Sales Forecasts
Business: BTEC Level 3 National Extended Diploma, topic 6.4.1
Sales Forecasts
Sales forecasts are used to predict the level of future sales. This helps a business make decisions and anticipate performance in the short and long term.
Consumer trends
- Consumer trends influence sales forecasts.
- Demand for products will be heavily influenced by consumer trends.
- If demand is affected, a business' market share may change as well.
Economic variables
- Economic variables influence sales forecasts.
- This is because demand for a product depends upon variables such as interest rates, indirect taxes, and exchange rates.
- An economy's overall condition (i.e. in a period of boom or bust) will influence the total level of consumption in the economy.
Competitor actions
- Sometimes sales forecasts are off-kilter because they have not anticipated the actions of competitors.
- Generally, this is why sales forecasts are too high.
The limits of sales forecasting
- Sales forecasting poses difficulties:
- Start-ups have no existing information to base their forecasts off.
- Forecasts depend upon the elasticity of demand.
- Forecasts cannot anticipate new entrants in the market and the influence this will have.
- Forecasting could become political as managers face shareholder pressure. This means there may be a large discrepancy between the forecast and the reality.
Test yourself on Sales Forecasts
Why might sales forecasts be more difficult for new businesses?
Are sales forecasts likely to be pessimistic if an economy performs better than expected?