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Business Forecasting

The document discusses the meaning, use, and classification of forecasting. It identifies the difference between forecasting and planning. It also describes qualitative, past results, causal relationship, and simulation model methods of forecasting.

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Anaswara C A
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23 views

Business Forecasting

The document discusses the meaning, use, and classification of forecasting. It identifies the difference between forecasting and planning. It also describes qualitative, past results, causal relationship, and simulation model methods of forecasting.

Uploaded by

Anaswara C A
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Submitted by ,

Anaswara C A
MBA 2022-24
SIMS
BUSINESS FORECASTING

Explain the meaning ,use and classification of forecasting.


Identify the difference between forecasting and planning.
Describe the method and techniques of forecasting
MEANING

• Forecasting is a technique of anticipating


future problems and events. It involves
making a detailed analysis of the past
present to get an idea about future
operating events.

• Forecasting is a important part of


planning and managers need forecasts
that will allow them to predict future
events effectively in a timely manner
USE OF FORECASTING

• Makes planning possible: The most important use of forecasts is as premises


for planning. Forecasting awakens the management against business cycle,
minimize risk and reveals management’s weaknesses if any to face the future.

• Ensure coordination: The act of forecasting is a great benefit to all who take
part in the process and is the best means of ensuring adaptability to changing
circumstances.

• Facilitates control: The key executives by mutually developing the forecasting,


automatically assume co-responsibilty and individual accountability for such
later deviation of the actual from estimated result as may occur.

• Enables strategic changes :It helps in development of new market or services


and expansion or creation of new facilities
CLASSIFICATION OF FORECASTING

Classification of forecasting may be done according to space and time.


SPACE
• If forecast is done on a nation level to appraise the course of general
business of major segments of economic activity, it is called “economic
forecasting” or “business forecasting”.

• There may be “area” or “regional” forecast also, where the business


activity in a region , a state , a district or a city is studied.

The two forecasts are not independent and unrelated activities .In many
cases, "regiona”l forecasts are greatly influenced by the total level of
economic activity. In contrast ,if the economic base of a region is substantially
different from that of the nation as a whole , a forecast of national business
conditions may not helpful in appraisal the regional outlook.
TIME
If classified according to the time span of prediction involve, forecasting may
be short, medium, and long–term.

• Short term forecast looks ahead only few weeks and is concerned with
operational decisions such as determination of short-run production and
delivery schedules, inventory levels and so on

• Medium-term forecast looks ahead up to 2 years and is concerned with


tactical decisions such as replacement of an old product by a new one or
forecast of demand over the two year.

• Long –term or” economic forecasting” looks ahead several years(10 to 12


years) and is generally concerned with strategic decisions such as building
a new plant ,developing a new technique or entering a new market.
DIFFERENCE BETWEEN PLANNING AND FORECASTING

PLANNING FORECASTING

1.Planning commits individuals 1.Forecasting does not commit


to certain goals. It also calls for
individuals to any goals nor
some activity to achieve the does it stimulate any activity
planned goals. among them.
2.Planning is done with the 2.Forecasts made about the
help of forecasting which kind of market, quantity of
provides assumptions about the sales, rate, costs and similar
future environment of a plan other matter ,become premises
for the future
3.Planning is done by manager. 3.Forecasting is not done by
It is all-prevading. every manager. It is mostly
undertaken by staff people
METHODS AND TECHNIQUES OF FORECASTING

4 types of forecasting methods used in the field of


business
1. Qualitative or Judgemental method.
2. Method based upon Past results.
3. Method based upon Casual relationship
4. Method based upon stimulation models
Qualitative and Judgemental Method
This forecasting method involves the use of subjective manner and is appropriate in
the situation where essential data are not available. For instances ,when a new
product or technology is introduced ,past experience is not available for estimating
what near term effects will be.

Techniques Description Application


Jury of opinions Combines and averages the Polling the company’s
opinions of expert human resource managers
to predict next year’s
college recruitment needs
Sales force composition Combines estimates from Predicting next year’s sales
field sales personnel of of industrial lasers.
customer’s expected
purchases.
Customer evaluation Combines estimates from Surveying major car
established customer’s dealers by a car
purchases manufacturer to determine
types and quantitative of
products desired.
Method based upon past Results

• This method forecast is extrapolate from past experience .Thus , if we want


to forecasts sales , we may draw graph of the past sales and project the
same into the future and adjust the changes that are expected to occur. This
is called time series analysis.

• Focus forecasting simply tries several rules that seem logical and easy to
understand to project past data into the future. Each of these rules is used
in computer simulation to actually project demand and then measure how
well that rule performed when compared to what actually happened
Method based upon casual Relationship
In some situation ,it may be possible to understand the relationship between
the item being forecast and the system underlying or surrounding the item
Eg : The sale of cars dependent upon personal income and consumer
confidence .In such areas where correct casual relationships can be established
, regression analysis is the most accurate of forecasting tool
Method based upon simulation Models
Simulation models , usually computer based , allow the forecaster to run
through a range of assumption about the condition of the forecast . No single
technique of forecasting can satisfy the requirements of all types of managers
and organisation. The technique a manager will select depend up on his own
technical ability ,the functional area involved ,the amount of information
available ,the level of accuracy , the time period to be forecast , the amount of
information available to complete the analysis ,and the value of forecast to the
organisation.
References:
1.Principles of Management 6th edition-P C TRIPATHI,P N REDDY.
2.Management 11 th edition –Stephen P .ROBBINS , Mary COULTER
Thank you

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