A manager needs to develop an early warning system that includes: 1.Macroeconomics 2.End User information 3.Customer sales forecasts 4.Critical costs
Managing through the Business Cycle
| Steps | Description |
|---|---|
| macroeconomic warning signals | The early warning system should include indicators for the overall economy and the relevant industry. |
| end-user information | For example, a bottle manufacturer should watch sales of beer and soft drinks. A fabric manufacturer should watch apparel sales. |
| consumer sales forecast | A company should also monitor its own clients. A manager should break out sales reports by product groups, regions, and customers to trace major surprises in sales. |
| critical cost | The companies that need pay the closest attention to costs are usually manufacturers, utilities, and contractors with with significant exposure to one or two raw materials with typically volatile prices. |
Macroeconomic warnings watch over the entire and economy and focus on the sector that a business is associated with. This type of warning system also exposes when sales are increased or decreased. This especially helps in anticipating slowdowns. This monitoring system should also not use the help of forecasting since forecasting is unreliable. It is much better for business to analyze the data themselves so that they don’t get unreliable information and are more understanding of the nature of there business.
End User information is a monitoring system that is used by producers of intermediate goods. This system watches the consumption of the goods that are used in their products. Giving a business the capability to determine that sales are declining as early as possible. It is important to watch end user data no matter how removed you are since it may effect you greatly in the near future. Forecasts are not reliable for end user information since economist may not want to discourage investors.
Looking at Consumer sales is very important when doing radar for a business. this monitoring system examines sales and figures out why sales are declining or increasing. it is also important to remember that these increases and decreases may not always be relevant due to blips. Blips may occur when a sale is made early causing a “spike in sales”. This form of monitoring determines whether this increase or decrease was a blip or not. It is also important to separate new products from and new markets since these may show outliers and may not reflect the state of the overall economy. Forecasts of consumers sales helps companies with ongoing sales. These forecast are taken from the costumers to give the company honest feedback about there product. These sales forecasts are then taken in as advice for the company to continue its success.
Cost is monitored by looking at how much your buying your materials for. Fortunately for most companies they don’t have to monitor this because there material prices most likely won’t be going up or down too drastically to effect business. On the other hand manufacturers, contractors and utilities are effect by price. These types businesses should monitor this constantly to insure when they need to increase or decrease there prices to customers.
In the end in the world of business you cant always know for sure that a slowdown or growth is about to occur. But to make sure you can be aware as soon as possible of slowdowns you should review the market data on a regular basis to insure you are informed of what is going on and how it will effect you. It is also important to know that this job cannot be done on your own and you will need other opinions on the way. Monitoring your slowdowns overall allows you to act faster to slowdowns and growth and could potentially save your business one day.
Explian each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the terms in your own words briefly.
Looking for trends and patterns in when sales are seasonally low in the year and seasonally high.
Describe the characteristics of the following events briefly.