Factors Affecting Global Demand and Supply Research Paper

Factors Affecting Global Demand and Supply - Research Paper Example A research conducted by Ronaldo (2010) indicates that a significant loss of shareholder value emerges from gaps in demand and supply management. Mostly, these shortages in supply are caused by monopolized supply, poor forecasting, poor planning, low inventory levels, long delivery processes and poor communications. With a delay in one of the above elements of demand or supply, a big impact is evident in the business operations especially financially. When a company ignores the importance of advanced and innovative technology, it stands a big chance of losing its competitive edge. Demand can be either independent or dependent. A dependent demand is whereby the demand for a certain product depends on the availability of and demand for another product (Aswathappa, 2004). For example, the demand for mobile batteries will depend on the availability of mobile phones. On the other hand, independent demand means that each product demand does not rely on demand or supply of any other product or service. Factors Affecting Demand and Supply Demand for commodities and services are mainly influenced by commodity price change as customers can easily shift to the same product offered by a competitor. If there is a change in customers’ income, the customer can either purchase more or less with respect to the income change. Tastes and preferences constantly change among customers due to change of fashion trend or other influencers such health and change of status. Demand is also affected by a change in the price of competitive goods; if the prices of such goods increase, the demand for supplementary goods go high and vice versa (Nezih & Lewia, 2011). Government policies may also increase or reduce demand when they pose a control bill and supply restrictions. Further, when certain goods are taxed and levied heavily, producers limit production. Thus, prices are high due to the cost involved in the production, hence high price tags per unit product. Natural calamities and s easons play a big role in changing goods and services demand and supply. For instance, during winter, the demand for warm clothing is high, but during summer, the demand is very low. Commercial advertisements, when communicated effectively, increase demand of the particular product or service since a large volume of customers is exposed to the information and is willing to try out the product due to curiosity and as a result, the demanded goods flood the market (Collins, 2012). Demographic factors such as age, the total available population and a change of growth rate have a very big impact on demand and supply. A certain age group will show demand high of a specific commodity than that of another age group. For example, kids will demand more of toys than any other age group and a population with a big number of babies means that the total demand and supply of toys is high. Sociological factors such as level of education, marital status and sex will also influence demand. The quanti ty of competition in the market affects demand in the sense that if competitors are many, there is a lot of supply. Therefore, the customer has a wide variety to choose from, and this inversely affects demand and price stability. Cost of inputs has a major influence on supply. If labor and capital charges are high, the supply is limited since the producers have a limited production capability.