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Saturday, April 18, 2009

Quite indispensable in business

The policymakers, economists and analysts are not the only ones who hunger for statistics. In the business community, figures are indispensable in just about every aspect. The property and automotive sectors are two obvious examples of businesses that rely significantly on the power of numbers.

According to property consultant Knight Frank Research, data and indices relating to property prices, resale values, rental rates and population are of interest to developers, real estate agents and consumers.

“These statistics can help the public in making informed decisions. For instance, in the purchase of property as a hedge against inflation, relocation or expansion of business, and the review of business strategies,” it says in an email reply to StarBizWeek.

“For developers, the data is used to understand market dynamics and in making projections of the market trend, as the property market is cyclical.”

Addressing supply and demand

The research outfit’s forecasts are based on, among other things, past years’ price trends, existing and new supply trends, the sales performance of new launches, and general occupancy of existing schemes. To gauge demand, it also talks to agents because they have first-hand knowledge of the market.

It adds: “Numbers on the income groups and population of an area will help developers to identify their market positioning, pricing and rentals of their products.”

Real estate agency S.K. Brothers Realty (M) Sdn Bhd concurs that statistics are essential indicators of property demand. General manager Chan Ai Cheng says property players are primarily interested in the level of demand and related factors such as the type, location and affordability.

This helps developers to come up with the right products at the right places and prices.

“With an awareness of house prices – including the trend and locality – developers and real estate agents will know whether the prices of the houses they are proposing to sell are realistic or otherwise,” she tells StarBizWeek.

She says statistics like the property index, stock market indices, supply of property, selling prices, sales performance and vacancy rates are some of the important numbers for the sector.

She adds that the data help the players address the supply and demand. Developers who understand the demand will likely enjoy good sales take-up rates. They will also be able to avoid an oversupply situation because they know which products are needed and which ones are coming on stream.

Chan says “on the ground” research is preferred because it provides current data needed for immediate decisions.

Indicator of consumer spending

“Numbers are important because they quantify the sentiments experienced by the population. In that sense, it can indicate the depth and extent of a problem. It also serves as a good guide and indicator,” she adds.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad says car sales numbers are a key indicator of consumer spending because they reflect well the sentiments towards the country’s economy.

“After housing, a car is the next single biggest item for many consumers. In good times, the demand for cars will increase and vice versa,” she explains.

She points out that the resale values and interest rates are two of the most important factors affecting the industry’s performance.

Generally, high resale values stimulate the demand for new vehicles because the owners pay less to upgrade or switch to new vehicles. In addition, they need less financing and this results in lower car instalments.

High interest rates mean consumers pay larger monthly instalments and this discourages them from buying new vehicles. “Without the numbers, we are unable to analyse, compare and evaluate the performance of economic activities as numbers enable the objective measurement of activities,” says Aishah.

However, she warns that the numbers do not always tell the true story of our social and economic status.

For example, most people in urban areas such as the Klang Valley find it hard to accept that the inflation rate is only 2% per annum, she notes.

She says the prices of goods have gone up, particularly during the first half of 2008, when the prices of petrol were raised by 40%. With RM100 today, you can buy less than what you could a year ago.

“This is how the layman relates to inflation. Perhaps the Government needs to introduce different price indices for the urban and rural areas,” she adds.

Benchmark value

“We need numbers not just for comparison purposes but also to benchmark ourselves against the industry,” says Datuk Syed Hafiz Syed Abu Bakar, managing director of of Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

He says it also benchmarks its sales and service quality with the JD Powers & Associates customer satisfaction index (CSI) and sales satisfaction index (SSI) survey.

“Manufacturers like us keep track of the GDP, population growth, housing, per capita income, inflation, tax rates, employment, exports and manufacturing, forex, commodity prices, the stock market and other financial figures, to gauge the health of the country’s economy.”

He says numbers by themselves can also be misleading; how the statistics are derived should be clearly stated.

For example, Perodua ViVA, the company’s second best-selling model after the Perodua Myvi, was actually outselling the Myvi in states such as Kelantan, Terengganu, Sabah and Sarawak.

Nevertheless, Perodua believes in the saying, “What gets measured, gets done; and what gets done, gets rewarded.”

Syed Hafidz says that due to the strong demand for new Perodua cars, their resale values are holding well. A 10-year old Kancil is going for between RM6,000 and RM7,000 in the used-car market.

“As a car manufacturer, we live and breathe the sales, service and production numbers,” he adds.

By The Star (by Rachael Kam)

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