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Applying time series methodologies simulation - Essay Example

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With a sizeable market share of 6%, Blue Inc already has a competitive niche. A simple occurrence is that increase in advertising budget would increase in…
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Applying time series methodologies simulation
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Applying Time Series Simulation Calculation of time series is a good way of understanding what the long and short business future would be (Harvey, 1999). With a sizeable market share of 6%, Blue Inc already has a competitive niche. A simple occurrence is that increase in advertising budget would increase in proportional measure in market dominance. An increase in advertising budget has always increased the levels of sales over time. Forecast in revenue generated or sales would be:
(2,164.18 + 2,454.41+2,264.85)/3 = 2,294.48 sales
This means that if the company is invest more in advertising budget, an approximated 2,294 million USD would be generated by the company. Its worth investing because the results are tangible and positive. A decrease in advertising budget has resulted to reduced sales. With investing 164 million USD in advertising, the company generated 2,454.41 million USD. Putting 140 million dollars for advertising resulted to 2,264.85. This is a significant decrease in revenue or sales generation.
Average investments in advertising would bring an average accumulation of sales. Blue Inc in the last three advertisement budget has ranged between 148 million USD to 164 million USD. This means that the level of sales would remain at the same level if there would be no or little increase in advertising budgets. A decrease in advertising budget from 164 million USD to 140 million USD resulted to a decrease in revenue generation from 2,454.41 million US dollars to 2,264.85 million dollars. Therefore (164-140) = (2454.41-2264.85)
Δ24- Δ189.56
The above is significant for it means that if the competitors were to put massive investments in advertising, they would surpass the sales of Blue Inc. The current trend in advertisement investment is a threat, and the company should consider adding the amount set aside for advertisement.
At current rate of allocation of advertising resources, the company would significantly lose in retail coverage. Decreased levels of advertising would mean that few people would be reached by the message. The competitors would be capitalizing on this, and therefore, if the company is to avoid losing its competitive niche, it has to consider increasing levels of advertisement.
Reference
Harvey, A. C. (1999). Forecasting, structural time series models and the Kalman Filter. New York: Cambridge University Press, Inc. Read More
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