Forecasting Methods Compare and Contrast

Essay by EssaySwap ContributorUniversity, Master's February 2008

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Forecast in a simple terms is a prediction thru a statement or claim that a particular event will occur in the future. It looks like to me that almost the majority of the people, including children, once in their life time were a forecasters, as sometimes in their past they?ve tried to predict any future event. This act of making such prediction is therefore, called forecasting. Forecasts are never finished, they are needed continuously and as the time passes, their accuracy and their impact on actual performance are meas So it looks like that forecast in itself, is not too complicated, it becomes complicated once the word ?good? is attached to it. Thus, the forecast has to be well thought and planned so it can be called good or adequate forecasting. In order to prepare a forecast, one should first identify the assumptions in the forecast model one intent to use.

Then gather and analyze relevant data. After that, forecast and finally, monitor the results to whether or not the trend has weakened, strengthened, or if there is any factors that have gone unchanged. Forecast should be timely, accurate, reliable, and the technique should be simple to understand and yet, cost-effective (McGraw-Hill, 2005).

Obtaining a reliable and accurate forecasting of future sales or market behavior is of paramount importance for business people such as policy makers, companies making investment decisions, setting up prices and so on. There are several forecasting methods and they are differently used by different companies to satisfy each one specific needs. Forecasting models companies use depend mainly of factors such as accuracy required, time horizon, availability of data and competent personnel (1995, Colgate, et al).

Forecast can be long-term or short-term. The techniques used in forecasting may be grouped into two categories: qualitative or quantitative. Qualitative...