Derived Demand Assignment

Derived Demand Assignment Words: 524

“Demand for Industrial Products is derived”. Explain and also how would you estimate the demand for compressor for refrigerators and air conditioners? Industrial marketing – definition Industrial marketing consists of all activities involved in marketing of products & services to organizations i. e. commercial enterprises, profit & not for profit institutions, government agencies, & resellers, that use products & services in the production of consumer or industrial goods & services, & to facilitate the operation of their enterprises.

Viewed from the perspective of marketing, industrial marketing is, then, human activity directed toward satisfying wants & needs of organizations through the exchange process. Derived demand – definition Derived demand is a term in economics, where demand for one good or service occurs as a result of demand for another. This may occur as the former is a part of production of the second. For example, demand for coal leads to derived demand for mining, as coal must be mined for coal to be consumed.

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As the demand for coal increases, so does its price. The increase in price leads to a higher demand for the resources involved in mining coal. Demand of industrial products is derived Demand for industrial products is derived from the ultimate demand for consumer goods & services. That is, demand is derived from expectations of the actions of ultimate consumers. Derived demand is the single most important force in the marketing of industrial goods & services.

Industrial customers purchase goods & services for use in producing other goods & services. Eventually, whatever is finally will be sold to the consuming public or kept forever in inventory. The demand for wool does not exist in & of itself. Wool is demanded to spin yarn because yarn is demanded to weave cloth because cloth is denuded to make coats, & all these demands are derived from forecasts of ultimate consumer demand for coats. Thus, real inventory problems can develop when final demand is over or under that which has been estimated.

Consequently, forecasts of ultimate consumer demand determine the levels of demand throughout the entire industrial pipeline. Estimating demand for compressors for refrigerators & air-conditioners Demand for refrigerators & air-conditioners is determined by actual as well as expected sales. When the consumers demand for refrigerators & air-conditioner increases & expectations are bright, purchasing managers increase their inventory objectives.

However, when projected demand becomes shaky in the recessionary periods or in the non-season periods, inventory objectives of compressors may be significantly reduced due to uncertainties of future demand for refrigerators & air-conditioners. Such actions magnify fluctuations in demand, dramatically shifting the demand curve in the short run throughout the entire industrial pipeline, often with a domino-like-effect- much like a car hitting its brakes as it moves along a congested free way.

The same can be explained with the help of the following diagram:- The diagram shows the demand for refrigerators & air-conditioners for the 10 year period & the manufacture of compressors over the years in accordance to the demand for the refrigerators & air-conditioners. Thus, derived demand nature of industrial products can be determined. Assignment On “Demand for Industrial Products is derived” Submitted to Prof. Ravi Kumar Submitted by Sourav Garg Section-E 09BS0002389

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