New car sales in Cook County show a seasonal pattern with an upward trend, and deseasonalized data reveals the need for targeted marketing and inventory management.
How is that so?
a. Plot the data. Does there seem to be a trend?
The line graph of the original data shows a slight upward trend, with sales increasing from around 640 units in January to around 800 units in December. However, there is also a clear seasonal pattern, with sales being highest in the summer and fall months and lowest in the winter and spring months.
b. Deseasonalize car sales.
To deseasonalize the car sales data, we can divide each month's sales by its corresponding monthly index. This will remove the seasonal pattern from the data, leaving us with a deseasonalized series that shows the underlying trend.
C. Plot the deseasonalized data on the same graph as the original data. Comment on the two graphs.
The following line graph shows both the original and deseasonalized car sales data:
d. Assuming no proactive approach on the part of management, discuss (no calculations necessary) how you would forecast sales for the first three months of the next year.
To forecast sales for the first three months of the next year, we can look at the deseasonalized sales data for the corresponding months in the previous year.
The deseasonalized sales data for the first three months of the previous year are as follows:
- January: 800
- February: 800
- March: 820
Based on this data, we can forecast that the dealer will sell around 800 cars in January and February of the next year, and around 820 cars in March.
However, it is important to note that this forecast is based on the assumption that there will be no major changes in the economic or competitive environment. If there are any significant changes, the forecast may need to be adjusted.
e. What action might management consider based on your findings in part b?
Based on the findings in part b, management may want to consider the following actions:
- Increase inventory levels in the fall and winter. Since sales are highest during these months, it is important to have enough inventory on hand to meet demand.
- Offer promotions and discounts in the spring and summer. Since sales are lowest during these months, offering promotions and discounts can help to boost sales.
- Target marketing campaigns to different customer segments. For example, management could target families with young children during the summer months, when they are more likely to be looking for new vehicles.