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Paper submission By Prof.K.Prabhakar
SOCIAL FORECASTING - RELEVANCE IN STRATEGIC PLANNING FOR CORPORATE SECTOR Abstract:
Business Forecasting based on economic and technological forecasting has lead to serious errors in prediction of future. One of the tools suggested is social forecasting. The use of social forecasting stems from recognition that social pressures are becoming an increasing determinant for the success of any organization in the globalized economy. The various indicators indicate that the society will be experiencing a total change in next few years. Some of these changes have to be anticipated and must be incorporated in any strategic plans of an organization. This paper examines the need for social forecasting and provides frame work for analysis. Important key dimensions for better understanding of social forecasting are discussed. Key words: Social Forecasting, Economic Forecasting, Technological Forecasting, Strategic Planning, syntropic model. Title: SOCIAL FORECASTING - RELEVANCE IN STRATEGIC PLANNING FOR CORPORATE SECTOR Suggested Theme: Strategic Internationalization Sub theme: Forecasting Author Prof.K.Prabhakar Affiliation Director, KSR College of Technology, KSR Kalvinagar, Tiruchengode-637209 Namakkal, Tamilnadu. India firstname.lastname@example.org email@example.com Tel: 9444074491 Tel (office): 04288- 274741/274744 Fax: 04288-274745/274757 Mobile: 9444074491 Residence: G-8, Staff Quarters, KSR College of Technology, KSR Kalvinagar, Tiruchengode-637209.
2 Namakkal, Tamilnadu. India ( Copy right is held by Indian Institute of Technology, Mumbai and plase take care not to copy with our permission from IIT(Mumbai) and SMF.)
Introduction In business forecasting, we used technological and economic forecasting to depict the future scenario or picture of future to design strategies to meet future opportunities and challenges. However, many organizations are experiencing residual error in forecasting which is too large to explain or caused by factors other than economic and technological. In order to further our argument, let us consider an example given by Steven D.Levitt in Frekonomics. In 1995 James Allan Fox predicted forecast of increase rate of murders by teenagers in United States of America. He proposed optimistic and pessimistic scenarios. In optimistic scenario it will be fifteen percent increase and in the pessimistic scenario it will be double the number. Other criminologists and political scientists predicted similar situation. However the reality turned out to be different. The crime rate started falling down. Most of the category of crimes started showing downward trend. The teen age murder rate has dropped by fifty percent with in five years. The explanations for fall in crime rate have been attributed to: 1) Growing economy providing better job opportunities 2) Gun control initiatives and innovative policing strategies. However, the reason for the fall of crime is attributed to an important event that has happened twenty years back. Norma Mc Corvey who was poor, uneducated and unskilled, drug using twenty one year old woman. She has given up two children for adoption and found herself to be pregnant again. In Texas in United States of America, abortion was illegal. She filed a class action lawsuit to seek legalization of abortion. United States Supreme Court on January, 22, 1973, ruled in her favor. Our question is how this is related to crime rate after two decades. It has been established by large number of
research reports that children born in adverse family and economic environment is more likely to turn to crime. The reduction in crime rate is attributed to the unborn children to the millions of poor mothers who adopted abortion mode. More than the gun control, innovative policing techniques or growing economy has really produced the expected result of decline in the crime rate but the pool of unborn likely children who are likely to take up crime has come down. What we missed in all the forecasting? The economic factors and technological dimensions are taken in to account. The error that is produced by these forecasts is caused by factors that arising from social factors. These factors are not taken into consideration by the forecasters. This study strengthens our argument to introduce concept of Social Forecasting. The term Social Forecasting is not a recent addition business studies. The use of social forecasting stems from recognition that social pressures are becoming an increasing determinant for the success of any organization. The various indicators indicate that the society will be experiencing a total change in next few years. Some of these changes have to be anticipated and must be incorporated in any long-range plans of an organization. Daniel Bell, sociologist has mentioned about social forecasting. He put forth the concept of a post-industrial society or information age in his book, The Coming of Post-Industrial Society (1973). Later, he renamed this concept the information society, for which he is generally considered as the creator of the term (1979). By an information society, Bell means that we move from a producer of goods (manufacturing) to service economy and that theoretical knowledge, technology, and information become the major mode of commodity. Information, and those who know how to create, assemble, and disperse, are more valued than labor. Information is normally costly to produce, but cheap to reproduce. That is, the cost of producing the first copy of an information good (such as writing a book or recording a CD) is initially expensive, but reproducing those goods is often negligible. In The Coming of Post Industrial Society, he wrote that we need to learn how to "predict" the future, rather than to "forecast" it in order to raise the number of possibilities so as to the directions in which society should be changing can provide better insights. If we examine history we find a series of significant shifts in the conditions of human society. The Renaissance, the Agricultural Revolution, Industrial Revolution culminating to present knowledge revolution. .The age of communications and knowledge has already begun with the advent of internet and convergence of various technologies. However, web 2.0 tools and semantic web brought reverse convergence in the sense anyone who is interested in technology with minimum training could be a part of this revolution. The phenomenon of www.youtube.com and models such as Wikipedia
4 are most successful where non-profit motive and volitional trait of humans enabled by technology to produce content that is shared by all. The globalization era demands less government intervention into business. Can we ignore government’s has role and go ahead with strategic planning? If various interest groups are demanding share of economic growth what kind of equality should government offer? Where the post knowledge society heading? It is towards Super Industrial State where everything is managed by machines or voluntary simplicity living according to environment. What kind of explanation we can give for explosion in investment in second generation dotcom such as www.youtube.com (acquired by Google) at a sum of 1.1 billion dollars? Is it because raise of individualism a trait that is started loosing its effect due to convergence of technologies with the help of YOU phenomenon? The purpose of social forecasting is to provide an analytical framework for helping corporate decisionmaker to make his own judgment based on analysis. The social forecasting may not guarantee that correct decisions will be taken. Nor will it ensure that forecasts will be obtained from the emerging trends. It provides a better understanding of the forces shaping the environment. It should provide confidence to manager that his decisions reflect assessment of issues. In social forecasting we include all those environmental factors that are not currently embraced by economic or technological forecasting. Primarily it involves individual as customer, supplier, manager or employee. It concerns people in-groups both inside as well as outside organizations. It further unfolds to government, society in general and to transnational organizations such as European Union. Therefore, Social Forecasting is a term, which includes both political and legal factors in addition to social factors. Economic forecasting is essentially concerned with modeling how people behave using financial criteria as a means for maximizing welfare. It is dependent on certain assumption of people behavior. If the behavior changes the forecast is likely to change. Therefore, one role of social forecast is to find the underlying relationships used by economic forecasters and to modify them as necessary. In the case of technological forecasts, it has been assumed that we can extrapolate part trends into future. However, we find lots of these relationships are unable to predict future. In the case of pharmaceutical organizations the new molecule development is more dependent on the R & D expenditure allocated. The advances cannot be attributable to serendipity. In fact they result from managerial investment decisions. In case of pharmaceutical industry these resources have been raising due to society’s growing concern for health. The liberalization of health insurance in India combined with
accepting patent regime has totally changed the role of Indian pharmaceutical organizations. The example of Pharma industry in India illustrates the complexity consisting of technological, economic potential, economic support based on legislation, governmental action and globalization of business. As we go through the article we will examine the interrelationships and dimensionalities of social, political, economic and technological factors. However, certain important factors need to be considered. 1. The forecasting techniques are developed by economists more specifically econometricians and technologists. However, the output has to be used by managers who are working in the real time environment who has information on different trends that cannot be incorporated in to the economic and technological forecasting. 2. Active involvement of sociologists and business organizations are needed to further the objectives of forecasting supplementing the economic and technological forecasts with social forecasts. 3. Disadvantage of social forecasting is for many phenomenon of interest, these are no clearly defined measures. Though objectivity is stressed, subjectively is inevitable. Elements of Social Forecasting We will analyze the elements of social forecasting for the purpose of better understanding. 1. What to forecast? It is not obvious for us to discern the possible future events that could be significant for organizations. In the case of social forecasting it is likely to be more difficult. Our views of the society in which we are living, the way it has developed and it is likely path in future is affected by personal experience and individual values. It is likely that forecaster may overlook changes in attitudes that are not familiar to him. Though objectivity is attempted, it may not be achievable. Individual personal judgment is involved in the selection of the data to be used in the forecast and his interpretation of results. The importance of first stage in the forecasting process cannot be over stressed. It calls for sensitivity to evolving influences and judgment. Which phenomenon has to be selected for study or what factors to be considered?–scanning of the Psycho-sociopolitical environment generally leads to large number of trends and possible future events which might be considered within the forecasting exercise.
6 Measurement – for social forecaster, he should be concerned with two types of phenomenon ‘event’ and ‘trend’. “Event” is used to describe something which either does or does not happen. The great depression in 1929 in United States of America is an event. We may foresee their occurrence with some probability rather than forecast the dates at which that would happen. The use of the word ‘trend’ implies “social phenomena evolving over a period of time”. If we identify a trend than we can identify the pattern of its evolution and we can take a view regarding future. Therefore, the probability of occurring of any event at any point of time may be less but a cumulative probability is likely to increase. On the other hand, the trend evolves over a time. Majority of the social forecaster works falls into this category. For example, the size of high-income group varies in magnitude with time. In order to make a forecast we need a parameter to measure the phenomena. Such parameter is obtained from economic and demographic data. Many a times the phenomena for interested of social forecaster are not directly measurable. Let us consider the example of ‘attitude towards leisure for work force’. These particular phenomena can be understood but how it is measured? We may consider some surrogate measures such as number of days spent by families for vacation or increased number of people at different pilgrimage centres. The precision may not be available in social forecasting, however, the impact of event or trend can be incorporated into the forecasting process. A time-scale – The association of an event or attainment of a quantified level for a trend, (which we generally) is called call it as tipping point or point of inflexion with a time scale, is an essential feature of forecast. A time scale is necessary for taking decisions based on informed view of future. Many of the studies of the future without application of forecaster methodology are likely to provide ineffective information. In recent years much of the data has been published with respect to impact of nanotechnology on society. However, we have to have a time scale to be of more use to the business organizations. A probabilistic assessment – Decision making under uncertainty is one of the major limitations of social forecaster. The probability will vary with the forecaster confidence in selection of indicators.
Forecasting Social Trends . However, this pattern may take variety of forms. In the case of technological, techno-economic relationship “S” shaped growth curve
is exhibited. The main feature is slow initial growth followed by period of rapid growth and reaches a plateau as physical limit is approached. This process is irreversible. The ability of the computer chip to shrink in its size is limited by its atomic structure. On the other hand economic forecasting is largely based upon cyclical pattern superimposed upon a trend line which may slope upwards or may be downwards a long-term cycle. We generally assume that the pattern established in the past is likely to repeat in future and therefore economic movement is reversible. In forecasting both technology and economic attributes we dismiss the possibility of discontinuities. They can occur but their probability of occurrence is low. In the case of social forecasting the occurrence and discontinuity is one of the most important factors to be taken into consideration.
A framework for conducting social forecast The framework has been compiled and given in Table 1 for better understanding. . In order to make an ideal forecasting we will analyze the total environment of the organization as given in the table that is likely to affect corporate decision making. However, it is necessary for us to establish the mutual influence between these factors by an analysis known as cross impact analysis. The next step will be to establish the quantitative or qualitative relationship for each of these influences is required. This is followed by forecasting of the future trend of each factor. Finally, each of these forecasting must be modified in the light of the trends in all the other factors. This ideal forecast is in effect a comprehensive quantitative and qualitative model that reflects total operating environment. The good forecast is based upon understanding in-depth of the fundamental forces, which shape in future. However, in reality most of the techniques are based on observations and based on the past Behaviour rather on full understanding of the underlined factors determining the trends observed. However, the use of computers has helped us to prepare the modeling. Let us consider the example of social consequences of computerization. We will start by considering the development of technology capability. Its application depends upon economic factors in the form of availability of finance, political influence, cultural attitudes (willingness of management to innovate) and so on. However, the application of technology will have an effect upon employment, education system, industry skill requirement, etc. These in turn will affect social attitudes which, will feed back upon the political, economic and technological factors modifying the initial analyses. This complexity makes the construction of a comprehensive
8 model difficult but not impossible. Table 1. A suggested social variable checklist Unit of Analysis The individua l The Political process Categorie s Attributes Suggested Variables
Socioeconomi cs Demogra phy Sociotechnolo gy
Physical characteristics Attributes, Abilities, Preferences, wealth, Lifestyle, Skills, Social roles, Competencies, Work ethos, role models, Relationshi Family Kinship systems, Formal groups, ps Informal groups, organizations, Roles in society National Government, opposition, Administration, political structure, quasi-political Process, bodies, Local government, legislation, likely political impact of company Action, Competition law, Promotion of corporate governance, Availability of institutional infrastructure for effective governance, free market economy, Patents Internation Political structure nationalism, Ideology, al Administration, Attitudes to foreign companies, international and regional groupings, Regime stability, Trends in patenting, Role of world trade organization, Role of international Monetary Fund, Role of World bank Etc. Formal Objectives, Literacy, Numeracy Duration, Specificity, Primary education, Higher education, Advent of virtual universities, Vocationalization of education Social purposes of educational system Informal Cultural Environment, cultural variables such as values, ethics, media, role of news papers in molding public opinion, logs, web 2.0 tools usage. Distribution of wealth Distribution of income Patterns of spending Economic philosophy the use of money, cheques, Attitude towards credit Taxation, existence of caste and class system. Income distribution Size of population, Age structure, migration within the country, migration out of country, Changes in population demography Characteristics of population Etc. Uses of technology benefits of technology Spread of technology –Telecom diffusion Control of technology Development of technology – levels, Social perceptions of technology, Effects of technology
Groups in society
Political nonpolitical Formation Issues Morality
Political parties, Pressure groups, Interest groups, Trade unions Interest groups, non government organizations, User’s groups, Environmental groups Actions, Effects of formation of groups Crime, Religion, Social norms, behavioral norms, values, role of religion in molding social values, major health indicators Museums, public libraries, Availability of social goods Water pollution, Air pollution, Land pollution, attitude towards ecological issues, urbanization
Quality of life
Arts and Science Pollution and Ecology health and Legislation, Product liability, Consumerism, Welfare Protection of the individual Child mortality, Reduction in child labour, welfare of women, Human Development Index work / Working days per year, hours worked per week, leisure Life-style, attitude towards work, leisure, attitude towards complexity in job environment, availability of jobs, changes in nature of jobs, job profiles, work ethic, leadership models in business, mobility in jobs
Monitoring and Measurement in Social Forecasting Social aspirations can be monitored from statistical data. The attitude towards obsolescence can be obtained from the market research showing the repurchase cycle of the main durable goods. Freedom from drudgery is shown by the increasing density of ownership of certain household goods. The acquisition of social prestige can be found by the ownership density of high valued consumer durables such as cars and ownership of residences. Sociological inputs can be quantified. We will consider how it can be done in India. The income structure can be obtained from the research done by National Council for Economic Research and various statistical data provided by government of India and Reserve Bank of India. In an income-structured society, which is related to ability, the demand for education rises? Once income is totally related to ability, the people will demand better educational facilities. The emancipation of women and empowerment of women can be traced through the employment of figures, reduction in atrocities towards women, reduction in physical violence towards women etc. A host of data can
10 be generated and related in order to find the place of women in the society. The most difficult factor is to study family relationships. The breaking of joint family system the concept of nuclear families and large population immigrating to different parts of the world is one of the trends which are likely to provide us information on change in family relationships. Measuring Change in Social Attitudes – Leading Indicators Forecasting will, however, become impossible unless we are able to track changes in the social environment and in social attitudes as they occur. An individual enterprise will need, to organize a databank of such information once it has been established which aspects of change are likely to be of most significance to it, taking care to examine every facet of its operations – its immediate customers, its markets, its relationships with employees and with local and central government. How do we go about organizing such a databank? We might begin by posing a series of questions about the population of the area or country or the countries in which within which the organization operates. 1. Growth or Decline - Is the total population growing or declining? How is the age structure of the population likely to develop? What factors (e.g. changes in fertility, the birth rate, mortality) do we need to examine in order to predict change? 2. Economic Activity - What is the size of the employed population? What is the unemployment rate, distinguishing between long and short – term unemployment? How is the employed population distributed by age and marital status? How is it distributed by manufacturing industry, services, the professions, agriculture etc.? 3. Housing - What are the level of home ownership and the various forms of home tenancy? What is the balance between demand and supply of property and of finance for buying and renting? 4. Ownership of ‘key’ Durables - Ownership of durables which may fundamentally change the pattern of life, such as a car and a telephone. 5. Patterns of Expenditure - What are the broad patterns of expenditure by the population as a whole and by the various ages and socio-economic group housing and associated expenditure, food, clothing, leisure activities and so on?
This is obviously only a short, selective, list of the type of questions that we could ask. Yet when we have answers to all these questions we merely have the outline of a data system for the examination of social change. In order to estimate attitudes and changes in the attitudes, we need to have synoptic model in which all the assumptions are dynamic. In the synoptic model discussed in this research paper consists of six separate models all interconnected with each other such that output of one becomes input of others and cause these models to react within themselves. The six models that are to be analyzed are economic model, demographic model, technological model, psychological model, sociological model and political model. We will consider expansion of one the models psychological model which consists of seven important factors: The desire of freedom of choice, Acquisitive motive, Change the attitude to obsolescence, Freedom from drudgery, Acquiring social prestige, Attitude towards work, attitude towards leisure. The political model consists of following factors:1. Basic philosophy, equality (equality of results or equality of opportunity), Policy regarding full employment, Stability of prices, Social welfare and defense, fiscal policy, monetary policy. The economic and demographic models are to a certain extent independent when compared to other models. All other models either increase rate of change or decrease rate of change in the economic model. They are also likely to affect the time lapse in economic model. They also provide barriers to economic forecast or determine the maximum above, which the economic model cannot operate. We should understand the five models other than economic model as our areas of interest. They should be analyzed in terms of their inter relationship to obtain a better view of the environment. This is an essential prerequisite for organizational effective planning. All the six models described are used to identify and find changes in the market potential. However, economic model, demographic model and technological model define economy capability or its output potential. Thus, they are connected with resource allocation. The lower group defines the effectiveness in the use of that output potential. We can also segregate economic, demographic and technological models as theoretical output potential and the rest as realizable output potential. Our focus will be on psycho-social-political
12 models as they are least explored compared to other models. 1. Information forecasts; are those whose purpose is to forewarn and to help us to mould attitudes about future. They have wider margins and errors compared to other forecasts and they are not specified. For example, the discussion on nanotechnology is information on forecast. 2. Decision forecasts; are designed for a particular purpose and for a particular decision and the error of assumption has to be clearly stated. Social forecasting as we have used tends to be concerned more with information rather than decision forecasting. There are four general rules evolved to help to curtail the residual error in social forecasting and we will discuss them. 1. The forecasting should not be technique oriented. 2. Good social forecasting should have a fine understanding of particular situation for which forecasting has been done. 3. Forecast should work from simplicity to sophistication. Sophistication by way of mathematics is introduced only as and when it is necessary to reduce the margin of error. 4. The forecast should have a funnel approach from general to specific and from macro to micro 5. Forecast if they are worked from long term to short term, they are likely to be more effective. Conclusion: Based on the discussion, we can conclude that social forecasting provides a framework of analysis for business planners especially relating to strategic planning. It has different methodology of approach compared to that of economic and technological forecasting. It captures dynamic nature of business. Thus social forecasting reflects present and future likely events and can be used for supplementing economic and technological forecasting. Though, we observe that blind spots are pervasive in social forecasting they can be bridged with the help of information revolution. Social forecasting combines various disciplines and provides explanation for different types of phenomenon that is happening around us. We could clearly see the move from individual to societal dependence and in turn from societal dependence to individualism. Therefore, we can conclude the social forecasting is a must for business planners to plan their resource allocation and achieve mission and vision of their organizations.
References: 1. The Fall and fall of Crime: Steven D.Levitt, “Understanding Why Crime Rate in the 1990’s: Four Factors that Explain the Decline and Six That Do Not”. Journal of Economic Perspectives 18, no.1 (2004). Pp.163-90 2. Twiss Brian.C (ed.) ‘Social Forecasting for Company Planning’ by MacMillan Press Ltd. (1982). 3. There is a very little ‘hard data’ on how many do, in fact, do so. A useful survey of current practice is contained in D.J.Romano and J.C.Higgins, The Role of Social Forecasting in Business Planning (Management Centre, University of Bradford, 1978). 4.Social Trends, No.6 (1975), ‘Subjective social indicators’, by Mark Abrams; and No.7 (1976), Subjective measures of the quality of life in Britain, by John Hall. Survey Unit, Social Science Research Council. 5. Meadows, D, H.and Meadows, D.L., The limits to growth (Potomac Associates, 1972). 6. Coyle, R.G.Management Systems Dynamics (Wiley, 1977) 7. Kahn, H.World Economic Development: Projections from 1978 to the year 2000 (Boulder, Colorado: Westview Press, 1978). 8. Hayek, F.A. Individualism and Economic Order (London: Routledge & Kegan Paul, 1949). 9. Mitchell, A Life ways and Life Styles (1973) and Elgin, D., Voluntary Simplicity (1976) Social Change: Implications of Trends in Values and Lifestyles 91979) 10.Rao.S.L. and Natarajan.I, ‘Indian Market Demographics’, Global Business Press, 1996.
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