Business Forecasting

Business Forecasting

Business Forecasting

Business Forecasting

• Used to try to predict the future• Uses two main methods:• Qualitative – seeking opinions on which to

base decision making– Consumer panels, focus groups, etc

• Quantitative – using statistical data to help inform decision making– Identifying trends– Moving averages – seasonal, cyclical, random– Extrapolation - simple

Business Forecasting

• Some businesses use alternative methods:

• Astrologers!• Is such a strategy any better or

worse than using quantitative or qualitative methods?

Business Forecasting

Business Forecasting

• Costs and Benefits of Forecasting:• Benefits:

– Aids decision making– Informs planning and resource

allocation decisions– If data is of high quality, can be

accurate

Business Forecasting

• Costs:– Data not always reliable or accurate– Data may be out of date– The past is not always a guide to the future– Qualitative data may be influenced by peer

pressure– Difficulty of coping with changes to external

factors out of the business’s control – e.g. economic policy, political developments (9/11?), natural disasters – hurricanes, earthquakes, etc.