1.

Given the fast pace of change in today’s business, is forecasting relevant

useful? Justify your stand.
Yes, forecasting is relevant useful for a business to operate efficiently, it needs some
idea of what the future will look like. A forecast provides this look as a foundation upon
which to plan. Every functional group within a business benefits from a forecast.
For sales people, forecast numbers influence how the sales function is managed.
Forecasts also help to understand customer engagement and therefore shape
marketing efforts. Since forecasts estimate an expected sales volume over a specified
period of time, salespeople can use them to set their activity goals, and subsequent
adjustments can be made to reach sales goals. Marketers can use forecasts to gauge
the effectiveness of their campaigns, decide which markets to enter and exit, and
determine the life cycle of their products.
Senior managers and finance teams use forecasts to prepare and evaluate financial
plans, capitalize on production, and assess needs and logistics. A forecast can help
inform critical decisions on how to allocate resources and set overhead levels within a
business: personnel, rent, utilities, and other overhead.
2. How does forecasting relate to planning?
Forecasting is the essence of planning. In fact, forecasting is so essential to sound
planning that it would not be an exaggeration to state that the success of the plan
depends in a large measure upon the validity and accuracy of the forecast. Planning
and forecasting are closely related to each other. Planning is deciding in advance what
is to be done in future. Futurity is its essence. But future is uncertain and risky.
Planners, in majority of cases, do not know with certainty the conditions which will exist
in future, when activities take place. As a result, they are forced to make certain
assumptions regarding future. This is forecasting. Forecasting provides pertinent
information for successful planning. Planning without forecasting proves to be wasteful
and useless.
3. Can you give 2 examples of different types of forecasting problems in
business?
Macroeconomic Forecast Problems
Take interest rate forecasting, for example. The demand for credit and short-term
interest rates rises if businesses seek to build inventories or expand plant and
equipment, or if consumers wish to increase installment credit. The supply of credit rises
and short-term interest rates fall if the Federal Reserve System acts to increase the
money supply, or if consumers cut back on spending to increase savings. Interest rate
forecasting is made difficult by the fact that business decisions to build inventories, for
example, are largely based on the expected pace of overall economic activity which
itself depends on interest-rate expectations. The macroeconomic environment is
interrelated in ways that are unstable and cannot be easily predicted.
Microeconomic Forecast Problems
For example, in August 1999, Standard and Poor’s DRI forecast new car and light truck
sales of 15.7 million units for the 2000 model year. This was a reasonable number, and
within the 15.3–16.0 million-unit range of forecasts provided by the University of
Michigan, Blue Chip Economic Forecasters, and others. Unfortunately, in September
2000, all such forecasts proved too conservative in light of the 17.2 million units actually
sold in a robust economic environment. Undaunted, forecasters expected unit sales of
16.1 million in 2001 and 16.8 million in 2002. Those numbers looked good, until terrorist
attacks in New York City and Washington, DC, on September 11, 2001, sent new car
and light truck sales into a tailspin as consumer confidence plummeted.
4. Aren’t forecasts wrong more often than they are right?
The weather and climate are unpredictable because of the complexity and diversity of
the driving forces causing climate change. This means UNCERTAINTY RULES.
Everyone knows first-hand you cannot depend on weather forecasts for more than few
days yet somehow Alarmists have convinced the public that with fancy computer
models they can predict what the earth’s climate will be in 100 years. This is anti-
intellectual, anti-scientific rubbish.
Forecasting the weather is a huge challenge. For a start, we are attempting to predict
something that is inherently unpredictable. The atmosphere is a chaotic system a small
change in the state of the atmosphere in one location can have remarkable
consequences over time elsewhere, which was analogized by one scientist as the so-
called butterfly effect. Any error that develops in a forecast will rapidly grow and cause
further errors on a larger scale. And since we have to make many assumptions when
modelling the atmosphere, it becomes clear how easily forecast errors can develop. For
a perfect forecast, we would need to remove every single error.