2009 Report Fishing Excluding Combinations

This study does not report actual sales selective information (which are merely unavailable, in a comparable or consistent manner in almost all of the cities of the world). This study gives, however, my estimates for the international latent demand, or the P.I.E. for fishing rods excluding fishing rod and reel combinations. It also shows how the P.I.E. is separated throughout the world’s cities. In order to make these estimates, a multi-stage methodology was used that is oftentimes taught in courses on international strategic planning at graduate schools of business.

What is Latent Demand and the P.I.E.?
The conception of latent demand is rather subtle. The term latent distinctively refers to something that is dormant, not observable, or not yet realized. Demand is the notion of an economic amount that a target population or market requires beneath dissimilar assumptions of price, quality, and distribution, amid other factors. Latent demand, therefore, is normally specified by economists as the industry earnings of a market when that market becomes accessible and beautiful to serve by competing firms. It is a measure, therefore, of potential industry net profit (P.I.E.) or total revenues (not profit) if a market is served in an effective manner. It is specifically conveyed as the total revenues potentially extracted by firms. The “market” is specified at a given level in the value chain. There may be latent demand at the selling level, at the wholesale level, the manufacturing level, and the raw materials level (the P.I.E. of higher levels of the value chain being always littler than the P.I.E. of levels at lower levels of the same value chain, assuming all levels maintain minimum profitability).

The latent demand for fishing rods excluding fishing rod and reel compoundings is not actual or historic sales. Nor is latent demand future sales. In fact, latent demand may be lower either lower or higher than actual sales if a market is inefficient (i.e., not representative of comparatively competitory levels). Inefficiencies arise from a number of factors, including the lack of global openness, cultural barriers to consumption, regulations, and cartel-like conduct on the part of firms. In general, however, latent demand is quintessentially larger than actual sales in a city market.

Another reason why sales do not equate to latent demand is interchange rates. In this report, all figures assume the long-run efficacy of currency markets. Figures, therefore, equate values based on purchasing power parities throughout countries. Short-run distortions in the value of the dollar, therefore, do not figure into the estimates. Purchasing power parity estimates of country income were collected from official sources, and extrapolated using general econometric models. The report uses the dollar as the currency of comparison, but not as a measure of dealing volume. The units applied in this report are: US $ mln.

For reasons discussed later, this report does not consider the notion of “unit quantities”, only total latent revenues (i.e., a calculation of price times amount is never made, though one is implied). The units applied in this report are U.S. dollars not adjusted for inflation (i.e., the figures incorporate inflationary trends) and not adjusted for future dynamics in interchange rates (i.e., the figures reflect intermediate interchange rates over recent history). If inflation rates or interchange rates vary in a significant way equated to recent experience, actually sales may also exceed latent demand (when conveyed in U.S. dollars, not adjusted for inflation). On the other hand, latent demand may be distinctively higher than actual sales as there are often distribution inefficiencies that reduce actual sales underneath the level of latent demand.

As noted earlier, this study is strategic in nature, taking an aggregate and long-run view, disregarding of the players or productions involved. If fact, all the current productions or services on the market may discontinue to subsist in their present form (i.e., at a brand-, R&D specification, or corporate-image level) and all the players may be substituted by other firms (i.e., by way of exits, entries, mergers, bankruptcies, etc.), and there will still be an global latent demand for fishing rods excluding fishing rod and reel compoundings at the aggregate level. Product and service providing details, and the actual identity of the players involved, while crucial for sure issues, are comparatively not significant for estimates of latent demand.

The Methodology
In order to estimate the latent demand for fishing rods excluding fishing rod and reel compoundings on a city-by-city basis, I employed a multi-stage approach. Before applying the approach, one needs a basic theory from which such estimates are created. In this case, I to a considerable degree rely on the use of sure basic economic assumptions. In particular, there is an assumption governing the shape and type of aggregate latent demand functions. Latent demand functions relate the income of a country, city, state, household, or person to realized consumption. Latent demand (often realized as consumption when an industry is efficient), at any level of the value chain, takes place if an equilibrium in realized. For firms to serve a market, they will have to perceive a latent demand and be competent to serve that demand at a minimal return. The single most necessary variable determining consumption, assuming latent demand exists, is income (or other financial resources at higher levels of the value chain). Other elements that may pivot or shape demand curves include external or exogenous shocks (i.e., business cycles), and or changes in utility for the product in question.

Ignoring, for the moment, exogenous shocks and variations in utility throughout countries, the aggregate relation amongst income and consumption has been a central theme in economics. The figure underneath concisely surmise one aspect of problem. In the 1930s, John Meynard Keynes conjectured that as incomes rise, the intermediate propensity to consume would fall. The intermediate propensity to consume is the level of consumption separated by the level of income, or the slope of the line from the origin to the consumption function. He approximated this kinship empirically and found it to be true in the short-run (mostly based on cross-sectional data). The higher the income, the lower the intermediate propensity to consume. This type of consumption function is labeled “A” in the figure beneath (note the rather flat slope of the curve). In the 1940s, another macroeconomist, Simon Kuznets, approximated long-run consumption functions which indicated that the marginal propensity to consume was rather uninterrupted (using time series info all over countries). This type of consumption function is show as “B” in the figure under (note the higher slope and zero-zero intercept). The intermediate propensity to consume is constant.

Is it declining or is it constant? A number of other economists, notably Franco Modigliani and Milton Friedman, in the 1950s (and Irving Fisher earlier), explained why the two functions were dissimilar using respective assumptions on intertemporal budget constraints, savings, and wealth. The shorter the time horizon, the more consumption may depend on wealth (earned in former years) and business cycles. In the long-run, however, the propensity to consume is more constant. Similarly, in the long run, households, industries or countries with no income at last have no consumption (wealth is depleted). While the debate surrounding beliefs when it comes to how income and consumption are related and interesting, in this study a very peculiar school of thought is adopted. In particular, we are giving careful consideration to the…