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 betteror worse than using quantitative or qualitative methods?
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Business Forecasting • Costs: • Data not always reliable or accurate • Data may be out of date • The past is not always a guide to the future • Qualitative data may be influenced by peer pressure • Difficulty of coping with changes to external factors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.