Sales Forecasting + market analysis

Question 1

Explain why businesses collect data

Answer 1

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.

Question 2

What are the types of data

Answer 2

Qualitative (non-numeric number)

Quantitative (Numeric number)

Historic data – data from the past previously measured

Question 3

Why do businesses use graphs

Answer 3

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

Question 4

Define and evaluate pie charts

Answer 4

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

Question 5

Define and evaluate histograms

Answer 5

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.

Question 6

How do you calculate percentage change

Answer 6

Difference in change/original x100

Question 7

Define PED

Answer 7

Price elasticity of demand Measures the responsiveness of demand to a change in price

Question 8

What is the formula for PED

Answer 8

Percentage change in quantity demanded /
Percentage change in price

Question 9

What is an example of an elastic good

Answer 9

Goods that have lots of substitutes and are in a very competitive market, such as bread, cereals and chocolate bars.

Question 10

Explain the term “elastic”

Answer 10

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.

Question 11

What are luxury goods

Answer 11

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

Question 12

What is meant by the term “inelastic”

Answer 12

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

Question 13

Give examples of inelastic goods

Answer 13

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

Question 14

What are some factors affecting PED

Answer 14

Time - PED tends to fall the longer the time period.

Competition for the product

Branding – The stronger the branding the less substitutes.

Question 15

Define YED

Answer 15

Income elasticity of demand, Measures the responsiveness of demand to a change in income

Question 16

What is the formula of YED

Answer 16

Percentage change in quantity demanded / Percentage change in income

Question 17

What are the 3 types of goods measured in YED

Answer 17

Luxury goods

Normal goods

Inferior goods

Question 18

Define Luxury goods

Answer 18

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.

Question 19

Define Normal Goods

Answer 19

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.

Question 20

Define Inferior Goods

Answer 20

These are cheap substitutes of products people prefer to buy when their income is reduced (such as value line baked beans): negative income elasticity.

Question 21

Define sales forecasting

Answer 21

Sales forecasting is the process of estimating future sales performance based on historical data, market analysis, and other relevant factors.

Question 22

How is sales forecasting useful

Answer 22

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

Question 23

What factors can affect sales forecasting

Answer 23

Factors which can affect the reliability of the sales forecast is
bias
market conditions
external factors
economic conditions
accuracy of forecasting methods

Question 24

How to calculate 3 point moving average

Answer 24

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

Question 25

Define extrapolation

Answer 25

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.

Question 26

What are the types of correlation

Answer 26

Positive
Negative
NONE

Question 27

How is time series analysis useful

Answer 27

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.

Question 28

Define Time series analysis

Answer 28

Time series analysis is a statistical technique used to analyse and interpret data points collected at regular intervals over time

Question 29

What are 3 qualitative techniques

Answer 29

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.

Question 30

Give advantages of qualitative forecasting

Answer 30

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

Question 31

Give disadvantages of qualitative forecasting

Answer 31

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.