Sales Forecast

1. Sales Forecast Decision Screen

2. Price • entries always have a “big” effect on forecasted sales and market share. The higher a company's wholesale price relative to the industry-average in a region, the more that footwear consumers in the region will be inclined to shift their purchases to lower-priced brands. However, the loss of unit sales that accompanies charging retailers a higher wholesale price can be partially or wholly counteracted by raising S/Q ratings, models available for sale, advertising, and so

3. S/Q ratings • S/Q ratings are generally the second most important factor (behind price) in shaping consumers’ choices of which footwear brand to purchase. So entries to raise/lower the S/Q rating will typically have a sizable sales/market share impact (as you can readily confirm by checking out the projected changes in sales/market share for 3-star S/Q and 7-star S/Q entries).  a function of five factors: • (1) current-year spending per model for new features and styling, • (2) the percentage of superior materials used, (3) current-year expenditures for Total Quality Management (TQM) and/or Six Sigma quality control programs, • (4) cumulative expenditures for TQM/Six Sigma quality control efforts (to reflect learning and experience curve effects), and (5) current-year expenditures to train workers in the use of best practices.   Hence any changes in your S/Q rating entries in one or more regions will spill over to impact your production decision entries and costs.

4. Models/styles • The number of models/styles comprising your product line in each geographic region normally has a sizable impact on the branded sales forecast—as you can quickly see by comparing the difference in projected sales and market share for, say, 50 models versus 500 models.   However, the production-run set-up costs for adding more models is substantial, so the effect on cost per pair of making 250, 350, or 500 models available for sale in a region can be sizable.  

5. Advertising • Advertising strengthens awareness of your company’s brand, helps pull buyers into retail stores carrying your brand, informs people about the features and prices of your latest styles and models, and is a vehicle for conveying celebrity endorsements (and leveraging the costs of signing celebrities to tout your brand).   • Your company's market aggressiveness in advertising its lineup of models and styles in a given geographic area is a competitive plus when annual advertising expenditures exceed the region average and a competitive minus the further your ad budget is below what rival companies are spending on average.  

6. Mail-in rebate • The size of your company's mail-in rebate offer in a given geographic area is a competitive plus when the size of the rebate exceeds the region average and a competitive minus the further rebate offer is below the average rebate offers of rival companies. Although mail-in rebates, if offered, can range from as low as $1 per pair to as much as $10 per pair, the rebate cost per pair sold is less than the face value of the rebate because some buyers lose the coupon or the sales receipt and other buyers, for various reasons, fail to take advantage of the rebate offering.

7. Retail outlets • The number for retail outlets shown on the screen when you first arrive represents the actual number of retail outlets your company utilized in the prior year.   But the total number of retail outlets willing to stock your company’s brand in this upcoming year could be larger or smaller, depending on how retailers view your company’s brand given the events of the preceding year.   The number of retailers in a region willing to stock your company’s brand in any year upcoming is based on • (1) your company’s prior-year market share of branded footwear sales in that region, • (2) your prior-year S/Q rating for branded footwear, ( • 3) your prior-year delivery times in filling retailer orders, • (4) the degree of support your company provided to retailers stocking your brand of footwear last year, and • (5) whether your Internet price is perceived by retailers as undercutting the prices that they normally charge for your company’s branded footwear, such that retailers consider your low-price Internet strategy as a direct attempt to steal away their customers—a low Internet price will cause retailers to avoid stocking your brand. There’s nothing you can do to secure additional retailers immediately. If you want to increase the size of your retailer network in a given region next year, then you will have to make stocking your brand more appealing to them this year by improving your S/Q ratings, market share penetration, retailer support levels, delivery times, and avoiding use of an Internet price that poses channel conflict with retailers. • As with the preceding entries, the size of your company's retailer support expenditures in a given geographic area is a competitive plus when it exceeds the region average and a competitive minus the further such expenditures are is below the average retailer support levels of rival companies.

8. Delivery time • While retailers can live with a 4-week delivery time, you can boost the appeal of your brand and help convince more retailers to carry your brand next year by shortening the delivery times on retailer orders to 3 weeks, 2 weeks, or 1 week. Your company's delivery time in a region is a competitive plus when it exceeds the region average and a competitive minus when it is below the average delivery times of rivals. Unless your instructor has notified you otherwise, 4-week delivery costs $0.25 per pair, 3-week delivery costs $0.75 per pair, 2-week delivery costs $1.50 per pair, and 1-week delivery costs $3.00 per pair. You can see the effects of shorter/longer delivery times on branded sales volumes, market shares, and net profit by observing the on-screen calculations when you make different entries.

9. Celebrity endorsement • As with all the entries in the Marketing Effort column, the size of your company's celebrity appeal indexes in a region is a competitive plus when it exceeds the region average and a competitive minus when the index value is below the average retailer support levels of rival companies. The numbers on the screens for celebrity appeal are a given for the upcoming year because any new celebrities signed in the upcoming year will not be available to promote your brand until the following year.

10. Decisions Regarding Plant Upgrade Options • There are four options for upgrading existing plants and equipment as shown below: •   Option A Reduces the number of defective pairs by 50% One-time capital outlay of $2.5 million per million pairs of plant capacity • Option B Reduces production run set-up costs by 50% One-time capital outlay of $8.0 million per million pairs of plant capacity • Option C Boosts S/Q rating by 1-star One-time capital outlay of $7.0 million per million pairs of plant capacity • Option D Increases worker productivity by 25% One-time capital outlay of $3.5 million per million pairs of plant capacityOnly one option per year may be undertaken at the same plant. • A maximum of two upgrades can be chosen for any one plant. • Payments to the suppliers of upgrade options are made the year the option is ordered and construction/installation begins. • Upgrade options take effect the year after being ordered and undergoing construction/installation.  An upgrade option can be ordered for a new plant the first year the new plant is on line or any year thereafter • The projected annual cost savings for each option at each plant (based on current plant operations) are shown on the screen. The costs of plant upgrades are treated as additional investments and have a 20-year service life depreciated on a straight-line basis at the rate of 5% annually.