A manager needs to develop an early warning system that includes: Macroeconomic warning signals End-user information Customer sales forecasts Critical costs *Consistency
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. |
The macroeconomic component of the early warning system watches the overall economy and the major sector most relevant to the company. Monitoring economists’ forecasts can be very helpful. *The information in this early warning system can be presented in a table, but most people are more comfortable with visual learning.
The end user may not be your customer Companies need to monitor the buying ability and levels of their end users. The general rule is to watch the end user of your product, no matter how far removed from that end user you are. If major competitors are publicly traded companies, watching their financial reports may be valuable
A system need to be in place to report to management both the sales that are currently occuring and expectations of future sales. Current sales reports should include a “drill down” of major surprises Product and regional breakdowns must be used when new products or territories are added Pipeline forecasts are useful for companies making large one-time-only sales Sales forecasts should be developed in consultation with customers for ongoing sales. Sales representatives estimate their own probability of success on each project and how large each project will be. *Many companies should include sales forecasts as wel as actual sales data in the early warning system.
*You should put costs in the early warning system if your company’s expenses are dominated by one or a few major items subject to large price swings.
The hardest thing for most people to accept is that things don’t always go as expected. The most successful managers are open to evidence of changing conditions. *The discipline of regularly reviewing data will pay dividends in a better understanding of the unfolding economic environment.
Explan 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.
*Seasonal adjustment is a statistical technique that attempts to measure and remove the influences of predictable seasonal patterns to reveal how employment and unemployment change from month to month. It is when you are analyzing time-series data, the one that has frequency that is shorter than or more frequent than annual data, such as month to month, quarter to quarter, or week to week. Very often weekly and monthly data have seasonality in it. This means that there are differences from week to week, and the sales in October might be completely different to the sales in December, especially in retail business. Because of this, you can’t really compare October sales to December sales, but instead you have to compare October sales this year to last year.
Describe the characteristics of the following events briefly.