2.2.1 Sales forecasting

Question 1

Sales forecast

Answer 1

A sales forecast estimates the volume or value of future sales using market research or past sales data

Question 2

Purpose of sales forecasting

Answer 2

-avoid cash flow problems
-frees up management time
-production capacity
-employ more workers
-start promotional activity
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Question 3

Purpose of sales forecasting - avoid cash flow problems

Answer 3

Helps the business to manage their production, staff and financing needs more effectively and possibly avoid unforeseen cash flow problems

Question 4

Purpose of sales forecasting - frees up management time

Answer 4

a well-constructed sales forecast can allow the business owners to spend more time developing their business rather than responding to day-day developments in sales and marketing

Question 5

Purpose of sales forecasting - production capacity

Answer 5

• Can use a sales forecast to estimate if they need ti increase or decrease production. Allow them to see if they have enough production capacity to deal with the expected demand
• business may need to buy or rent new premises if there is a huge increase in sales forecast

Question 6

Purpose of sales forecasting - employ more workers

Answer 6

If a business has high sales forecasts for a new product or service it may need to take on new employees to cope with new levels of demand
-Failure to meet required staffing levels could result in poor reviews, customer service and this may have an impact on future sales

Question 7

Purpose of sales forecasting - start promotional activity

Answer 7

If sales are forecast to be very low and the product or service is not in the decline phase of the product lifecycle - then the business may decide to try and increase sales through promotion and marketing

Question 8

Factors affecting sales forecast

Answer 8

Consumer trends
economic variables
actions of competitors

Question 9

Factors affecting sales forecast - consumer trends

Answer 9

• A sales forecast may take into account consumer trends
• Documents like MINTEL can help businesses identify an upcoming trend
• Market research to find new popular products

Question 10

Factors affecting sales forecast - economic variables

Answer 10

Variables - interes rates, inflation, unemployment rate and GDP can affect how a business plans its sales forecast

Question 11

Factors affecting sales forecast - Actions of competitors

Answer 11

the actions of competitors may affect sales forecasting
-if the business has products that face declining sales, due to a competitors superior product they may decide to produce or sell less of those products.

Question 12

Difficulties of sales forecasting

Answer 12

No guarantees of success
dynamic markets
short term

Question 13

Difficulties of sales forecasting - no guarantees of success

Answer 13

No guarantees that sales will meet these levels

-This could be down to any number of uncertain factors

Question 14

Difficulties of sales forecasting - dynamic markets

Answer 14

Trends for fashion and customer interest constantly change making it hard to estimate the demand for products

Question 15

Difficulties of sales forecasting - short term

Answer 15

a sales forecast is useful to a business which can produce and sell products or services in a one year period

Question 16

consumer trends

Answer 16

Habits or behaviours which consumers have towards the products they buy and services they use

Question 17

Economic variables

Answer 17

These are key indicators in the economy