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forecasting
Forecasting is a systematic process of
predicting future demand for goods and
services. There are various stages of
demand forecasting as explained below:
1) Identification of objectives
The objectives must be cleared about
whether forecasting is short term or long term
Whether market share or industry as a whole
For the overall demand for a product or for firms own
product only
Whether for the whole product or only a part of the
product
the objectives of demand forecasting must be
determined before the process of forecast is started.
It is because the technique of demand forecasting are
different for different objectives.
2) Identification of demand
determination
For demand forecasting purpose, economist
classify the products in to three parts;
Durable goods : its determinants are time of uses,
composition and size of population, rate of
interest, credit facility, installment facility,
amount of 1st installment
Non durable goods: disposable income of the
consumer, price of related goods , price of same
goods , elasticity of demand etc.
Capital goods : profit of the firm, ratio of cost and
capacity of output , phase of trade cycle etc.
3) Collection of data
To forecast demand, data relating determinants of
demand should be collected.
Data can be obtained by survey, test marketing or
from existing sources ( such as historical records,
government publications etc.)
Time series or cross section data may be used in
forecasting
In time series data :particular market of different
time of each variable that influencing demand are
observed
In cross section data : different market at a
particular point of time is observed.