There are two aspects of Scientific Business Forecasting 1. Analysis of past economic conditions. Analysis of present economic conditions. B Methods Of Business Forecasting: Almost all businessmen forecast about the conditions related to their business. In recent years scientific methods of forecasting have been developed. The base of scientific forecasting is statistics. To handle the increasing variety of managerial forecasting problems, several forecasting techniques have been developed in recent years.
The following are the main methods of business forecasting. Business Barometers: Business indices are constructed to study and analyse the business activities on the basis of which future conditions are predetermined. With the help of these business barometers the trend of fluctuations in business conditions are understood and a decision can be taken relating to the problem by forecasting.
Time series analysis: Time series analysis is also used for the purpose of making business forecasting. The forecasting through time series analysis is possible only when the business data of various years are available which reflects a definite trend and seasonal variation.
By time series analysis the long term trend, secular trend, seasonal and cyclical variations are ascertained, analysed and separated from the data of various years. Extrapolation: Extrapolation is the simplest method of business forecasting.
By extrapolation, a businessman finds out the possible trend of demand of his goods and also about the future price trends. Regression analysis: The regression approach offers many valuable contributions to the solution of the forecasting problem. It is the means by which we select from among the many possible relationships between variables in a complex economy, which will be useful for forecasting. Modern econometric methods: Econometric techniques, which originated in the eighteenth century, have recently gained popularity for forecasting.
Econometrics refers to the application of mathematical economic theories and statistical procedures to economic data to verify economic theorems. Models take the form of a set of simultaneous equations. The values of the constants in such equations are supplied by a study of statistical time series, and a large number of equations may be necessary to produce an adequate model. Exponential smoothing method: This method is regarded as the best method of business forecasting as compared to other methods.
Exponential smoothing is a special kind of increasing exponential weighted average assigned to recent observation data and is found extremely useful in short-term forecasting of inventories and sales. C Theories of Business Forecasting: There are a few theories that are followed while making business forecasts. Some of them are: 1. Sequence or time-lag theory: This is the most important theory of business forecasting. It is based on the assumption that most of the business data have the lag and lead relationships, that is, changes in business are successive and not simultaneous.
There is time-lag between different movements. Action and reaction theory: This theory is based on the following two assumptions. Thus, according to this theory a certain level of business activity is normal or abnormal; conditions cannot remain so for ever. Economic Rhythm Theory: The basic assumption of this theory is that history repeats itself and hence assumes that all economic and business events behave in a rhythmic order.
According to this theory, the speed and time of all business cycles are more or less the same and by using statistical and mathematical methods, a trend is obtained which will represent a long term tendency of growth or decline. It is done on the basis of the assumption that the trend line denotes the normal growth or decline of business events.
Specific historical analogy: History repeats itself is the main foundation of this theory. If conditions are the same, whatever happened in the past under a set of circumstances is likely to happen in future also.
A time series relating to the data in question is thoroughly scrutinised such a period is selected in which conditions were similar to those prevailing at the time of making the forecast. However, this theory depends largely on past data. Statistics can interpret aggregates of data too large to be intelligible by ordinary observation because such data unlike individual quantities tend to behave in regular, predictable manner.
It is subdivided into descriptive statistics and inferential statistics. It will help you to understand the question paper pattern and type of statistics for management question and answer asked in MBA 1st year statistics for management exam.
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View PDF This course is designed to provide an introduction to statistical methods useful for analyzing data, with specific application to problems of business and economics. Catalina Stefanescu A, ext , cstefanescu london. Instructor: Adam B. Munson —abmunson mail. However, solutions will be posted to the course website within the View PDF Information is an essential element in management and much of it is in statistical form.
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