Organizational Demand Analysis Chapter 6

Forecasting Why is forecasting important? Why is forecasting important?

Organizational Demand Analysis Market Potential Market Potential “Maximum possible sales of all sellers of a given product in a defined market during a specific time period.”“Maximum possible sales of all sellers of a given product in a defined market during a specific time period.” Sales forecast Sales forecast “Maximum share of market potential an individual company might expect for a certain product or product line.”“Maximum share of market potential an individual company might expect for a certain product or product line.” Example Example

Forecasting Where to get information? Where to get information? InternetInternet Census bureau Census bureau Competitors Competitors Customers Customers IssuesIssues

Forecasting Potential for Planning Strategy Potential for Planning Strategy Forecast helps to plan:Forecast helps to plan: Engineering design and implementation Engineering design and implementation Marketing and commercial development Marketing and commercial development External stakeholders External stakeholders Potentials: Planning and Controlling by Segment Potentials: Planning and Controlling by Segment Segment marketSegment market Allocate expendituresAllocate expenditures

Forecasting Life Cycle Potential Life Cycle Potential Role of the Sales Forecast Role of the Sales Forecast What does it do?What does it do? Applying Market Potential and Sales Forecast Applying Market Potential and Sales Forecast Market potentialMarket potential Sales forecastSales forecast Supply chain implicationsSupply chain implications

Determining Market & Sales Potentials Statistical Series Methods Statistical Series Methods Easy ifEasy if ExampleExample Single Series Method Single Series Method 1.Make sure series is related to demand for product 2.Determine the relationship 3.Estimate future values Independently forecasting Independently forecasting Rely on government or industry forecasts Rely on government or industry forecasts 4. Determining market potential

Market Research Surveys Surveys AdvantagesAdvantages DisadvantagesDisadvantages Role of Forecasting Role of Forecasting

Market Research Forecasting Methods Forecasting Methods Qualitative methods (AKA management judgment and subjective techniques)Qualitative methods (AKA management judgment and subjective techniques) Executive judgment Executive judgment AdvantagesAdvantages DisadvantagesDisadvantages Sales force composite Sales force composite AdvantagesAdvantages DisadvantagesDisadvantages Delphi method Delphi method AdvantagesAdvantages DisadvantagesDisadvantages

Market Research Forecasting Methods Forecasting Methods Quantitative methods (systematic or objective forecasting)Quantitative methods (systematic or objective forecasting) Time series Time series Historical data to project futureHistorical data to project future ComponentsComponents Trend Trend Cycle Cycle Seasonal Seasonal Irregular Irregular

Market Research Regression or causal techniques Regression or causal techniques Determine relationship between sales and an outside variableDetermine relationship between sales and an outside variable RequirementsRequirements LimitationsLimitations Spurious relationships Spurious relationships Historical data Historical data May not work May not work Several methods= Better accuracy Several methods= Better accuracy