Predicting the sales revenue of a business.
- helpful to a business as long as the sales forcasting is accurate
Time series analysis - seasonal variation (winter!) - random variations - cyclical variations (economic booms and slumps)
Benefits
- make informed decisions about growth+expansion
- predict identify and prepare for threats and opportunities, cyclical and seasonal changes
- identify sales trends
Drawbacks
- past data + trends not indicative of the future
- extrapolated results can be inaccurate
- depends on accurate market research - which is expensive
- limited for product oriented businesses or rapidly changing markets
- qualitative factors are mostly ignored (i.e. political economic social stability)
- changes in external business environment create inconsistences/inaccuracies in sales forecast
- random variations nullifies effort put into sales forecasting (i.e. an earth quake, natural disaster)
