Thanks Dr Mullens for the video, Our prof stresses the importance of forecasting in relation to our whole performance,short and long. Can you please incorporate a little more detail and the effects of a over optimistic and overly conservative forecasts in your next version of this vid. ok im off to your next vid. cheers.
In my opinion, accurately forecasting is the second most important factor to success behind producing products that are aligned with consumer specifications. With that said, I don't advocate creating an optimistic forecast and a conservative forecast. I advocate creating an accurate forecast. In short, a conservative forecast results in lost sales. Consumers want to buy your product, and the product is not available to them. In the event a competitor has an acceptable product, the consumer will purchase from the competitor. You're padding the pockets of rivals. An optimistic forecast can be hugely consequential. You will invest in the development of a product (R&D). You will pay for inputs to manufacture the sensors. You will pay your employees to manufacture the sensors, yet you don't generate any revenue on the unsold sensors. Additionally, you are penalized with inventory carrying costs. The consequences don't end there. The next round you will need to sell that previously unsold inventory. Therefore, the production in the current will need to be reduced. This can negatively impact your capacity utilization. Finally, students find themselves strapped for cash because they expected the revenues from the unsold sensors, as indicated by the estimated ending cashing balance. There is not revenue from unsold sensors, and an emergency loan may be necessary to remain solvent.
Capsim Mullens thankyou for the great concise explanation. If the awareness and sales budgets increase by whole $1000s (millions) then how can incremental changes of $$ be measured as far as percentage of awareness/accessibility increases?
You must refer to the graph provided in the player's guide. You can determine the percentage increase in awareness for each level of investment with the graph. However, you should be aware that you experience diminishing marginal returns on expenditures for awareness, and you lose a third of your awareness each round.
Thank you for the video, in the guide we have a formula to forecast (Total Industry Demand) ( 1+ segment growth rate)(Market share), do you think this is a good formula to forecast or could you explain me how can I do a better a forecast? Thank you,
The forecasting method you mentioned is adequate as a baseline forecast. However, it doesn't account for any initiatives you or your competitors undertake. Also, I would use my previous round product sales, as opposed to total segment demand, to calculate forecasts. In early rounds, you may have products competing in multiple segment which only make the calculation marginally more difficult (segment A sales * (1+segment A growth rate) + segment B sales * (1+segment B growth rate)).There's no reason to believe that all firms in the industry will capture an equal share of the segment growth. To improve the accuracy of your forecasts, I would encourage you to examine changes in your benchmark prediction before and after changes (decisions). You can also use this method to determine if investments are prudent. As an example, you can increase your promotional budget by $500k. If you find a corresponding increase in sales of 100k units (on the benchmark prediction) and you're earning $10 per shoe, this would likely be a good investment. As noted, the benchmark prediction is useful in understanding how changes will influence your demand. You can then adjust your forecasts accordingly. If you have a revised sensor being introduced in the market, adjust your forecast accordingly. You can also pick up on trends in competitor actions and adjust your forecasts for this. You should also consider your actual market share vs potential market share. If you under produced and stocked out in the previous round, establishing a new forecast based on the previous inaccurate forecast is not particularly helpful.
Thank you for your reply it really help me to understand better my forecast. And I have another question I hope you could give some advise. On round two I unfortunately got and Emergency loan of $21,404.184. I am doing some changes in my R&D section and going to do some at marketing. And I am planning to take all my available in ling term bonds. Do you have any tips I would really appreciated it.
Hello, this semester my I going to perform the capsim simulation. I am bit nervous how I have to do the simulation. I have never done this kind of simulations before. Is there anyone in this group who can help to understand what exactly simulation is and how I have to perform in this simulation? Please help to clear the simulation.
![Jack Harlow - Hello Miss Johnson [Official Music Video]](http://i.ytimg.com/vi/Q86_nlRoIGw/mqdefault.jpg)
Thanks Dr Mullens for the video,
Our prof stresses the importance of forecasting in relation to our whole performance,short and long.
Can you please incorporate a little more detail and the effects of a over optimistic and overly conservative forecasts in your next version of this vid.
ok im off to your next vid.
cheers.
In my opinion, accurately forecasting is the second most important factor to success behind producing products that are aligned with consumer specifications. With that said, I don't advocate creating an optimistic forecast and a conservative forecast. I advocate creating an accurate forecast.
In short, a conservative forecast results in lost sales. Consumers want to buy your product, and the product is not available to them. In the event a competitor has an acceptable product, the consumer will purchase from the competitor. You're padding the pockets of rivals.
An optimistic forecast can be hugely consequential. You will invest in the development of a product (R&D). You will pay for inputs to manufacture the sensors. You will pay your employees to manufacture the sensors, yet you don't generate any revenue on the unsold sensors. Additionally, you are penalized with inventory carrying costs. The consequences don't end there. The next round you will need to sell that previously unsold inventory. Therefore, the production in the current will need to be reduced. This can negatively impact your capacity utilization. Finally, students find themselves strapped for cash because they expected the revenues from the unsold sensors, as indicated by the estimated ending cashing balance. There is not revenue from unsold sensors, and an emergency loan may be necessary to remain solvent.
Capsim Mullens thankyou for the great concise explanation. If the awareness and sales budgets increase by whole $1000s (millions) then how can incremental changes of $$ be measured as far as percentage of awareness/accessibility increases?
You must refer to the graph provided in the player's guide. You can determine the percentage increase in awareness for each level of investment with the graph. However, you should be aware that you experience diminishing marginal returns on expenditures for awareness, and you lose a third of your awareness each round.
Thank you for the video, in the guide we have a formula to forecast (Total Industry Demand) ( 1+ segment growth rate)(Market share), do you think this is a good formula to forecast or could you explain me how can I do a better a forecast?
Thank you,
The forecasting method you mentioned is adequate as a baseline forecast. However, it doesn't account for any initiatives you or your competitors undertake. Also, I would use my previous round product sales, as opposed to total segment demand, to calculate forecasts. In early rounds, you may have products competing in multiple segment which only make the calculation marginally more difficult (segment A sales * (1+segment A growth rate) + segment B sales * (1+segment B growth rate)).There's no reason to believe that all firms in the industry will capture an equal share of the segment growth.
To improve the accuracy of your forecasts, I would encourage you to examine changes in your benchmark prediction before and after changes (decisions). You can also use this method to determine if investments are prudent. As an example, you can increase your promotional budget by $500k. If you find a corresponding increase in sales of 100k units (on the benchmark prediction) and you're earning $10 per shoe, this would likely be a good investment. As noted, the benchmark prediction is useful in understanding how changes will influence your demand. You can then adjust your forecasts accordingly. If you have a revised sensor being introduced in the market, adjust your forecast accordingly. You can also pick up on trends in competitor actions and adjust your forecasts for this. You should also consider your actual market share vs potential market share. If you under produced and stocked out in the previous round, establishing a new forecast based on the previous inaccurate forecast is not particularly helpful.
Thank you for your reply it really help me to understand better my forecast. And I have another question I hope you could give some advise. On round two I unfortunately got and Emergency loan of $21,404.184. I am doing some changes in my R&D section and going to do some at marketing. And I am planning to take all my available in ling term bonds. Do you have any tips I would really appreciated it.
Mullens
thank you so so so much
Hello, this semester my I going to perform the capsim simulation. I am bit nervous how I have to do the simulation. I have never done this kind of simulations before. Is there anyone in this group who can help to understand what exactly simulation is and how I have to perform in this simulation? Please help to clear the simulation.