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Chapter 2 by Mind Map: Chapter 2

1. 1. Forecasting in Business Management

1.1. Objectives

1.1.1. To reduce uncertainties facing an organisation, whether business or non- business entity

1.1.2. To develop models capable of simulating the consequences of uncertain future events and quantifying the effects of alternative management decisions

1.1.3. To provide users and preparers with standards or criteria of performance and procedure for comparing actual against target

1.2. Keywords

1.2.1. Planning

1.2.1.1. Concerned with the direction towards which the organisation needs to take and is usually within an organisation's control

1.2.2. Forecasting

1.2.2.1. Usually involved with determining what the future events will be and are usually beyond the organisation's control

1.3. Applications of Forecasting

1.3.1. Weather forecasting, flood forecasting and meteorology

1.3.2. Transport planning and transportation forecasting

1.3.3. Economic forecasting

1.3.4. Technology forecasting

1.3.5. Earthquake prediction

1.3.6. Land use forecasting

1.3.7. Product forecasting

1.3.8. Player and team performance in sports

1.3.9. Telecommunications forecasting

1.3.10. Political forecasting

1.3.11. Sales forecasting

2. 2. Forecasting Techniques

2.1. Qualitative

2.1.1. Properties

2.1.1.1. scarce data

2.1.1.2. hard to evaluated

2.1.2. Applications

2.1.2.1. commonly used for new products

2.1.2.2. involving human judgements

2.1.3. Technique

2.1.3.1. Delphi

2.1.3.2. Jury of Opinion

2.1.3.3. Sales force composite

2.1.3.4. Consumer market survey

2.2. Quantitative

2.2.1. Properties

2.2.1.1. situation is stable

2.2.1.2. historical data exist

2.2.2. Applications

2.2.2.1. Formulation of mathematical models

2.2.2.2. Forecast future data

2.2.3. Technique

2.2.3.1. Univariate modelling techniques

2.2.3.2. Causal techniques

3. 3. Forecasting Procedures

3.1. STAGES INVOLVED

3.1.1. 1. Determine the purpose and objective

3.1.2. 2. Select the relevant theory

3.1.3. 3. Collect the data

3.1.4. 4. Analyse the data

3.1.5. 5. Estimate the initiate model

3.1.6. 6. Evaluate the model and make revision

3.1.7. 7. Present initial forecast & the management

3.1.8. 8. Make the final decision

3.1.9. 9. Distribute the forecast

3.1.10. 10. Establish the monitoring procedure

3.2. FACTORS TO BE CONSIDERED

3.2.1. Time Frame

3.2.2. Choice of Technique

3.2.3. Cost Consideration

3.2.4. Level of Accuracy

3.2.5. Availability of Data

3.2.6. Model's Complexity

3.3. ISSUES OF FORECASTING

3.3.1. Selection of Wrong Model

3.3.2. Insufficient Diagnostic Testings

3.3.3. Failed Assumptions

3.3.4. Forecast Bias