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For example, an organization has set a target of selling 50, 000 units of its
products. In such a case, the organization would perform demand
forecasting for its products. If the demand for the organization’s products is
low, the organization would take corrective actions, so that the set objective
can be achieved.
c. Controlling sales:
Helps in setting sales targets, which act as a basis for evaluating sales
performance. An organization make demand forecasts for different regions
and fix sales targets for each region accordingly.
d. Arranging finance:
Implies that the financial requirements of the enterprise are estimated with
the help of demand forecasting. This helps in ensuring proper liquidity
within the organization.
v. Economic Viewpoint:
Play a crucial role in obtaining demand forecasts. For example, if there is a
positive development in an economy, such as globalization and high level of
investment, the demand forecasts of organizations would also be positive.
4. Level of Forecasts:
Influences demand forecasting to a larger extent. A demand forecast can be
carried at three levels, namely, macro level, industry level, and firm level. At
macro level, forecasts are undertaken for general economic conditions, such
as industrial production and allocation of national income. At the industry
level, forecasts are prepared by trade associations and based on the
statistical data.
Moreover, at the industry level, forecasts deal with products whose sales are
dependent on the specific policy of a particular industry. On the other hand,
at the firm level, forecasts are done to estimate the demand of those
products whose sales depends on the specific policy of a particular firm. A
firm considers various factors, such as changes in income, consumer’s
tastes and preferences, technology, and competitive strategies, while
forecasting demand for its products.
5. Nature of Forecasts:
Constitutes an important factor that affects demand forecasting. A forecast
can be specific or general. A general forecast provides a global picture of
business environment, while a specific forecast provides an insight into the
business environment in which an organization operates. Generally,
organizations opt for both the forecasts together because over-
generalization restricts accurate estimation of demand and too specific
information provides an inadequate basis for planning and execution.
c. Deciding whether to forecast the demand for the whole market or for the
segment of the market
4. Collecting Data:
Requires gathering primary or secondary data. Primary’ data refers to the
data that is collected by researchers through observation, interviews, and
questionnaires for a particular research. On the other hand, secondary data
refers to the data that is collected in the past; but can be utilized in the
present scenario/research work.
5. Estimating Results:
Involves making an estimate of the forecasted demand for predetermined
years. The results should be easily interpreted and presented in a usable
form. The results should be easy to understand by the readers or
management of the organization.