1.17 Ponderosa & Smythe plc is a shoe manufacturing business, specialising in children’s shoes. The finance director has just received the following letter from a shareholder who has recently bought some shares in the company:

‘Dear Mr Pershore I have just read a most interesting article in the Financial Times about the decline in the market for children’s shoes. The article suggests that, because of demographic changes, the market will decline by 3-4% each year over the next 10 years. In the circumstances I think our company should branch out into women’s shoes. I would like the directors to discuss this at the next board meeting. Could you please send me a copy of the sales budget for the coming year, so that I can see whether or not you have taken the declining market properly into account.’

What are the principal points that the finance director should make in response to this letter?