Reference no: EM13840019

Regression examples that we have seen included explanatory variables such as income, price of the good, prices of related goods, and geographic area. Assume that you have been asked to forecast demand for your company's new product, signature t-shirts. What explanatory variables would you initially include (and test) to forecast domestic sales? What impact would you expect each of them to have on demand? Would you include anything different if you were asked to forecast international sales? If so, what would be different? Why?

Regression analysis is a statistical tool for the investigation of relationships between variables (Keat, Young, & Erfle, 2013). Its purpose is to ascertain the causal effect of one variable upon another (Keat, Young, & Erfle, 2013). These explanatory variables include "income, price of the resource, price of related goods, and geographic area" (Keat, Young, & Erfle, 2013).

Assuming I was forecasting demand for my company's new signature t-shirts, the variables I would use to forecast domestic sales would all try to predict the market potential of the t-shirts. The first variables that the t-shirt would encounter would be

1)What product line to pursue? (which t-shirt would sell)

2)How much to spend on production?

3)Which method to use for production?

4)How to promote and advertise our t-shirt?

5)How to put the t-shirt in market place to meet projected demand?

The variable of which product line to pursue would end up determining the quality of resources used to produce, proportionately affecting price. That leads us to how much to spend on production. Assuming the lower end and higher end t-shirts could be made by the same production method and cost exactly the same, a higher quality more expensive thread would demand additional expenditure for t-shirt design, in essence determine how/what it needs to look like to be successful in the higher or designer-end boutique t-shirt market.

Now there's an expensive t-shirt made out of exceptional quality resources designed by expensive fashion designers. This leads us to our final variable= promotion/advertisement and how to get the t-shirt into the marketplace. The answer is the same. The t-shirt would be given to the "hippest" or "coolest" people for free with no expectations. Allow for "hype" to develop about its design or quality uniqueness and how "everyone who is anyone" has one and it's the "it thing" to have. Then announce a major release date in NY, LA, San Francisco, and Chicago only and open up the business to the "golden calf" of pre-orders.

International sales would be the natural next step in the evolution of the product. Nonetheless, the pre-order's closed out at 10,000 shirts and no more would be sold in the U.S. until the next release, overflowing the market with the shirts would make them commonplace and lose their niche value and raising the price would also take them out of cultural milieu. The international market responds to what sells in the U.S. and often for a very steep mark up. Its really not different at all, the beauty of it is that the advertisement/marketing does not need to be paid for in the international release, the "cool" trend setters change minds and hearts globally. The "it" thing to have, for example, Apple phones, don't require Apple to advertise in the Middle East. Word of Mouth gets around.