Get Full Essay Get access to this section to get all help you need with your essay and educational issues.
Selection of Forecasting Method The choice of a forecasting technique is influenced significantly by the stage of the product life cycle and sometimes by the firm or industry for which a decision is being made.
In the beginning of the product life cycle, relatively small expenditures are made for research and market investigation. During the first phase of product introduction, these expenditures start to increase.
In the rapid growth stage, considerable amounts of money are involved in the decisions, so a high level of accuracy is desirable. After the product has entered the maturity stage, the decisions are more routine, involving marketing and manufacturing.
These are important considerations when determining the appropriate sales forecast technique. After evaluating the particular stages of the product and firm and industry life cycles, a further probe is necessary.
Instead of selecting a forecasting technique by using whatever seems applicable, decision makers should determine what is appropriate. Some of the techniques are quite simple and rather inexpensive to develop and use.
Others are extremely complex, require significant amounts of time to develop, and may be quite expensive. Some are best suited for short-term projections, others for intermediate- or long-term forecasts. What technique or techniques to select depends on six criteria: What is the cost associated with developing the forecasting model, compared with potential gains resulting from its use?
How complicated are the relationships that are being forecasted? Is it for short-run or long-run purposes? How much accuracy is desired? Is there a minimum tolerance level of errors?
How much data are available?
Techniques vary in the amount of data they require. The choice is one of benefit-cost trade-off. Quantitative models work superbly as long as little or no systematic change in the environment takes place. When patterns or relationships do change, by themselves, the objective models are of little use.
It is here where the qualitative approach, based on human judgment, is indispensable.
Because judgmental forecasting also bases forecasts on observation of existing trends, they too are subject to a number of shortcomings. The advantage, however, is that they can identify systematic change more quickly and interpret better the effect of such change on the future. Next, let us have a look at the qualitative forecasting method on the next section [I will take several quantitative methods, along with their illustrations, next time].
Qualitative Forecasting Methods The qualitative or judgmental approach can be useful in formulating short-term forecasts and can also supplement the projections based on the use of any of the quantitative methods.
Four of the better-known qualitative forecasting methods are executive opinions, the Delphi method, sales-force polling, and consumer surveys: Executive Opinions The subjective views of executives or experts from sales, production, finance, purchasing, and administration are averaged to generate a forecast about future sales.
Usually this method is used in conjunction with some quantitative method, such as trend extrapolation. The management team modifies the resulting forecast, based on their expectations. The advantage of this approach: The forecasting is done quickly and easily, without need of elaborate statistics.
Also, the jury of executive opinions may be the only means of forecasting feasible in the absence of adequate data.
This, however, is that of group-think. This is a set of problems inherent to those who meet as a group. Foremost among these are high cohesiveness, strong leadership, and insulation of the group.
With high cohesiveness, the group becomes increasingly conforming through group pressure that helps stifle dissension and critical thought. Strong leadership fosters group pressure for unanimous opinion.
Insulation of the group tends to separate the group from outside opinions, if given. Delphi Method This is a group technique in which a panel of experts is questioned individually about their perceptions of future events.There are four basic types of forecasting methods: qualitative, time series analysis, causal relationships, and simulation.
Qualitative Techniques Qualitative techniques are subjective or judgmental and based on estimates and opinions (Chase, ). Approaches to time Series Forecasting: There are two basic approaches to forecasting time series: the self-projecting time series and the cause-and-effect approach.
|The Differences Between Qualitative and Quantitative Forecasting Techniques | Bizfluent||The Differences Between Qualitative and Quantitative Forecasting Techniques by Sam Ashe-Edmunds - Updated June 28, Quantitative forecasting requires hard data and number crunching, while qualitative forecasting relies more on educated estimates and expert opinions. Using a combination of both of these methods to estimate your sales, revenues, production and expenses will help you create more accurate plans to guide your business.|
|Get Full Essay||The Differences Between Qualitative and Quantitative Forecasting Techniques by Sam Ashe-Edmunds - Updated November 08, Quantitative forecasting requires hard data and number crunching, while qualitative forecasting relies more on educated estimates and expert opinions.|
Cause-and-effect methods attempt to forecast based on underlying series that are believed to cause the behavior of the original series. Compare and contrast qualitative, time series, and causal analysis approaches to revenue forecasting.
The qualitative methods of revenue forecasting use judgment, experience and opinions for making revenue forecasts. Forecasting Methods Compare and Contrast Essay Sample. Forecast in a simple terms is a prediction thru a statement or claim that a particular event will occur in the future.
There are four basic types of forecasting methods: qualitative, time series analysis, causal relationships, and simulation. Qualitative Techniques Qualitative techniques are subjective or judgmental and based on estimates and opinions (Chase, ).
There are several different methods that can be used to create a forecast, this paper will compare and contrast the Seasonal, Delphi, Technological and Time Series method of forecasting.