Managerial Service .In Sri Lankan context most of the

 

Managerial
Economic—MBA 5102

Demand
Estimation and Forecasting

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Group -01 Team 04

 

Student
Name

Index No

 

Mr.

2017MBAWD

 

Ms.

2017MBAWD

 

Ms.

2017MBAWD

 

Ms.

2017MBAWD

 

Ms.

2017MBAWD

 

Mr. I.C. Hapuarachchi

2017MBAWD21

 

 

 

MBA 2017/2019 – Weekday Program

Postgraduate and Mid-Career Development Unit

Faculty of Management & Finance

University of Colombo

 

 

Table
of Contents
 
1.    Introduction. 3
2.    Specifying the demand Function. 4
3.    Data Collection. 6
4.    Estimation. 7
5.    Interpreting parameters. 7
6.    Forecasting. 7
7.    Reference. 7
 

1.    
Introduction

 

In
the highly competitive Business Environment, all the Business Organizations aim
at profit maximization. To take profitable business decisions, it is crucial to
monitor the demand conditions for its service and forecasting and estimating
changes in demand in future. Hence Demand forecasting and estimation has
achieved a prominent place in today’s competitive Business world. It is one of
the most powerful tools to determine prices and output levels in competitive
markets.

 

Here
for the Demand estimation and forecasting, we have chosen SLT Broadband Service
.In Sri Lankan context most of the market research
has done on various commodities and services but there are very few research
have done focused on demand estimation and forecasting for Broadband service.

 

With
the rapid Digitization in the country, demand for Broadband has increased
drastically and hence choosing Broadband service as our commodity is
well-suited to current context. There are many services available in the market
for accessing Internet. Among these options, we have selected SLT ADSL
Broadband service which counts over 600,000 customers. Sri Lanka Telecom (SLT)
is the market leader in Broadband Service Sector in Sri Lanka which has   the largest internet backbone with high
speed internet access. SLT offers wide range of ADSL packages which are
packaged based on Data volume to meet different customer requirement. Here, for
our analysis, we restrict our study only for ADSL Web Family Plus package. ADSL
web family plus is specifically designs as household package and it is the
bestselling package among the existing packages. This package offers maximum
16Mbps download speed and Monthly Data Usage volume is 60GB.

 

For the purpose of
Demand Estimation, Metro Region of Sri Lanka Telecom has been considered. Metro
Region consists of 06 regional office areas including Havelock Town,
Ratmalana,Nugegoda,Kotte,Maradana and Wattala.We have restricted to this
geographic area because 35% of annual revenue from ADSL is contributed from
this region and this has the highest customer base.

2.    
Specifying the demand Function

 

According to the emerging economic
indicators and the market factors relevant to telecommunication

Industry there are several
determinants which impact the demand variation of our selected service ‘ADSL
Web Family Plus’.

 

2.1  For the purpose of
demand estimation of the selected service we have recognized the following
determinants,

 

1.    
Price of the service
(P)

Price
of the service is defined as the installation price, which varies according to
the seasonal marketing/ advertising condition of the selected service.  The price of the service was considered to
identify whether price change influences increase/ decrease of sales of the service.

 

2.    
Household income
(I)

Although
this is not an essential good it is important to consider household income to
measure consumer’s ability to purchase the selected service.  Since the service is catered to households,
per capita income of individuals has not been taken into consideration.

 

3.    
Advertising cost
(A)

Advertising
cost is a key factor.  It has been used
to measure the impact of advertising cost on the demand of the service, as
advertising persuades customers make the purchasing decision. It’s determined
by the service development department of ADSL service according to their
seasonal variations.

 

4.    
Number of houses
(H)

Number
of houses is in the area is clearly an important factor in calculating market
demand.

 

Since
service is catered to domestic use, we have considered number of houses
approved in the selected area to measure the impact of the increase in houses
which leads to increase in demand for the selected service.

 

5.    
Competitor price
(Pd)

We
have identified, Dialog 4G home broadband lite 60 GB package and Lanka Bell
home broad band package as competitors of our selected service ”SLT ADSL Web
Family Plus”. However, we have recognized the dialog package as our main
competitor since both services consist of similar specification and catered
towards a similar market segment.

 

6.    
Complimentary service
(N)

It is
required to have a SLT fixed phone connection to use an ADSL internet
connection. Hence, this will be a contributing factor to the purchasing
decision of the selected service as the goods need to be consumed in
combination. 

Based
on the above factors, demand function can be illustrated as per below,

 

 

Qd = f ( P, I, A, H,
Pd, N )

 

 

 

Where, Qd is the quantity demand of
ADSL Web Family Plus’.

 

 

 

2.2 
The
following determinants have been excluded in the demand function although they
have an impact on the market demand of the service. This is due to the degree
of significance of the impact on the demand as well as the difficulty in
converting such data in to monetary terms. 

 

 

2.2.1
Population

In
general population has a direct impact on the demand of a service. As
population increases, the demand for goods increase as well. However, in this
instance since we are considering the number of households the impact of change
in population within each household can considered as insignificant.

 

2.2.2
Computer Literacy

Ideally
computer literacy should have some impact on the demand for internet
connection. However, since we are considering home broadband and internet is
not limited to use through only computers as it could be accessed and use
through various devices for different purposes we have omitted it from the
demand function.

 

2.2.3
Per capita income

Per
capita income would generally have an impact on the demand function. However,
we have not considered per capita income as we are considering the income of
household.

 

2.2.4
Rental charge of ADSL package

We
have omitted the rental charge of ADSL package as the demand does not change
with the change in monthly rental price and the demand mainly depends on the
price of the installation price.

 

 

 

 

3.    
Data Collection

 

Information
gathered for this study from range of different sources. Primary data
collection from the SLT systems and Dialog systems the secondary data were
collected from various annual reports and the department of census and
statistics Sri Lanka publications for year 2016 and 2017 for Colombo district.

 

Price of the Service

The
price of the service which is SLT ADSL Broadband Web Family Plus package prices
has been taken Directly from SLT for concerned years.

Household income
and Population

We
gathered household income, 2012 data
were taken from Department of Census and Statistics Sri Lanka.  This is Mean (or Average) household income in
rupees for the Colombo district,
per capita income of individuals has not been taken into consideration

Advertising cost

Advertising
cost has been considered for the monthly allocated budget for the Advertising
the service

Number of House

The
Department of Census and Statistics (DCS) has been releasing Colombo Consumer
Price Index (CCPI) with base period 2013:100 for no of houses in Colombo
district.

Competitor price

The
price of the Dialog 4G home broadband lite service has been taken Directly from
Dialog for concerned years.

Per Capita income

We
gathered per capita income of 2014, 2015 from Sri Lanka Central Bank reports
and it has been deflated.

No of Buyers / Population

Considered
the National population data for related years which is taken from Census and
Statistical Department for concerned period.

 

Reason to select
such data set is due to availability of actual quantity sales, prices and
expenditures for 2016 and 2017 and the competitive service value/volume for the
same period, Base on our selection our periods data will provide us clear and
better behavior of the selected service

4.     Estimation

 

5.    
Interpreting parameters

 

6.    
Forecasting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.    
Reference

 

Statistics.gov.lk. (2018). Department of Census and
Statistics-Sri Lanka. online Available at: http://www.statistics.gov.lk
Accessed 03 Jan. 2018.

 

Cbsl.gov.lk. (2018). Central Bank of Sri Lanka. online
Available at: http://www.cbsl.gov.lk Accessed 30 Dec. 2017.

 

Dialog.lk. (2018). Dialog Home Page. online Available at:
http://www.dialog.lk   Accessed 2 Jan.
2018.

 

Statistics.gov.lk. (2018). Department of Census and
Statistics-Sri Lanka. online Available at: http://www.statistics.gov.lk
Accessed 15 Jan. 2018.

 

Thomas, C. R., & Maurice, S. C. (2016). Managerial
Economics. United States of America: McGraw-Hill Education.