In previous post, I wrote about how to write technical aspect of feasibility study. In this post, I want to share you how to write marketing aspect of feasibility study. This topic is important to ensure that the proposed product has market/specific market and to determine how much the capacity of product to be produced.
When I involved in the project, which was reactivation of carboxymethyl cellulose (CMC) plant, I learnt that Indonesia mostly imported CMC from China. Local producers of CMC in Indonesia were only two, PT Humpuss Karboksimetil Selulosa (PT HKS) and the other one (I forgot). The fact that Indonesia imported CMC means there are demand that cannot be met be local supply. So, marketing aspect aspect of feasibility will be started from supply and demand.
Demand analysis involves estimation of market demand of the product. For CMC, I learnt that trend demand is increasing every year. There were food grade CMC and standard grade CMC. The food grade CMC can be found around us, for example in tooth paste, soap cream, ice cream, and laxative. The more people in world, the more people who use tooth paste, consume ice cream. So the demand increased as function of population.
Demand analysis includes:
- Identification of demand determinants
- Estimation of past and present demand
- Projection of future demands
There are several aspects that determine demand as depicted in picture below.
When I was involved in 2nd feasibility study project, which was bankable feasibility study of ferronickel plant, there were at least two major demand determinants involved, which were government policy and price. Based on Law of Mineral and Coal No 4/2009, Indonesia mining companies must not export mining raw materials. The raw materials shall be processed to increase value added of material. That’s why we had feasibility study of ferronickel smelter.
Estimating Past and Present Demand
Past and present demand can be obtained from commercial statistics companies, government statistics agency, or from trade association firms. For example, to estimate supply and demand of LNG, I used data from International Gas Union yearly report.
Projecting Future Demand
Future demand can be estimated based on:
- Need’s assessment
- Expert opinion
- Trend projection
- Statistical demand analysis
Supply analysis involves evaluation of existing of supply conditions toward bridging the gap between the supply level and demand level for the proposed project output.
Same as demand analysis, steps in supply analysis includes:
- Identification of supply resources
- Estimation of past and present supplies
- Projection of supply
Supply and Demand Consolidation
Purpose of supply and demand consolidation is to determine to what extent there is a market for the product output. There are several steps to consolidate supply and demand:
- Determine demand gap. The purpose is to provide indication of total current shortage
- Determine supply without project. The purpose is to check surplus/shortage in supply according to type of demand, source of production, seasonal variations, geographic fluctuations, etc.
- Determine supply with project. The purpose is to check if the project will close gap with future supply and demand
I did supply and demand consolidation in my third feasibility study project, which was LNG supply chain management. I used energy and gas balance to check if current LNG suppliers in Indonesia meets LNG demand for power plant purpose.
That’s all I want to share. Hopefully you enjoy the topic!