Question

"Some​ companies, such as​ Heinz, can forecast revenues well using pure time series analysis​ (that is, by extrapolation of prior​ data, accounting for seasonal​ effects). Other​ companies, such as FedEx​ (which makes money by shipping​ packages), or Sony​ (which sells consumer​ electronics) find that they cannot rely on pure time series analysis for reliable forecasting. They are strongly affected by recessions and need to use​ theory-based methods, including such explanatory variables as income in their forecasting models. Why are they different from​ Heinz?"

Answer 1

Answer:

Heinz sells ketchup and other sauces and condiments. Their demand is relatively stable and doesn't change that much year after year. The demand for their products is not that seriously affected by economic recessions or expansions.

On the other hand, Sony is a consumer electronics company and the demand for their products can vary drastically from one year to another. It depends on trends and innovations, and their total sales are affected by disposable income (expansions increase disposable income while recessions decrease it).

FedEx is also affected severely by economic recessions or expansions. Since FedEx ships and transports goods, when the economy is booming, FedEx is doing excellent. But if the economy starts to cool down or enters a recession, the amount of goods transported falls.