Identifying possible sales rates and making forecasts is a challenging task, as the subject matter depends on a variety of factors and, therefore, may be altered by the slightest changes in either the company’s operations or the target market. However, several tools for locating possible changes in the sales rates as well as estimating the latter rather accurately have been developed. Particularly, the phenomena known as MAPE and SES deserve to be mentioned.
While SES does provide grounds for making long-term forecasts, its accuracy is rather low, whereas MAPE (mean absolute percentage error) and its modifications (ME (mean error), MPE (mean percentage error), etc.) (Ord and Fildes 47). It helps identify the possible outcomes in a rather precise manner due to the approximation technique used. Therefore, MAPE must be viewed as the most reasonable choice for the firm under analysis.
Main body
According to the results of the forecast, the company is likely to experience minor drops in sales in May, June, July, and November. However, the calculations show that the general prognosis for the sales rates is rather positive. Indeed, as the formula shows, the prognosis for the sales makes y = 0.1887x + 260.06, which is rather impressive (Lawrence and Geurts 88).
According to the sales forecast provided, the mean error of the outcomes calculated with the help of the tool in question makes approximately 35.5. Despite the fact that the specified data can be viewed as rather significant, one must admit that, compared to the average size of data sets provided, the specified mean error can hardly be deemed as significant. Indeed, the estimated mean error is unlikely to affect the sales forecasts considerably and, therefore, is unlikely to jeopardize the organization’s performance in the future.
The MAPE rates are very low as well, according to the estimations carried out. Landing at 0.2994, the specified percentage cannot be viewed as a serious impediment to developing a sales forecast. The specified tool, therefore, can be considered very efficient in terms of outlining the possible obstacles in the company’s way; particularly, certain financial inconsistencies regarding drops in sales can be predicted with rather high accuracy rates (Swanson and Tayman 385).
Compared to the method of SES, the tool in question is clearly more efficient, as linear regression and the MAPE analysis provide solid premises for making very accurate calculations. The company’s safety, which hinges on the choice of the forecast tool incorporated into the analysis, therefore, is facilitated by the linear regression approach and the adoption of the tools such as MAPE, ME, and MPE.
It is strongly recommended, therefore, that the linear regression analysis should be carried out (Dursun 102). The specified tool allows identifying the chances for evaluating every single opportunity available and at the same reduces the MAPE rates considerably. Indeed, the linear regression approach helps not only identify the opportunities that the organization is going to have when entering the market next year but also calculates the approximate amount of the company’s revenues based on the current ratio (Davis and Pecar 217).
The SES analysis, in its turn, though admittedly efficient, still lacks precision. Moreover, the SES tool cannot provide the organization with information regarding the short-term options (e.g., the opportunities for sales increase that may occur next month). Indeed, the MAPE approach has been deemed by a variety of experts as more valid and “superior to SES with regard to the MAPE for smoothing constants” (Lawrence and Geurts 129). In other words, the tool in question offers a perfect method for results approximation and, therefore, creates premises from making the outcomes of the evaluation as close to the future result as possible. Hence, the MAPE tool can be viewed as a much more reliable instrument than SES when it comes to forecasting sales.
The significance of the SES tool is not to be underrated, either, though, it would be wrong to claim that the SES analysis is entirely invalid when it comes to the assessment of the sales rates at a specific point in time. Quite on the contrary, the specified method turns out to be rather useful when applied to the cases with an updating trend (Chase 194).
Nevertheless, when it comes to carrying out the process of exponential smoothing and, therefore, more precise identification of the linear trend for a specific process, sales being the case in point, the MAPE tool turns out to be much more efficient. As it has been stressed above, MAPE creates opportunities for more accurate calculations and the exact location of the possible error in calculations.
Conclusion
It is, thus, strongly suggested that the MAPE tool should be used as the means for carrying out any further calculations of possible future sales rates. The above-mentioned approach should be credited for the opportunity to approximate the data, thus, allowing for a smoother analysis of the future sales and, therefore, a more precise forecast. Efficient and rather simple, the specified method deserves to be deemed as the foundation for the company’s further financial forecasting strategy.
Works Cited
Chase, Charles W. Demand-Driven Forecasting: A Structured Approach to Forecasting. Somerset, New Jersey: John Wiley & Sons, 2013. Print.
Davis, Glyn, and Branko Pecar. Quantitative Methods for Decision Making Using Excel. Oxford: OUP Oxford, 2012. Print.
Dursun, Omur. Early Estimation of Project Determinants: Predictions through Establishing the Basis of New Building Projects in Germany. Munchen: Walter de Gruyter, 2014. Print.
Lawrence, Kenneth D. and Michael D. Geurts. Advances in Business and Management Forecasting. Vol. 5. Bingley, Washington: Emerald Group Publishing, 2010. Print.
Ord, Keith and Robert Fildes. Principles of Business Forecasting. Boston, Massachusetts: Cengage Learning, 2012. Print.
Swanson, David A. and Jeff Tayman. Subnational Population Estimates. Berlin: Springer Science & Business Media, 2012. Print.
Collaborative Planning Forecasting and Replenishment (CPFR) is a business practice that aims to fulfill consumer demand by combining the knowledge of multiple trading partners. It enables partners to electronically access information about one another’s demand, order forecast, and promotional data to anticipate and satisfy future demand. “The CPFR Reference Model provides a basic framework for the flow of information, goods, and services and can be applied to many industries, where collaboration participants, namely the buyer and seller, work together to satisfy the demands of the end customer, who is at the center of the model. The consumer creates the demand for goods and services while the retailer provides these goods and services. The manufacturer supplies the products to the retail stores as product demand is pulled through the supply chain by the end-user.”(Haag, 2006). The CPFR Process involves four (4) steps namely: Strategy & Planning which involves developing a Joint Business Plan which identifies the significant events that affect supply and demand in the planning period, Demand & Supply Management which entails sales forecasting and order planning, Execution which consists of order generation and fulfillment and Analysis which involves exception management and continuous and active monitoring and evaluation.
Advantages of using CPFR include increased revenue: i.e. reduction in stock-outs thus increasing sales, flexible relationships and deeper collaboration through interdependencies, joint systems & processes, increased accuracy in forecasting demand and replenishment plans which leads to lower inventory levels and safety stocks and decreases storage and financing costs, process efficiencies such as improved accuracy in forecasting and inventory control and transportation management which could include Less than Truckload (LTL) Consolidation, capacity utilization, demurrage, and tactical rate management.
Limitations of the CPFR model are distrust amongst the partners in sharing internal corporate data such as demand forecasts, the implementation might require a lot of money upfront, or a huge investment in technology and a fair amount of work e.g. meetings, conference calls and software training, differences in internal process changes could prove difficult, technical issues, such as complexity caused by the wide range of systems used by different partners since this creates an interoperability jigsaw, and since CPFR is relatively still a new concept, benefits may be difficult to calculate.
In summary, CPFR is a concept that is catching on with a lot of players in the retailing industry, and because the concept calls for the sharing of information and knowledge, suppliers will have to adopt the concept not only to gain the cost and revenue benefits accruing from it but also to be able to keep doing business with their customers who already are using the system. According to a study conducted on 130 individuals picked from 120 different companies by Syncra Systems and Industry Directions, 68% of them were actively involved in the piloting and rolling out of the CPFR model. As technology advances and businesses continuously realize that they no longer compete as enterprise entities but as supply chains, the need to gain a competitive advantage is gearing more retailers and manufacturers to take a look at CPFR and determine if they could soon be on the disadvantaged side.
The model assumes that partners clearly see the benefits of deeper collaboration and that their relationship will remain positive and organizations will shift to a consumer-centric, inter-enterprise orientation for successful implementation.
Reference
Haag, Stephen. Cummings, Maeve. McCubbrey, Donald. Pinsonneault, Alain. Donovan, Richard. (2006). Management Information Systems – for the Information Age. Toronto, Canada. McGraw-Hill Ryerson Publishing.
Globalization has limited distances to the extent of words only. No more do companies or businesses think twice before reaching foreign markets to increase profits and customer base. Globalization isn’t the name of the game. The concept involves interlinked processes such as logistics, supply chain, licensing, franchising, offshoring, outsourcing, etc. These activities have made life for multinational corporations easier than ever before.
Offshoring is when some internal functions of an organization are transferred to another country within the same firm (Schroeder, 2008). The idea is to cut costs. A firm can have several reasons for off-shoring such as cheap labor, abundant supply of skills, cheap technology, etc. Companies argue that if something can be produced cheaply abroad then why not import it rather than producing it at a high cost within one’s own country. Off-shoring is controversial though. While reducing costs, results in increased unemployment and wage erosion, etc (Farrell, 2006). The critics against off-shoring say that in developed countries offshoring has more negative impacts than under developed countries. The reason is that people who lose jobs get a job at a lower level than the one they were employed at. This results in lowering down their buying power even though goods have reduced in prices due to off-shoring.
Outsourcing is another phenomenon that goes along with off-shoring. The basic motive behind both is cost reduction which is not possible without eradicating unnecessary expenditures. Outsourcing however is transferring an area of operations to another firm which can be native or foreign (Schroeder, 2008). In reality, in recent years purchase of off-the-shelf products has become as easier as it is stated in theory. Today, one almost can purchase just any function that is needed to run a company. Procter and Gamble for example have outsourced its IT infrastructure, human resource management, and even its products in the last three years (Engardio, 2006). Outsourcing though also results in loss of jobs and has been a very debatable topic. The issue however remains the same; cost cuts are no good if there is no demand for products that fall down in the parent country due to wage erosion and unemployment. In 2009, CEO of General Electric, Jeff Immelt, for example, urged the government to reduce outsourcing and increase the amount of workforce hired by manufacturing units as the United States could no longer depend on consumer spending to create demand (Bailey, 2009).
The concept that is gaining more popularity than off-shoring and outsourcing these days is offshore outsourcing. Offshore outsourcing is the transfer of activities from a domestic facility to another firm situated in another country (Schroeder, 2008). As already discussed the threats remain the same. However what the point that needs to be emphasized here is that when to use offshore outsourcing? To put it simple, if outsourcing or offshore outsourcing does result in work being done more effectively and less costly without jeopardizing other functions, then only it should be done (Kehal, 2006). A company shouldn’t move its call center to India only because call center representatives can be hired at a lower cost. The company might lose its customer base for the simple reason that they are unable to communicate because of accent differences. This will result in cost savings at the expense of losing customers.
Despite disadvantages, it is seen that many of the firms around the globe are opting for outsourcing and off-shoring activities. Companies are relying heavily upon such activities to juice their performances. The near future holds better and enhanced prospects for such endeavors.
References
Farrell, D. 2006. Offshoring: understanding the emerging global labor market. Illustrated edition. Published by Harvard Business Press.
Kehal, H. and Singh, V. 2006. Outsourcing and off shoring in the 21st century. Published by Idea group Inc.
Schroeder, R. 2008. Operations Management: Contemporary Concepts and Cases. 4th edition. McGraw Hill publishers.
Bailey, D. and Kim, S. 2009. GE’s Immelt says U.S. economy needs industrial renewal. Web.
Engardio , P and Arndt, M. 2006. The future of outsourcing. Web.
The cellular radio service is the subject of rapid and relentless change. The cellular radio products are constantly trying to increase their coverage of the web; and to improve their functionality. E.T. Phone Home requires efficient marketing strategy to compete on the market and sustain its strong brand image. Marketing professionals therefore need to work extremely hard to keep up to date with developments in order to ensure that they are up to speed. The case of E.T. Phone Home shows that the company uses resource-based strategy which helps it to develop strategic capability.
Similar to its market philosophy, valuable resources of E.T. Phone Home allow the company to meet high demands of customers and deliver exceptional quality to end consumers. E.T. Phone Home in particular seems to have already undertaken a number of major initiatives such as the indexing of radio services. But the reality is that individual radio service does not cover the whole of the visible space. So the prospect of there being a single cellared service which has complete coverage is some way off.
Current Market Situation
Principles of the Firm
Imperfectly Imitable resources are created by “unique historical conditions, causally ambiguous, social complex”. It is possible to say that these resources have a great impact on the brand name and market position of E.T. Phone Home. E.T. Phone Home was the first mover in the industry. It is possible to assume that a strong brand name helps the company to obtain a large market share. Non-Substitutable resources are not strategically equivalent valuable resource.
Thus, these resources allow E.T. Phone Home to break down organizational barriers that block the sharing of data across functions. Design, sales, and manufacturing departments must work together (Johnson and Scholes 76). The use of appropriate technology in properly planned systems can have dramatic effects on operations. Organizations are becoming flatter and leaner because top management are able to monitor operations more directly and computers are now taking many decisions previously taken by middle management. E.T. Phone Home relies on an efficient market system and product improvement.
Marketing communication plays a crucial role in successful market performance as it influences brand image and product recognition. For E.T. Phone Home, effective marketing communication depends upon effective marketing system and ability to evaluate target market and economic conditions. Technological factors/resources Innovation in production technologies and computerized system of supply chain is the main opportunity for E.T. Phone Home marketing communication. The threat is that investment in new technologies requires additional finance. Intellectual property and licensing protect business operations (Doyle and Stern 44).
From the vendor’s perspective, the high replacement rate of mobile phones reflects the pressing need to build brand loyalty which can only be developed from a continually positive customer experience. Understanding consumer behavior is the basis for marketing strategy formulation (Cespedes 4). Marketers need to acquire consumer insight before they can devise persuasive marketing strategies in promoting consumer acceptance of a new product or service. Consumer insight can be defined as an understanding of consumers’ expressed and unspoken needs and realities that affect how they make life, brand, and product choices (Hollensen 32).
Market Conditions
E.T. Phone Home operates on a static market. The main competitors of the company are Ohio Bell Telephone Company and RCC, Cleveland Mobile Telephone. Ohio Bell Telephone Company has 57, 4 % of market share while Cleveland Mobile Telephone has only 25,8%. The main drivers of market include competitive and strong position on the market. View allows E.T. Phone Home to achieve competitive advantage in relations to rivals in a given industry.
It is important to note that rare resources reflect quality requirements of customers, their needs and expectations. A primary concern of the company like Google is to seek to innovate through service development, and to strive to enhance competitive performance. In this case, it is only by placing the customer at the centre of service that success can be achieved. Competitive advantage is achieved by E.T. Phone Home when the demand sets the quality standard and gives firms a better picture of buyer needs at an earlier time than is available to their rivals. This advantage is enhanced when buyers pressure the firms to innovate quickly and frequently.
In general, E.T. Phone Home has competitive advantages being one of the biggest companies within the industry. In organizations, noticeably in service industries, the personnel function can also be closely associated with a task function. Human resources have a great impact on profitability and position of E.T. Phone Home on the market (Doyle and Stern 65).
Product Demand
In order to evaluate the quantity of product demand, E.T. Phone Home follows forecasting model. The model calculates the historical and forecasting employment rates, it calculates percentage demands, and it takes into account total number of business customers, number of units per customer, total potential units and the level of adoption. The sales forecast is concerned with evaluating market and sales potentials.
It is the basis for matching marketing resources with future opportunity to achieve company objectives. It affects almost every other phase of business operation and is used in establishing marketing controls, budgets, policies, and directions. Sales forecasts determine the limits of management programs and decisions. Sales forecasting is a means of providing information about the size, nature, and trend of various market segments, and hence, the anticipated profitability of markets. In reaching opportunity estimates, management has two types of information available: information about the past and information about the future.
Information about the past is provided by various feedback mechanisms, such as marketing research, accounting, various corporate records, surveys, published statistical data, and experiments. This information is referred to as factual and is available from either the company itself or such secondary sources as governmental bureaus, universities, and trade associations. Also, the market penetration depends upon such factors as estimated market demands, market share for ETPH and estimated number of units (Cespedes 3). The counterpart of past information is future information.
Future information is available through the sales forecasting process, just as past information is available through the feedback process. Sales forecasts are, of course, based on past data, and result from the application of predictive techniques to past information (Walker 62).
Pricing and Cost Structure
In order to determine the price level and cost structure, the company uses past data and demand analysis. It is estimated that “construction costs and first year operation expenses would amount to at least $10 million” (Cespedes 9). Future data are anything but factual, and are really based on assumptions. Forecasts reflect expectations; as a result, varying degrees of error are bound to occur. Sales forecasts may be short run (usually designated by a period of up to a year), intermediate (one to five years), or long run (more than five years).
Usually, the longer run the forecasts, the greater the error. Regardless of the sophisticated techniques used for forecasting purposes, and the records available, future conditions will always deviate to some degree from those predicted by forecasters, and management must expect this (Cespedes 8). For the purposes of evaluating market opportunity, future information, even though nonfactual, is extremely important. It guides the destiny of a company (Walker 28).
Today’s marketing plans and decisions are based on executive expectations of what will occur during some future period of time. To quantify expectations, probability techniques are often used. When sales forecasts furnish marketing managers with information about probable expected market conditions, management can use this knowledge as a basis for planning both company goals and the strategies and resources to achieve them. The potential volume and profit targets resulting from sales forecasts, and the budgets established from them, guide the company toward the cultivation of market opportunity. The cultivation of opportunities in turn affects sales forecasts (Doyle and Stern 87).
To make it forecast sales management must be concerned with three environments: the noncontrollable, the partially controllable, and the controllable. The noncontrollable environment includes such factors as demographic trends; domestic and international economic trends; and sociological, psychological, and cultural forces that management cannot influence significantly. The partially controllable environment refers to factors such as technology and competition that management can influence to some extent (Cespedes 6).
The controllable environment relates to internal factors, including finances, image, production, facilities, personnel, and others that management can determine over time. The second phase of the forecasting process is concerned with evaluating and projecting the data. Various analytical tools are used to determine the patterns and relationships, the result being the prediction and definition of sales opportunity. Following this, the sales forecast must then be applied operationally (Doyle and Stern 62).
Globalization and Possible Risks
Globalization creates for E.T. Phone Home bow opportunities and risks. The benefits are low price and exceptional services, high quality and customer support. Improved technologies like mobile phones and Internet banking makes it possible to take market segmentation to another level, by providing an economical means by which E.T. Phone Home can deliver individualized products and services to each and every customer based on feedback and interaction with the customers. Relationship marketing strategies embrace this idea of treating each customer in an individualized way (Cespedes 5).
Behavior segmentation is focused on whether or not people buy and use a product, as well as how often and how much they use or consume. Specification in E.T. Phone Home is determined as a result of an organization’s policy, which in turn resulted from decisions on its market policy, which in turn resulted from its consideration of the market or customer needs, requirements, and the activities of competitors (Doyle and Stern 45).
If customers cannot afford premium services, where the prices are too high for them, they can choose quality services at low price. Target market is divided into two broad categories: foreign and domestic customers. Psychographics segmentation includes values and attitudes of potential passengers. The main attitudes are truly high standards of services and excellent support services at comparatively low price (Fill 41).
The risks are associated with increased competition and products available for global consumers. This results in the establishment of specific targets that are translated into operating programs such as sales programs, advertising programs, and inventory programs. The reverse procedure is sometimes adopted, whereby management derives a market target and then specifies a sales forecast — hopefully, it is realistic.
Both long- and short-range forecasting are part of opportunity assessment. The major difference is the time dimension, the degree of specificity of factors, and the tendency to give more immediate problems greater attention. Long-range forecasting is particularly relevant for growth considerations and general concern with adjustment and survival. It is geared more to future opportunity (for which companies can adjust and prepare), whereas short-range forecasting tends to be more concerned with the immediate operational elements (Doyle and Stern 61).
Industry Fundamentals and Historical Data
Historical data and key drivers of the industry allow to say that E.T. Phone Home uses market segmentation in such spheres as advertising, applications and search engine services. A major strength of E.T. Phone Home market is that it can generate specialization. At the same time, industry fundamentals involve costs, risks, and possible weaknesses in some cases, especially where accessibility is not easy.
In international marketing a common way of defining and describing markets is in terms of export countries. E.T. Phone Home market segmentation is based on behavior and psychographics characteristics. E.T. Phone Home focuses on whether or not people buy and use its services, as well as how often, and how much they consume. Also, marketing communication is based on psychographics characteristics which group people in terms of their attitudes, values, and lifestyles (Doyle and Stern 87).
E.T. Phone Home uses the following variables to segment the market. Each of the factors plays a role in determining the nature and development of marketing communication. But the relative importance of each depends upon the product/service category E.T. Phone Home is dealing with. For instance, in advertising and desktop applications, the market is divided between individual and business customers, small and large companies, national and international companies.
There is no great impact of age and gender differences. Still, the core of users consists of young professionals and students. E.T. Phone Home proposes a great number of services for diverse customer targets. Virtual companies like E.T. Phone Home, are becoming more and more interlinked on a world-wide basis. Advertising and search engine industry that deals in large transactions for companies are becoming increasingly globalized (Fill 87).
E.T. Phone Home follows differentiated strategy oriented on diverse customer groups with different offerings. Product and price differentiation allows E.T. Phone Home to attract diverse customers proposing unique services and products. Clearly there are advantages in following this approach based on the business efficiency. Those products which lend themselves to a standardized approach are those for which there is a sufficiently large global market segment and cultural differences do not impose the need for adaptation.
To an extent, then, the greater potential for raised profitability resulting from more efficiency in business functions is undermined by the additional costs required to market the brand on a broad scale. In E.T. Phone Home, the price of the product conveys much more to the consumer than simply the amount of money required to make the transaction. Price plays a powerful role in product positioning as it indicates to customers the ‘value’ of the product, that is, both the actual and perceived value.
Forecasting Management Tools
E.T. Phone Home demand analysis refers to the volume of sales that would occur under various conditions for a product during a period of time. It has several dimensions, such as the demand for a product, the demand for a brand, or the demand of a specific market segment. Market demand, which refers to the demand for a group of products that represent an industry, is distinguishable from company demand and the demand of a control unit.
Company demand refers to the demand for a company’s products and relates to market opportunity. Although it is affected by the industry demand level, it is also affected by the use of marketing tools and techniques by a firm to gain a market share. Let us note that corporate effort may also shape the industry demand. E.T. Phone Home uses control-unit demand which can be defined as demand at the level of the particular unit utilized for control purposes. The unit may be a product line, specific product, brand, group of consumers or wholesale, or retail outlet. Here, demand refers to purchasing actions of a significant unit.
Several economic concepts are useful in appraising opportunity (Doyle and Stern 82). Elasticity of demand is usually used to describe price-sales relationships -the change in sales proportionate to a change in price. Elasticity, however, is a broader concept and applies to a relationship between any demand determinant and sales. For example, the promotional elasticity of demand would refer to the percentage change in sales related to percentage change in expenditure on promotions — such as advertising or personal selling. Elasticity is useful in analyzing components of the marketing mix (McDonald and Christopher 82).
The assessment of market opportunity may be viewed essentially as a balancing operation in the firm. It balances marketing and company resources to bring them into line with potential profit. For performing this balancing activity, economic analysis has provided us with the useful tool of marginal analysis. The marginal approach relates production schedules, investment planning, new plant and equipment, and personnel needs to market opportunity. The marginal-cost principle is a guiding criterion. Marginal costs refer to changes in total costs resulting from producing an additional unit in either the physical or marketing sense.
These are but a few of the concepts relevant to the assessment of opportunities. Regardless of the techniques used, marketing management must recognize the pivotal position of this function in shaping and guiding the direction of the total company. Assessment of marketing opportunity, the first of the systemic functions of marketing (those functions necessary to manage the mobile phone marketing system), is also the most critical. It deals with both the identification and the means of attaining marketing and corporate goals. It furnishes a perspective for current and future operations (Doyle and Stern 73).
Opportunity assessment requires a good intelligence system, a sense of corporate mission, and management sensitivity to changing environments. Sales forecasting is related to both market opportunity and innovation. It is a key component or driver in designing coordinated marketing systems. The elements of a total sales-forecasting program include assembling information, evaluating and projecting data, operationally applying the forecast, and, finally, performing an audit. Marketing opportunity is related to both stages in the product-development cycle and the nature of competitive environments (McDonald and Christopher 77).
Financial Analysis
Ratio analysis allows to perform time-series analyses that portray the association between prices and sales over time; this method is widely used in estimating elasticities. Regression and correlation analysis are its major tools, and the analysis ignores factors other than price that affect demand. The magnitude of buyer response to price change in E.T. Phone Home is represented by the price elasticity of demand.
It is a ratio, the percentage change in demand related to the percentage change in price. Percentage analysis statement pertains to a point in time. Examples are interviewing buyers, using panels, simulating price situations, and conducting pricing experiments. Often, companies conduct experiments by increasing or decreasing prices in test cities and analyze the impact on sales, market share, and profits.
Operating and financial analysis shows that E.T. Phone Home has enough financial resources and operating resources to increase sales and introduce new strategic approach. Trend cyclical analysis allows to say that costs and revenues can be estimated accurately, that price is the significant marketing variable, and that immediate profits are to be maximized on each product. Given such theoretical conditions, an optimal price may be established (see appendix).
Conclusion
Resources based approach and behavior and benefit segmentation help E.T. Phone Home to obtain a strong market position. Behavior segmentation principles are used for new services and products which attract diverse target audiences. It consumers can be categorized according to brand loyalty. These activities reflect the ability to get along with other people, and are important attributes at all levels of interaction. The degree of technical competence required varies according to the type of information provided. Dozens of radio service operators worldwide have launched 3G services, but uptake among consumers has been poor.
It was partly due to limited and expensive handsets, poor network coverage and image problem as indicated by market analysts. The biggest challenge that mobile phone operators are now facing is how to introduce mobile phones to new market as successful as its predecessors. From the marketing perspective, one critical step is to target the right consumers with services tailored to meet real consumer needs with speed and efficiency in order to outperform their competitors.
Despite the inherent problems with the technology that are yet to be improved, there has still been a set of early adopters or trendsetters envisaging taking up radio services. A clear understanding of the needs and expectations of such consumer group is a prerequisite to attract the mass-market. The case study suggests that E.T. Phone Home needs effective marketing and advertising campaign in order to resist increased global and national competition and meet customers’ demands.
Sales forecasting is the estimated dollar or unit sales volume for a specific future period expected to be achieved because of a proposed marketing program. There are different methods used to make sales forecasts (Sykronix).
Naïve Forecast
Naïve forecast as the name implies is the simplest form of making the sales forecast. It assumes that the forecast for the next period is the same as that of the last period. This method does not look at the past data but only at the present data (Sykronix). The last observation in the given data is 141, so naïve forecast can be taken as 141 in respect of the future periods. The relevant formula is:
F(t) = A(t-1), where
A(t-1) Actual figure for period t-1
F(t) Forecast figure for period t
Advantages of Naïve Forecast Method
The method is very simple and easy to adopt.
The forecast can be done at virtually inexpensively
The forecasts can be arrived at quickly and can be prepared easily
It is easy to understand the method.
The accuracy standard for the forecast can be maintained through Naïve Forecast
Moving average Method
Under this method, the forecast value is calculated as a simple average of the values pertaining to the previous periods (Investopedia). In the given problem, we will use 5 periods as suggested in the question. The formula for calculating the moving average is:
Advantages of Moving Averages Method
The method is still quite simple to adopt.
The peaks and trough values are smoothened to arrive at more or less precise forecast values with the given observations
The method is quite adaptive
The method can be considered appropriate for forecasting ‘stable’ variables. Stable variables imply the values that do not fluctuate too high or too low but flows rather across some average value.
Weighted Moving Average Method
In this method instead of using a simple average weights are assigned to each observation of the previous periods (Investopedia). In the given illustration, we will assign weights for four past observations for calculating the weighted moving average. The formula here is:
Advantages of Weighted Moving Average Method
It is possible to can assign more weight to recent observations. This is advantageous since the recent observations tend to reflect the current trends of the market/industry due to current changes in the economic environment.
This method also smoothens values for peaks and troughs in a given set of observations.
The calculations are done in the attached excel sheet and the following table presents the values for easy reference. For comparing all the different observations, the forecast values are plotted in the following graph.
Predicting the demand for products in different life cycles helps to avoid wastage associated with excessive costs. Currently, StarTech’s demand forecasting process does not differ throughout its lifecycle. I will argue that further guidance can help the company maintain sales growth without increasing investment in inventory.
First of all, demand forecasting should vary for the products in the different life cycles. It is known that demand increases less sharply at the maturity stage compared to demand at the growth stage. Such analysis allows more precisely to predict the required supply and reduce the costs associated with surplus goods’ manufacturing and storage.
The second recommendation touches upon anchor product relationships. It is suggested that besides taking into account the stages of the life cycle, the demand forecast should also consider that growing demand for one product might influence sales for supplementary.
Let me provide an example: the growing demand for portable batteries might lead to a higher need for specific cables. Simultaneously, the appearance of wireless batteries that charge devices via Bluetooth connection would lead to lower demand for traditional portable batteries and wires. Consequently, demand forecasting needs to be restructured to account for changes in demand for other products that require cables to use.
As we wrap up, for supply chain improvement, the Internet of Things and Machine Learning usage are highly recommended to StarTech. The technological solution allows for processing vast amounts of data and providing more accurate predictions.
In this essay, I wanted to introduce the recommendations that will help the company keep its sales growth. The advice to implement different demand forecasting processes for products in different life cycles, thus, seems to be an effective strategy that would reduce high transportation costs and investments in inventory.
Most markets do not show sustainable development and demand; therefore, forecasting is a major factor in the successful operation of a company. Ineffective prognostication can lead to excessive or unnecessary use of resources and subsequent waste. The more volatile the demand is, the more important it is for a company to make an accurate forecast. The purpose of this paper is to discuss the way Seven Cycles utilizes its forecasting strategy and the effect it has on its organizational decisions.
Just-in-Time Method
Seven Cycles is a US bicycle brand, which produces and sells craft-made vehicles. This company actively utilizes forecasting methods to ensure it delivers a valuable product for the market (Seven, 2015). In particular, the firm has employed a Just-in-Time (JIT) manufacturing system. The core of this approach lies in the fact that the producer receives the required inventory when they need it and when the client has placed an order. That is, “a rider ordering a bike actually triggers the process of the bike’s component parts beginning to move toward the bike builder’s workspace” (Seven, 2015, para. 2). Seven Cycles benefits from using this type of forecasting in multiple ways. In particular, they do not need to keep excess inventory and spend money on storing it. The organization can streamline its processes and focus on examining sales patterns. As a rule, sales can have peaks and valleys, and the JIT method is helpful in predicting future demand (Javadian Kootanaee, Babu, & Talari, 2013). The company has to forecast not only local but also regional demand, and the chosen strategy ensures they can do it for a defined customer group.
Conclusion
Thus, it can be concluded that the JIT method utilized by Seven Cycles is a wise approach to demand forecasting. It ensures the management of material flows in production is based on the actual need that is created by the current demand for finished products. Therefore, the company offers high-quality custom bicycles without excess waste and inventory by correctly forecasting the demand for their goods.
References
Javadian Kootanaee, A., Babu, K., & Talari, H. (2013). Just-in-time manufacturing system: From introduction to implement. International Journal of Economics, Business and Finance, 1(2), 7-25.
Seven. (2015). The big ideas – just-in-time manufacturing. [Blog post]. Web.
A graph of actual (salesSeries 1), Moving avarages (Series 2), Weighted moving avarage (series 3) Exponential smoothing (Series 9) and doudle exponential smoothing (series 12) against time in moths in three years.
Business Forecasting
From the graph indicated above, it can be deduced that the most realistic trend is that of exponential smoothing. This is the only series that has provided a vivid trend that can be followed keenly and depict prediction while making out forecasts. This is therefore the most likely data that can give the best description of what can be expected. In comparison to the moving avarages, they are all treated equally while in exponential smothing, they are assigned a decreasing weight over the duration that data was collected. “Double exponential will also not be realistic because the data has some trend that cannot be applied” Clement and Hendry (1998, p 270). This makes the exponential smoothing the best and the very realistic measure for the forecasting in this context.
Forecasting predicts targets to be anticipated and can be used to estimating future aspect of business or other related operations when used as a technique. Volume of sales can be forecasted basing on past data. Production schedules, purchasing plans for raw materials. Business policies regarding will thus be affected by such forecasts that may laead to poor planning and increased cost to the business.
“Review of sales forecast marks an important part in business planning over a specific period” Armstrong (2001, p 543). One will then be capable to efficiently identify factors that boost his sales of the business and he or she can generate data for future sales.
“Qualitative forecasting can be carried out using the Delphi method that seeks to extract the group consensus from a panel of experts depending on the set information” Makridakis et al (2003, p 242). Scenario setting can also be utilised as it bases its approach on a set off assumptions and the likely impact of the business outcome is extracted from that data. Development of time series includes various factors that include; trend components, cyclical or repetitive mechanisms, seasonal functions that are based on peaks of either high or low times, and irregularly determined components. All these when integrated provide a specific value for the time series which can be seen as a precise forecast.
Modes of transport
This is not a good decision to make because sales are dependent on customer willingness to buy the goods and services provided. More so, “the high transport cost will impact on the final goods selling price” Goodman (2009, p 73). This has an impact on the clients whose effect has not yet been pre-determined. “The extra increase in inventory and ware housing all affect the final cost of the goods” Leland and Bailey (2006, p 225). The company will also increase their expenses. This is very insecure because the goods may not sell due to the change in the prices as customers may decide to opt for alternatives and avoid buying the goods supplied by the company since consumers have the freedom of choice. If the company has to increase the price of goods in order to balance the profit margin. “It will be to the disadvantage of the company because it will be total loss to the company, which makes futile the whole objective of the business” Fogli (2005, p 123). This therefore does not support making the decision in favour of the advice at any cost because it will only predispose the business to risks that might lead to closure of the business.
Customer Service
High cost of transportation means more expenses to the company. Transport infrastructure has been addressed by providing alternative sources and therefore the company has to opt for cheap alternatives. Considering the cost of rail transport over four days, it is relatively cheap basing on the fact rail accommodates a large quantity of good even though it takes very long. More so, other factors such as maintenance of trucks and servicing are also to be accounted as they are extra expenses that need to be incorporated on the cost of transport. However, “another approach can be an integrated system that may combine several transport modes before they get to the destination” European Conference of Ministers (1991, p 26-29). Rail may be used for a section that is convenient and road to take over for the section that befits the road transport. Also, new polluter charges is a big debate for controlling the modes of transport and if these is implemented, then transport business will be hampered because of the heavy taxation limiting the benefits of the business and more especially the road transport.
Rail remains one of the modest transports with little external costs, trucks are likely to cost thrice as much as trains and these does not vary either at peak or wee hours as it has been suggested by Quinet and William ( 2004, p 312.)
Economic Order Quantity (EOQ)
Economic order quantities have been in existence long before the computer came into existence. It is an aspect of inventory management and can be used to set up cost effective solutions to questions such as when, and how much. It was initially referred to as minimum cost quantity. EOQ is simply an accounting procedure that predicts the position at which order costs and inventory are at minimum in order to fix the cost benefit mechanism for companies and organizations. However, determination of performance by the inventory turns out to be very disastrous in the name of inventory management as at times, it may lead to the increase in operational costs.
EOQ is best utilised at any time, one has to have a repetitive purchasing of goods. EOQ are purchases to stock for distributers and make to stock for manufacturers or release for products of the same items. Maintenance of machines, repair of worn out parts and operating Inventory are applications of good practice in EOQ.
“EOQ is in cooperated with the inputs in the calculations, yearly usage which is an input forecasted on annual basis” Hansen et al (2007, p 612). Order cost that is also referred to as set up cost; they are not associated with the quantity of the ordered goods but the physical handling of goods. For goods that are being purchased, they will include cost of entering the purchase order, processing of the receipt, inspection, an invoicing and vendor payments.
Caring cost is the cost of having an inventory at hand. They may include costs for interests, insurance, storage costs and taxes. In case the lead time is changed to 10 days, the reordering will lead to an increase in the order cost and caring cost which do have an impact on the Economic order quantities and may increase extra expenses that are likely to fault the cost of re-order. Also, the assumption that are applied in EOQ will not have a base because it is assumed that the ordering cost will remain constant, “the rate of demand and lead time is fixed while the purchase price of the item is constant with no discounts” United state federal supply service (1957, p 37).
References
Armstrong, J. S., 2001. Principles of forecasting: a handbook for researchers and practitioners. London: Springer.
Clement, P.M. & Hendry, F. D., 1998. Forecasting Economic Time Series. Cambridge: Cambridge University Press.
European Conference of Ministers., 1991. Social aspects of road transport. Germany. OECD publishing.
Fogli, L., 2005. Customer service delivery: research and best practices. Professional practice series. New Jersey: John Wiley and Sons.
Goodman, A., J., 2009. Strategic Customer Service: Managing the Customer Experience to Increase Positive Word of Mouth, Build Loyalty, and Maximize. USA: AMACOM Div American Mgmt Assn.
Hansen, R. D. Owen, M. M. & Guan, L., 2007. Cost Management: Accounting and Control. 6th Edn. Califonia: Cengage Learning.
Leland, K and Bailey, K., 2006. Customer Service for Dummies. 3rd Ed. Chicago: Dummies.
Makridakis, G. S. Hyndman, J.R. & Wheelwright, C. S., 2003. Forecasting: Methods and Applications. 3rd Ed. San Francisco: Wiley.
Quinet, E. & William, R., 2004. Principles of Transport Economics. USA, Elgar Publishing.
United States federal supply service., 1957. The Economic Order.USA: Govt. Print.
A company’s planning activities are centered around finances, because the language and plans are states in terms of financial states, and measures to evaluate plans are financially focused as well. Furthermore, money remains the most critical resource for a commercial organization. Since practically every corporate action has financial consequences, the viability of any plan is seen through the lens of whether it is attainable in the context of limited financial resources (Higgins, 2019). Therefore, the process of financial forecasting can be described as using historic data to predict the financial future in a wide variety of contexts (Investopedia). Business managers may use forecasting to predict sale and plan operations, as many other practices such as cash flow, hiring, or projects depend on having the revenue to ultimately fulfill them. One of the most common tools used are pro forma financial statements, which is a prediction of a company’s financials at the end of the specific forecast period. These can vary from detailed plans and budgets to simply rough estimates (Higgins, 2019). Other applications of financial forecasting can include investors predicting market trends and government economic agencies forecasting economic trajectories to guide policy.
It is important to distinguish forecasting from budgeting. Budgeting is a regular required practice where management plans expenses, quantifies expectation of revenues, and ultimately sets the financial direction for a company in the short-term (usually no more than a year), it is a baseline to which actual results are compared. Financial forecasts are long-term, used to determine how companies should allocated their budgets in the future, helping to generate long-term strategy in determining the viability of major projects, and unlike budgeting, it does not analyze the difference between forecasts and actual performance. Therefore, it is a difference of quantification and estimating. Financial forecasting remains important for companies, providing insight to business performance in the past and how it compares to the future. In turn, it allows executives to establish business goals that are both feasible and will help guide the long-term direction of a company to achieve the planned objectives and performance.
References
Higgins, R. (2019). Financial management (12th ed.). McGraw-Hill.
The studied case reveals that Reebok has been relying on different parameters to forecast demand for jerseys. However, player demand is an issue that presents a unique challenge to this company. The inventory manager should approach inventory planning from a different perspective. Specifically, it can consider player demand towards the end of every NFL season and use the information for pursuing inventory in the next season (Kakhki & Gargeya, 2019). It can also open additional printing warehouses whereby blanks are completed accordingly depending on the performance of new players. An expedited production strategy would also meet the unpredicted demand throughout the season.
The ultimate goal of Reebok should be to maximize profits since that is what matters the most for any business. Towards the end of the season, the company can increase inventory to meet the demands of the projected customers. Such evidence-based measures resonate with the recorded market demand. The company can achieve both aims by implementing a superior inventory approach that meets the demands of all customers. The inclusion of proper strategies to expedite logistical operations and distribution to different customers will ensure that positive results are recorded (Simchi-Levi et al., 2003). A high service level would also be necessary for Reebok to provide to the targeted customers. Such an approach will attract more individuals and eventually improve the level of recorded profits. These gains will reduce the overall level of competition and eventually maximize profitability.
The models presented in Section 2.2.2 would be described as helpful here. This happens to be the case since they provide a design plan for ensuring the demands of all intended customers are met. The approach also allows the company to attract more customers and eventually maximize profits. From the available data, the cost of overage for a dressed jersey would be around 10-11 US dollars. The cost of overage for a dressed jersey would be 10.90 US dollars. Reebok incurs additional expenses to deliver plain or blank jerseys in comparison with the dressed ones. However, the sales for blank jerseys could be much higher since Reebok could print the names of famous and most preferred players throughout the period. While the overhead cost remains high, the company can meet the unpredicted demand in the market during every NFL season (Simchi-Levi et al., 2003). The move to increase the orders for plain jerseys would eventually be profitable when the logistical and printing processes are expedited depending on the recorded demand.
Reebok can use the available forecast data to decide the optimal quantity of jerseys to order for New England Patriots players. The optimal quantity for Brady Tom could be around 30,000 while those for Law TY would be 10,000. The jerseys for Brown would be around 8,100 while those for Vinatieri Adam would be 7,000. The ones for Bruschi Tedyy would be 5,500 while those for Smith Atowain would be 2,000. The company can order 23,000 aggregate for the other layers of the team. The company could consider the recorded standard deviation and dictate the number of blank jerseys to order. This would give a total of around 19,000 jerseys. Consequently, Reebok can expect a profit margin of around 7-8 US dollars for every jersey sold. However, it would have to consider all unsold jerseys and those that are of less value after the end of every NFL season (Sánchez-Flores et al., 2020). The company would be unable to dictate the number of leftovers due to the changing dynamics. The service level for such jerseys would be low to medium.
References
Kakhki, M. D., & Gargeya, V. B. (2019). Information systems for supply chain management: A systematic literature analysis. International Journal of Production Research, 57(15-16), 5318-5339. Web.
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2003). Designing and managing the supply chain: Concepts, strategies and case studies (2nd ed.). McGraw Hill Professional.
