Q-5 If you were hired by Hewlett - Packard to forecast how many inkjet printers

were it would sell next year, how you would go about doing it? What Data would you
need? What Techniques you would use? How accurate do you think your forecast would
be?

Answer:
In Order to forecast demand of ink jet printers of HP in the next yera, we can use
Time - Series Forecasting, which simply uses Time - Series history of variable to
predict future values. For this forecasting method, we will require all available
data pertaining to sales volume of HP inkjet printers for each years of the
previous years.

As Indicated from the case we can assume that sale of inkjet printers have
increased steadily over the last few years, a linear trend forecasting regression
model may be used. Assuming a linear relation between sales and time, we have

QT = a + bt
Where, Q = Sales for any year
and t = Year of Sales

Using the method of least squares as the regression model, we would then look to
estimate the values of 'a' and 'b' to a desired level of statistical significance,
say 10%. Thus we can be 90% confident that the estimated values of 'a' and 'b' are
correct. Once the estimated values of 'a' and 'b' are available, we may substitute
them in the trend equation and fin out the forecasted sale for the next year.
Assuming that the linear trend equation fits the real world demand for printers, we
may be relatively confident(determined by the signinficance level) that our
estimates are correct. However this estimate precludes the possibilty of any change
in the existing market structures for printers. Entry of a new competitor or a new
kind of substitute cannot be taken into account under such a model. While making
forecast we must be carfeful to recognize that further into the future the forecast
will be made wider with the region of uncertainity due to the occurence of changein
the existing market structure, which may cause some turning points in the variables
of forecast. Many times these turning points cannot be predicted.