Question

Say you are an economic forecaster for an American automotive manufacturer. Besides market share, how might your company's forecast differ from the industry as a whole? Identify two possible differences, and discuss why you think these differences would exist

Answer 1

Company's forecast may differ from the industry as a whole. The two possible differences are as follows:

While the objective of industry forecast would be to provide general trend and pattern over the forecasted time-period, for company based forecast, there are various factors that may find its way in estimation of forecasted numbers such as:

(1) Stage of product's life cycle - The data availability and the possibility of establishing relationships between the factors depend directly on the product maturity, and hence the life-cycle stage is a prime determinant of the forecasting method to be used.

(2) Purpose of forecast - Company's forecast has many dimensions as far as purpose of performing forecast is concerned. Deciding whether to enter a business may require only a rather gross estimate of the size of the market, whereas a forecast made for budgeting purposes should be quite accurate. The appropriate techniques would differ accordingly.

(3) Methodology adopted for forecasting - A company may use market research, input-output model, life-cycle analysis, intention-to-buy or anticipation survey or delphi method or prefer visionary forecast or historical analogy, whereas industry forecast are primarily done using time-series forecasting techniques