Sales Forecasting + market analysis Flashcards
Explain why businesses collect data
Businesses Collect data as information is a valuable resource.
Businesses may hire a company to collect data for them.
Examples of data businesses collect are – Costs of production, share prices and exchange rate, company reports, weekly or monthly sales, market research and business news.
What are the types of data
Qualitative (non-numeric number)
Quantitative (Numeric number)
Historic data – data from the past previously measured
Why do businesses use graphs
Businesses may make use of graphs, tables, charts as this makes data more concise and easier to understand.
Easier to identify trends and data can be presented internally and externally
Define and evaluate pie charts
Shows the total amount of data collected is represented in a circle
Advantages – Easy to read, Pie charts are simple to create
Disadvantages - Unsuitable for Time Trends, Not suitable for complex data
Define and evaluate histograms
The chart shows the number of candidates in the sample which falls into various age ranges.
Advantages - Histograms are easy to interpret, Useful large datasets
Disadvantages – Limited use for small datasets, may lose some detailed information present in the raw data.
How do you calculate percentage change
Difference in change/original x100
Define PED
Price elasticity of demand Measures the responsiveness of demand to a change in price
What is the formula for PED
Percentage change in quantity demanded /
Percentage change in price
What is an example of an elastic good
Goods that have lots of substitutes and are in a very competitive market, such as bread, cereals and chocolate bars.
Explain the term “elastic”
Number is greater than 1
This means that a change in price will cause a more than proportional change in the quantity demanded. the level of demand is sensitive to a change in price.
If the price goes up, the demand falls more dramatically vice versa
shallow line on graph.
What are luxury goods
Luxury goods, goods that can be done without e.g., sport cars, exotic holidays and organic bread.
Expensive goods that are a big percentage of income, such as sports cars so they are elastic
What is meant by the term “inelastic”
Number is less than 1
If a good has inelastic price elasticity of demand, then a change in price causes a less than proportional change in the quantity demanded.
If the price goes up, the demand falls just a little.
If the price goes down, the demand increases just a little.
Steep line on graph
Give examples of inelastic goods
Example of inelastic goods
Necessities, such as water, power, petrol and basic foods.
Addictive goods, such as cigarettes.
The stronger the branding, the fewer alternatives (substitutes) are acceptable to customers. Good branding can therefore make a product more inelastic
What are some factors affecting PED
Time - PED tends to fall the longer the time period.
Competition for the product
Branding – The stronger the branding the less substitutes.
Define YED
Income elasticity of demand, Measures the responsiveness of demand to a change in income
What is the formula of YED
Percentage change in quantity demanded / Percentage change in income
What are the 3 types of goods measured in YED
Luxury goods
Normal goods
Inferior goods
Define Luxury goods
the demand for luxury goods will grow at a faster rate than the increase in real income that created the change in demand: positive income elasticity that is greater than 1. Examples are holidays abroad, health club membership, sports cars.
Define Normal Goods
as real incomes increase, the demand for normal goods will also increase positive income elasticity that is less than 1. Examples are matches, lemonade, newspapers.
Define Inferior Goods
These are cheap substitutes of products people prefer to buy when their income is reduced (such as value line baked beans): negative income elasticity.
Define sales forecasting
Sales forecasting is the process of estimating future sales performance based on historical data, market analysis, and other relevant factors.
How is sales forecasting useful
Resource allocation - By predicting future sales, companies can plan for the appropriate levels of inventory
Production Planning - This ensures that the right amount of goods is produced to meet anticipated demand
Risk management - Sales forecasting helps businesses identify potential risks and uncertainties. By recognizing factors that may impact sales
What factors can affect sales forecasting
Factors which can affect the reliability of the sales forecast is
bias
market conditions
external factors
economic conditions
accuracy of forecasting methods
How to calculate 3 point moving average
Add up the first 3 numbers in the list and divide your answer by 3, your first 3 point moving average, then
Add up the next 3 numbers in the list and divide your answer by 3.
When in reverse, times the three year moving average by 3 then minus that number by the total of the 2 existing numbers
Define extrapolation
Extrapolation is a statistical and mathematical technique that involves estimating or predicting values beyond the range of known or observed data.
Use the given historical data and use it to predict.
What are the types of correlation
Positive
Negative
NONE
How is time series analysis useful
Trend Identification - Time series analysis helps identify trends in historical data, allowing businesses to understand the direction in which key variables are moving
Seasonal Patterns - Time series analysis can uncover recurring patterns or seasonality in data, helping businesses anticipate and prepare for regular fluctuations.
Anomaly detection - Time series analysis can help identify anomalies or unusual events in the data, such as sudden spikes or drops.
Define Time series analysis
Time series analysis is a statistical technique used to analyse and interpret data points collected at regular intervals over time
What are 3 qualitative techniques
Intuition means when you make an individual decision without giving it much data backup. (gut feeling).
Brainstorming is when there is a group of individuals who generates a wide range of ideas, solutions, or alternatives to address a specific problem or make a decision.
Delphi Method – You hire experts in the area of topic and send them to make a decision (or thought) on the area you ask them to investigate, then they send their summary of their findings/thoughts, you put all the summaries together and make a decision.
Give advantages of qualitative forecasting
Qualitative forecasting methods are often more flexible and adaptable than quantitative methods.
Qualitative forecasting techniques are particularly useful when forecasting for new products, emerging markets
Qualitative forecasting relies on the expertise, knowledge, and judgment of individuals with relevant experience
Give disadvantages of qualitative forecasting
One of the main criticisms of qualitative forecasting is its openness to bias.
Qualitative forecasts are challenging to assess their accuracy and reliability.
Qualitative forecasting methods can be time and resource-intensive.
