1. Forecasting
Forecasting is the art of predicting the
future value of a random variable(i.e., a
variable with more than one possible
outcome )
Jackwinder Singh Uppal

2. Used to try to predict the future

3. Uses two main methods
• Qualitative – seeking opinions on which to base decision
making.
– Consumer panels, focus groups, etc
• Quantitative – using statistical data to help inform decision
making.
– Identifying trends
– Moving averages – seasonal, cyclical, random
– Extrapolation - simple

4. Costs and Benefits of Forecasting:
• Costs:
– Data not always reliable or accurate
– Data may be out of date
– The past is not always a guide to the future
– Qualitative data may be influenced by peer pressure
– Difficulty of coping with changes to external factors out of
the business’s control – e.g. economic policy, political
developments (9/11?), natural disasters – hurricanes,
earthquakes, etc.

5. Costs and Benefits of Forecasting:
• Benefits:
– Aids decision making
– Informs planning and resource allocation decisions
– If data is of high quality,
can be accurate

6. Aim of forecasting
• Aims to predict the future values of random
variable as accurately as possible.
• Preparation of forecast using all the relevant
information available.
• Effective decision making.
• Change is constant, Forecasts help us by
predicting these changes ahead of time.

7. Three approaches of forecasting
Time series
Econometrics
analysis
Combination of
previous two +
subjective
judgement

8. Resort Forecasting
• Identify the Variables
• Do the data analysis/study
• Do paperwork
• Prepare forecast plans
• Make Decisions
• Implement/execute
• Achieve desired results