ch 30

Question 1

What is forecasting?

Answer 1

a business process assessing the probable outcome using assumptions about the future

Question 2

What is time series data?

Answer 2

a method that allows a business to predict future levels from past figures

Question 3

What is the purpose of sales forecasts?

Answer 3

How much stock to purchase?
How many staff to employ?
How much finance is required?
What marketing strategy?

Question 4

What is time series analysis?

Answer 4

this is a forecasting technique which uses historic data to predict future sales forecasts

Question 5

what are different ways of time series analysis?

Answer 5

-trend(raw data shows patterns of sales figures, this allows trends to be identified)
-seasonal fluctuation(performance of a business based on the position of the economy in the business cycle)
-cycle fluctuation(performance of a business based on the position of the economy in the business cycle)
-random fluctuation(freak figures that stand out from the trend, usually influenced by external factors)

Question 6

What is important to remember about time series analysis?

Answer 6

time series analysis does not attempt to explain data it is solely looking at the data to inform prediction
further investigation may be required to identify the factors behind the result

Question 7

How can you calculate sales adjustments?

Answer 7

Change on sales/original x 100

Question 8

What are the benefits of sales forecasting?

Answer 8

-informs cash-flow forecasts(clear idea about inflows and finances)
-plan for deliveries of supplies(how much and when)
-ensures correct staffing levels(able to deal with demand )
-ensure that the business can identify any capacity issues(equipment or resources )

Question 9

What factors affect sales forecasting?

Answer 9

-consumer trends(business need to satisfy their customers’ needs and desires the ones who are the most successful at doing this are the ones who can anticipate changes in consumer trends, either by identifying them or influencing them)

-economic variables
-action of competitors

Question 10

What are the factors under the consumer trends?

Answer 10

seasonal variation
fashion
long term trends

Question 11

How does Seasonal Variation affect sales forecasting?

Answer 11

certain industries are seasonal in nature and its important that businesses account for that in their planning
The obvious ones are holiday resorts, Christmas tree and ice cream sales
However, utility companies, such as gas ad electric also have season variation in their usage
Its important that businesses that see high levels of seasonal demand account for this to ensure that any spending on either capital or revenue expenditure dont impact negative on the businesses cash-flow

Question 12

How does fashion affect sales forecasting?

Answer 12

consumer preference and tastes can vary widely and quickly interpreting and anticipating fashion choices is a difficult and unpredictable business
fashion and technology are 2 sectors hit hard by this uncertainty and as such, it makes accurate sales forecasting very difficult

Question 13

How does economic variables affect sales forecasting?

Answer 13

charges in the wider economy will have a great impact on the businesses ability to accurately forecast.
they economy in this respect refers to consumers (households), businesses and government
Perception on future performance will have a big impact on sales predictions

Question 14

What are difference factors under economic variables?

Answer 14

economic growth
interest rates
inflation
unemployment
exchanges rates

Question 15

How does economic growth affect sales forecasting?

Answer 15

economic growth is measured by the relative increase in GDP of an economy. it can affect forecasts in the following wages
if GDP grows at a rate which is in line with, or better then anticipated, this can be seen as positive and an lead to an increase in business sales as confidence is high
if GDP growth slows ,this can be an indicator towards future issues, which can lead to reduced confidence and reduced consumer spending on non-essential items

Question 16

How does a rise in interest rates affect sales forecasting?

Answer 16

the cost of borrowing increases due to larger interest payments, this reduces people willingness to take loans to purchases larger items
customers have more intensive to save as they receive more interest, more saving reduced spending

Question 17

How does a fall in interest rates affect sales forecasting?

Answer 17

as less interest is paid, the cost of borrowing larger amounts of money is reduced, infrastructure and larger household purchases
As rewards for saving are less, there’s little incentive to do so consumers may spend cash instead

Question 18

How does unemployment affect sales forecasting?(PPQ 10 MARK)

Answer 18

unemployment measures the number of people who are out of work but actively seeking employment

if unemployment is low, this means that businesses feel confident about the strength of the economy as consumers feel secure in their jobs, with less need to save

However, if unemployment is high, that these out of work will be living off reduced incomes, meaning they have less disposable income, this will lead to a reduction in spending on all but non-essential items, this would lead to reduced sales forecasts

Question 19

How does exchange rates affect sales forecasting?

Answer 19

-the exchange rates between one currency and anther reflects the relative value of those currencies and their purchasing power in the other
-Exchange rates only affect a business if they either purchase products or material from overseas, or they sell to those markets
-If the value of the pound falls relative to another currency, then it becomes cheaper for customers from overseas to buy UK manufactured products, in this scenario, companies would increase their sales
forecast
- if the value of the pound rises, then the goods sold overseas increases in prices , this would usually see a reduction in sales forecasts

Question 20

how does action of competitors affect sales forecasting?

Answer 20

the action of competitors has a major impact on many areas, from innovation to pricing and promotion. Sales forecasting is an area which can be greatly affected by the action of competitors

Question 21

What issues will businesses have to consider when considering the actions of competitors?

Answer 21

New players moving into markets
Rivals new products
Internal development
business relocating to/from your area
web based sales
acquisition and merger (joining of businesses)

Question 22

What are the difficulties of sales forecasting?

Answer 22

-volatile consumer tastes and preferences( can lead to misinterpretation of sales figures, using data only to inform forecasting can lead to wrong decisions being made)
-range of data(ensuring that the RIGHT data is used is fundamental. Combinations of primary and secondary data will be used, but businesses must be careful, inaccurate data could lead to dangerous inaccurate forecasts)
-subjective expert option ( can also lead to issues when forecasting , Whilst ‘experts’ may have a better understanding of the market,they can still call it wrong)

Question 23

two reasons PPQ
two factors PPQ

Answer 23

Q1-to plan finance
-in order to plan human resources(staff levels)

Q2-Actions of competitors
-economic variables(exchange rate)

Question 24

why the actual is higher than predicted
PPQ

Answer 24

-increased awareness of environmental issues
-positive feedback on social media

Question 25

how can competitors actions affect sales forecasts PPQ

Answer 25

sales forecasts are affected by competitors\ or economic variables
or trends
if you have high competition all of whom have he same AIM of high sales
customers will have other options that might be at a ,lower pice and go to that instead pushing there price down
though the market is large so he may not be affected
he can avoid anything by reducing prices