1. Sales Forecasting

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

3. 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

4. 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, ?

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

6. 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

7. 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

8. 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

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

10. 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?

11. 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

12. Textbook questions