sales forecasting

Question 1

define sales forecasting

Answer 1

projection of future sales revenue, often based on previous sales data

Question 2

what is the purpose of sales forecasts?

Answer 2

they are used to reduce uncertainty and to be able to calculate how much stock it needs, staffing levels etc

Question 3

list 3 factors affecting sales forecasts

Answer 3

1. consumer trends
2. seasonal variations
3. actions of competitiors

Question 4

factors affecting sales forecasts

consumer trends

Answer 4

consumer trends are the habits and behaviours of consumers around the products they buy and how they use them

consumer trends affect sales forecasting as they are constantly changing, and a sales forecast doesn’t take into consideration change, it predicts everything will be stable

Question 5

factors affecting sales forecasting

seasonal variations

Answer 5

seasonal variation refers to products being purchased in smaller or greater quantities at different times of the year

businesses that are affected by seasonal factors use sales forecasts to recognise when sales get lower from previous data, and they use time series data to identify seasonal variations

Question 6

what is time series data?

Answer 6

involves predicting future levels from past data, like getting the yearly sales from the past 10 years

Question 7

list 3 benefits of sales forecasting

Answer 7

• allows the business to manage finances
• the business can plan orders and supplies. this is good as some suppliers need notice for large orders, this builds good relationships with suppliers
• ensures the business has enough capacity/stock for projected orders, if the projected orders are higher, they will need to buy more stock/premises

Question 8

factors affecting sales forecasting

economic growth

economic variables

Answer 8

consumer incomes increase, meaning they have higher spending, meaning the business will have to prepare for more sales by ordering more stock

Question 9

factors affecting sales forecasting

interest rates

economic variables

Answer 9

when interest rates are high, the cost of loans increases and the demand for loans falls, this will lead forecasts to be adjusted downwards

Question 10

factors affecting sales forecasting

unemployment

economic variables

Answer 10

an increase in unemployment means a decrease in spending, which impacts sales and orders

Question 11

factors affecting sales forecasts

exchange rates

economic variables

Answer 11

UK goods become more expensive to US consumers if the dollar value is higher than the pound

Question 12

factors affecting sales forecasts

actions of competitors

Answer 12

• pricing: if a competitors reduces their prices, the business will have to aswell, and will have to try and find a way to minimise costs in order to do so
• if a new business opens nearby, this will be a long term impact

Question 13

what are the difficulties of sales forecasting?

Answer 13

• volatile consumer tastes and preferences
• lack of data
• subjective expert opinon

Question 14

what are the difficulties of sales forecasting?

volatile consumer tastes and preferences

Answer 14

hard to predict

Question 15

what are the difficulties of sales forecasting?

lack of data

Answer 15

although the business uses past sales figures to sales forecast, it lacks wider economic data, like unemplotment, average income growth etc

Question 16

what are the difficulties of sales forecasting?

subjective expert opinion

Answer 16

sales forecasts are made by experts, like sales analysts, and may construct the forecast based off their own opinions, could be inaccurate