Market Forecasting for Amazon Inc

Exercise 1

 

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You will be using very sophisticated forecasting software in this course. This software is used widely by organizations in the United States and abroad. You should visit johngalt.com to learn about the company whose software you will be using. Take a few minutes to look through their site, especially the references, company and support tabs.

 

 

You will use the attached Amazon excel data for all of the exercises in which you will apply various forecasting methods. I have selected Amazon because the company has been in the news recently and I think it will be in the news for the eight weeks of this course. Amazon’s fiscal year begins in January and ends in December (see:

https://www.google.com/search?client=firefox-b-1-d&channel=cus&q=amazon+company+fiscal+year).

 

 

For Exercise 1 there two parts. Your results should be submitted in a two (2) page Word document.[1]

 

Use 12 pt Times New Roman for all submissions in MKT555. For names in headers use single spacing but for the content use 1.5 line spacing unless told otherwise.

 

In Amazon data files for dates we will use the middle month of each quarter to represent each quarter. Thus, February will represent the first quarter, May the second quarter, August the third quarter and November the fourth quarter.

 

 

 

Exercise 1 Page One (for this you need only Excel):

 

  • In Excel prepare a time-series line graph of the of the Amazon sales revenue. Use only the16 quarters of 2015 through 2018. Go to “Insert” then select “Line Graph.” Paste the graph into Word. This should be prepared in as professional a manner as you can make it and should be as easily read as possible. Make sure that your graph has a meaningful and clear title.

 

Below your graph indicate two forecast methods that you think might be appropriate for these data based on Table 2.1 of your forecasting text. For each method you mention give a short explanation of why you think that method could be appropriate. At this point the selection is based only on the information in Table 2.1. As the term progresses you are likely to rethink the selections.

 

 

 

 

 

 

 

 

 

 

Page 2 (for this you will need the current version of ForecastX). By now you should have already installed the software:

https://details.johngalt.com/support/download/

 

Note: Sometimes when one clicks on this link it takes them to email. I have no idea why this can happen. If this happens to you copy the link and paste it into the address bar of your browser.

 

Sign in using the following:

username: fxstudent

password: fx8wizedu#s

 

  • With the data file open place your cursor in cell B4, click on ADD-INS, then click on the blue “Forecast” icon right under the word FILE in Excel. A dialog box appears that has the following main tabs: Data Capture, Forecast Method, Grouping (a tab we will not use), Statistics, and Reports.

 

Note that, in the dialog box that first appears, ForecastX has correctly identified that the data are in columns and contain dates. Look at the dialog box for “Periodicity.” Check the periodicity and if it is not quarterly use the drop down menu to select quarterly. Make sure that under “Labels” there is a 1. This indicates that ForecastX sees one row of labels, which is correct for this file.

 

At the top right you see a box for “Seasonality.” Use the up arrow to indicate 4, because the data are quarterly. In the box for “Forecast Periods,” indicate 8.

 

 

Now you are ready to make a forecast. For this first exercise, we have not discussed any methods. Therefore, we will let ForecastX select a method based on the software’s review of the data series. To do this, in the “Forecast Method” tab under “Forecast Technique” use the drop down menu to select Procast and under Parameters select only MAPE. MAPE stands for Mean Absolute Percentage Error which is the error measure we will focus on. MAPE is the most widely used error measure in business applications.

 

In the Statistics tab uncheck everything except MAPE. In the Reports tab check Audit. Have no other selections checked for this exercise. Then click on Finish. This will generate an automated forecast for this short series of A&F sales.

 

At the top of your output there is a graph. Edit the numbers along vertical axis of the graph so that there are zero decimal places (usually those decimal places are not useful). Also, select “Currency” for the Category so that the data are shown to be in $.

 

Edit the graph to change the line for the actual historic data to a (square) dotted blue line that has a 1.5 pt width. Then change the fitted values (these are values predicted by the model in the historic period) line to be a green, dashed line also with a 1.5 pt width. Change the line representing the forecast values to a red (round) dotted line with a 2 pt width.

 

Sometimes a fourth series shows up in the legend. If so, delete it from the legend. (It is not clear to my why this extra series sometimes shows up in a legend. Watch for this and delete when necessary.)

 

Edit the title for the graph to read “Amazon Net Sales ($000,000).” Change the font for the title to Times New Roman 14 pt, do not use a bold font and remove underlining.

 

This will give you a start on (or practice with) how to edit graphs in Excel.

 

After your editing, copy the graph and paste it into the top of page two of your Word document. Paste using “Keep Source Formatting and Embed Workbook.”

 

Under the graph comment on what you think about the forecast provided and give the MAPE for this forecast.

 

You should submit your two (2) page Word document.

 

 

 

 

 

 

 

 

 

 

 

Example of Page 1 Results

(Data Used for the examples on this page and the next page are unrelated to your exercise data, so the results will look quite different. However, this provides you with an expected format.)

Exercise 1

Team2

Sally Alwood

*Ken Campbell

Barry Wickert

 

 

 

 

Two forecasting methods that might be useful based on the information in Table 2.1 are:

  1. Linear Trend … with explanation
  2. Holt’s exponential smoothing … with explanation

I know that we have not covered methods yet but use the information in the table to make an educated guess of two methods that appear likely to you at this time.

 

Example of Page 2 Results

Exercise 1

Team2

Sally Alwood

*Ken Campbell

Barry Wickert

 

 

This forecast looks reasonable (or not reasonable) because …

 

The MAPE is …

 

[1] When you have items to submit that have multiple pages be sure that you number pages.

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