Forecasting is a technique used for estimating future market value of an operation or business. It is an important tool that helps business’s owners and executives in attempts to manage with the ambiguity of the future. Forecasts are essential for long-term and short-term decisions. There are two methods of forecasting: quantitative methods (objective approach) and qualitative methods (subjective approach).
Quantitative forecasting techniques are on historical data and assume that past data can be possible to forecast future data points (Encyclopedia of Business, 2nd ed., 2010). According to Encyclopedia of Business, 2nd ed. (2010), "(There are two major categories of quantitative forecasting methods. The first type uses the past trend of a particular variable to base the future forecast of the variable. As this category of forecasting methods simply uses time series on past data of the variable that is being forecasted, these techniques are called time series methods)” (Forecasting, para. 10). The second type uses explanatory methods. Qualitative forecasting techniques use the judgment of expertise in an appropriate field to generate the forecast (Encyclopedia of Business, 2nd ed., 2010). The scatter plot graph below is an example of Sony Corporation time series data for the next five years. The graph is based on the company’s historical data from July 25, 2005- July 25, 2010. The first type of quantitative forecasting method is used for this scatter plot graph below.
The scatter plot graph shows how the time series data of indices fluctuates by decreasing and increasing fairly steadily over the years from 2005 to 2008. In 2008 to 2009 the prices started too dropped below 60.00 and continue to increase in 2009 to mid 2010. From the mid 2010 the price index started to decrease again. Looking at Sony Corporation forecast for next year the price index will possible fluctuate with a decrease- increase pattern depending... [continues]
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