DEMAND FORECASTING-Economic Analysis of Business

Economic Analysis of Business
Demand Forecasting
Presented By: Abner B. Domingo
Professor: Dr. Melody Hate
Philippine School of Business Administration
Quezon City
Graduate School of Business

Economic Analysis of Business-Demand
Forecasting
Business Forecasting Objectives
• The very objective of business forecasting is to
be accurate as possible, so that planning of
resources can be done in a very economical
manner and therefore, propagate optimum
utilization of resources. Business forecasting
helps in establishing relationship among many
variables, which go into manufacturing of the
product. Each forecast situation must be
analyzed independently along with forecasting
method.

Forecasting
Classification of Business Forecasting
• Economic forecasting -these forecasting are related to
the broader macro-economic and micro-economic
factors prevailing in the current business environment.
It includes forecasting of inflation rate, interest rate,
GDP, etc. at the macro level and working of particular
industry at the micro level.
• Demand forecast -organization conduct analysis on its
pre-existing database or conduct market surveys as to
understand and predict future demands. Operational
planning is done based on demand forecasting.
• Technology forecast- this type of forecast is used to
forecast future technology up gradation.

Forecasting
Timeline of Business Forecasting
• Long term forecast: this type of forecast is made for a time
frame of more than three years. This type of forecast are
utilized for long-term strategic planning in terms of capacity
planning, expansion planning, etc.
• Mid term forecast: this type of forecast is made for a time
frame from three months to three years. These types of
forecasts are utilized production and layout planning, sales
and marketing planning, cash budget planning and capital
budget planning.
• Short term forecast: this type of forecast is made from one
day to three months. These types of forecast are utilized for
day to day production planning, inventory planning,
workforce application planning, etc.

Forecasting
Demand Forecasting
• The process of estimating the future demand
of product in terms of a unit or monetary
value.
• Forecasting the future level of demand
• Involves predicting aggregate measures of
economic activity at the international,
national, regional, or state level. E.g GDP,
unemployment, interest rates by “blue chip’’
business.

Forecasting
Demand Forecasting
• GDP is the value at final point of sale of all
goods and services produce in the domestic
economy during a given period by both
domestic and foreign-owned enterprises. GNP
is the value at final point of sale of all goods
and services produced by domestic firms.

Forecasting
Method of Forecast
• Subjective or intuitive method
– Opinion polls, interviews
– DELPHI
Idea or information is gathered from a set of
people or experts on what is the demand likely to be
appear.
Advantage: relying upon the various knowledge based,
and the experience of an individual, like share price,
fluctuation.
Disadvantage: subjective biased if you rely

Forecasting
Method of Forecast
• Method based on averaging of past data
Two most commonly used
Moving average
Exponential smoothing

Forecasting
Method of Forecast
• Regression Models on Historical Data
Trend Extrapolation
Projection of what going to be.
Limitation: essentially assume that whatever happen in
the pass may continue to occur in the future as well.

Forecasting
Method of Forecast
• Causal or Econometric Models
(also Regression Model)
It can answer “what if question
What will happen to the demand if the variable
is changing.
What if government policy changes.

Forecasting
Method of Forecast
• Time Series: Analysis using Stochastic Models
– Box Jerkins Model
– Generating the demand distribution
Advantage: accurate short term forecast

Forecasting

Difference of
Forecasting
• Is essentially objective
• Scientific discipline
• Free from bias
• Reproducible
• Error analysis possible-
extent of error
Predictions
• Subjective
• Intuitive
• Individual bias
• Non-producible
• Error analysis possible
Forecasting

Commonly observed “normal”
demand patterns
Forecasting

Abnormal Demand Pattern
Forecasting
Transient impulse Sudden Rise
Sudden Fall

Forecasting
Opinion Polls
• Personal interviews
Aggregation of opinions of sales
representative to obtain sales forecast of a
region
Knowledge based (experience)
Subjective bias- impair the accuracy

Opinion Polls
• Telephonic Method
Advantage: Fast method in getting
information
Forecasting

Opinion Polls
• Questionnaire Method
– Questionnaire design
– Choice of respondents
– Obtaining respondents
– Analysis and presentation of results(forecasting)
Forecasting

Opinion Polls
• Delphi Method
A structural method of obtaining responses from
experts
– Utilized the vast knowledge based of experts
– Eliminate subjective bias and “ influencing” by
members through anonymity
– Iterative in character with statistical summary at end
of each round, generally three rounds
– Consensus (or divergent viewpoints) usually emerge
at the end of the exercise.
Forecasting

Forecast Using Delphi
Question: when does the petroleum reserve of the
world come to an end?
Coordinator
Expert 1
Expert 2
Expert 3
Forecasting
2010
2011
2012
2013
2012
2012
2013
2013
2013

Forecasting
Category of Forecasting Method
Moving Average
Month Demand 3 Months MA 6 Months MA
Jan 500
Feb 525
Mar 575 533.33
Apr 560 553.33
May 600 578.33
Jun 615 591.67 562.50
Jul 595 603.33 578.33
Aug 609 606.33 592.33
Sept 696 633.33 612.50
Oct 690 665.00 634.17
Nov 700 695.33 650.83
Dec 900 763.33 698.33

Forecasting
Philippine Economy posts 7.8 percent GDP growth
• HIGHLIGHTS
• With the upbeat business and consumer sentiment, as well as sustained government capital expenditure, the
Philippine economy posted a 7.8 percent GDP growth in the first quarter of 2013 from 6.5 percent the previous
year. The Q1 growth is the highest so far under the Aquino administration and also the third consecutive quarter
of more than 7.0 percent GDP growth.
•
• The robust growth was boosted by the strong performance of Manufacturing and Construction, backed up by
Financial Intermediation and Trade.
•
• On the demand side, increased consumer and government spending shored up by increased investments in
Construction and Durable Equipment contributed to the highest quarterly GDP growth since the second quarter of
2010.
•
• The continued inflow of remittances from our overseas workers accelerated the Net Primary Income from the Rest
of the World to grow by 3.2 percent boosting the Gross National Income (GNI) growth to 7.1 percent from 5.7
percent in 2012.
•
• On a seasonally adjusted basis, GDP is gaining momentum growing by 2.2 percent in the first quarter of 2013;
GNI grew by 1.9 percent. All major sectors posted positive growth in seasonally adjusted terms for the first quarter
of 2013. In particular, the entire Agriculture sector posted a growth of 0.8 percent in the first quarter of 2013 from
0.4 percent the previous quarter. However, Industry slowed down to 2.5 percent growth in the first quarter of 2013
from 4.0 percent in the previous quarter. But the Services sector accelerated to 2.2 percent in the first quarter of
2013 from 1.1 percent in the previous quarter as all its subsectors recorded positive growth. Positive growth in
seasonally adjusted terms across major sectors has been resulting since the fourth quarter of 2010.
•
• With the country’s projected population reaching 96.8 million in the first quarter of 2013, per capita GDP grew by
6.1 percent while per capita GNI grew by 5.3 percent and per capita Household Final Consumption Expenditure
(HFCE) grew by 3.4 percent.

Forecasting
Ang sipag mo naman mag aral
abner.Kahit holiday banat ka pa rin
ng banat. Sige bilisan mo. Sana
maging Doctor ka

DEMAND FORECASTING-Economic Analysis of Business

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