Sales Forecating for Navy TV

Logistics and Supply Chain Management

Submitted by:

Suman Saurabh

Roll No -10

Dept – Marketing

Trimester – IIIrd
 Sales Forecating for Navy TV

Introduction
Forecasting implies predicting the future after studying and analysing the past and present data.
Forecasting is of special importance in industries, where important strategic decisions need to be taken
to optimize the efficiency of the resources and hence maximize the profits.

Sales Forecasting
The forecasting of sales is one of the most important information tools for every management. In a
company lot of units use the sales forecast for example top management, finance, production, human
resources, purchasing and marketing units. Top management unit allocates resources among functional
areas and to control operations inside and outside of the company by using the sales forecast. The
company’s finance unit uses the sales forecasting to decide on capital appropriation, to project cash
flows, and to establish operating budgets. Production uses it to decide how much the company has to
produce and in what time and to control inventories. Human resource units use the sales forecasting (to
plan personnel requirements and also as an input in collective bargaining). Purchasing unit uses it to
plan how much materials the company needs and in which part of the year/month/week or even day.

Marketing units of firms find sales forecasting very useful (to plan marketing and sales programs and to
allocate resources among the various marketing activities). The meaning of sales forecasting grows as
firms start to coordinate their own business in a world wide scale. The business world knows two types
of sales forecasting methods and they are subjective methods and objective methods, all of them have
advantages and disadvantages. Usually decision makers use one or another forecasting method and
their decision will depend on technical knowledge, previous sales data, and for what exactly the sales
forecasting will be used.

SALES FORECASTING OF NAVY TV

Last 5 year sales data of Navy TV

Years Sales (Rs. in Crores)

2007 65.54

2008 71.95

2009 91.34

2010 125.69

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 Sales Forecating for Navy TV

TIME SERIES ANALYSIS

A company can use different time-series analysis methods for forecasting sales. Time-series analysis
makes a forecast for the future sales on the base of historical data. The difficulty and style of these
analyses can differ extensively.

The easiest assessment might use last year’s figures as the next year’s forecast, but if the company is
new or is a growing company, then this easy method cannot be used.

Y = 20.72x + 44.60

Using the trend line, the sales forecast is determined to be approx Rs. 129.62 cr

New forecast = α (actual demand) + (1-α) (previous forecast)

= 0.3x125.69 + 0.7x89.342

= Rs.100.246 cr.

Correction for trend:

St+1 = αAt + (1-α) (St+Tt)

T t+1 = β (St+1 - St) + (1-β) Tt

Ft+1 = St+1 + T t+1 where,

= corrected trend

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 Sales Forecating for Navy TV

= initial forecast for period t

= tend for period t

= trend smoothing constant

St+1 = 0.3x125.69 + 0.7x89.342 = Rs. 100.246 cr.

T t+1 = 0.3(100.246 – 89.342) + 0.7x0 = Rs. 3.2712 cr.

Ft+1 = (100.246 + 3.2712) = Rs. 103.5172 cr.

Moving Average sales data:

Moving average is a quite simple method of sales forecasting, it considers the previous year’s sales to be
the forecast for the next year. Using this method, can lead to large errors if there is much variation in
sales from one year to the next. By using some kind of average of recent values, it is possible to not care
about the randomness of sales from one year to the other.
For example, company might average the last two years’ sales, the last three years’ sales, or any number
of other periods. The forecast would simply be the average that resulted. The number of observations
included in the average is typically determined by trial and error. Differing numbers of periods are tried,
and number of periods that produce the most accurate forecasts of the trial data is used to develop the
forecast model. Once determined, it remains constant.

Years Sales (Rs. in Crores)

2008 71.96

2009 87.45

2010 114.56

Y = 20.55x + 52.82

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 Sales Forecating for Navy TV

According to moving average method, sales forecast for year 2011 is found to be Rs. 126.56 cr.

Ratio Analysis Method:

Sales forecast for next year = (actual sales of current year) 2/actual sales of last year

= (125.69)2/91.34

= Rs. 172.95 cr.

Comparative Analysis of Growth rate:

Years Navy TV Sales (Rs. in Crores) Onida Sales (Rs. in Crores)

2007 65.54 136.49

2008 71.95 118.44

2009 91.34 78.65

2010 125.69 83.10

Years Growth rate of Navy TV Growth rate of Onida

2008 9.78% -13%

2009 27.06% -33.60%

2010 37.60% 5.65%

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 Sales Forecating for Navy TV

Figure 1

In comparison to Navy TV, Growth rate of Onida is low in 2009-10

Correlation between sales of Navy TV and Onida:

Year Navy Onida(y) dx dy Dxdy dx2 dy2

TV(x)

2007 65.54 136.49 23.09 -32.32 -746.27 533.14 1044.58

2008 71.95 118.44 16.68 -14.27 -238.02 278.22 203.63

2009 91.34 78.65 -2.71 25.52 -69.16 6185.82 651.27

2010 125.69 83.10 -37.06 21.07 -780.85 1373.44 443.94

Total ∑x=354.52 ∑y=416.68 ∑dxdy= -1834.3 ∑dx2=8370.62 ∑dy2=2343.42

r = ∑dxdy/√(∑dx2 X ∑dy2)

= -1834.3/4428.98

= -0.41

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 Sales Forecating for Navy TV

Hence, sales of Navy TV and Onida are strongly negatively correlated.

Interpretation:
 Time series analysis is used to predict the sales for the coming years on the basis of the past
years sales figures.

 Time series takes into consideration the sales data of the previous years i.e. 2007-2010, and
sales forecast for 2011 was Rs.129.62 crores

 According to moving average method, sales forecast for year 2011 is found to be Rs. 126.56 cr.

 Ratio Analysis to determine the sales forecast can be done taking into consideration the square
of the Actual Year sales, divided by the previous year’s sales. Thus , the sales forecast made on
this basis comes to Rs.172.95 crores

 When we consider the growth rates of the 2 firms, ONIDA and NAVY TV, we can see that there is
significant difference between the growth rates of the 2 firms. The growth rate of NAVY TV is
higher compared to ONIDA in all the 4 years.

 In order to study the nature of correlation between the sales of the 2 firms, we consider the
sales of both the firms for the last 4 years. It is determined that there exists negative correlation
between the sales variables of the 2 firms

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