Market Analysis Moving Averages

Market AnalysisMoving AveragesA2 Business Studies

StarterMallet of Panic

Topic 1: Species of British WildlifeTopic 2: Brands of ConfectionaryTopic 3: Marketing Key Terms

Aims and ObjectivesAim:

To understand Moving Averages.

Objectives:

Define and explain Moving AveragesDescribe the use of Moving Averages.Analyse the usefulness of Extrapolation

Moving AveragesDefinition:

A technique for identifying an underlying trend by smoothing out fluctuations in sales data.

Fluctuations may be caused by seasonal demand etc.Three Month Moving AverageMethod:

Add together three consecutive months data.

Calculate an average.MethodMonthSales (000s)Calculation3 Month Moving AverageJanuary24February27March29April29May32June27Case Study4Sport Gym

4Sport Gym MonthSales (000s)Calculation3 month Moving AverageJanuary24February27(24+27+29) / 326.6March29(27+29+29) / 328.3April29May32June27July31August32September34October38November39December39Task 1MonthSales (000s)Calculation3 month Moving AverageJanuary24February27(24+27+29) / 326.6March29(27+29+29) / 328.3April29(29+29+32) / 330May32(29+32+27) / 329.3June27(32+27+31) / 330July31(27+31+32) / 330August32(31+32+34) / 332.3September34(32+34+38) / 334.6October38(34+38+39) / 337November39(38+39+39) / 338.6December39Task 2Fluctuation 2Task 3The PresentThe FutureThree Month Moving AveragesTakes out variations in financial figures.

Eg. Seasonal factors.

Timescale ie. 3 month/ 4 month/ 12 month depends on nature of business.

Supermarkets use short time periods.

Construction firms use longer time periods.ExtrapolationTaking past and present data about a market and using an identified underlying trend to predict future sales.

Benefits & Drawbacks of ExtrapolationIn groups decide on your whiteboards on the benefits and drawbacks of extrapolation.

You may wish to consider the following:Budgets, motivationObjective settingPitfalls of predictionType of market the business is inBenefits and Drawbacks of Extrapolation