Introduction
Forecasting in business is always an attempt to predict the outcome of an event. It is a vital process because it allows one to plan the enterprise’s activities. However, some issues must be considered: factors, statistical errors, and the risk of missing an important detail. Forecasting is an important aspect of the development of companies in any sector, so it is important to know the various methods and what they can be used for.
How to Choose a Forecasting Method
The choice of forecasting methods in business depends on its goals, availability, the quality of initial information, the experience of experts, and technical capabilities. Short-term forecasts do not require many methods or the involvement of many specialists (Bandara et al., 2019). In the long term, forecasting requires a large number of methods, including computer modeling and mathematical and statistical calculations.
Search Forecast
Several basic forecasting methods can be implemented depending on external and internal conditions. The first method can be called a search forecast, which determines the possible state of the phenomenon in the future. This refers to the conditional continuation in the future of the development trends of the phenomenon under study in the past and present (Cuypers et al., 2021). Such a forecast answers what will happen if the existing trends continue.
For example, this method is well suited for predicting the value of a company’s securities on the stock exchange (Liang, 2022). The other methods fit this scenario less because their role is to analyze the popularity of certain products.
Programmatic Forecast
Another option is a programmatic forecast that answers what exactly is needed to achieve the desired goal. To answer this, both search and normative predictive developments are important. The former identifies the problems that need to be solved to implement the program, and the latter determines the conditions for implementation (White & Samuel, 2019).
An example of a programmatic forecast method by a company is the calculation of the expected number of sales of a new product by a certain company. This method is carried out through a list of goals the organization must achieve by calculating market fluctuations and product features (White & Samuel, 2019). To do this, it is important to conduct market research and analyze the market in which to trade.
Expert Assessments
The third main type of forecasting is the method of expert assessments, which involves considering specialists’ subjective opinions about the future state. Methods of expert assessments, as a rule, are qualitative. Expert assessments are divided into individual and collective. Individual expert assessments include scenarios, interview methods, and analytical memorandums (Haikola et al., 2019). Collective peer reviews include the commission method, the brainstorming method, and the Delphi method.
Companies use this method to determine the direction of movement in the context of their closest competitors and the correct course (Haikola et al., 2019). At the same time, all possible factors are considered that the method of expert assessments differs from the rest.
Conclusion
In conclusion, it should be noted that the company’s future may depend on using a certain forecasting method. With the correct prediction of future events, achieving significant success in the organization’s management is possible. If managers make mistakes in determining prospects and dangers, such a forecast will be inaccurate. Accordingly, following it, the organization can direct all its resources in the wrong direction, leading to financial or reputational losses.
References
Bandara, K., Shi, P., Bergmeir, C., Hewamalage, H., Tran, Q., & Seaman, B. (2019). Sales demand forecast in e-commerce using a long short-term memory neural network methodology. In Neural Information Processing: 2 6th International Conference, ICONIP 2019, Sydney, NSW, Australia, Proceedings, Part III 26 (pp. 462-474). Springer International Publishing. Web.
Cuypers, I. R., Hennart, J. F., Silverman, B. S., & Ertug, G. (2021). Transaction cost theory: Past progress, current challenges, and suggestions for the future. Academy of Management Annals, 15(1), 111-150. Web.
Haikola, S., Hansson, A., & Fridahl, M. (2019). Map-makers and navigators of politicized terrain: expert understandings of epistemological uncertainty in integrated assessment modeling of bioenergy with carbon capture and storage. Futures, 114, 102472. Web.
White, G. R., & Samuel, A. (2019). Programmatic advertising: Forewarning and avoiding hype-cycle failure. Technological Forecasting and Social Change, pp. 144, 157–168. Web.
Liang, Y. H. (2022). Forecasting of business visitors arriving from Japan using big data. Co-Editors, p. 296. Web.