Executive Summary
Ted Ralley (Ted), Director of marketing research for an auto spare parts company wants to ensure the highest level of accuracy for sales projections for the upcoming business year 2008. Ted is aware that forecasting can be an expensive undertaking if results are inaccurate, as such he utilized the most accessible work tool, Microsoft Excel time series forecasting method to run several forecasts using the historical sales data from the previous four years. He was however tentative about the results, as he is of the view that economic activity and oil prices plays a significant role in auto parts sales. To test his theory he has decided to generate additional forecasts using econometric variables. His forecast decisions
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The report further stated that industry revenue fell during the recession, but has risen in subsequent years, as growth in the national level of per capita disposable income and corporate profit aided increased consumer and business spending on auto parts. Director of marketing research for a large manufacturing company of auto parts, Ted Ralley is tasked with predicting quarterly sales for 2008. Aware of the cost to the company if an inaccurate forecast is made, Ted is keen on providing the most accurate predictions. He believes that econometric variables such as oil prices and economic activities have positive impact auto parts sales, and is of the opinion that these variables are better indicators of future sales. Historical data were examined to determine whether economic activity and oil prices have any effect on auto parts sales, and to verify if these factors are in fact better predictors of auto parts sales. The interpretation of these results will guide the direction of the company in the next ensuing business year.
Problem
Are economic activity and oil prices better predictors of auto parts sales?
Analysis
The historical auto parts sales data were analyzed using Excel Data Analysis to help predict the future of auto parts sales, by observing trends and pattern. A line
* Forecasting is an impartial strategic ingredient that will ensure apt base for reputable planning. Our forecast is always the first step in developing plans in running the business along with our future plans of growth strategies. With this tool, we are able to anticipate our sales within reason that then can allow for us to control our costs in conjunction with inventory which will then help us to enhance our customer service. Sales forecasting is a vital strategic tactic in our company’s methodology.
Last week, you selected a business for which you’ll make a budget proposal. Your first step is to create a sales forecast (in sales dollars) when no historical data is available. Use methods such as historical analogy, expert judgment, consumer surveys, the Delphi method, or calculations based on population distributions, estimated growth rates, or expected market penetration rates to arrive at reasonable sales figures for your business for the next 5 years.
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* potential declines in market research spending for calendar year 2009 based on industry analyst forecasts
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