It is essential in preparing forecasts to specify exactly what are being forecast ed (defined product-market), the time period involved, and the geographical area. Otherwise, comparisons of sales and market share with those of competing firms will not be meaningful. Several operational problems may occur in forecasting as a result of differences in measures of sales (e.g., dollars versus units), problems in defining the relevant market, leads and lags in product movement through distribution channels, promotional pricing practices, and the handling of infra company transfers.17 Additional forecasting guidelines are provided in the Appendix to Chapter, 3.A-company’s sales depend, in part, on its marketing plans; forecasts and marketing Strategy are closely interrelated.

Forecasting involves what-if analyses. Alter-native positioning strategies (product, distribution, price, and promotion) must be evaluated for their estimated effects on sales. Because of the marketing effort/sales relationship, it is important to consider both potential and planned marketing expenditures in detaining the forecast. Also important is considering the variation in production and other marketing distribution costs for alternative sales forecasts.

The impact of different sales forecasts must be evaluated from a total business perspective. These forecasts affect production planning, human resource needs, and financial requirements. The global market for personal computers in households is an interesting market potential and forecasting application. Rapidly declining prices and software availability are stimulating sales around the world. Penetration of PCs in households is shown in Exhibit 3-12. Taiwan's Acer Group estimates sales outside the United States to account for 40 percent of its total sales in 1996 compared to 20 percent in 1995.18 One estimate of total industry salary 2000 for Asia and Europe is 25 million units, compared to 16 million units in the United States. Other forecasters are more conservative but acknowledge the huge sales opportunities L- many countries around the world.

The demise of Grandmother Calendar Company illustrates the critical importance of sales forecasts in the business planning of small companies.19 while personalized photo calendars are not new, Harvey Harris, who founded the company, offered an array of options in the calendar kits sold by retailers Priced at $20 ($5 under competitors retailers signed on and consumers bought the kits, selected their options, and sent them to Grandmother Calendar for Processing. Without giving much thought to how much business the company could handle, Harris offered the kits to major chains,’ catalog companies, and thousands of other retainers.

One catalog company sold 25.000 kits in six months, compared to a forecast of 8,000. Grandmother Calendar increased its output to 300 calendars a day but was receiving 1,000 orders a day. Success killed the company. Harvey ran out of operating capital and. couldn’t expand fast enough to meet the demand. Planning and forecasting could have limited initial distribution, allowing management market feedback to better forecast sales.

Sales forecasts of target markets are needed so that management can estimate the financial attractiveness of both new and existing market opportunities. The market potential and growth estimates gauge the overall attractiveness of the market. The sales forecast for the company's brand in combination with cost estimates provides a basis for profit projections.

The decision to enter a new market or to exit from an existing market depends heavily on financial analyses and projections. Alternative market targets under consideration can be compared using sales and profit projections. Similar projections of key competitors are also useful in evaluating market opportunities.