DEMAND FORECASTING-Economic Analysis of Business

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  • Resource allocation
  • LTF-new product introduction, plant expansionMTF- aggregate product planning-basically how much should be produce to meet fluctuating demand, manpower, inventory policySTF-
  • Basically, Statistical side of demand
  • Basically, Statistical side of demand
  • Expert in this area. What is likely to happen as far as the demand is concern
  • Weighted Average
  • Regression-estimate the functionsIf the assumption is true, therefore this is a good modelIf the assumption is false, need not a model
  • It can answer what if questions
  • It can answer what if questions
  • Forecasting-taught in school of managementPrediction- school of astrologyBut in real life used all of this
  • Focus on normal demand Gradually increasing its sales over the yearsRandom fluctuation
  • Transient impulse- causes- competitive advantage External forcesSudden rise- liquidation of customersSudden rise- introduction of new entrantsSomething happenYour model is normal
  • Salesman know the customerHow many sales of this yearCompiling informationOne must be bias to impress his boss
  • Ultimately get information
  • Keep Anonymity-a person don’t know who are the other memberEXPERT OPINION
  • How does it works?2013 is the statistical summary
  • DEMAND FORECASTING-Economic Analysis of Business

    1. 1. Economic Analysis of Business Demand Forecasting Presented By: Abner B. Domingo Professor: Dr. Melody Hate Philippine School of Business Administration Quezon City Graduate School of Business
    2. 2. Economic Analysis of Business-Demand Forecasting Business Forecasting Objectives • The very objective of business forecasting is to be accurate as possible, so that planning of resources can be done in a very economical manner and therefore, propagate optimum utilization of resources. Business forecasting helps in establishing relationship among many variables, which go into manufacturing of the product. Each forecast situation must be analyzed independently along with forecasting method.
    3. 3. Economic Analysis of Business-Demand Forecasting Classification of Business Forecasting • Economic forecasting -these forecasting are related to the broader macro-economic and micro-economic factors prevailing in the current business environment. It includes forecasting of inflation rate, interest rate, GDP, etc. at the macro level and working of particular industry at the micro level. • Demand forecast -organization conduct analysis on its pre-existing database or conduct market surveys as to understand and predict future demands. Operational planning is done based on demand forecasting. • Technology forecast- this type of forecast is used to forecast future technology up gradation.
    4. 4. Economic Analysis of Business-Demand Forecasting Timeline of Business Forecasting • Long term forecast: this type of forecast is made for a time frame of more than three years. This type of forecast are utilized for long-term strategic planning in terms of capacity planning, expansion planning, etc. • Mid term forecast: this type of forecast is made for a time frame from three months to three years. These types of forecasts are utilized production and layout planning, sales and marketing planning, cash budget planning and capital budget planning. • Short term forecast: this type of forecast is made from one day to three months. These types of forecast are utilized for day to day production planning, inventory planning, workforce application planning, etc.
    5. 5. Economic Analysis of Business-Demand Forecasting Demand Forecasting • The process of estimating the future demand of product in terms of a unit or monetary value. • Forecasting the future level of demand • Involves predicting aggregate measures of economic activity at the international, national, regional, or state level. E.g GDP, unemployment, interest rates by “blue chip’’ business.
    6. 6. Economic Analysis of Business-Demand Forecasting Demand Forecasting • GDP is the value at final point of sale of all goods and services produce in the domestic economy during a given period by both domestic and foreign-owned enterprises. GNP is the value at final point of sale of all goods and services produced by domestic firms.
    7. 7. Economic Analysis of Business-Demand Forecasting Method of Forecast • Subjective or intuitive method – Opinion polls, interviews – DELPHI Idea or information is gathered from a set of people or experts on what is the demand likely to be appear. Advantage: relying upon the various knowledge based, and the experience of an individual, like share price, fluctuation. Disadvantage: subjective biased if you rely
    8. 8. Economic Analysis of Business-Demand Forecasting Method of Forecast • Method based on averaging of past data Two most commonly used Moving average Exponential smoothing
    9. 9. Economic Analysis of Business-Demand Forecasting Method of Forecast • Regression Models on Historical Data Trend Extrapolation Projection of what going to be. Limitation: essentially assume that whatever happen in the pass may continue to occur in the future as well.
    10. 10. Economic Analysis of Business-Demand Forecasting Method of Forecast • Causal or Econometric Models (also Regression Model) It can answer “what if question What will happen to the demand if the variable is changing. What if government policy changes.
    11. 11. Economic Analysis of Business-Demand Forecasting Method of Forecast • Time Series: Analysis using Stochastic Models – Box Jerkins Model – Generating the demand distribution Advantage: accurate short term forecast
    12. 12. Economic Analysis of Business-Demand Forecasting
    13. 13. Difference of Forecasting • Is essentially objective • Scientific discipline • Free from bias • Reproducible • Error analysis possible- extent of error Predictions • Subjective • Intuitive • Individual bias • Non-producible • Error analysis possible Economic Analysis of Business-Demand Forecasting
    14. 14. Commonly observed “normal” demand patterns Economic Analysis of Business-Demand Forecasting
    15. 15. Abnormal Demand Pattern Economic Analysis of Business-Demand Forecasting Transient impulse Sudden Rise Sudden Fall
    16. 16. Economic Analysis of Business-Demand Forecasting Opinion Polls • Personal interviews Aggregation of opinions of sales representative to obtain sales forecast of a region Knowledge based (experience) Subjective bias- impair the accuracy
    17. 17. Opinion Polls • Telephonic Method Advantage: Fast method in getting information Economic Analysis of Business-Demand Forecasting
    18. 18. Opinion Polls • Questionnaire Method – Questionnaire design – Choice of respondents – Obtaining respondents – Analysis and presentation of results(forecasting) Economic Analysis of Business-Demand Forecasting
    19. 19. Opinion Polls • Delphi Method A structural method of obtaining responses from experts – Utilized the vast knowledge based of experts – Eliminate subjective bias and “ influencing” by members through anonymity – Iterative in character with statistical summary at end of each round, generally three rounds – Consensus (or divergent viewpoints) usually emerge at the end of the exercise. Economic Analysis of Business-Demand Forecasting
    20. 20. Forecast Using Delphi Question: when does the petroleum reserve of the world come to an end? Coordinator Expert 1 Expert 2 Expert 3 Economic Analysis of Business-Demand Forecasting 2010 2011 2012 2013 2012 2012 2013 2013 2013
    21. 21. Economic Analysis of Business-Demand Forecasting Category of Forecasting Method Moving Average Month Demand 3 Months MA 6 Months MA Jan 500 Feb 525 Mar 575 533.33 Apr 560 553.33 May 600 578.33 Jun 615 591.67 562.50 Jul 595 603.33 578.33 Aug 609 606.33 592.33 Sept 696 633.33 612.50 Oct 690 665.00 634.17 Nov 700 695.33 650.83 Dec 900 763.33 698.33
    22. 22. Economic Analysis of Business-Demand Forecasting Philippine Economy posts 7.8 percent GDP growth • HIGHLIGHTS • With the upbeat business and consumer sentiment, as well as sustained government capital expenditure, the Philippine economy posted a 7.8 percent GDP growth in the first quarter of 2013 from 6.5 percent the previous year. The Q1 growth is the highest so far under the Aquino administration and also the third consecutive quarter of more than 7.0 percent GDP growth. • • The robust growth was boosted by the strong performance of Manufacturing and Construction, backed up by Financial Intermediation and Trade. • • On the demand side, increased consumer and government spending shored up by increased investments in Construction and Durable Equipment contributed to the highest quarterly GDP growth since the second quarter of 2010. • • The continued inflow of remittances from our overseas workers accelerated the Net Primary Income from the Rest of the World to grow by 3.2 percent boosting the Gross National Income (GNI) growth to 7.1 percent from 5.7 percent in 2012. • • On a seasonally adjusted basis, GDP is gaining momentum growing by 2.2 percent in the first quarter of 2013; GNI grew by 1.9 percent. All major sectors posted positive growth in seasonally adjusted terms for the first quarter of 2013. In particular, the entire Agriculture sector posted a growth of 0.8 percent in the first quarter of 2013 from 0.4 percent the previous quarter. However, Industry slowed down to 2.5 percent growth in the first quarter of 2013 from 4.0 percent in the previous quarter. But the Services sector accelerated to 2.2 percent in the first quarter of 2013 from 1.1 percent in the previous quarter as all its subsectors recorded positive growth. Positive growth in seasonally adjusted terms across major sectors has been resulting since the fourth quarter of 2010. • • With the country’s projected population reaching 96.8 million in the first quarter of 2013, per capita GDP grew by 6.1 percent while per capita GNI grew by 5.3 percent and per capita Household Final Consumption Expenditure (HFCE) grew by 3.4 percent.
    23. 23. Economic Analysis of Business-Demand Forecasting
    24. 24. Economic Analysis of Business-Demand Forecasting Ang sipag mo naman mag aral abner.Kahit holiday banat ka pa rin ng banat. Sige bilisan mo. Sana maging Doctor ka

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