Forecasting, an impact is necessary for short term planning and long term planning. There are various assumptions regarding forecasting. Let me state the assumptions so that even a layman can understand.
1)History repeats itself
The past always conflicts with the present. It will repeat itself is the first assumption.
2)The horizon of the forecast shortens, the accuracy of forecast increases. For example, can you choose the best answer.Forecast of tomorrow is more accurate or the forecast of next month or next year. Many of your answer will be tomorrow, my calculated guess.
3)It is sometimes not accurate due to various internal and external factors. It is never fully accurate. It is only partly accurate.
There are many characteristics of forecasting. We can create more by using our intelligence. But let me state a few important one.
It is accurate in many cases
It is reliable and meaningful
It is timely(weather forecast is a fine example)
Cost effective (a rise in gold price can be predicted and bought accordingly)
Forecasting is not simple. It is complex than it seems.The basic understanding of economics and commerce helps people have an understanding of how forecasting operates.
There are techniques used in forecasting. They are namely,
Qualitative technique and Quantitative technique
Qualitative technique includes Delphi technique, Nominal group technique, sales force opinions, executive opinions, and market research.
Quantitative methods includes Trend projection methods, Exponential smoothening methods, Moving average method.
Demand and supply
Demand and supply must be equal. In other words, it should be balanced. If people demand more goods from a domestic company or foreign company, there is no adequacy of goods. There exists a shortage. The company in question must try to fill the gap. How many goods were bought by their customers in a day and month must be assessed. Then they should produce more goods than the previous month. If they keep this in mind, it is win-win situation where both customers and the company is satisfied. Demand forecasting must be done in a proper manner. Though it is easy to comprehend, it is not so.
The role of an expert in economy is vital for the company’s success otherwise the company whether it’s a startup or small or large concern will blow themselves in the market.In short, they will not be able to survive the storm.
The willingness of the consumer to pay for a product must be thoroughly analysed by conducting surveys. Intelligent questions like do you have anything to say about the product quality, quantity, any complaints, etc must be asked to the previous purchasers of the product.
A complete analysis must be done. Nothing should be missed. This is why a economist must be appointed in a company more than the account. Appointing economists is the primary duty of the company and appointing accountants is the secondary duty of the company. All companies must understand they are dependent on the consumers and the consumers are also dependent on them. This is the basis of good forecasting.