2.2.1 Sales forecasting

• What is a sales forecast and what is it's function?

  Estimates the volume (no. of units) or value (£) of future sales

  • Uses market research and past sales data
  • Accuracy depends on reliability of the data
• What is the purpose of sales forecasts? (4 things)

  Finance:

  • manage money
  • pay bills
  • accurate budgeting = save costs

  HR:

  • rewards
  • people
  • hiring, training, firing - accurate prediction of staff needed, how many more staff needed, training needed, let staff go

  Marketing:

  • advertisement
  • PR
  • research - marketing budget, which products to market

  Production:

  • processes
  • materials
  • machinery - how much need to produce, buy resources, less waste
• What is time series analysis?

  • Predicting future data using past data
  • Doesn’t take into account any potential change
  • Easy to calculate
• How do you calculate % change?

  • % change = change in sales/original x 100%
• What are the factors affecting sales forecasting? (3 things)

  • Consumer trends
  • Economic variables
  • Actions of competitors
• How do consumer trends affect sales forecasting?

  When forecasting businesses must take into account upcoming trends which may affect their sales
• How do economic variables affect sales forecasting?

  Economic variables include:

  • Interest rates
  • Inflation - impacts products eg. quality = lower sales
  • Unemployment rate - high unemployment = low production
• How do actions of competitors affect sales forecasting?

  If competitors have superior product/promotion/collaboration, the business may decide to produce/sell less of those products.
• What are the difficulties for sales forecasting? (3 things)

  • No guarantees
  • Dynamic markets
  • Short term thinking
• Why are no guarantees difficult for sales forecasting?

  • Unable to predict sales will be at these levels
  • This could be due to uncertain factors eg. impact of terrorism
• Whyare dynamic markets difficult for sales forecasting?

  • 2017 fidget spinner was a must-have toy
  • Banned after a month and sales declined
  • Fast paced, trend based markets move too quickly for accurate forecasting
• Why does short term thinking make sales forecasting difficult?

  • Useful for predicting sales over the next year
  • Wouldn’t work for large sales over long periods eg. boats, planes