A manager needs to develop an early warning system that includes:
*Macroeconomic warning signals
*End user information
*Customer sales forecasts
*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. |
These watch the overall economy and major sectors that are most relevant to your company. The system can pick up broad based slowdowns of economic activity. The system at it’s highest level should be formalized however it’s acceptable to have it as simple as a few charts or lines of data as that is sufficient to cover major data series which then show changes within the economy.
Focuses on end user close to the ultimate customer such as retailers. COmpanies which produce intermediate goods need to watch consumption of the goods which use their product. Capital goods manufactures need to watch end users of the products which their machinery produces. The general rule is to watch the end user of your product.
A system needs to be implemented which can report both sales which are occuring presently and future sales to management. Drilling down the source of growth or decline in sales can help determine whether new trends are in place or the change is temporary. Many companies should also include sales forecasts as well as actual sales data in their early warning systems.
Most companies should include cost elemet into thier early warning systems. Companies which need to pay closest attention to costs are most often manufacturers, contractors, or utilities which have a large amount of exposure to one or two amterials raw materials with typically volatile prices and the changes which come with those.
A good manager should pay close attention to a well made ofrecast. Howevr economies, trends and the data which is related to them do change. The best managers are open to evidence in changing conditions. In conclusion if the basis of a view is dis proven then that view must be abandoned.
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 the statistical tool that attempts to measure and remove the influences of predictable seasonal patterns to reveal how employment and unemployment change from month to month.