Forecasting

Question 1

What’s the definition of forecasting?

Answer 1

Use of existing data to predict future trends.

Question 2

What are the advantages and disadvantages of forecasting?

Answer 2

Advantages:
- provides info to aid decision making.
- helps remain competitive.
- helps company get loans.

Disadvantages:
- only as reliable as the data used.
- doesn’t take into account any change of objective.
- just a prediction.

Question 3

What is qualitative forecasting?

Answer 3

Based on views and opinions to reach future decisions.

Question 4

What is the Delphi technique?

Answer 4

Based on results of questionnaires given to experts.
After 1st round, info is summarised anonymously and given back for new set of results.
Over this process, the opinion will converge to a median.

Question 5

What is brainstorming?

Answer 5

People brought together to discuss solution to a problem (better than someone working alone).

Question 6

What are some qualitative forecasting methods?

Answer 6

• consumer expectations (market research).
• sales staff (in daily contact with consumers).
• expert opinions (meetings).

Question 7

What are quantitative forecasting methods?

Answer 7

Time series analysis.

Question 8

What is time series analysis?

Answer 8

Moving average calculated over a period of time to forecast for the future.

Question 9

What’s the time series analysis used to find?

Answer 9

Trend - to show if overall movement in sales is up or down.
Cyclical variations (result of the business cycle).
Seasonal variation.
Random fluctuations.

Question 11

How do you work out the 3 point moving average?

Answer 11

Add the first 3 numbers and put total alongside the middle number (carry on through all data). Moving average found by dividing answer by 3 and putting it next to middle number.

Question 12

What is the line of best fit?

Answer 12

Line drawn through graph points, so points are evenly above and below the line. Extend this line to predict future trends.

Question 13

What’s the cyclical variations?

Answer 13

The amount the actual sale figures in a period vary from the moving average figures.

Question 14

How do you calculate the cyclical variation?

Answer 14

Actual sales - moving average sales

Then calculate average of the cyclical variation for each period. Then add or subtract this form the forecasted figures on the line of best fit.