Making decisions based on demand and forecasting essay

If one particular alternative is clearly better than the rest, your choice will be obvious. However, if you still have several competing options, there are plenty of tools that will help you decide between them. If you have various criteria to consider, use Decision Matrix Analysis to compare them reliably and rigorously.

Making decisions based on demand and forecasting essay

Conclusion The process by which businesses make decisions is as complex as the processes which characterize consumer decision-making. The reliability and currency of the information a business uses, therefore, is of the utmost importance. What a business does with that data is decided by senior and top management.

The major influences on their decisions may entail all or some of the following factors: Logic What the competition is doing The state of the economy A variety of other variable and unknown factors Logic Microeconomic data may be reduced to mathematical constructs from which logical decisions may be made.

Microeconomic data from this imaginary company has shown that its customers prefer navy blue, button-down shirts at a certain price.

Logic would dictate that at least another 50, navy blue, button-down shirts should be manufactured and offered for sale. Although that seems logical, it might not be the best choice.

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How does Firm A compete now? And if the share price declined, would there be further sales of the stock, bringing down its price even more? However, another factor is introduced before a final decision is made on the number of shirts to be made and at what price they will be sold for in the market.

Would the increase in marketing and advertising of blue shirts sell more shirts, and therefore meet or beat the competition? Microeconomic data has shown that in some cases a vigorous ad campaign is often a successful way to beat the competition.

For related reading, see: What Factors Influence Competition in Microeconomics?

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Economic Indicators to Know. Variables and Unknown Factors Variables and unknown factors may include a consumer desire for something new. Consumers may inexplicably tire of blue shirts and prefer another color.

Taste-makers and fashion trend-setters may show a preference for green shirts rather than blue shirts. Firm A may recover some of its costs by offering blue shirts at a steep price discount. But this, of course, hurts the perception of quality associated with the Firm A brand.

The Economics Behind Sneakers. All of these elements — the microeconomic data, the questions it provokes, the possible outcomes of each choice made in the decision-making process — are what business executives must consider to assure the success of their companies and maximize their profitability.

Each of these firms is determined to maximize its profits. Each firm is also aware that beyond a certain number of shirts produced and sold, the cost of manufacturing just one more shirt and selling it returns no more income to the firm than the cost of manufacturing the shirt.

Making decisions based on demand and forecasting essay

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