Business Analytics

Business Analytics



Business Analytics

Introduction

Forecast as a word itself describes future prediction. The prediction of happening or non-happening of an event in future period based on mathematical and/or logical calculations may be termed as forecast. It can never be absolute as it is based on assumptions and estimates. The actual outcome is most probably in near range of the previously made forecasts. It is due to proper and highly professional judgments of data which makes the estimates match up to a greater extent. Forecasting is done every now and then in a business so to get an idea of where the business would be in its future periods and towards which direction it is projecting.

Various forecasts are done by the business professionals and such persons are highly trained, experienced and diversified. They have an approach to look on the picture of the businesses as a whole and then apply their knowledge to a particular company or organization.

Forecasting may be of different kinds such as, demand forecast, sales forecast, revenue forecast, liquidity forecast, profitability forecast, financing forecasts etc. Demand forecast specifically relates to estimating future demand for a product of a company by the existing as well as prospective consumers. Demand forecast is regarded as important entrepreneurial activity which describes the forecasting of future sales and costs of a business. If an entrepreneur somehow knows the demand for the products of his company in future periods, he can easily forecast the sales and the costs pertaining to such demand for his business (Beasly, 2011).

Discussion

It shall be noted that there is a difference in Demand and Sales. Sales simply describe how much has actually been sold from the business. However, demand shows the requirement or need for the product in the market. Demand forecast means estimating the demand for the product in different seasons around the year. It is very important to know because there may be two extreme positions.

The demand is not satisfied - this extreme show that there is sufficient demand for a particular product in the market that not only our company but the competitors too are unable to supply with a quantity to cope up with the demand for that product in the market.

Sales are less than demanded - this situation shows that the demand for the product is catered by the competitors or our company possesses exceed capacity of production in response to the demand for that product.

Characteristics of Demand

Demand possesses different characteristics which include variability, dynamic in nature and having its own pattern. They may be seen in the following graph and it is very important to know about them as it helps in demand forecasting significantly (Beasly, 2011).

The graph clearly shows that demand and its pattern. When the data has been plotted and the values have been graphed over the whole year in various months, it has been seen that demand has variations i.e. ups and downs depending on the season over the whole year. These variations may result from different factors but most importantly ...