competition, rapidity of change in circumstances and the trend towards
automation demand that decision in business are not based purely on guesses and
hunches but rather on a careful analysis of data concerning the future course
of events. The future is unknown to us. Yet every day we are forced to make
decision involving future and therefore there is a uncertainty. Great risk is
associated with business affairs. All businessmen are forced to make forecast
regarding business activities.
Success in business depends upon
successful forecasts of business events. In business or trade the importance of
forecasting is so great, that when someone enters into the business
world, he really enters the
profession of forecasting. In recent times, considerable
research has been conducted in this field. Attempts are being made to make
forecasting are scientific as possible.
Business forecasting as such is not a
new development. Every businessman must forecast: even if his whole product is
sold before production. Forecasting has always been necessary.
What is new in the attempt to put forecasting on a scientific basis is
to forecast by reference to past history and statistics rather than by pure
intuition and guess-work.
One of the most important tasks
before businessmen and economists these days are to make estimate for the
future. For example, a
business man is interested in finding out his likely sales next year or as long
term planning in next five or ten years so that he could adjust his production
accordingly and avoid the possibility of either inadequate production to meet
the demand or unsold stocks.
Similarly, an economist is interested
in estimating the likely population in the coming years so that proper planning
can be carried out with regard to jobs for the people, food supply and so on.
First steps in making estimates for the future consists of gathering
information from the past. In this connection we usually deal with statistical
data which are collected, observed or recorded at successive intervals of
time. Such data is generally referred
to as time series. Thus when we observe numerical data at different points of
time the sets of observations is known as time series.
Business forecasting refers to the
analysis of the past and present economic conditions with the object of drawing
interface about probable future business condition. The process of making definite
estimates of future course of events is referred to as forecasting.