164 CHAPTER 8 GETTING TO GROSS PROFIT
TRENDS, CYCLES AND SEASONS
Recall that around the long-term trend (up, down or flat), there usually is a cycle (reces-
sion, depression, recovery, boom). Superimposed on this there is frequently a seasonal
pattern. Are you in a seasonal business? Does demand increase at certain times of the
year and fall off at others? Almost every business experiences some seasonal variation,
even if it is only slight, perhaps caused by vacations or religious festivals. The effects of
seasons, cycles and trends is illustrated in Figure 8.1. When you have a long run of sales
figures, identifying seasonal variation is one of the easiest and most useful activities that
you can undertake. The mechanics are outlined below. A clear understanding of seasonal-
ity will help you to manage your operations during the year.
Ten inuences on sales volumes
(Using travel as an example)
1 Fundamental trends – long-term economic growth that has enabled mass
travel, baby booms that have produced a generation of thirty-somethings
eager to travel.
2 Economic cycles – medium-term fluctuation around the long-term trend (see
pages 91–92 and below) where, for example, recession dampens spending on
luxuries such as travel.
3 Meddling governments – short-term changes in policies, incentives, etc.;
higher personal taxes might reduce disposable incomes available for travel.
4 Seasonal variation – summer holiday travel, travel for religious festivals.
5 Demand for a product class – travel in this example.
6 Demand for a product category – e.g. air travel.
7 Demand for your product – your specific air services.
8 Demand for competing products – a competing airline.
9 Demand for substitute products – rail and sea.
10 Demand for other unrelated products – which eats up disposable income
and changes the amount available for spending on travel.