Market capacity is an indicator determined by the volume of goods or services that were sold on it for a certain time period. To measure market capacity, both value and in-kind terms can be used. In theory, market capacity is equated to the sum of national production and import volume minus the volume of exported products (this is true if stocks are unchanged). It is worth noting that in practice this formula, due to its difficult application, is practically not used.
Knowing the size of the market is very important when planning business development. The indicators on the basis of which the company plans are built depend on the market size, as well as an assessment of the results of its activities in this market segment.
In the absence of knowledge about market capacity , it is not possible for a company to determine its market share . This in turn leads to the inability to track the dynamics with which the competition is being waged.
Among other things, knowledge of the size of the market makes it possible to understand the meaning of doing business in the future. Based on this most important economic indicator, it is possible to analyze the possibility and necessity of releasing new products for each specific market segment. In the event that the potential market capacity is not large enough, the company's expenses for the creation of new goods and their launch into production will not pay off.
To date, various methods have been developed to assess market capacity, involving both field and desk research. One of the methods, which includes both field and desk research, is the chain relationship method. This method is widely used because of its suitability for assessing market capacity, both in the field of industrial goods and in the field of consumer goods.
How to determine the market capacity by the method of chain relations.
Initially, a working hypothesis is built, which assumes the dependence of market capacity on a variety of market factors. In this process, an assumption is made that this dependence has the following form:
E = K1K2K3Kn
K1, K2, etc., in this dependence are coefficients that reflect the influence of all market factors on the market volume. For each next (from left to right) coefficient, the task is to clarify the result that was obtained after the introduction of the previous coefficient. For example, K1 is the total population in the study area, K2 is the proportion of the male population, KZ is the proportion of men aged 18 to 25 in the total male population, etc .;
Through conducting desk or field studies, the numerical values of all the coefficients (from K1 to Kn) are subject to clarification;
Based on the coefficients, market capacity is calculated.
For a more complete understanding of the chain relationship method, we give a simple example. We calculate the market capacity of compact discs with films sold through online stores that deliver compact discs in this region.
To build a formula, it is necessary to clarify each coefficient, which in turn clarifies the previous one, and which is part of the chain.
K1 - the number of people living in this region;
K2 - the proportion of people who use the Internet in the population of the region;
K3 - the average income received by Internet users living in this region;
K4 - the share of funds allocated by Internet users in a given region for the purchase of CDs in average monthly income;
K5 - the share of income spent on the purchase of CDs in online stores (of the total amount spent on the purchase of CDs);
K6 - the share of funds spent on the purchase of movie CDs.
As a result, the formula that allows you to calculate the market capacity will look like this:
E = K1K2K3K4K5K6.