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10th International SMF Convention

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
kprksr@gmail.com
prabhakar.krishnamurthy@gmail.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.
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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 re-
named 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
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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 decision-
maker 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.

2. Which phenomenon has to be selected for study or
what factors to be considered?–scanning of the Psycho-socio-
political environment generally leads to large number of trends
and possible future events which might be considered within the
forecasting exercise.
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3. 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.

4. 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.

5. 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
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model difficult but not impossible.

Table 1. A suggested social variable checklist

Unit of Categorie Suggested Variables
Analysis s
The Attributes Physical characteristics Attributes, Abilities,
individua Preferences, wealth, Lifestyle, Skills, Social
l roles, Competencies, Work ethos, role models,
Relationshi Family Kinship systems, Formal groups,
ps Informal groups, organizations, Roles in society
The National Government, opposition, Administration,
Political political structure, quasi-political Process,
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.
Educatio Formal Objectives, Literacy, Numeracy Duration,
n 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.
Socio- Distribution of wealth Distribution of income
economi Patterns of spending Economic philosophy the
cs use of money, cheques, Attitude towards credit
Taxation, existence of caste and class system.
Income distribution
Demogra Size of population, Age structure, migration
phy within the country, migration out of country,
Changes in population demography
Characteristics of population Etc.
Socio- Uses of technology benefits of technology
technolo Spread of technology –Telecom diffusion -
gy Control of technology Development of
technology – levels, Social perceptions of
technology, Effects of technology
Groups in Political Political parties, Pressure groups, Interest
society groups, Trade unions
non- Interest groups, non government organizations,
political User’s groups, Environmental groups
Formation Actions, Effects of formation of groups
Issues
Quality Morality Crime, Religion, Social norms, behavioral
of life norms, values, role of religion in molding social
values, major health indicators
Arts and Museums, public libraries, Availability of social
Science goods
Pollution Water pollution, Air pollution, Land pollution,
and attitude towards ecological issues, urbanization
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
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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
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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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