2.2.1 Sales Forecasting

Question 1

what is a sales forecast

Answer 1

• predicting sales volume and sales revenue based on previous data

Question 2

what does a sales forecast enable a business to make decisions about

Answer 2

1 Finance- sales revenue is a firms main cash inflow so this will help them produce accurate cash flow forecasts
2 Marketing- business may decide to start marketing heavily if sales are set to decline
3 resources- a firm will need more resources (staff, stock, machinery) if sales revenue is set to be high

Question 3

what 3 factors affect sales forecasting

Answer 3

1 consumer trends- what is popular at the time ?
2 economic variables- these economic variables (interest rates, unemployment, inflation) affect consumer income and the demand for different products
3 actions of competitors- if a competitor launches a new product or drops their prices sales may decrease

Question 4

what is the problem with sales forecasting

Answer 4

• uses past data which may not always reflect future sales
• in the short term they are more likely to reflect the past but if they are more long term they will be less reliable
• dynamic markets that are always changing can be hard to predict
• they take time and lots of skill to produce, small firms may not have this ability