Sales Forecasting

Market Analysis & Forecasting Trends Businesses attempt to predict the future – need to plan ahead Why?

Why do businesses need to forecast? Businesses need to know what is happening in their industry. Is it growing? The forecast for sales volume and revenues will form the basis for many plans. Discuss which plans: HR. How many staff will be needed? Training? Production planning and scheduling. Any more equipment needed? Stocks: stock levels will depend on production and demand over a period Cash flow forecast will depend on revenues and the payment period Ask them to list why forecasts will form the basis for plans and which ones

Next one in the series Next one in the series: 120,130,140,150,160, ? 3,6,9,12,15,18, ? 2,4,8,16,32,64, ? 1,2,3,2,3,4,3,4,5,4,5, ?

Tesco results – good or bad? Last few years revenues have been falling Why? What do you think will happen to revenues What factors do you think will influence sales revenues over the next few years In pairs, discuss

Forecasting sales Your thoughts General comments Consumer trends Changes in tastes and fashions (healthy eating, technology) Demographics – size and composition of the population Economic variables Is the economy growing, so are incomes rising Exchange rate Taxes Inflation

Forecasting sales Your thoughts General comments Competition Big one for Tesco. From who? Increasing low cost competition (Aldi,Lidl) Amazon for online M&S and Waitrose for high end Affects all businesses

Forecasting sales - how Generally forecasting is based on the past Assume past trends will continue Called extrapolation Eg Apple iPhones sales m Sales 2012 10 2013 11 2014 12.1 2015 13.2 2016 2017 2018

Difficulties in forecasting sales From the text book – Branston tomato ketchup. In blue actual sales from launch in 2005 to 2010. In dotted red is a forecast based on extrapolating the trend. Do you think this was accurate?

The future may be orange, but we can’t be sure Donald Rumsfeld quote “There are known knowns. There are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know” Can you think of any examples?

Sales forecasting conclusion Sales forecasts are vital to all parts of a business Forecasts may not be accurate, but they can form a basis for planning Young Enterprise teams - do you have any kind of forecast? Management need to take care with forecasts What plans do they have if their forecasts are wrong? These are one type of contingency plan Homework from the textbook p 212 q1-4 and Edexcel Jan 2012 Paper 2 B11 on Ocado sales forecast

Textbook questions