2.2.1 Sales Forcasting Flashcards

1
Q

Define sales forecasting

A

Is the prediction of future sales and volume tends

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2
Q

The purpose of sales forecasts

finance

A
  • Inform cash-flow forecasts i.e. how much money can the business expect to flow in from sales
  • Predict sales volume and sales revenue (2.2.2)
  • Assess ability to break-even (2.2.3)
  • Help set budgets (2.2.4)
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3
Q

The purpose of sales forecasts

Marketing

A
  • Identify when promotional activity is needed e.g. before a potential peak or to avoid a dip
  • Plan distribution
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4
Q

The purpose of sales forecasting

people

A

Sales team
Seasonal staff
Peak times
Operative to ensure supply meets demand

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5
Q

The purpose of sales forecasting

Resource management

A
  • required levels of output
  • stock management
  • can supply match demand
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6
Q

Factors affecting sales forecasts include

consumer trends

A
  • Goods come in and out of fashion
  • Difficult to predict what the next trend will be
  • Follow experts e.g. London fashion week as an indicator of short term fashion trends
  • Shopping habits
  • Online sales – how will this affect who buys what, where and when?
  • Demographics
  • UK has an ageing population with high net migration
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7
Q

What factors affect sales forecast

A

Customer trends
Economic variables
Actions of competitors

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8
Q

Factors affecting sales forecasting

economic variables

A
  • Interest rates
  • If interest rates are low this encourages consumers to spend as the reward for saving is low
  • Employment
  • The amount of people employed in an economy directly influences spending power, those in employment will have an income to purchase goods and services with
  • Consumer confidence
  • If consumers are confident in the future of the economy they are more likely to spend, however if the economy is in decline they are more cautious
  • Stage in economic cycle
  • If the economy is recovering then consumer confidence will be higher and employment rising which will impact on sales as identified above
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9
Q

Factors affecting sales forecasting

actions of competitors

A
  • Competitors entering or exiting the market
  • This will impact on market share and therefore sales
  • Changes in price and promotion
  • e.g. what if a competitor lowers price or increases promotional activities?
  • Competitor is better able to respond to consumer trends
  • Greater flexibility and speed of response to changes in consumer wants
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10
Q

Difficulties in sales forecasting

A
  • By definition the future is unknown and therefore uncertain
  • Changing external environment
  • Unpredictable events
  • Time frame
  • Past is not a clear indication of the future
  • Lack of perfect information
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