2.2.1 Sales forecasting

Question 1

what is sales forecasting?

Answer 1

the process of estimating future sales with accuracy

Question 2

what does PESTLE +C stand for

Answer 2

Political
Economic
Social
Technology
Legal
Environment
+ Competition

Question 3

what is extrapolation?

Answer 3

this uses trends established from historical data to forecast the future
-use a line of best fit
(the general path that a variable takes over a period of time)

Question 4

what is a moving average?

Answer 4

a quantitative method used to identify underlying trends in a raw set of data
-it seeks to smooth out fluctuations to make extrapolation meaningful

Question 5

what is a correlation?

Answer 5

it looks at the strength of a relationship between two variables

Question 6

what are confidence intervals and why are they used?

Answer 6

they are used to allow for margins of error, useful with potential errors in forecasts
-it gives the % probability that an estimated range of possible values includes the actual value being estimated

Question 6

what is the purpose of sales forecasting?

Answer 6

used for managers to look ahead, think about what is likely to happen in their industry and prepare accordingly in all areas of the business

Question 7

what are sales forecasts the basis of?

Answer 7

-HR planning
(right number of staff are employed, right skills etc)
-marketing budgets
(decide how to allocate its budget)
-profit forecasts and budgets
(help to shape expectations of spending)
-production planning
(manage capacity, minimise waste)

Question 8

name some factors that affect the sales forecast

Answer 8

-consumer trends
-economic variables
-actions of competitors

Question 9

how do consumer trends affect sales forecasts?

Answer 9

changing tastes and habits, demographics, globalisation and affluence

Question 10

how do economic variables affect sales forecasts?

Answer 10

value of the pound, changes in taxation and inflation

Question 11

how does actions of competitors affect sales forecasts?

Answer 11

changing prices (if competitors lower prices, sales revenue, profit and cash flow forecasts are all affected)
launching new products (impact forecasted sales)
promotional campaigns (stealing customers and market share)

Question 12

what are some difficulties with forecasting cash flows?

Answer 12

in the longer term, the market will experience economic changes and competitor actions that will inevitably affect demand