Forecasting and Planning

Forecasting is a technique to assess the environment. It is the essence of planning. As planning is future oriented, forecasting helps in predicting the future. It estimates, predicts and projects future trends and events and provides important inputs to managers to frame meaningful plans. Business firms need information about various aspects of future like economic policies, price conditions, competitors’ strength; growth of the economy, change in technology consumers’ tastes, availability of inputs etc. Organization can virtually forecast any component of the environment depending on their size and nature.

Though forecasts relate to future, they are bases on past and current economic and non-economic information. This information is obtained from sources witching and outside the organization. How good are the forecasts depends upon how accurate is the information upon which these estimates are based.

The forecast can range from months to a few years depending upon the size and nature of industry. Short term forecasts are generally less complex and more reliable. Longer the period of forecasts, lesser is their reliability. Some forecasts, however, cannot be predicted like natural disasters, take over’s and acquisitions etc.

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