Professional Documents
Culture Documents
CHP 2 - 3
CHP 2 - 3
? 7 mile
s
? 12 miles
?? 15 miles
Topics to be discussed
Forecasting
Planning & Forecasting
Advantages of Forecasting
Limitations
Techniques
Forecasting
Forecasting: Predicting future
needs on the basis of historical
data, present conditions, and
assured future.
Forecasting controls staffing,
purchasing, and production
decisions.
Forecasting is a very important
function!
3
Forecasting
Business forecasting is a systematic attempt to
probe the future, so as to recognize the problems
& opportunities & turn them into plans of action.
It helps in analyzing the economic, political &
market information to reduce the risks involved in
making business decisions & long-term plans.
It makes managements think ahead & give
singularity of purpose to planning by
concentrating attention on the future.
Forecasting
It involves a ‘look ahead’ approach.
A systematic attempt is made to look into all
the influential factors( past & present),
affecting the working of the organizations.
Based on the analysis of these factors,
through sophisticated statistical & econo-
metric techniques, a reliable calculation of
probabilities about the future is made
Forecasting
There are 4 essential elements in business
forecasting identified by Redfield.
Developing the groundwork
Estimating future business
Comparing the actual with
estimated results
Refining the forecast process
Planning & Forecasting:
Relationship
Planning is deciding in advance what is to be
done in future.
• Futurity is in its essence. But, future is uncertain
& risky.
• Planners do not know with certainty the
conditions which will exists in the future, when
activities will take place.
• As a result they are forced to make certain
assumptions regarding future. This is forecasting
Planning & Forecasting:
Relationship
• Forecasting provides pertinent information for
successful planning.
• Planning without forecasting proves to be wasteful
& useless.
• Fayol, “ the plan is synthesis of the various
forecasts: annual, long-term, short-term, special
etc”.
• Success of plan depends, in large measure, upon
validity & accuracy of the forecast.
Forecasting as an Aid to
Planning
Forecasts offer pertinent information regarding
future.
It helps in bringing a singleness of purpose to
planning, that cannot exist easily otherwise.
Improves the quality of managerial planning.
Supplies the vital information regarding the weak
spots in the organization thereby paving the way
to appropriate control
Advantages of Forecasting
Is essence of planning. Forecasts are the premises or
basic assumptions upon which manager’s planning &
dm are based
Forces executives to look ahead, think through the
future
Helps in achieving better coordination by focusing
attention on the future
Helps to reveal the weak spots
Helps in identifying the environmental forces &
assists in providing for these challenges
Limitations of Forecasting
Econometrics
mathematical approach, main variables are joined together in a series
of equations
Forecasted on the basis of assumptions developed from these
equations
Sales Forecasting Methods