What is the forecast for Blues Inc.? A team, playing the role of managers, has been selected to conduct a study applying time series methodologies. The study is to forecast future sales for the denim manufacturer, Blues Inc. A time series methodology is to be used in this simulation. A time series is a collection of data over a period of time. The trend is the long run direction of the time series. (Lind, Marchal & Wathen, 2004)The first assignment for the team was predicting the advertising budget. There needs to be an effective advertising strategy in place. The team needs to decide the variables that affect the advertising budget. Those variables are sales, retail coverage and competitors budget for advertising. The acting managers must choose a variable which sets the tone for the advertising budget.
Tim, a member of the team, believes to increase market share at Blues Inc.,
they need to strengthen their retail presence. All multi-brand stores have denim products and the team needs to keep that in mind when deciding the advertising budget. Blues Inc. ma need to increase storefront displays and promotional activities. The team decided to set a budget of $126 million dollars. The retail coverage is expected to increase by two to three percent this year. The retail coverage may range between 85-86% with the current regression equation. The advertising budget works out to $122 million dollars. The market share of Blues Inc. is six percent of the $40 billion dollars. Expected sales this year work out to be $2,400 million. Using the regression equation, the value of the budget is $162 million dollars.
The next step was to study the fluctuation in the market size to arrive at a sales forecast. The team looks at the time series data for the market...