2.2.1 Sales forecasting Flashcards
What is sales forecasting?
A prediction of the sales revenue for a product or whole business
What is the purpose of sales forecasting?
-Measures performance in department or individual
-Monitor achievements against targets
-Make informed decisions about future operations, marketing, and resource allocation
What is a time series analysis?
A method to predict future levels from past data
What are the 4 key components a business wants to identify?
-The trend (patterns)
-Seasonal fluctuations
-Cyclic fluctuations (patterns in economy)
-Random fluctuations
What 3 factors affect sales forecasting?
1- consumer trends
2- economic variables (trends in economy)
3- actions of competitors
What are consumer trends?
habits and behaviors of consumers around products they buy
What are the 5 areas that can affect economic variables?
- Economic growth
- Intrest rates
- Inflation
- Unemployment
- Exchange rate
What is economic growth?
An increase in the amounts of goods/services produced in the economy
What are interest rates?
Tells us how high or low the cost of borrowing and rewards for savings
How will economic growth affect sales forecasting?
Consumers will have more disposable income because of increased employment so businesses sales will increase
How will high interest rates affect sales forecasting?
People will have less money when interest and borrowing costs are high
How will high inflation affect sales forecasting?
Will lead to lower levels of consumer spending unless product is necessity
How will high unemployment affect sales forecasting?
It will reduce spending then sales will decrease
What are the 3 pros of sales forecasting?
-Help prepare for risks
-Performance evaluation
-Helps with budgeting
What are the 3 cons of sales forecasting?
-Inaccurate as it is a prediction
-External factors may not be considered
-Time consuming
-Often uses past data so likely to present the near past rather than the present
