Explain the methods of business forecasting.
Answers
1. Developing the Basis:
The first step involved in forecasting is developing the basis of systematic investigation of economic situation, position of industry and products. The future estimates of sales and general business operations have to be based on the results of such investigation. The general economic forecast marks as the primary step in the forecasting process.
2. Estimating Future Business Operations:
The second step involves the estimation of conditions and course of future events within the industry. On the basis of information/data collected through investigation, future business operations are estimated. The quantitative estimates for future scale of operations are made on the basis of certain assumptions.
3. Regulating Forecasts:
The forecasts are compared with actual results so as to determine any deviations. The reasons for his variations are ascertained so that corrective action is taken in future.
4. Reviewing the Forecasting Process:
Once the deviations in forecasts and actual performance are found then improvements can be made in the process of forecasting. The refining of forecasting process will improve forecasts in future.