NACIONALES, PHIEL DAPHINE FEBRUARY 19,2021

BBE4102-BCD 8:40-9:40AM

1. Discuss How Forecasting Plays a Major Role Both in Business and Economics.
2. Enumerate, Discuss and Provide Sample Situations of Forecasting Process.
3. Differentiate Qualitative to Quantitative Methods of Forecasting. Provide Sample Situations.
4. Differentiate Individual Demand to Market Demand. Provide a Sample Case.
5. Enumerate and Discuss the five types of price elasticity.
6. Discuss the relationship between marginal profit and output.
7. The following are new management tools, briefly discuss its significance and use.
• Benchmarking
• Total Quality Management
• Reengineering
• Learning Organization
Answers:
1.) A forecast can play a major role in driving business success or failure. At the base level,
an accurate forecast keeps prices low by optimizing a business operation - cash flow,
production, staff, and financial management.  It helps reduce uncertainty and anticipate
change in the market as well as improves internal communication, as well as
communication between a business and their customers. It also helps increase
knowledge of the market for businesses. Forecasting is valuable to businesses so that
they can make informed business decisions. Financial forecasts are fundamentally
informed guesses, and there are risks involved in relying on past data and methods that
cannot include certain variables.
2.) There are 6 steps in Forecasting Process, first is Identify the Problem,
Defining the problem can seem simple at first because it looks like you are simply asking
how will the market react to a new product, or how the company’s sales will look like in a
few months. Even more so if you have a good forecasting tool for small business.
However, this step is quite tricky because there aren’t actually any tools that can help
here. It requires you to know who the forecast is directed too, how the market works, and
what your customer base and competition are. You should spend some time evaluating
these issues together with the people who will be responsible for maintaining databases
and gathering the data. Second is Collect Information, We say information here, and not
data, because data may not be available yet if for example the forecast is aimed at a
new product. Having said this, the information comes essentially in two ways: the
knowledge gathered by experts and actual data. If no data is yet available, the
information must come from the judgments made by experts in the area. If the forecast is
based solely on judgment and no actual data, we are in the field of qualitative
forecasting. If data is available on the subject, a model is used to analyze the data and
predict future values. This is called quantitative forecasting. Third is Perform a
Preliminary Analysis An early analysis of the data may tell you right away if the data is
usable or not. It may also reveal patterns or trends that can then be helpful, for example,
in choosing the model that best fits it. Another thing that can be done here is to check for
redundant data and cut it down or make some educated assumptions. By reducing the
amount of data to analyze you can greatly simplify the entire process. Fourth is Choose
the Forecasting Model Once all the information is collected and treated, you may then
choose the model you think will give you the best prediction possible. There is not one
 single model that works best in all situations, it all depends on the availability and nature
of the available data. Fifth, Data analysis, this step is simple. After choosing a suitable
model, run the data through it. And last, Verify Model Performance
When the time comes, it is very important to compare your forecast to the actual data.
This allows you to evaluate the accuracy of not only the model, but the entire process,
and change each step accordingly. Hopefully, if you use a good forecasting tool for small
business, there won’t be much tweaking needed.
3.) The difference between qualitative and quantitative forecasting are, Qualitative
forecasting is an estimation methodology that uses expert judgment, rather than
numerical analysis. This type of forecasting relies upon the knowledge of highly
experienced employees and consultants to provide insights into future outcomes.
Examples of qualitative forecasting methods are informed
opinion and judgment, the Delphi method, market research, and historical life-cycle
analogy. While quantitative forecasting s used to develop a future forecast using past
data. Math and statistics are applied to the historical data to generate forecasts. Models
used in such forecasting are time series (such as moving averages and exponential
smoothing) and causal (such as regression and econometrics). Examples of quantitative
forecasting methods are last period demand, simple and weighted N-Period moving
averages, simple exponential smoothing, poisson process model based forecasting and
multiplicative seasonal indexes.
4.) The difference between individual demand and market demand are Individual demand is
influenced by an individual's age, sex, income, habits, expectations and the prices of
competing goods in the marketplace. refers to the demand for a good or a service by
an individual (or a household). Individual demand comes from the interaction of
an individual's desires with the quantities of goods and services that he or she is able to
afford. For example, suppose you get a pay raise at your job, so you have more income.
As long as chocolate bars are a normal good, this increase in income will cause
your demand curve for chocolate bars to shift outward. This means that, at any given
price, you will buy more of the good when income increases. While Market demand is
influenced by the same factors, but on a broader scale – the taste, habits and
expectations of a community and so on. For example, at 10/latte, the quantity demanded
by everyone in the market is 150 lattes per day. At 4/latte, the quantity demanded by
everyone in the market is 1,000 lattes per day. The market demand curve gives the
quantity demanded by everyone in the market for every price point.
5.) The five types of price elasticity of demand are perfectly inelastic, inelastic,
perfectly elastic, elastic, and unitary. Price elasticity of demand can be calculated by
dividing the percentage change in quantity demanded by the percentage change in
price. perfectly elastic is When a small change in price of a product causes a major
change in its demand, it is said to be perfectly elastic demand. In perfectly elastic
demand, a small rise in price results in fall in demand to zero, while a small fall in price
causes increase in demand to infinity. In such a case, the demand is perfectly elastic. A
perfectly inelastic demand is one when there is no change produced in the demand of a
product with change in its price. The numerical value for perfectly inelastic demand is
zero. Relatively elastic demand refers to the demand when the proportionate change
produced in demand is greater than the proportionate change in price of a product. The
numerical value of relatively elastic demand ranges between one to infinity. Relatively
inelastic demand is one when the percentage change produced in demand is less than
the percentage change in the price of a product. For example, if the price of a product
increases by 30% and the demand for the product decreases only by 10%, then the
demand would be called relatively inelastic. The numerical value of relatively elastic
demand ranges between zero to one (ep<1). Marshall has termed relatively inelastic
 demand as elasticity being less than unity. And Unitary elastic is When the proportionate
change in demand produces the same change in the price of the product, the demand is
referred as unitary elastic demand. The numerical value for unitary elastic demand is
equal to one
6.) The relationship between marginal profit and output. Marginal profit is the profit earned by
a firm or individual when one additional or marginal unit is produced and
sold. Marginal refers to the added cost or profit earned with producing the next unit. If a
company's marginal revenue is less than the marginal cost of producing more units, it's
an indication that the company is producing too much. On the other hand, if a
company's marginal revenue is greater than its marginal cost, it indicates that the
company is not producing enough units.
7.) Benchmarking is a way of discovering what is the best performance being achieved –
whether in a particular company, by a competitor or by an entirely different industry. This
information can then be used to identify gaps in an organization’s processes in order to
achieve a competitive advantage. Thus it is important for Six Sigma practitioners to
Understand fully the purpose and use of benchmarking, Understand the
difference between benchmarking and competitor research, and Gain insight to
ensure that benchmarking is in alignment with the company’s management
objectives. Benchmarking is a process for obtaining a measure – a benchmark. Simply
stated, benchmarks are the “what,” and benchmarking is the “how.” But benchmarking is
not a quick or simple process tool. Before undertaking a benchmarking opportunity, it is
important to have a thorough understanding of the company’s guidelines. Some
companies have strict guidelines as to what information can be gathered, and whom
practitioners can contact to get that information. Depending on the size of the company,
practitioners may be surprised at what is readily available in-house. TQM can have an
important and beneficial effect on employee and organizational development. By having
all employees focus on quality management and continuous improvement, companies
can establish and uphold cultural values that create long-term success to both
customers and the organization itself. A reengineering effort supports the company's
Business Plan. The focus is to achieve benefits in support of mid-term targets which are
three to four years in the future. The results of a successful project contribute to
corporate performance and should be tracked to the bottom line within a year
of implementation. Business process reengineering is the act of recreating a core
business process with the goal of improving product output, quality, or reducing costs.
Typically, it involves the analysis of company workflows, finding processes that are sub-
par or inefficient, and figuring out ways to get rid of them or change them. A learning
organization is an organization skilled at creating, acquiring, and transferring knowledge,
and at modifying its behavior to reflect new knowledge and insights. This definition
begins with a simple truth: new ideas are essential if learning is to take place. A learning
organization breaks-down traditional silos, and enables all areas to work together
towards a common vision. Ensure there is consistency and alignment of values and
behavior around learning. Encourage the sharing of learning, skills and knowledge, and
encourage coaching and mentoring across the organization.