Performance Lawn Equipment:Executive Summary

Si WongProfessor Rankin

BAS121 – Final Project11/19/2013

Table of Content

Purpose pg. 3

Methodology pg. 3

Objectives pg. 3

Results by Market RegionMowers pg. 4

Sales ForecastIndustry Market Assessment

Tractors pg. 10Sales ForecastIndustry Market Assessment

Production Cost Analysis pg. 16MowersTractors

Overview/Conclusion pg. 17

Sources pg. 18

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PurposeThe purpose of this executive summary is to provide an update to clarify new questions and shed light on future sales trends and unit production costs of mowers and tractors in each marketing region as well as assessing future changes in market share of the industry. This summary also provides insights on production costs for PLE mowers and tractors.

MethodologyPLE managers have developed and provided a database of measures, which are summarized and stored in the form of a Microsoft Excel workbook, Performance Lawn Equipment. The database contains various measures, recorded based on length in time, which are used to evaluate the business performance of PLE. The following worksheets of interest are given below:

Mower Unit Sales and Tractor Unit Sales, which provide sales by product by region on a monthly basis. Unit sales for each region are aggregated to obtain world sales figures.

Industry Mower Total Sales and Tractor Total Sales, which list the number of units sold by all producers by region.

Unit Production Costs, which provides monthly accounting estimates of the variable cost per unit for manufacturing tractors and mowers over the past 5 years.

(Business Analytics, Evans 28-29)Double Exponential Smoothing and Holt-Winters models were utilized to determine forecasts based on observing overall sales and seasonal trends, respectively. One-year forecasts were used to provide insight on the next fiscal year and prevent major miscalculations in further forecasts.

ObjectivesPoints of interest include:

I. Analyzing and forecasting sales of mowers and tractors in each of the marketing regions.

II. Determining industry sales trends to assess future changes in market share.III. Forecasting future increases in production costs of mowers and tractors.

Results by Market Region

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MowersNorth America

Unit Sales

Industry Sales

PLE and Industry sales seem to be holding a constant seasonal trend between 2008 and 2012. We used a Holt-Winters forecasting model to determine future trends. Looking at the model, we do not anticipate any significant changes in the PLE market share in the next fiscal year.

South America

4

Unit Sales

Industry Sales

PLE and Industry sales seem to be holding a constant seasonal trend between 2008 and 2012. We used a Holt-Winters forecasting model to determine future trends. Looking at the model, we do not anticipate any significant changes in the PLE market share in the next fiscal year.

Europe

5

Unit Sales

Industry Sales

PLE and Industry sales are seeing declining seasonal trends between 2008 and 2012. We notice that the Industry sales are declining at a slower rate than PLE unit sales. We used a Holt-Winters forecasting model to determine future trends. Looking at the model, we may anticipate a decline in PLE market share by about 1% in the next fiscal year.

Pacific

6

Unit Sales

Industry Sales

PLE and Industry sales have been seeing growth between 2008 and 2012. PLE has been seeing a slightly faster growth than the industry. We used a Holt-Winters forecasting and Double Exponential Smoothing models, respectively, to determine future trends. Looking at the model, we may anticipate PLE capturing an additional 1.5% market share in the next fiscal year.

China

7

Unit Sales

There is not enough information to assess growth or recline in mower market share in China.

World

8

Unit Sales

Industry Sales

Looking at PLE and Industry sales trends, it seems that the seasonal trends appear to be holding consistent between 2008-2012. We used a Holt-Winters forecasting model to determine future trends. Looking at the model, we may anticipate that PLE may overall anticipate a slight decline in market share in the entire mower industry.

Tractors

9

North AmericaUnit Sales

Industry Sales

PLE and Industry sales have been seeing positive seasonal and overall growth between 2008 and 2012. PLE has been seeing significantly faster growth than the industry. We used Double Exponential Smoothing models to determine future trends. Looking at the model, we may anticipate PLE capturing additional market share, approximately 5% by December, in the next fiscal year.

South America

10

Unit Sales

Industry Sales

PLE and Industry trends have been seeing an increase in sales between 2008 and 2012. We used Double Exponential Smoothing models to determine future trends. Looking at the model, we do not anticipate any significant changes in the PLE market share in the next fiscal year.

Europe

11

Unit Sales

Industry Sales

PLE and Industry sales are seeing declining seasonal trends between 2008 and 2012. Although we do not see noticeable differences at first, after further assessment, Industry sales are declining at a slower rate than PLE unit sales. We used Double Exponential Smoothing models to determine future trends. Looking at the model, we may anticipate a decline of about 0.5% in PLE market share in the next fiscal year.

Pacific

12

Unit Sales

Industry Sales

PLE and Industry sales have been on a slow decline between 2008 and 2012. We used Double Exponential Smoothing models to determine future trends. Assessing future trends, PLE unit sales may remain constant and industry sales may rebound slightly in the new fiscal year. With this, we may see a slight loss, approximately 0.5%, in PLE market share in 2013.

China

13

Unit Sales

Industry Sales

PLE and Industry trends have both seen an increase in sales since the launch of tractors in China. We used Double Exponential Smoothing models to determine future trends. Despite capturing 5% of market share in the first 3 years, PLE may remain relatively flat to 1% additional market share in the 2013 fiscal year.

World

14

Unit Sales

Industry Sales

PLE and Industry sales have been seeing positive seasonal and overall growth between 2008 and 2012. PLE has been seeing significantly faster growth than the industry. We used Double Exponential Smoothing models to determine future trends. Looking at the model, we may anticipate PLE capturing additional world market share, approximately 1% by December, in the next fiscal year.

Production Costs

15

Mowers

Tractors

PLE production costs have been observed to increase since 2008. Looking into the new 2013 fiscal year, it can be estimated that the production costs will increase slightly every month in a linear fashion.

Overview/Conclusion

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This report was commissioned to evaluate trends in mower and tractor unit and industry sales in the different marketing regions globally as well as providing insights in production costs at PLE. Double Exponential Smoothing and Holt-Winters forecasting models are used to determine future trends for mower and tractor sales. Through trial and error, a Double Exponential Smoothing or Holt-Winters forecasting model were used depending on the observations of current trends having overall sales growth/recession, cyclical cycles, or both. One-year forecasts were used to provide direct insight into the next fiscal year and not forecast too far ahead where error is greater.

While observing mower unit sales for PLE and the industry, we notice various trends across the different marketing sectors. In North America, mower sales and PLE market share remain constant over the five years and in the forecast. In South America, similar observations are noted as North America. In Europe, both PLE unit and Industry sales were declining over the five years into the forecast. However, PLE unit sales in Europe depicted an accelerated recession resulting in loss of market share. In the Pacific, the sale of mowers rate of growth exceeded the industry rate of growth, which resulted in capturing additional market share and a forecasted capture of 1.5% by the end of 2013. Unfortunately, China’s mower industry sales report was not available and an absence of PLE unit sales data prevented assessing an accurate forecast of the next year. Looking into the World data of PLE unit sales compared to the industry, we may anticipate a decline in overall PLE market share in the mower industry.

While observing tractor unit sales for PLE and the industry, we notice several differences across each marketing sector. In North America, we notice a seasonal cycle as well as a positive sales growth in PLE unit sales and the industry. Growth of North American tractor sales exceed the industry resulting in an anticipated 5% market share capture by the end of the forecasted year. In South America, we notice a positive pattern in both PLE and industry sales, however it is noted that PLE market share may remain relatively flat for 2013. In Europe, overall sales from PLE and industry are on the decline with the forecasted loss in market share of half a percent. In the Pacific, a similar issue in loss of market share can be observed. In China, we see a healthy growth within the provided five-year data, which is forecasted to flatten out in 2013. Looking into the World data of PLE unit sales, tractor sales increase gradually in a cyclical fashion. World PLE unit sales growth rate seems to be growing at a faster rate than the industry, which concludes that PLE may overall capture slight market share.

When forecasting PLE production costs of mowers and tractors, it is observed that production costs are gradually increasing and forecasted to continue rising into the next year.

In the end, we can expect global market share to be largely influenced by North American sales with a slight push or pull from growth or recession from other marketing sectors.

Sources

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Evans, James. Business Analytics. New Jersey: Pearson Education, Inc., 2013. Print.

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