2.2.1 Sales forecasting Flashcards
Forecast:
7 relations
- predict
- sales
- trends (mr)
- objectives
- staff performance data
- budgets
- cash flow
why would you forecast?
5 reasons
- stock control (supply chain)/ know demand
- derive of aims/obj
- financial impact
- capacity utilisation
- HR strategy
-use primary if afford it
Forecasting definition
- business process
- assessing probable outcome
- using assumptions about future
Sale forecast definition
- projection of future sales revenue
- often based on previous sales & market data
How are sales forecasts derived ?
- from correlation (positive strong)
- link internal/external influences & future sales (relationship = external factors will affect future sales)
- magnitude of relationship = use for forecasting - extrapolation
- using past sales data to predict future sales data
- assuming past is repeating itself
9 factors affecting sales forecast?
- availability of data
- seasonality
- demand (tastes/trends change)
- nature of product (essential/luxury)(market -dynamic)
- competitors (close substitute)
- success of sales team
- experience of manager forecasting
- external factors
- economic variables
economic variable
-any measurement that helps to determine how an economy functions
e.g. interest rates rising
consumer income rising
tax on sugary drinks increasing
exchange rates for £ depreciating
how do you measure size of economy?
growing/shrinking
- GDP (interest rates)
- inflation
- unemployment
- deprivation rate
- exchange rate
income elasticity
-measure sensitivity of demand to changes in consumer income
normal good
-one with a positive relationship between income and demand e.g. bottled water (income + = demand +)
inferior good
-one with a negative relationship between income & demand e.g. supermarket own brand (income + = demand - afford more luxurious)
Interest Rates rising:
-reward for saving & a cost of borrowing (interest rates have negative effect on businesses sales forecast) - depends on what good
Consumer income rising (slowly):
- positive effect on sale forecast for luxury goods
- not good for inferior goods
Tax on sugary drinks increasing:
- increase in price
- more expensive products could decrease decline sales (business sales forecast)
Tax
- duty charged by government
- direct; income
- indirect; spend
