1. Business Simulation Seminar
Forecasting

2. What Does a Business Forecast?
The market
Overall size
Segments
Sales
Costs
Material, labor, breakage, theft, etc.
Headcount
Hires and losses
Cash needs
Pretty much everything

3. Methods of Forecasting
Graphical

4. Mathematical
Linear regression

5. Mathematical Forecasting
Linear regression
– potential problem

6. Mathematical Forecasting
Econometric
Create complex models based upon a number of inputs
E.g. sales may be a function of GDP, new home sales, existing home sales, and unemployment
Other models
Simple alpha – based upon prior period data
Limited only be creativity

7. Delphi Method Get variety of subject matter experts together
Have each describe environment from their perspective
Have each member then make own forecast
Share the forecasts
Discuss
Repeat votes and sharing until concensus is reached

8. Practical Forecasting Example
Sales Forecast
Sales = market size * market share
market size = market size last period * (1 + growth rate)
market share = market share last period adjusted for product improvements and changes in marketing

9. Example How many cars will you sell next year?
Market size = 10,000 cars per year
Market growth = -2%
Your market share = 25%
You are coming out with a new line of hybrids
You will spend more on advertising and improve your showroom