Forecasting and Analysis
FORECASTING AND ANALYSIS
Objectives: 1. To know the importance of developing forecasts of the business environment. (cognitive) 2. To determine the critical inputs to forecasting. (cognitive) 3. To learn why companies do need to be sensitive with their external environment. (affective)
Forecasting
The definition of forecasting is: * a way of estimating the future events that have a major impact on the enterprise. * It is a technique whereby managers try to predict the future characteristic of the organizational environment and hence make decisions today that will help the firm deal with the environment of tomorrow.
The Critical Inputs to Forecasting
There are three critical inputs to forecasting, which are used to analyze the external environment, and they are:
1. Environmental Scanning
-alerts the organization to critical trends and events before changes develop a discernible pattern before competitors recognize them.
-surveillance of a firm’s external environment to predict environmental changes and detect changes already under way.
For example, an environmental scan might project that in the next five years, the number of people (potential customers) between the ages of 18-24 will increase from 30% to 40%. That 's important information if we want to decide what kind of new products we might consider introducing into the marketplace. Should we work on developing products targeted at a dwindling seniors population? Or should we develop products to take advantage of the shift to a youth dominated market. The environmental scan forces us to look at these factors.
Suggestions on how to spot hot trends 1. Listen – Ask customers about your products and services. Ask what they are looking for next. Use survey questionnaires. 2. Pay attention – Read trade publications related to your industry and identify key issues. 3. Follow trends online – watch industries such as music, fashion, etc that may affect the business.
Objectives: 1. To know the importance of developing forecasts of the business environment. (cognitive) 2. To determine the critical inputs to forecasting. (cognitive) 3. To learn why companies do need to be sensitive with their external environment. (affective)
Forecasting
The definition of forecasting is: * a way of estimating the future events that have a major impact on the enterprise. * It is a technique whereby managers try to predict the future characteristic of the organizational environment and hence make decisions today that will help the firm deal with the environment of tomorrow.
The Critical Inputs to Forecasting
There are three critical inputs to forecasting, which are used to analyze the external environment, and they are:
1. Environmental Scanning
-alerts the organization to critical trends and events before changes develop a discernible pattern before competitors recognize them.
-surveillance of a firm’s external environment to predict environmental changes and detect changes already under way.
For example, an environmental scan might project that in the next five years, the number of people (potential customers) between the ages of 18-24 will increase from 30% to 40%. That 's important information if we want to decide what kind of new products we might consider introducing into the marketplace. Should we work on developing products targeted at a dwindling seniors population? Or should we develop products to take advantage of the shift to a youth dominated market. The environmental scan forces us to look at these factors.
Suggestions on how to spot hot trends 1. Listen – Ask customers about your products and services. Ask what they are looking for next. Use survey questionnaires. 2. Pay attention – Read trade publications related to your industry and identify key issues. 3. Follow trends online – watch industries such as music, fashion, etc that may affect the business.
Bibliography: Dess, Gregory, Lumpkin, G.T. and Eisner, Alan, © 2010, “Strategic Management: Creating Competitive Advantages”, Fifth Edition, McGraw-Hill Companies, Inc., 1221 Avenue of Americas, New York, NY, 10020 Morgan, G., 2008, “Be your own trendspotter”, Entrepreneur Rao, Shree Rama, 2010, “Forecasting Techniques” http://www.citeman.com/12958-forecasting-techniques-2.html ‘What Is An Environmental Scan?’, Planning resource center, http://work911.com/planningmaster/faq/scan.htm barto2046, 2012, ‘Marks & Spencer’, http://www.bignerds.com/papers/76518/Marks-Spencer/ http://www.bignerds.com/papers/77844/Jollibee-Case/