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1/10/2012 Zohaib H. Shah (Sec I)

Question 1 A certain degree of assurance is needed to sell these forecasts, hence they need to be prudent and should follow a number of steps that need to be undertaken when forecasting. The basic steps involved in forecasting are: assess economic environment, estimate market potential, develop forecasts, compare forecasts with objectives and establish quota. These steps if followed strictly can make more convincing forecasts. The most important thing in forecasting is deciding the methods of forecasting.There are two basic methods of forecasting which subjective and objective methods of forecasting. The decision to select one will depend on a companys level of technical expertise, availability of sales data and the proposed use of forecast. Subjective methods include user expectations, sales force composite, jury of executive opinion and Delphi technique whereas objective methods include market test, time series analysis, moving averages and statistical demand analysis. Therefore a combination of both can yield more precise and close forecasts.

Question 2 The sales forecast lies at the core of any future planning and as such is one of the most important tools at the companys disposal; these forecasts may be highly detailed and formal or could be informal but nonetheless almost every corporation forecasts sales. Top management used forecast to allocate resources, Finance department uses it to project cash flows production uses it to determine quantities and human resources uses it to plan its personnel needs , therefore forecasts are made in different areas in an organization. This can be seen by analyzing the way the business has defined its sales quotas. The sales force size and sales territory also show the sales forecasting as they are assigned on the basis of forecasts. Without these forecasts these functions cannot be done. Implications of not using sales forecasts can be bad for an organization. If a firm is not forecasting it sales, it would end up in wasting resources which could be used effectively if proper forecasting was done. Moreover the firm would be unable to predict the variability in the demand and supply which
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could result in shortages or surplus. Territory distribution can also make the operations of firm smoother

Question 3 a) Yoplait yogurt: No. of family members, income, sales of local retail store and population. b) Rolex watch: household income, age, geographic area, lifestyle c) Dell personal computers: no. of household, education level, income. d) Toro power lawnmowers: no. of homes, income, size of lawn e) Ektelon racquetball: age, household members, population, income. f) Nicole miller designer ties: age, income, geographic area, marital status, lifestyle g) Swatch watches: age, income, family members, and lifestyles. h) Tylenol: income, family size, age i) Mary Kay cosmetics: age, gender, income, family size, lifestyle

Question 4 Market potential is an estimate of the possible sales of a commodity, a group of commodities for an industry in a market during a stated period under ideal conditions. This multiple regression equation shows the relationship between the dependent variable which is the unit of sales of U.S garden tractors and four independent variables which are number of single family homes, disposable personal income, index of food prices and family size. The model tested has a coefficient of determination (R squared) of 65.0 percent. This measures the goodness of fit or the quality of fit. Therefore we can conclude that 65% of the variation in sales of U.S garden tractors around its mean is explained by our model. This regression analysis is not a good method to predict market potential since it only tells us that whether these independent variables like family size , food prices affect unit sales in U.S garden tractors or not. This regression analysis does not allow us to predict the market potential. Other methods can be used to predict market potential.

Question 5 The proposed index to develop territory potentials for a new cake mix introduced by Miracle foods is a Buying Power Index (BPI) which considers income, population and retail food sales as important variables in developing territory potentials. This index is very popular in estimating territory potential for frequently purchased, low-priced convenience goods. Income is an important variable since the purchasing power of consumers depends on their disposable income. Population is also an important variable because the manufacturer should know his target population to which he is catering is. Retail food sales are important because Miracle foods should know what percentages of consumers disposable incomes are spent on food. Yes, it makes sense to use retail food sales and it can be said that cake sales are a function of food sales. Sales of the retail food store would be valuable to know the territories where people prefer to buy such things from the retail store and it will also help in analyzing the overall demand in the area.

Question 6 A companys sales force is potentially one of its best sources of market and sales forecasting information, especially under unique economic conditions which make historical data unreliable. One major reason often cited for having salesperson participates in forecasting is to take advantage of the insight of those company representatives who are closest to the customer. Another is that greater commitment by salespeople to the forecast might result if they believed that they had a voice in formulating it. For example, quotas based on these forecast inputs might be more acceptable to the sales force. Benefits include: y y y y Salespeople know the actual sales potential in their territories Salespeople are closest to the source. Salespeople accept the forecast because they did it Put responsibility for forecasting in the hands of those that can make it happen
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y y

Statistical and technical errors are minimized Detailed final forecast is done by product, customer, market can be done with little or no data or history

Some of the disadvantages are: y y y y Salespeople are not trained forecasters Salespeople focus on the present. They do not anticipate environmental change Salespeople may be too optimistic They may go low so that they have an easier time hitting quota

Question 7 Pros: y y y y Cons: y y y Bigger learning curve Time needed for adjustment Employee may be unsuited to new territory Greater exposure Skill enhancement New perspective Greater motivation

Factors that drive a company to reassign sales territory: y y y y y y The salesperson is unsuited to the current territory The salespersons experience is needed in a new market The salesperson has become demotivated in current environment There is a change in company structure resulting in reassignment A new market has opened up and the company cannot hire new employees quickly There have been company layoffs

Question 8 Changes that would result in a need to realign territories: 1. Change in the basic control unit: When the criteria used to define the territory changes, so to must the alignment of territory. The reason is that since the basis upon which the sales territory has been changed, the sales territory must change as well. For example: If the control unit is a central city and the boundaries of the city are changed over time, the firm must reassess its territory assignment and come up with a new one. 2. Change in market potential: Over time as market potential changes of various territories, the expected return or potential of each market must be assessed and in cases when there is a huge change in market potential, the firm must realign its territories to look for other more profitable areas. Process and implementation of realignment: An effective approach for a successful realignment typically involves developing a centrallyderived alignment to act as a benchmark, followed by local adjustments. The centrally-derived benchmark alignment should be developed by some-one with a broad perspective using objective business criteria. It should use consistent logic for determining staffing needs across the country and provide quantifiable criteria against which all alignments can be judged. Local adjustments to this central benchmark can ensure local conditions are taken into account. Incorporating local input also facilitates acceptance of the realignment by the entire sales organization.

Realignment can take place via an 8 step process - In Step 1, alignment criteria such as balance workload and minimize disruption are selected. In Step 2, a database is developed. The database usually includes customer and prospect locations, travel time data, and alignment attributes such as market potential, sales, and workload. In Step 3, optimal sales territory centers (or salesperson locations) are determined centrally, based on business needs. In Step 4, territory centers are audited and finalized by the national and regional managers. In Step 5, regional alignments are developed centrally, based on well-defined, objective criteria. In Step 6, the regional alignments are audited and finalized, again by the national and regional managers. In Step 7, optimal territory alignments are developed centrally. In Step 8, alignments
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are audited and finalized with the help of first-line sales managers.

Question 9 Generally a close examination of below-par situations is done by the management in which the focus is on the products that are not selling according to the expectation, customers who are not buying the products as predicted or sales representative who are not meeting objectives. This examination is done to identify the cause of the problem so that it can eliminate. However, close examinations of above-par situations are also done. These are conducted to make sure that whether the pattern is consistent or not. For example if a sales representative is meeting objectives , examination would be done to ensure that is he consistent with his work , would he achieve his objectives in future or not. Moreover, if a product is selling according to the expectation, it would be ensured that would this product hold its market in future? Are these sales temporary or do they have a consistent pattern. Question 10 Improving service y Consumer tastes can be analysed No more observation mistakes Better weights can be assigned to products

Efficiency: Less survey work in the field Less administrative burden for retailers Ease of forecasting demand

Question 11 Table 1

Performance index is calculated by dividing the actual sales by sales quota and then multiplying it with 100. Table 1 shows the performance indexes for all the territories. It can be concluded that representative of territory 5 had the best performance amongst all other representatives.

Question 12 In planning a sales analysis system we should consider that the information needs from district sales manager to national sales manager would vary, since these are three different levels of a hierarchy. National sales manager

Regional sales manager

District sales manager Sales analysis required by a district sales manager would be different as compared to sales analysis required by a regional or a national sales manager. For example a sales manager of Lahore district of Nestle would only be interested in sales analysis of areas within Lahore like defense, gulberg etc. where a sales manager of Punjab region would not only be interested in sales analysis of areas of Lahore, instead he would be interested in sales analysis of Lahore and other cities which come under the Punjab region. Sales manager of Nestle Pakistan would not be interested in sales analysis of Punjab; he would require sales analysis of all provinces of Pakistan. This can be seen that information needs vary across the hierarchy of sales managers from a district levels manager to a national level manager.