Time Series Methodologies Simulation

Essay by shaycandiceUniversity, Bachelor'sA, December 2008

download word file, 2 pages 4.0

Blues Inc.

MemoTo:Myra Reid, Vice President of ProductionFrom:Market AnalystCC:Barbara Baderman, CEO, James Fuller, VP of Marketing, Tim Eisenhardt, VP of SalesDate:December 29, 2006Re:Time Series Methodologies SimulationThis memo is intended to inform you of the forecasts that have been projected and the decisions that have been made concerning the sales production for the up coming quarters. As a team, we conducted a study applying time series methodologies to forecast possible future sales for Blues Inc. The time series is a collection of data over a period of time (Doane and Seward 2007). The first part of the study consisted of predicting the advertising budget. The team first ensured there is an effective advertising strategy and considered the variables that affect the budget. The variables taken into consideration are: sales, retail coverage and the competition's allowable budget for advertising. It has been decided that sales will be uses as the primary variable for the regression analysis.

The advertising budget has been set to $126 million dollars and the retail coverage is forecasted to increase 2-3 percent in the up coming year. Using the regression equation, the expected sales for this year should be $2,400 million dollars, which makes the advertising, budget $162 million dollars. This budget should assist with maintaining and improving our production plan and fine-tuning our advertising strategy, thereby increasing over all sales and profits.

The fluctuations in the market size were analyzed using the time series data to reach our predicted forecast for sales. A 2-period weighted moving average with a weight of .09 and a k-period of 5, shows to be the best and most accurate option Blues Inc.. Production levels have also been fixed at 55 million units because the market size given by the 2-weighted moving average was 776.70 million units and the market...