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Wednesday, 19 September 2018

The Three Terms Used in forecasting

1.Market potential.
2. Sales potential.
3.sales forecast.

Market potential is the total potential sales of a product or a service or a group of product in a specified period of time. It relates to the total capacity of the market to absorb the entire output of a specific industry.

Sales potential is different from market potential in that it is the ability of the market to absorb or reject the output from single firm.

Sales forecast is different from sales potential. Where as sales potential represents the maximum ability of the market to absorb a product from the entire industry or single firm comma forecast is a prediction of the actual sales that are expected in whatever time period is decided upon. For example, the total potential for bicycle might be 50 billion a year for an entire industry. The total potential of the product 41 firm say tyre maybe 10 billion. Yet the sales forecast for the one firm might be only 5 billion. While the difference between 5 billion and 10 billion?

  For various reasons, a company may seek not to attain full potential for a product. Perhaps limited resources are available for marketing or only a limited number of products can be manufactured. Also there is the law of diminishing returns which says that as we try to achieve 100% of anything, the marginal cost for each additional percentage becomes greater and greater.

 As a result, it will be better to forgo hundred percent of sales potentials for one product in order to use the resources to go for the sales of other products which profits. Unexpectedly, environments may change, causing shortfalls of the sales potentials possible.