3.3 - business growth Flashcards
What is quantitative sales forecasting? (QSF)
Quantitative Sales Forecasting is a statistical technique which uses
data to make predictions about the possible sales level in the future.
-uses historical data, smoothed out, to make better
sales predictions for the future.
What can a business do with Quantitative
Sales Forecasting / time series analysis data?
-Organise production
-Organise the staff needed for the
level of production (human
resources)
-Organise the finances to
manufacture the products
-Organise marketing to promote
the products being sold
calculation
- 3 period moving average.
business production
operations manager might need
to look at the sales data 3 times
a year and smooth out any
seasonal variations or spikes in
the data.
This will help the business to
organise
goods or services; marketing,
finance, production and human
resources.
calculation
4 quarter moving average
look at
the sales data in terms of the 4
seasons in the year
scatter graphs - interpretation.
-sales vs …
-negative/ positive correlation.
-strong/weak correlation.
Limitations of quantitative sales
Past sales figures are no
guarantee of future sales
Businesses need to appreciate
the SWOT and PESTLE factors
that may affect future
Investment appraisal
-Investment appraisal attempts to determine the value of capital
expenditure projects.
-
Investment appraisal – planning process
Investment appraisal is the
planning process used to
determine whether the long
term investments will give the
best return.
-ex) projects, new machines etc.
Investment appraisal – decision making
-way of finding out which project is the most valuable - giving a return of greater profit.
3 methods to calculate Investment appraisal
-payback
-ARR
-NPV
3 methods to calculate Investment appraisal, limitations.
Payback limitations; very simple, only looks at speed of
payback and does not look at profitability
ARR limitations; Does not take into account the effects of
time on the value of money
NPV limitations; Very complex, not used by small
businesses, also results dependent on rate of discount used,
the higher the rate the more likely it is that the project will
be rejected as unprofitable
decision trees
- business can decide which option
would be the most profitable.
-quantitative.
decision tree - limitations.
Decision trees are based on predicted data of the potential impact
of a decision
Decision tree does not take into account unforeseen costs and
circumstances
Probabilities and net outcomes are all estimates
Critical Path Analysis (CPA)
CPA is a management tool
which helps a business to
identify how long a project will
take and what the critical tasks
in that project are
CPA can also be used to:
Launch a new product onto a
market.
Plan the installation of new
technology in a business e.g. a new
server
Plan the renovation of old buildings
Schedule and plan advertising
campaigns
