Harmon Foods, Inc Harvard Case Solution & Analysis

Question 1

The most sensitive method that can be used from a management perspective is multiple regression analysis. With the help of this model, the relationship between the two different variables has been taken into account in order to predict the sales with the help of independent variable which is mentioned over here is an advertisement.

harmon foods case solution

harmon foods case solution

This method will help the management in predicting the accurate forecasts for the sales of Treat cereals. Furthermore, this method is useful for finding a significant relationship between the two variables. It is also useful because it tells the management about the future forecasts accurately, hence by getting accurate forecasts Harmon Foods will be able to reduce its advertising expenses.

By making accurate forecast, the company will be able to focus on its increased expenditure related to advertising. Currently they have to pay almost $80,000 per one minute advertisement. Despite this, the managers with the help of multiple regression analysis will be able to avoid any unplanned expenditures of advertisement. As a result the issue of low sales in the months of November and December may also be resolved respectively.

Previously, there were several errors in forecasts which ultimately resulted in high decline in the profit stream because most of the advertisement expenditure did not have any earlier approval that’s why the management had to face this problem which will also affect the sales forecast of the company. By keeping its focus on the fiscal year is a major aspect because if anything came up unfortunately later on then it will ultimately have a greater impact on the company’s profits and sales forecast.

The actual forecast that would have been made by the company will deviate from the actual forecast and the management will have to re plan the new forecasts and this will be a time consuming process without making use of any sort of analysis for example like multiple regression. There is quite an extra over spending on the treat cereals which should be taken into account and should be discussed with the senior management in order to avoid further sales forecast problems, with the help of which the company will be able to meet the customers’ demand effectively without facing any hurdles if they perform an appropriate analysis.

As a result of not much accountability the sales manager, the division manager and brand managers were not happy with the resulted less profits. Hence, by the help of this analysis the company will be able to predict the level of spending that they will have to make which can result in the increase of sales. By using this it can also be predicted in percentage terms like what will happen to the sales if the promotional activities increase by 5% and the sales price is about to increase from 15%.

Other than that, the management will also be able to make better future strategies and make better future plans respectively. Furthermore the summer sales were also affected due to the plant breakdowns so the company will also have to take this into account in order to avoid further breakdowns. Although the Treat sales showed a difference of 50% to 200% in the forecast that was only made without any specific analysis. The reason was that the company used a lot of historical data in order to further extrapolate the sales.

Question 2

It can be mentioned after the testing of the models which makes the most sense in order to perform forecasting of sales is multiple regression analysis as compared to other forecasting methods. As per the exhibits it can be seen that the Adjusted R Square under Combined forecast is higher. It is being produced by taking into account the Consumer packs, the case shipments and the Dealer allowances.

Ultimately, it is worth mentioning that the combined forecast (dealer and consumer) gives a higher Adjusted R square figure and this is the best model among the others which can be used to project shipments for January 1988.Hence, as per the calculations, it can be seen that the case shipments are increasing at a significant rate respectively. The growth rate of case shipments is 15.5%, almost, whereas the higher the Adjusted R square the better it is.

As compared to the previous years, it can be mentioned that the sales since January 1988 are showing an increasing trend. There is also an increase in the Consumer packs and the Dealers allowances, especially in the months of November and December. It is mentioned because Harmon food’s sales were very low in November and December in previous years. Therefore, by performing a further analysis of the next 12 months in 1988, the better picture of forecast sales can be seen...................

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