Marketing 5000 MBN Exercise 1: Estimating Market Demand
China and its Growing Economy
China is the most populous country in the world with approximately 1.35 billion people and is still exhibiting signs of population growth (The World Factbook, 2013). To go along with the large population size, China is also one of the fastest growing economies. The average median income throughout China has increased dramatically in recent years due to this quick market expansion. From 2000-2010 the median income quadrupled from $760 per year to $3,000 (Censky, 2012). Because of this influx of monetary gain the middle class of China can afford to purchase more new vehicles. Perhaps the ...view middle of the document...
This number is n in the chain ratio method equation.
The next step is to calculate the quantity purchased by an average buyer per year. The number of passenger cars purchased in 2012 is 15.1 million and many estimates put the projected number for this year to be 20 million despite potentially tight restrictions on new car purchases (Bloomberg News, 2013). Even with the newly imposed restrictions expecting to prevent 400,000 new car purchases that still leave the number at 19.6 million sales. To get q or the quantity purchased by an average buyer every year for the chain ratio method equation, the total sales number of 19.6 million must be divided by the total population of capable buyers which is 909 million. This leads to the q value being 0.0216.
Finally the average price of an average unit or p must be determined. This number is hard to determine as the market is still relatively new and buys must account for purchasing license plates. It can actually cost as much for a license plate as it does for a cheaper brand car in some parts of China because of the strict restrictions put in place to limit the number of cars. The best estimate is that of a small, compact car that is in the mid-range for intermediate priced cars. For this calculation the Volkswagen Golf 1.4 L will be used as it fits the criteria for price and size typically bought. This car is around $24.5k brand new in China (Numbeo, 2013).
Now that we have the values needed for the chain ratio method calculation, we can plug them in and get the Q or total market demand for new car sales in China.
Q = n X q X p
Q = 909,000,000 X 0.0216 X $24.5k
Q = $481,042,800,000
When one sees this astronomical value and potential car sales in China it’s not surprising that many car companies are shifting their focus to include China in marketing campaigns. With the largest population for purchasing, a quickly increasing median income, and newfound interest in Western car brands and ideals the Chinese market will be increasing for years to come despite the environmental and space struggles already exhibited (Luhby,...