MANAGERIAL ECONOMICS

Demand Forecasting:
The Colour Television Market
Adrija Chakraborty (F09063)

Aman Gupta (F09067)

Pritha Gupta (F09102)

Sofia Saxena (F09115)

This report primarily does a demand forecasting of Color TVs in the years to
come. In this forecasting, various standard and accepted forecasting techniques
are used for accurate prediction.
Contents
ABSTRACT...............................................................................................................3
INTRODUCTION:......................................................................................................3
DEMAND FORECASTING..........................................................................................7
NECESSITY OF DEMAND FORECASTING:..................................................................7
RECENT TRENDS IN DEMAND FORECASTING:..........................................................9
METHODS OF DEMAND FORECASTING USED FOR COLOUR TELEVISION DEMAND
PREDICTION:..........................................................................................................11
CONSUMER ELECTRONICS MARKET IN INDIA: COLOUR TELEVISION......................16
THE COLOUR TV INDUSTRY POST LIBERALISATION:..............................................17
DEMAND FORECASTING FOR COLOUR TELEVISION...............................................20
CONCLUSION:........................................................................................................23
REFERENCES:........................................................................................................24
REFERENCES:

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 Abstract
With the flow of information and with increasing rural spending the demand for consumer electronics has increased
many folds. Each year thousands of new products are introduced and each product is unique. In this cut throat
competition it becomes essentially important and retail and production firms need to take into account various
factors including the lead time and seasonality of goods. In this report, we study the various techniques used by
retailers in India to perform demand forecasting and analysis. We present a study where we understand that
historical data and judgmental techniques are primarily used for forecasting of demand.

INTRODUCTION:
In the last five years colour television industry (CTV) has witnessed drastic changes in the
intensity of competition. Exchange schemes, free gifts, price offs, prizes, deferred payment
schemes and other incentives as promotional tools have been deployed by the players, which
certainly have made the market, vibrant and pulsating. A major factor contributing to the growth
has been availability of consumer financing schemes. Concomitantly, the industry is going
through turbulent transformation. Companies are relooking at their strategies and are desperate
for growth. Since this is a technology driven industry, companies need to constantly improvise,
innovate and customise their products. Coloured cabinets, headphones, 3-D 360 degree sound
technology and e-mail TV, plasma TV and golden eye technology are just a few examples. The
last few years have seen a quantitative and qualitative change in TV technology and software.
With the advent of several local and foreign satellite channels, demand for CTVs has seen a rise.

In fact, the television manufacturing industry has come a long way since the big black and white
TV sets to the modern day ultra-thin Plasma and LCD TV sets. With the ever changing
technology the Television industry has adapted itself suitably to cater to the changing tastes of
the consumer.
Although the top players viz. LG, Sony, Videocon, Phillips, Samsung and Onida have drastically
reduced prices, they have gained more volume due to increasing market size and higher
penetration levels, coupled with conscious shift towards flat colour televisions. Aggressive and
innovative marketing strategies and technological advances have led to strong brand
differentiation and prices. In the process the industry has evolved with products available at
different price points at all levels. This process was also facilitated by growth in production in
the organised segment and domestic availability of multinational brands due to lowering of
import duties and other liberal measures. The television industry appears to have two clearly
differentiated segments. The MNCs have an edge over their Indian counterparts in terms of
technology, aggressive marketing strategy, economies of scale in branding through international
events and associations combined with a steady flow of capital. The sale of TVs also tends to be

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event driven. During the Cricket World Cup in 1999, CTV sales recorded a phenomenal rise of
40-50%.

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.

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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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DEMAND DETERMINANTS TO BE CONSIDERED IDEALLY TO DETERMINE THE
DEMAND FOR TV SETS ARE:

(i) Savings
(ii) Number & quality of Telecasting
(iii) Technical improvements in TV Sets
(iv) Repair and maintenance services
(v) Price
(vi) Credit facilities
(vii) Distribution of income / wealth
(viii) Population
(ix) Excise Govt. Policy with respect to tax, license, entertainment, community
development etc

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)

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 • Gather the data
• Make the forecast
• Validate and implement results

NECESSITY OF DEMAND FORECASTING:

Often forecasting demand is confused with forecasting sales. But, failing to forecast demand
ignores two important phenomena. There is a lot of debate in the demand planning literature as
how to measure and represent historical demand, since the historical demand forms the basis of
forecasting. Should we use the history of outbound shipments or customer orders or a
combination of the two to proxy for demand.

Stock effects

The effects that inventory levels have on sales. In the extreme case of stock-outs, demand
coming into your store is not converted to sales due to a lack of availability. Demand is also
untapped when sales for an item are decreased due to a poor display location, or because the
desired sizes are no longer available. For example, when a consumer electronics retailer does not
display a particular flat-screen TV, sales for that model are typically lower than the sales for
models on display. And in fashion retailing, once the stock level of a particular sweater falls to
the point where standard sizes are no longer available, sales of that item are diminished.

Market response effects

The effect of market events that are within and beyond a retailer’s control. Demand for an item
will likely rise if a competitor increases the price or if you promote the item in your weekly
circular. The resulting sales increase reflects a change in demand as a result of consumers
responding to stimuli that potentially drive additional sales. Regardless of the stimuli, these
forces need to be factored into planning and managed within the demand forecast.

In this case demand forecasting uses techniques in causal modeling. Demand forecast modeling
considers the size of the market and the dynamics of market share versus competitors and its
effect on firm demand over a period of time. In the manufacturer to retailer model, promotional
events are an important causal factor in influencing demand. These promotions can be modeled
with intervention models or use a consensus process to aggregate intelligence using internal
collaboration with the Sales and Marketing functions.

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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

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 on the basis of estimates of manpower requirement assessed according to long term sales
forecasts.

RECENT TRENDS IN DEMAND FORECASTING:

1. More firms are giving importance to demand forecasting than a decade ago.
2. Since forecasting requires close cooperation and consultation with many specialists, a
team spirit has developed.
3. Better kind of data and improved forecasting techniques have been developed.
4. There is a greater emphasis on sophisticated techniques such as using computers.
5. New products’ forecasting is still in infancy.
6. Forecasts are usually broken down in monthly forecasts.
7. In spite of the application of newer and modern techniques, demand forecasts are still not
too accurate.
8. The usefulness of personal feel or subjective touch has been accepted.
9. Top-down approach is more popular then bottom-up approach.

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METHODS OF DEMAND FORECASTING USED FOR COLOUR
TELEVISION DEMAND PREDICTION:

We are using following methods of forecasting:

✔ Moving average
✔ Trend projection method
✔ Least square method
✔ Linear regression method
We are estimating demand for television for the next 5 years:

• 2010,2011,2012,2013 and 2014.

This is done using the data for the previous five years:

• 2003,2004 ,2005,2006,2007 and 2008.

• 2009 is taken as the base year.

MOVING AVERAGE METHOD:

Moving average techniques forecast demand by calculating an average of actual demands from a
specified number of prior periods .Each new forecast drops the demand in the oldest period and
replaces it with the demand in the most recent period; thus, the data in the calculation "moves"
over time .
Moving Average = (Sum of the most recent n data values)/n
Moving average: At = (Dt + Dt-1 + Dt-2 + ... + Dt-N+1 ) / N

where N = total number of periods in the average

forecast for period t+1: Ft+1 = At
Key Decision: N - How many periods should be considered in the forecast
Disadvantages:
• Higher value of N - greater smoothing, lower responsiveness
• Lower value of N - less smoothing, more responsiveness
• The more periods (N) over which the moving average is calculated, the less susceptible
the forecast is to random variations, but the less responsive it is to changes
• A large value of N is appropriate if the underlying pattern of demand is stable
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 • A smaller value of N is appropriate if the underlying pattern is changing or if it is
important to identify short-term fluctuations
• One has to retain a great deal of data and carry it along with him till the end of forecast
period.
• All the data in the sample are weighed equally . If more recent data are more valid than
older data ,why not give them greater weight?

TREND PROJECTION METHOD:

Trend projection method is a classical method of business forecasting. This method is essentially
concerned with the study of movement of variable through time. The use of this method requires
a long and reliable time series data. The trend projection method is used under the assumption
that the factors responsible for the past trends in variables to be projected (e.g. sales and demand)
will continue to play their part in future in the same manner and to the same extend as they did in
the past in determining the magnitude and direction of the variable.

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

t=time

Computing the slope (b1) and intercept (b0)

b1 = (∑tYt - (∑t∑Yt)/n )/((∑t2 –(∑t)2/n)

b0 = ∑Yt/n –b1∑t/n

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There are three (3) techniques of trend projection based on time –series data.

1. Graphical Method: - under this method, annual sales data is plotted on a graph paper
and a line is drawn through the plotted points. Then a free hand line is so drawn that the
total distance between the line and the point is minimum. Although this method is very
simple and least expensive, the projections made through this method are not very
reliable. The reason is that the
extension of the trend line
involves subjectivity and
personal bias of the analysis.

2. Years /Trend Projection

Fitting Trend Equation: Least square method: - Fitting trend equation is a formal
technique of projecting the trend in demand. Under this method, a trend line (or curve) is
fitted to the time –series data with the aid of statistical techniques. The form of the trend
equation that can be fitted to the time series data is determined either by plotting the sales
data or by trying different forms of trend equations for the best fit.
When plotted, a time series date may show various trends. The most common types of
trend equation are

1) liner and
2) exponential trends

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 Linear Trend: - When a time series data reveals a rising trend in sales than a straight-line
trend equation of the following form is fitted. (S = A + BT ; Where S = annual sales , T =
Time (in year) , A & B are constant. The parameter b given the measure of annual
increase in sales)

Exponential trend:- When sales ( or any dependent variable) have increased over the past
years at an increasing rate or at a constant percentage rate, than the appropriate trend
equation to be used is an exponential trend equation of any of the following type ( Y =
aebt , Or its semi – logarithmic form -> Log y = = log a + bt; This form of trend equation
is used when growth rate is constant.)

3. Double log trend equation of equation

Y = aTB
Or it’s double logarithmic form
Log y = log a + b log t

This form of trend equation is used when growth rate is increasing.

Advantages of trend projection method:

• It is a very simple method.

• This method provides reasonably accurate forecasts.
• It is quick and inexpensive.

Disadvantages of trend projection method:

• Can be used only if past data is available.

• It is not necessary that past trends will continue to hold good in the future also
• There is no analysis of casual relations between the demand and time series explaining
the why’s of it.

LINEAR REGRESSION MEHTOD:

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A simple forecasting method that calculates a straight line. By its nature, the straight line it
produces suggests that it is best suited to data that is expected to change by the same absolute
amount in each time period. The mathematical equation shows that the variable y varies by a
constant a and increasing (or decreasing) over time (denoted by x) by factor b.
yt = a + b*x --------eqn (1)
Here a and b are constants and are calculated as under using 2 simultaneous linear equations:
∑y=n*a+ b*∑x ---------eqn (2)
∑x*y=a*∑x+ b*∑x^2 -------eqn (3)
Solve above 2 equations(eqn (2) and (3)) to get the value for a and b and then put value of a and
b in equation (1).
From equation (1) calculate y(demand forecasting variable) by putting different values of x for
different years.
Advantages of linear regression method:
• It explicitly addresses casual relationships that are evident in the real world. These
include effects of prices, income changes, marketing programmes and competitor’s
action on tourism demand.
• It aids assessment of alternative business plans: Managers can simulate the effect of
various government policies or marketing plans (for example: taxes, expenditure,
regulations and subsidies) on tourism demand.

Least square method:

In this method we use the equation:

y=a + bx; ------ (1)

where,

a=∑y/n;

b=∑(xy)/∑x2;

n=no. Of years for which the values are given;

a and b are constants.

We find the values of a and b and put in equation 1st. From this equation we calculate value of
y(demand forecasting variable)based on different values of x for different years.

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For even number of years: We need to take the middle 2 years average as the base year and then
calculate the value of x.

For odd number of years: We just directly take the middle year as the base year.

CONSUMER ELECTRONICS MARKET IN INDIA: COLOUR

TELEVISION
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.

SOURCE: ELCINA REPORT 2007-08

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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.

The history of the Indian television industry dates back to 1982, the year when India hosted the
Asian Games. There was a huge demand for colour televisions all through the 80s.

In 1984-1985, the colour television industry was growing at an astounding rate of 140.3%.
However, in 1985-86, it fell to 68.6%, 15% in 1988-89 and finally in the year 1989-90 it touched
a rock bottom level of 5%. In 1991-92, the Indian economy was going through a balance of
payment crisis. As a result of this, for the first time in the history of Indian colour television, one
saw a deceleration in the sales of colour televisions at -14.5%. During this period, the prices of
colour televisions skyrocketed due to the high import duties imposed on colour picture tubes.

THE COLOUR TV INDUSTRY POST LIBERALISATION:

The Colour TV industry in India has seen a gamut of changes in the past one decade as
liberalization set in the Indian subcontinent making its market highly competitive and consumer
driven. With the fast changing liberalization policies, changing and growing demands of the
consumers made the industry competitive. The constant desire of the companies (domestic or
international) to have a major share in the market often leads them to die many deaths which has
became a hackneyed phenomenon in this sector of Liberalized India if the companies are not in
able to cope with changing reforms and the changing tastes and preferences of the consumers.

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The foreign player entered the Indian market since the Indian economy increasingly
interdependent almost over the last one and half decades.

Consumers in India with open markets on an average are enjoying lower prices, improved
consumption, improved savings and rising standards of living. Before liberalization in India, the
consumer was at the mercy of the producer and savings management were prevailing in the sense
that individuals saved and then consumed. This might be because of no financing facilities, no
credit card facilities and moreover demand side economic were prevailing.

After liberalization the total scenario has changed- consumers in India moved from savings
management to expenditure management. This is because of the availability of goods and
services at lower price, availability of credit cards, availability of finance at low interest and in
some cases zero interest and moreover the death of power of monopoly in many sectors because
of the entry of the foreign players. Producers have become price takers rather than price setters.
The tastes and preferences, life style and consumption patterns of the consumers have also
changed. Like other third world countries, people in India have started spending much more
money on eating out; started buying a flat or a car because of the availability of credit cards and
easy financing facilities; more number of people have been travelling abroad after liberalization
and there has been a distinct shift from joint family system to that of nuclear families.

As per the estimates of the confederation of Indian Industry (CII) the Indian consumer durable
industry is Rs 20,000 crore business industry. The industry is highly dominated by the foreign
players occupying the top slots in the market shares.

From a recent data obtained from the Equitymaster.com the market share of all the MNCs in the
colour TV segment is about 65%. The biggest attraction for these players is the growing Indian
middle class, which is approximately 250 million, and also low penetration levels characterize
this market. Most of the segments in this sector are characterized by intense competition,
emergence of new companies (especially MNC’s), introduction of state-of-the-art models, price
discounts and exchange schemes. There is a significant shift today. 15-20 years ago, it was a
Seller's market. Customers had to buy what was available. There was absolutely no choice. But
today, it is entirely different. It is a Buyer's market. There is plenty of choice, both in terms of
brands and the items. It has helped in widening the product base of consumer durables. Also,
technological changes have helped the boom in the industry. TV sets are still the fastest growing
category among household durables. During the last two years 11.5% of Indian homes bought a
TV set. This figure is even higher among the top eight metros at 21.3% about one in every five
home in these cities acquired a TV set in the last two years.

Because of the entry of the foreign players we felt that in the Indian Colour T.V. Industry the
following changes have taken place, according to the Father of Economics Adam Smith in his
book wealth of Nations (1776):
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 1. Economic substitutability and technical substitutability: The colour T.V industry is
facing intense competition and in the process new innovations in the form of giving
additional features are taking place,
2. Indifference in brand preference: The consumers are indifferent in choosing the brand
because whatever the brand that the consumer is going to purchase gives the same
satisfaction. This because the features of T.V in almost all the brands are same and there
is a negligible difference in the prices. However in case of local made company products
are cheaper. Hence we can define the indifference in brand preference as the locus of all
brands in which the consumer gets the same level of satisfaction
3. Excludability: The producers are not excluding the customer before going to produce the
product like how they well ventilated before liberalization. Without due care and
attention, the relationship between producer and consumer becomes much more akin to a
gibberish than a purchase and sale one.
4. Rivalry: in the information era economy the use or enjoyment will no longer necessarily
involve rivalry. Especially with most tangible goods like TV, if X uses one brand of TV
there is no guarantee that Y also uses the same brand. Free market price provides the
producer with an ample award for its effort. It also leads to the appropriate level of
production.
5. Transparency: The consumers know what they want and what they are buying so that they
can effectively take the advantage of competition and comparison –shop and moreover the
marginal cost of information is zero. Hence the producers should be transparent.

As a result of which the entrenched position of the Indian market leaders in CTVs’ like
Videocon, BPL and Onida has been challenged by the MNCs such as LG, AIWA, Akai,
Panasonic, Samsung, Sony, Philips and Sharp; some in a perceptible way and others threatening
to do so.

Some of the growth drivers because of which CTV market is growing fast are:
• Increased awareness
• Increase in disposable income
• Emergence of nuclear families
• Rising availability
• Declining prices

Many MNC and domestic companies are now making India as a manufacturing centre because:
• Low cost skilled labor
• Tax free zones i.e. SEZs
• Qualified workforce

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 • Untapped domestic market
• Excellent supply base for glass and colour picture tubes

Some economic measures that have also played a role in this phenomenal growth are:

• Custom duty on colour picture tubes (CPT’s) lowered to 20% from 25%
• Abatement rates on TV sets have changed from 35% to 40%
• Special additional duty on customs of 4% was done away with
• Single rate of excise duty at 16%

DEMAND FORECASTING FOR COLOUR TELEVISION

Square Sales Product of
Deviations from the middle of 2005 of
Year (in million deviation and
and 2006 deviatio
no.) sales value
n

X X2 Y XY

2003 -5 25 8.5 -42.5

2004 -3 9 9.25 -27.5

2005 -1 1 10.25 -10.25

2006 1 1 11.75 11.75

2007 3 9 14.5 43.5

2008 5 25 16.5 82.5

We have already seen that there are various methods of demand forecasting. Here, we are going
to forecast the demand for colour television using three popular techniques, namely, regression
equation using least square, Moving Average Method and Trend Projection Method.

Regression equation method

The regression equation is given as:

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 Y= a + bX

Where, a= ∑Y/ n and b=∑XY/ ∑X2

Here, a=11.79, b=0.82

Year Deviations Sales

X y

2009 7 17.52

2010 9 19.15

2011 11 20.79

2012 13 22.42

2013 15 24.06

2014 17 25.69

A graph of the future trend in sales of colour television is given as below:

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Moving Average

Moving Average = (Sum of the most recent n data values)/n

To Illustrate the moving average method, consider the sales figures w.r.t Fig (i). Here we take a
two year moving average. The moving average calculation for the first two years for the time
series is

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 Forecast Squared Forecast
Year Average
Value Error Error
Forecast

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

2009 15.5

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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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
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:

Year (t) Sales Yt(t) t^2

Value(Yt)

1 8.5 8.5 1

2 9.25 18.5 4

3 10.25 30.75 9
Sum of t =21
4 11.75 47 16 ;Sum of Sales
5 14.5 72.5 25 Value Yt
=70.75 ; Yt *t =
6 16.5 99 36 276.25 ; t^2 =91

Therefore, µt
=3.5 µY =11.791

Applying the formula,

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 b1 =1.64 ; b0 = 6.05

Linear Trend,Tt=6.05+1.64*t

Therefore Trend for year 2009, T7=6.05+1.64*7=17.53

Thus, the trend for the next five years is given below:

Year Forecast

2009 17.53

2010 19.17

2011 20.81

2012 22.45

2013 24.09

CONCLUSION:
With the advent of new technologies and new markets opening up the positive trend for
consumer electronics especially television is bound to seen in subsequent years. The above
demand forecasting analysis done through regression analysis, moving average and trend
projection method suggests that demand for Color Television Sets will increase in next 5 years.

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REFERENCES:
1) ELCINA report for the year 2007-08
2) FICCI consumer durable goods survey, 2007
3) LIBERALIZATION AND COLOR T.V. INDUSTRY IN INDIA by SESHAIAH, Venkata
and KRISHNA, Radha
4) Indian Television Industry: A Strategic Analysis by Seema Gupta
5) Various statistical and Legal advisory sites

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