ANALYSIS OF SALES

FORECASTING
TECHNIQUES OF DUA MOTORS

UNDER THE GUIDANCE

OF

Pof.T.K.CHATTERJEE

SUBMITTED BY:-

PRITI AGARWALL

MBA-IINDYR

ROLL NO-01
CONTENTS:

1. History of Hero Honda

2. Introduction to forecasting

3. What is Sales Forecasting

4. Types of Forecasting method

5. Method of forecasting followed in Dua Motors

6. Sales Forecasting for the coming years.

7. Conclusion
 EXECUTIVE SUMMARY

The objective behind doing this project is to understand the statistical tools
applied by a company in forecasting sales. Sales are an integral part of the Sales
and Distribution Management. In order to target the future profit it is important
to calculate the future sales. Undertaking this project enables us to have a
practical knowledge and gain experience about how a sales function is
undertaken in an organization. The forecasting technique followed by them to
project their sales was understood by undertaking this project.

Dua Motors is an exclusive showroom of Hero Honda Bikes and spare

parts. As a part of projecting sales, they don’t follow a forecasting technique as
such. It is pre determined by the company. Hero Honda gives them target for
each kind of bikes that they have to meet at the end of the month, and by
meeting the target they can calculate the sales for the month. This as such can
be calculated by using any of the forecasting technique. But as it is not needed
the firm doesn’t follow any forecasting techniques by avoiding extra cost. The
sales figure provided by Dua motors shows an increasing trend, this shows that
from the past five years the firm is been doing a splendid job. Thus, it can be
concluded that hero Honda is earning profits.

ACKNOWLEDGEMENT

I would like to provide my sincere gratitude to PROF. T.K .CHATTERJEE for giving
us an opportunity to do such an innovative project. This project has helped me
learn a lot about two wheelers industries. A clear understanding about projecting
Sales was learnt and an understanding about forecasting techniques was built. I
would also like to thank MR. VINEET DUA without whom it was impossible to even
go about this project, the sales data of any company are crucial and confidential
figures and no firm will ever share those data. I would like to thank the entire
firm for their undue cooperation and trust on me.

HISTORY OF HERO HONDA LTD:-

Dua motor is a dealer of Hero Honda Ltd bikes. It is the only show room of Hero
Honda in Rourkela. The profit of Dua Motors indirectly means the profit of Hero
Honda, the sales growth of Dua motors would mean the growth of sales of Hero
Honda ltd company.
Hero Honda Motors Limited, based in Delhi, India is the world's third largest
manufacturer of motorcycles after Honda and Yamaha. Hero Honda is a joint
venture that began in 1984 between the Hero Group of India and Honda of Japan.
It has been the world's biggest manufacturer of 2-wheeled motorized
vehicles since 2001, when it produced 1.3 million motorbikes in a single year.
During the fiscal year 2008-09, the company has sold 3.28 million bikes and the
net profit of the company stood at Rs.1281.7 crore, up 32% from the previous
fiscal year.

Hero Honda's Splendor is the world's largest selling motorcycle. Its 2 plants are in
Dharuhera and Gurgaon, both in India. Third plant at Haridwar, Uttaranchal has
also started production by April, 2008. It will have production facilities such as
Lean Manufacturing concept, more flexible lines & stream line material flow,
within & proximity (planning to set vendors in nearby locations constituting
HHML Park) to achieve just-in-time manufacturing. It specializes in dual use
motorcycles that are low powered but very fuel efficient. “Hero” is the brand
name used by the Munjal brothers in the year 1956 with the flagship
company Hero Cycles. It is a joint venture between India's Hero Group and Honda
Motor Company; they are related to Jagdish Lal Munjal.

During the 1980s, Hero Honda became the first company in India to prove that it
was possible to drive a vehicle without polluting the roads. The company
introduced new generation motorcycles that set industry benchmarks for fuel
thrift and low emission. A legendary 'Fill it - Shut it - Forget it' campaign captured
the imagination of commuters across India, and Hero Honda sold millions of bikes
purely on the commitment of increased mileage

Hero Honda has consistently grown at double digits since inception; and today,
every second motorcycle sold in the country is a Hero Honda. Every 30 seconds,
someone in India buys Hero Honda's top-selling motorcycle: Splendor.

Hero Honda bikes currently roll out from two globally benchmarked
manufacturing facilities based at Dharuhera and Gurgaon in Haryana. These
plants together are capable of churning out 3.9 million bikes per year. A third
state-of-the-art manufacturing facility at Haridwar in Uttranchal will soon be
commissioned to cope with sustained customer demand.

Hero Honda's extensive sales and service network now spans over 3,000
customer touch points. These comprise a mix of dealerships, service and spare
points, spare parts stockists and authorized representatives of dealers across
different areas.

Hero Honda values its relationship with customers. Its unique CRM initiative,
Hero Honda Passport Program, one of the largest programs of this kind in the
world, has over 3 million members on its roster. The program has not only helped
Hero Honda understand its customers and deliver value at different price points,
but has also created a loyal community of brand ambassadors.
INTRODUCTION TO FORECASTING

Forecasting is the process of estimation in unknown situations. Prediction is a

similar, but more general term. Both can refer to estimation of time series, cross-
sectional or longitudinal data. Usage can differ between areas of application: for
example in hydrology, the terms "forecast" and "forecasting" are sometimes
reserved for estimates of values at certain specific future times, while the term
"prediction" is used for more general estimates, such as the number of times
floods will occur over a long period. Risk and uncertainty are central to
forecasting and prediction. Forecasting is used in the practice of Customer
Demand Planning in every day business forecasting for manufacturing
companies. The discipline of demand planning, also sometimes referred to as
supply chain forecasting, embraces both statistical forecasting and a consensus
process. Management use Qualitative methods based on Judgement , Opinion ,
past experience, or guesses to make forecasts. A number of Quantitative
forecasting methods are also available to aid management.

SALES FORECASTING:- Sales forecasting uses past figures to predict short-term

or long-term performance. It's a tricky job, because so many different factors
can affect future sales: economic downturns, employee turnover, changing
trends and fashions, increased competition, manufacturer recalls and other
factors. But there are several standard methods that can produce consistently
accurate sales forecasts from year to year. Sales forecasting is a difficult area of
management. Most managers believe they are good at forecasting. However,
forecasts made usually turn out to be wrong! Marketers argue about whether
sales forecasting is a science or an art. The short answer is that it is a bit of both.

REASONS FOR UNDERTAKING SALES FORECASTS

Businesses are forced to look well ahead in order to plan their investments,
launch new products, and decide when to close or withdraw products and so on.
The sales forecasting process is a critical one for most businesses. Key decisions
that are derived from a sales forecast include:
- Employment levels required
- Promotional mix
- Investment in production capacity

METHODS OF SALES FORECASTING

Two kinds of methods are used to forecast sales:-

1) Qualitative method
2) Quantitative method

Under Qualitative methods following are the sub categories:-

a) Executive opinion
b) Delphi method
c) Salesforce Composite
d) Survey of Buyer’s intentions
e) Test marketing

a) Executive opinion:- This is the most widely used method. The procedure
includes discussions and / or average of all executive’s individual opinions.
It is a quick forecasting method and is less expensive. The only
disadvantage is it is subjective.
b) Delphi method:- under this method a coordinator collects forecasts
separately from experts, summarise the forecasts and send it to the
experts to make another prediction , this process is repeated till some
consensus is reached. Experts are company managers, consultants and
trade associations.
c) Salesforce composite:- In this method , each salesperson estimate sales.
Company sales forecast is made up of all salespersons sales estimate.
d) Survey of buyer’s intention:- A questionnaire is prepared and consumers
are asked questions about their intention to buy the company’s product or
 services. It gives more market information , it is used to forecast new and
existing products.
e) Test marketing method:- under this method different technique is used for
consumer market testing and business market testing.

Under Quantitative method there are several sub categories but only those
methods will be discussed which are relevant with the project:-

a) Time series method

b) Moving Average method
c) Exponential smoothening average

a) Time series method:- Many business prepare their sales forecast on the
basis of past sales . time series analysis involves breaking past sales data
into four components:-

1) The trend: are sales growing, “flat-lining” or in decline?

(2) Seasonal or cyclical factors. Sales are affected by swings in general
economic activity (e.g. increases in the disposable income of consumers
may lead to increase in sales for products in a particular industry).
Seasonal and cyclical factors occur in a regular pattern;
(3) Erratic events; these include strikes, fashion fads, war scares and other
disturbances to the market which need to be isolated from past sales data
in order to be able to identify the more normal pattern of sales
(4) Responses: the results of particular measures that have been taken to
increase sales (e.g. a major new advertising campaign)

Using time series analysis to prepare an effective sales forecast requires

management to:

Smooth out the erratic factors (e.g. by using a moving average)

Adjust for seasonal variation
Identify and estimate the effect of specific marketing responses

b) Moving average:- The procedure is to calculate the average company

sales for previous years .this average is taken as normal or trend value for
the unit of time falling at the middle of the period covered in the
calculation of averages. The forecaster estimates sales based on an
average of previous time periods. Averaging lessens the fluctuation and
 gives smooth curve. It is simple and easy to calculate, it provides good
accuracy for short term and stable conditions.
c) Exponential smoothening average:- In this method the forecaster allows
sales in certain periods to influence the sales forecast more than sales in
other periods. Sales forecast is calculated by the following method – sales
forecast for next period= (L) (actual sales of this year) + (1-L)( this year’s
sales forecast), where L is a smoothening constant , ranging greater than
zero and less than 1. The larger the value the more sensitive will be the
forecast.

Methods of forecasting used in Dua Motors:

From the above mentioned methods be it Qualitative or Quantitative method,

none of them is used in forecasting sales of the firm. In two wheelers
industry, the dealers are given target for each month, that is every month the
number of units to be sold is predetermined by Hero Honda and Dua motors
meet this target. Thus no forecasting of sales is done.

The following are the past 5 years sales figure:-

Sale of 2005-2006 5025 lakhs

Sale of 2006-2007 5534 lakhs
Sale of 2007-2008 6052 lakhs
Sale of 2008-2009 6592 lakhs
Sale of 2009 APRIL to till date 2925 lakhs
SALES FORECAST FOR THE COMING YEARS BY TIME SERIES METHOD:-

year sales
2005 5025 2009- till date 2925 ( this figure is to be excluded for calcu
2006 5534
2007 6052
2008 6592
2009 7105.5
2010 7627.4
2011 8149.3
2012 8671.2
2013 9193.1

SALES FORECASTING FOR THE YEAR 2009 BY MOVING AVERAGE

METHOD:-

year output of moving

sales average
2005 5025
2006 5534
2007 5279.5 6052
2008 5793 6592
2009 6322

here for the year 2009 the sales forecast is been done
by takinginterval of 2 yrs, by moving average method
sales forecast has been made for the year 2009.
SALES FORECASTING FOR THE YEAR 2009 BY EXPONENTIAL
SMOOTHENING AVERAGE:-

year output of smoothening

sales average
k=0.2
2005 5025
2006 5534
2007 5025 6052
2008 5432.2 6592
2009 5928.04

here sales forecast for 2009 has been done by using expone
ntial smoothening average method, taking 0.2 as the dampening

CONCLUSION:-

The sales has been forecasted using all the three methods.