(3/6)))= .875
Exponenti
Time al
Year(t Series Forecast(F Forecast
) Value(Yt) t) Error(Yt-Ft)
2003 0.275
2004 0.37 0.275 0.095
2005 0.5 0.294 0.206
2006 0.65 0.3352 0.3148
2007 0.8 0.39816 0.40184
2008 1 0.478528 0.521472
Thus the Forecast for 2009 = (0.2*1)+ (0.8*.478) =.5824
Yea Sales
r (t) Value(Yt) Yt(t) t^2
1 0.275 0.275 1
2 0.37 0.74 4
3 0.5 1.5 9
35
4 0.65 2.6 16
5 0.8 4 25
6 1 6 36
Therefore, µt =3.5 µY =.6
Applying the formula,b1 =0.145 ; b0 = .092
Therefore Trend for year 2009, T7=0.092675+0.14471*7= 1.105
VISION FOR THE FUTURE
36
BIBLIOGRAPHY
37
38

Analysis of Consumer Electronics Industry

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Analysis of Consumer Electronics Industry

Nirmala Rachel (F08098)

Nita Teresa Jose (F08099)

Neha Dhir (F08097)

We are extremely grateful to Dr.Thiagrajan

TOPIC PAGE NO.

1. Basic Concepts of Demand and Supply 4

2. Basic Concept of Demand Forecasting 9

3. Overview of Consumer Electronics Industry 15

4. Calculation of Demand Forecasting 24

BASIC CONCEPTS OF DEMAND AND SUPPLY

THE LAW OF DEMAND

THE LAW OF SUPPLY

Time and Supply

2. Income Elasticity of Demand: Income elasticity of demand measures the percentage

• If y is a substitute of x, the cross price elasticity of demand is positive.

Meaning of demand forecast

Determination of the demand forecasts is done through the following steps:

• Determine the use of the forecast

• Select the items to be forecast

• Determine the time horizon of the forecast

• Select the forecasting model(s)

• Gather the data

• Make the forecast

• Validate and implement results

Purpose of demand forecasting

The purpose of demand forecasting differs according to the type of forecasting.

(a) Purpose of short term forecasting.

(i) Appropriate scheduling of production to avoid problems of over production and

(iii) Evolving suitable price strategy to maintain consistent sales.

(v) Forecasting financial requirement for the short period.

(b) Purpose of long term forecasting.

(i)Planning of a new project, expansion and modernization of an existing unit,

(iii)Planning man power requirements.Tranining and personnel development are long

Methods of Demand Forecasting

Consumer’s Sale force Jury of executive

Quantitative Forecasting Methods

Time Series Description

If July sales were 50, then Augusts sales will also be 50

Exponential The exponential smoothing is an averaging method that reacts

F t + 1 = the forecast for the next period

D t = actual demand in the present period

F t = the previously determined forecast for the present period

• = a weighting factor referred to as the smoothing constant

Time Series The time series decomposition adjusts the seasonality by

The time horizon of the forecast is classified as follows:-

Range Short-range Medium-range Long -range

Qualitative Forecasting Methods

Qualitative Method Description

Year Sales(Rs core)

CONSUMER ELECTRONICS INDUSTRY

Industry Trends in Consumer Electronics

 In-Home Entertainment—With prices of flat-panel TVs (LCD, Plasma, and DLP)

INDIAN CONSUMER ELECTRONIC INDUSTRY

Increased customisation to suit domestic demand

By conducting consumer research, companies are trying to identify customer requirements,

Domestic manufacturing to expand

Consumer electronics industry market forecast 2006 - 2011

Demand forecasting of consumer durables

Moving average = (8.5+9.25)/2

The calculation for the second two year moving average is

Moving average= (9.25+10.25)/2 .Thus the calculated result is as follows:

Forecast for 2009=((11.75(1/6))+(14.5(2/6))+(16.5*(3/6)))= 15.041

Therefore, Forecast for 2009=((4.4(1/6))+(4.75(2/6))+(5.5*(3/6)))= 5.06

Forecast for 2009=((1.85(1/6))+(2.2(2/6))+(2.75*(3/6))) =2.41

Thus the Forecast for 2009 = (0.22.75)+ (0.81.46) =1.718

Forecast for 2009=((6(1/6))+(7.25(2/6))+(8*(3/6))) =7.41

Thus the Forecast for 2009 = (0.28)+ (0.83.65) =4.52

Forecast for 2009=((1.85(1/6))+(2.1(2/6))+(2.25*(3/6)))=2.13

Forecast for 2009=((0.65(1/6))+(.8(2/6))+(1*(3/6)))= .875

Thus the Forecast for 2009 = (0.21)+ (0.8.478) =.5824