BALLESTEROS, LAURICE JADE A.

BSBA HRM 3-B

Assignment 3B: Answer the following review questions:

1. Identify some business applications in which judgmental forecasting techniques such as

historical analogy and the Delphi method would be useful.
When quantitative data is few, unclear, or qualitative aspects are important, judgmental
forecasting methods like the Delphi method and historical comparison are especially helpful.
Some business applications where these techniques can be used successfully are listed below:

o New Product Launches: Companies might employ historical analogy by contrasting

their new product with similar ones that have already been introduced when launching a
new product without previous sales data. Analyzing the success of prior electric car
launches, for instance, might be used to estimate the demand for a new model.
Historical analogy makes predictions by using similar situations.
o Market Entry Strategy: The Delphi approach can be used to get information from
industry experts regarding possible demand, competition, and regulatory obstacles when
entering a new market. For instance, estimating a tech product's commercial potential in
a developing nation. To provide well-informed projections, the Delphi approach compiles
the opinions of experts.
o Long-Term Strategic Planning: Businesses can predict long-term trends, such
changes in customer behavior or technology breakthroughs, by using the Delphi
technique. For instance, forecasting the use of renewable energy over the ensuing two
decades. An organized method for taking long-term uncertainty into account is long-term
strategic planning.
o Risk assessment and crisis management: In times of crisis, judgmental approaches
can forecast possible effects on company operations. For instance, predicting supply
chain interruptions in the event of a worldwide emergency such as COVID-19. It blends
limited real-time data with expert opinions.
o Fashion and Consumer Trends: Historical parallels can offer important insights in
sectors like fashion and retail, where customer tastes are dynamic and challenging to
measure. For instance, using historical consumer behavior from comparable cultural or
economic eras to predict fashion trends in apparel. It aids in demand estimation without
the need for copious amounts of numerical data.
o Policy and Regulation Impact Analysis: To predict the effects of new policies or
regulations, governments or corporations can employ the Delphi technique. For
instance, forecasting the financial consequences of enacting a carbon tax. Diverse
expert viewpoints are encouraged in order to manage policy uncertainties.

For strategic decision-making in situations when quantitative models might not be accurate
enough because of a lack of previous data or high levels of uncertainty, these judgmental
forecasting techniques are essential.
2. What is the difference between qualitative and quantitative forecasting? Suppose you need to
forecast the amount of relief required following an earthquake. What type of forecast do you think
is the most appropriate: qualitative or quantitative, and why?
Instead of using numerical data, qualitative forecasting depends on subjective inputs, expert
judgment, and intuition. It is usually applied in instances where the forecast incorporates novel or
unusual circumstances, or when previous data is unavailable or untrustworthy. The Delphi
approach, market research, and brainstorming are a few examples. In contrast, quantitative
forecasting makes forecasts using mathematical models and numerical data. When there is
enough historical data available and patterns or trends can be found, it works well. Regression
models, econometric forecasting, and time-series analysis are a few examples.
The best approach for predicting the amount of relief required following an earthquake is
qualitative forecasting. This is due to the fact that these circumstances frequently feature distinct,
erratic elements for which past data might not offer enough direction. The magnitude of the
earthquake, the population impacted, the damage to the infrastructure, and the response time are
all important factors. Geologists, local government representatives, and disaster relief experts can
offer insightful assessments of the immediate and long-term requirements of the impacted region.
3. Give examples of industries that are affected by seasonality. Briefly describe why.
o Retail Industry - Holidays and special occasions cause a great deal of seasonality in the
retail sector. For example, Black Friday, Christmas, and back-to-school times are when
sales are at their highest. A significant amount of retailers' yearly revenue frequently
depends on these peak periods. On the other hand, off-peak seasons usually see a drop
in sales.
o Construction Industry - The weather frequently affects construction activities. Due to
snow and freezing weather, outdoor building projects in colder climates tend to slow down
or stop throughout the winter, with activity peaking in the spring and summer. Project
schedules, labor demand, and equipment rental costs are all impacted by this seasonality.
o Energy Industry - Seasonal variations in heating and cooling needs result in seasonal
energy consumption. For instance, whereas electricity use rises in the summer owing to
air conditioning, natural gas and heating oil consumption rises in the winter. These trends
have an impact on the distribution, pricing, and production of energy.
o Entertainment Industry - Seasonal tendencies are seen in the entertainment sector,
which includes theme parks and movie releases. Blockbuster film releases are most
common in the summer, while theme parks enjoy a spike in visitors during holidays and
school breaks.
4. Define an indicator and index. How are they used in forecasting?
Indicators are often classified as leading, lagging, or coincident. For example, leading indicators,
like housing starts or stock market performance, predict future changes, while lagging indicators,
like GDP growth, confirm trends after they occur. An indicator is a measurable variable or statistic
that gives insight into the current state or trend of a specific economic, social, or business
phenomenon. Examples of indicators include unemployment rates, consumer confidence levels,
and sales figures. In contrast, an index is a composite measure that is created by integrating
several different indicators to give a more comprehensive picture of a certain topic. For instance,
the Dow Jones Industrial Average (DJIA) combines the stock prices of significant corporations to
track stock market performance, while the Consumer pricing Index (CPI) aggregates pricing data
across a range of commodities and services to evaluate inflation. Indexes make it simpler to
monitor changes and evaluate trends across time by condensing complicated facts into a single,
easily understood value.
Since they offer vital information for seeing patterns, comprehending the connections between
variables, and projecting future events, indicators and indexes are both crucial to forecasting. For
instance, companies forecast demand for their goods using leading indicators like consumer
confidence, while regulators use indexes like the CPI to predict inflation patterns and set interest
rates. Forecasters can model anticipated outcomes and direct strategic planning by examining
past trends in indicators and indexes.
5. What is a time series? Explain the difference between seasonal and cyclical effects in a time
series.
A time series is an arrangement of data points that are gathered or documented over a period of
time, usually at regular intervals like daily, monthly, or yearly. Numerous disciplines, including
operations management, finance, economics, and weather forecasting, use time series data to
examine patterns and trends over time. Daily stock prices, monthly sales data, and annual GDP
growth rates are a few examples. Understanding the factors impacting the observed data,
predicting future values, and identifying underlying patterns are all made easier with the aid of
time series analysis.
Cyclical effects are long-term, variable in duration, and associated with business or economic
cycles, whereas seasonal effects are short-term, predictable, and calendar related. Accurate time
series forecasting and decision-making require an understanding of both.

Sources:

 Armstrong, J. S. (2001). Principles of Forecasting: A Handbook for Researchers and

Practitioners.
 Rowe, G., & Wright, G. (1999). "The Delphi Technique as a Forecasting Tool: Issues and
Analysis." International Journal of Forecasting.
 Linstone, H. A., & Turoff, M. (1975). The Delphi Method: Techniques and Applications.
 Makridakis, S., et al. (2020). "Forecasting in Times of Uncertainty." International Journal
of Forecasting.
 Wilson, M. A., & Keating, B. (2018). Business Forecasting.
 Dalkey, N., & Helmer, O. (1963). "An Experimental Application of the Delphi Method to the
Use of Experts." Management Science.
 National Retail Federation. (n.d.). National Retail Federation | NRF. https://nrf.com/
 The American Institute of Architects: AIA. (n.d.). https://www.aia.org/
 U.S. Energy Information Administration (EIA). "Seasonal Energy Consumption Trends."
https://www.eia.gov/
 Motion Picture Association. "Seasonality in Movie Releases."
https://www.motionpictures.org/
 International Monetary Fund (IMF). "Economic Indicators." https://www.imf.org/en/Home
 Investopedia. "What Is a Leading Indicator?" https://www.investopedia.com/