sales forecasting

Question 2

sales forecasting

Answer 2

Sales forecasting is the process of predicting future sales levels by volume or value and future trends

Question 3

quantitative sales forecasting

Answer 3

quantitative sales forecasting is based on data which can be historic or the results of quantitative research

Question 4

extrapolation

Answer 4

Using past experience or past business data to forecast future sales

involves taking the past and extending it into the future.

Question 5

purpose of a sales forecast

Answer 5

A sales forecast acts as a goal against which a business can measure its progress. It also drives many other decisions within the firm.

For example: inform resource management about inventory levels, production output and logistics, inform cash flow and budgets, aid workforce planning

Question 6

time series analysis

Answer 6

Time series analysis uses evidence from past sales records to predict future sales patterns

Question 7

time series analysis- seasonal analysis

Answer 7

sales are measured on a monthly or weekly basis to examine the seasonality of demand

Question 8

time series analysis - trend analysis

Answer 8

this focuses on long-term data, which has been collected over a number of years. The
objective is to determine the general trend of sales - rising, falling or stagnant.

Question 9

time series analysis - cycle analysis

Answer 9

as with trend analysis, long term figures are used but now the objective is to examine the relationship between demand levels and economic activity. For example, by asking the question ‘what is the relationship between demand for the product or products and the stage in the economic or business cycle?’

Question 10

time series analysis- random factor analysis

Answer 10

this method of analysis attempts to explain how unusual or extreme sales figures occur

Random factor analysis therefore attempts to provide explanations for unusual or abnormal sales activity.

Question 11

moving averages

Answer 11

this technique evens out any major fluctuations in the sales data series to allow the underlying trend to be seen more clearly
the process of removing fluctuations is known as smoothing
smoothing mathematically removes any seasonal variations from data a series

Question 12

correlations

Answer 12

A correlation measures the relationship between two variables e.g. whether there is a link between a business’s
advertising expenditure and the amount of sales it achieves

can be either: positive, negative or non- existent.

Question 13

advantages of time series analysis

Answer 13

• Helps the business plan ahead
• Helps financial planning, including cash flow management
• Production planning to determine the right level of supplies are ordered and the production process is
  efficient to meet either higher levels or lower levels of production
• Human resource planning, getting the right number and type of staff in the jobs that are needed. This may
  mean recruiting more staff, retaining staff or making staff redundant.
• Is useful in identifying seasonal variations
• Reduces the risk of unexpected surprises that could affect business performance.

Question 14

disadvantages of time series analysis

Answer 14

• It is not always easy to predict the future
• Historical data is not always a good indication of what might happen in the future
• Even complicated sales forecasting methods can get it wrong and no forecast can be correct 100% of the
  time
• Less useful for long-term forecasts
• As with all forecasting methods, success is not guaranteed

Question 15

surveys of customer intentions

Answer 15

This method of forecasting makes predictions by asking people directly what they intend to do in the future

Question 16

direct sales information

Answer 16

Sales teams within businesses interact closely with customers. Sales staff might notice any developing trends, and they have the experience to spot market changes and shifts in customer preferences and attitudes.

Question 17

test marketing

Answer 17

Test marketing involves testing consumers’ response to a product, before the full release of the product. Test
marketing can involve the release of a product in a limited geographical area, or to a small section of the target
market.

Question 18

the delphi method

Answer 18

The Delphi method begins with the initial development of a questionnaire focusing on the problem or issue in
question. A panel of experts is selected, and then the questionnaire is sent to each of them. Each participant answers
the questionnaire independently and returns it. Responses to the questionnaire are summarised before a further
questionnaire is developed, based on findings of first questionnaire, and sent to the same panel of experts.
The members of the expert panel independently rate and prioritise ideas included in the second questionnaire. This
enables the group of experts to arrive at a consensus forecast on the subject being discussed.

Question 19

advnatgaes of delphi

Answer 19

It is flexible enough to be used in a variety of situations and can be applied to a range of complex problems
* Provides a structured way for a group of people to make decisions
* Participants have time to think through their ideas leading to a better quality of response
* The Delphi method creates a record of the expert group’s responses and ideas which can be used when
needed

Question 20

disadvantages of the delphi method

Answer 20

The method will more than likely require a substantial period of time to complete as the process is time
consuming to coordinate and manage
* It assumes that experts are willing to come to a consensus and allow their opinions to be altered by the views
of other experts
* Monetary payments to the experts may lead to bias in the results of the study.

Question 21

brainstorming

Answer 21

Brainstorming is a subjective technique for generating new, useful ideas and promoting creative thinking, usually between a group of people.
It can be used to predict outcomes based on the group’s subjective thoughts and feelings.
The basis of the brainstorm is ‘The Problem Statement’, which is the focus of discussion.

Question 22

intuition

Answer 22

It is difficult to predict the future if products are new to the market as there may be very little historical data available
or if the market a business operates in is unstable and is constantly changing.
With limited data available to collect and examine, business leaders and managers may instead use their ‘gut feeling’ or intuition

But gut feeling and experience should not be the only guide.

Question 23

expert opinion

Answer 23

They have opinions on future demand and expenditure patterns in the UK and the global markets.
Experts are useful for gaining specialised insights into likely future patterns and trends but should not be used on a ‘standalone basis’. Panels of experts are more reliable than consulting individual experts. The opinion of experts should also be combined with information gathered from other sources

Question 24

external factors

Answer 24

economic
consumer
competition