Question

Discuss the role of business forecasting. What do you think would be the major problems in forecasting a product's demand? Use an example to support your argument.

Answer 1

Forecasting plays an important role in a business. It is necessary for smooth functioning of the business. It makes the management aware of all the strengths and weaknesses at a particular period of time and enables them to work accordingly. Co-ordination is improved to a great extent since the management can focus on a particular aspect of production in order to improve. The accurate forecasting of sales helps to procure necessary raw materials on the basis of which many business activities are undertaken. The accurate sales forecasting becomes the basis for several other budgets.

Problems with demand forecasting
Forward Demand forecasting if gone inaccurate can cause terrible losses to the firms. For example, Blackberry during its prime years of business had its demand forecasts at newer peaks each time. According to these forecasts, they will buy the raw material and manage their policies, prices accordingly. But when Apple iPhone took major of the market share that once belonged to blackberry, they had to suffer huge losses since they had lot of unsold goods and many of production plants lying unproductive (in the years following)