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Assess the usefulness of a sales forecast for Sports Direct - Edexcel - A-Level Business - Question 2 - 2022 - Paper 2
Question 2
Assess the usefulness of a sales forecast for Sports Direct. A sales forecast is a prediction of the expected level of sales volume/revenue for a business for a fut... show full transcript
Worked Solution & Example Answer:Assess the usefulness of a sales forecast for Sports Direct - Edexcel - A-Level Business - Question 2 - 2022 - Paper 2
Step 1
Potential usefulness of sales forecasts
Answer
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Capacity Planning: Sports Direct can estimate the number of stores required to meet future customer demand, aligning with its ambition to enhance its market position.
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Stock Management: The company can plan how much stock to hold based on expected sales, thereby avoiding stockouts or excess inventory.
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Market Adaptation: With the trend of online purchases growing, sales forecasts can help Sports Direct adapt its business model to online consumers, ensuring relevance in a changing retail landscape.
Step 2
Potential limitations of sales forecasts
Answer
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External Forces: Factors such as economic changes and consumer behavior may influence the accuracy of forecasts, making them less reliable.
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Public Image Risks: Negative publicity surrounding Sports Direct could deter customers, resulting in forecasts being overly optimistic.
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Market Dynamics: The retail market is experiencing structural changes; therefore, using past sales data might lead to incorrect predictions.
Step 3
Final assessment
Answer
Sales forecasting is useful for planning but has limitations that Sports Direct must consider. The company is entering a new market with the House of Fraser acquisition, which could complicate accurate forecasting due to unfamiliar consumer preferences. Therefore, while sales forecasting is beneficial, Sports Direct should adopt a flexible approach to account for potential uncertainties in their market strategy.