Derived demand is described as a requirement for one product that is produced due to the purchase of another product. This happens when consumers purchase goods to further their production and their purchases are due to the demand of a final product. An example of this is when the demand for housing is high; therefor the demand for lumber and other materials would be high to finish the final product. If the demand of housing would drop, so would the sales and demand of the needed materials.
Derived Demand applies to Strategic Human Resource Planning for organizations to forecast the demand of what’s needed. Successful organizations combine quantitative forecasts with more qualitative expert processes to achieve the most comprehensive demand forecasts possible. They must consider demand for current personnel and for future to ensure the right numbers and skills are ready and available to work when the organization needs them. Also, the demand for labor is influenced by the level of economic activity, the productivity of labor and relative cost of labor compared to the capitol.
Also, a thorough analysis of the overall demand of the product/service, to them examines how these factors will affect the overall picture.
Explain ‘derived demand’ as it applies specifically to Stonewall Industries. (5 marks)
In the case of Stonewall Industries, the demand is derived on two major environmental factors: the number of housing in which starts in a given year, and the interest rates. As housing increases, Stonewall’s demand increases, but as the interest rates increase, funds available for investment decrease and demand for the product decreases.
Stonewall Industries produces a commodity item (there is very little discernible difference between their product and their competitors). The demand for that item is directly affected by interest