Suppose you are the Marketing Manager of Bayer & Company, Ahmedabad, which are the techniques you will apply in forecasting demand of a product yet to be manufactured.
The firm must plan for the future. Planning for the future involves forecasting. A forecast is an estimation or prediction about situations which are most likely to occur in near or distant future. No businessman can afford to ignore forecasting if he wants to thrive and prosper in his business. The firm has to forecast the future level of demand for its product under different possible circumstances; such as prices, competition, promotional activities and general economic activity. Similarly forecasting will be necessary with reference to costs…show more content… A large number of respondents is needed here to be able to generalize certain results. |
Quantitative Forecasting Methods
There are two forecasting models here – (1) the time series model and (2) the causal model. A time series is a s et of evenly spaced numerical data and is o btained by observing responses at regular time periods. In the time series model , the forecast is based only on past values and assumes that factors that influence the past, the present and the future sales of your products will continue.
On the other hand, t he causal model uses a mathematical technique known as the regression analysis that relates a dependent variable (for example, demand) to an independent variable (for example, price, advertisement, etc.) in the form of a linear equation. The time series forecasting methods are described below: Time Series Forecasting Method | Description | Naïve Approach | Assumes that demand in the next period is the same as demand in most recent period; demand pattern may not always be that stableFor example:If July sales were 50, then Augusts sales will also be 50 |
Time Series Forecasting Method | Description | Moving Averages (MA) | MA is a series of arithmetic means and is used if little or no trend is present in the data; provides an overall impression of data over timeA simple moving average uses average demand for a fixed sequence of periods and is good for stable demand with no pronounced behavioral