sales forecasting

sales forecast

a prediction of the expected level of sales volume for a business for a future period

why is sales forecast important

helps manager to make decisions about what resources the business needs in the future

why is sales forecasting difficult

consequences of getting wrong can be severe

over estimated forecast for deman may leave a firm with excess capacity and stocks meaning wastage

underestimate= firms miss out on revenue

how do forecasters predict changes in demand

very difficult

plot past trends and then consider what is likely to happen in future

fall in income tax

decrease or reduction in the amount of tax you need to pay

impact of a fall in income tax

customers have more dispoable income so they are likely to spend it so demand for certain goods is likely to rise normal and luxury goods will see an increase in demand, so fall in income tax =sale forecasts should be revised upwards

a rise in inflation

general prices of goods and services increase over time

impact of a rise in inflation

raise in average price level so consumer cannot purchase as many items so demand for some will fall so a rise in inflation =fall in demand so revise sales forecasts accordingly

what makes sales forecasting so difficult

natural disasters- earthquake, flooding

seasonality -summer(swimwear), back to school

fluctuations in demand-dynamic market=trend change

new businesses-different options, market reaction

historical data may not reflect future performance-new trends, data outdated

consumer trends

habitats or behaviours of those involved in the use of goods and services (tiktok)

factors affecting medium-long term trends

changing tastes and habits-fashion,eating,lifestyle,celeb

demographics-aging population

globalisation-holidays

seasonal variations- sledges in winter

legal infulecne-sugar tax