Forecasting Techniques
The modern day business environment is quite competitive and dynamic. The majority of businesses that succeed are those that can streamline their operations to match the changing environment while at the same time making profits. In order to do this, a business should be able to offer a product or service that rivals its competitors in price but still guarantees profits after expenses. A marketing strategy acts as a blueprint with which a company can design its marketing plan. At Onyx Corporation, the company does not have a sound marketing strategy; as such, its marketing plan is both ineffective and inefficient.
Forecasting refers to the activity or process of projecting or predicting the occurrence of an event or an activity (DuBrin, 2008). It is an essential activity for businesses of all sizes. Since businesses operate as going concerns, it is imperative that they carry out forecasting and use this information to estimate future activities. This enables the business to plan beforehand and minimize risk. For purposes of forecasting the business valuation of Onyx Corporation, the key determinants will be costs, sales, and selling prices. In order to forecast these factors, it is necessary to determine the factors that influence their growth. For instance, an increase in the unit sales of jewelry at Onyx stores may be because of an increase in the not reusable income of clients or because of a new advertising campaign. Likewise, an increase in operating costs may be,since there is an increase in the wage rate or other necessary operating expenses.
Several factors determine the profitability of a business. These include pricing strategy, macroeconomic environment,and regulatoryframework, availability of credit, demographics, competition, and price elasticity of demand.If these factors are not expected to change much in the future, it is easy to project future values by factoring in the company’s historical growth rate. In the case of Onyx Corporation, relevant forecasting techniques include time series analysis and regression analysis. Suitable statistical analysis software to use would be SPSS.
The company’s income statement reveals that since the previous year, either the wage rate has increased or the company has hired more people. In addition, the company incurred more travelling expenses than the previous year. These two factors have not affected sales volume but instead contributed to the negative net income.On the issue of gross profit, the value is lower than the previous year because the cost of goods has increased while the value of sales has decreased. This may be due to a poor pricing strategy and/or poor buying of raw materials used to make goods sold. Furthermore,from the balance sheet, the company should consider operating on a cash-only basis to avoid a high figure of accounts receivables.
Reference
DuBrin, A. (2008). Essentials of Management. Connecticut: Cengage Learning.
