Marketing on China's Economy

Marketing 5000 MBN Exercise 1: Estimating Market Demand

Aaron Binder

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 biggest burden to increasing car sales is that of government imposed restrictions due to severe air pollution and congestion. If these restrictions do pass, up to 400,000 potentially new vehicle purchases will be cut (Bloomberg News, 2013). With the factors already discussed along with current car ownership numbers one can dutifully deduce the market demand using the chain ratio method. The chain ratio method is defined by Armstrong and Kotler (2013) as estimating market demand by multiplying a base number of buyers in a potential market by a chain of adjusting percentages that are determined according to relatedness.

Calculating Market Demand

The first thing we need to determine is that of the approximate total number of potential buyers in the Chinese population. The total population is 1.35 billion but not every person living will be buying a vehicle due to age. For simplification, assumptions were made that persons over the age 65 are not buying vehicles due to restrictions and an established public transit system in most urban areas. Since the legal driving age is 18 in China that all that are that age and under are assumed to not be buying vehicles. With the age range established of potential car buyers being 18-64 then the approximate population total is 909,000...