Question 3 (a) Assume that you work for a company that makes prepared breakfast

Question

Question 3 (a) Assume that you work for a company that makes prepared breakfast cereals like com flakes. Your company is planning to introduce a new hot breakfast product made from whole grains that would require some minimal preparation by the consumer. This would be a completely new product for the company. How would you propose forecasting initial demand for this product? In your answer, you should examine at least three (3) different techniques (9 marks) Oriental Trading Company decides to establish an EOQ for an item. The annual demand for the item is 400,000 units with a unit cost of $9. The ordering costs are $35 per order, and inventory carrying costs are 22%. The supplier offers a 2% discount on orders of 5,000 units. Solve for the purchase cost, the cost of ordering, the cost of carrying and the total cost for an order of 5.000 units and EOQ. You should present your results in tabular form comparing Q 5,000 and Q -EOQ. Determine which option is better and how much cost can be saved. (b) (16 marks)

Explanation / Answer

3-a- Before launching of new product initial demand forecast is necessity to know how consumer will react to the product and perceive the product. In this case the product is on food segment where it is important to know how consumer behave in the segment. The first technique that should be consider by the company is market research. It is a qualitative technique where primary market survey and research will be done to know the thought process of the audience on the product and to decide the target market in better way. It is a formal and conscious procedure which test the real market hypothesis. The second important technique is trend projection. Any similar line product launched by any competitor or similar company in the target market should be study. Through this the consumer behavior and market dynamics of the product will be analyzed and examined. It will help the company to know how consumer behave with the product and what all shortcomings are faced by the consumer in the segment. It will help the company to know the nuances of the target market and target audience on the product. The third method I will suggest is the predictive modelling through big data analysis. In this technique consumer lifestyle and behavior of the target market will be captured and thanks to social media these days which have lots of metadata to consider

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