Strategic forecasting techniques

There are two methods:-

•    Quantitative techniques
•    Qualitative techniques

Quantitative techniques

Projections are based on numerical data such as statistics and accounting data often analysed by computer based model. Examples of quantitative techniques:-

Budget forecasting:- used by middle and senior managers. They attempt to quantify their target for the coming year, estimate the cost and justify the results they want.

Ratio analysis:- involves the analysis of management and financial ratios for the purpose of identifying trends in key performance areas. A ratio signifies a quantifiable relationship often expressed as a percentage between the key aspects the key aspects of companies activities eg.

                        Rate of Return on Capital      =         Profit before tax x 100

Employed                                        Capital employed

                                                    Current ratio =     Current Assets

                          Current liabilities

Computer modelling:- used in planning, design, control and review of large scale projects.

 Time series analysis – projections may also be carried out based on past data of the organisation. In time series analysis, data eg. sales are plotted against time period eg. months, or years and then the “bests fit” line is obtained showing a future trend in the predicted sales.