Reference no: EM132158605

Module Overview:

Economically, the world is getting smaller. Companies depend more and more on international markets to sell goods and services. The more complex the economic system, the harder it is to project the future, especially, understand the risks associated with investments.

As a manager, you must respond and build flexibility into your company to best adapt to the changing environment. You should make projections and plan for contingencies to maximize the probability of success. For example, a company may own several different lines of hotels, high-end expensive hotels and lower-end casual hotels designed for long distance travelers and families.

Based on budgets and forecasts, management may want to focus marketing and promotion efforts on business travels at the high-end expensive hotels.

What if there is an unexpected economic turn where business travelers from targeted clients have budgets significantly cut and cannot stay at these expensive hotels anymore?

Management may quickly need to change the marketing efforts and begin to invest in tools that will attract more casual guests and markets into your high-end products for lower rates, which will reduce profitability, but keep rooms filled at a volume significant enough to cover costs.

In this module, you will be introduced to the principles of risk, and how they impact supply, demand, price, and ultimately investor returns.

Module Readings

Complete the following readings early in the module:

Module overview

From your course textbook, Managerial economics: Economic tools for today's decision makers, read the following chapters:

Demand Estimation and Forecasting

The Theory and Estimation of Production

The Theory and Estimation of Cost

From the Argosy University online library resources, read:

Lawler, E. E., III, & Toole, E. (Eds.). America at work: Choices and challenges. Gordonsville, VA: Palgrave Macmillan.

Assignment: Applications of Forecasting by Firms

Instructions:

Forecasting is used as a tool for planning. When developing forecasts, firms need to think of all possible scenarios and their future impacts.

For example, if you are in a management role and overforecast sales, you will then overforecast employees or payroll as you will schedule more employees than needed to meet your projected sales.

This overforecasting will lead to excess purchasing of supplies and, ultimately, lead to insufficient cash flows because you will need to pay for expenses incurred to maintain and provide services for revenues that did not come in as projected.

A small error in forecasting at the start can significantly affect overall results. In this assignment, you will be exposed to the basic principles of forecasting.

Tasks:

Research a firm that applies forecasting principles and methods. You can take examples from your own work experiences. You can also consult sources such as the Wall Street Journal, Financial Times, Bloomberg Markets, the Economist, US News and World Report, and the Argosy University online library resources.

Create a 4- to 5-page research paper that includes responses to the following:

Identify the sales forecast for the firm.

Analyze how this sales forecast impacts all other forecasts for the firm, such as materials, labor, overhead, cash receipts, and disbursements.

Explain the exogenous factors that you need to be aware of when developing these forecasts. Assess the GDP, rate of inflation, rate of unemployment, and interest rates trends.

Evaluate the prerequisites of a good forecast that you should keep in mind as a manager when budgeting sales and production amounts.

At the end of your report, include a reference page and cite scholarly sources in APA style.