Strategic Forecasting: A Guide to Better Decision-Making in Organizations
Posted on Nov 20, 2023 at 05:11 AM
Making future decisions according to the results of strategic forecasting is no longer a luxury. Instead, it has become an urgent necessity in light of this technological transformation because it is a roadmap for institutions and companies toward progress or decline.
That is, assuming that you want to succeed in making the most appropriate future decision for your company, you must follow some methods of strategic forecasting and planning. This is what we will discuss briefly in today's article.
What are the strategic forecasting methods?
According to studies of revenues, expenditures, and financial crises, the process of predicting the future of companies has become the most critical factor affecting their success or failure. This is, although no one has been able to confirm whether his/her predictions will work.
However, using strategic forecasting will facilitate the potential for risk analysis and the development of appropriate planning for essential issues in the organisation. Therefore, here are the primary strategic forecasting systems and methods that you can rely on in developing the company's plan:
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Quantitative Forecasting:
The basis of the principle of quantitative forecasting is probabilistic planning based on facts that make decisions or predictions closer to the truth. This method of strategic forecasting includes several processes:
This method of quantitative strategic forecasting in the business world relies on historical data and temporal measurement of events or scenarios that occurred in the past. Then, it provides a future prediction based on them.
Quantitative forecasting is based on some determinants or parameters according to time series that you have to consider when using this forecasting method. These determinants include mean, trend, cyclical effect, seasonal effect, and random factors. The result of multiplying these parameters and the previous information is the expression of the value on which the prediction is studied.
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Straight Line
Managing expectations through the straight-line method of quantitative forecasting is one of the easiest methods of strategic forecasting. These methods include the use of mathematical systems when budgets are financial or when future revenue growth is to be projected. By following these methods, you can build a future picture for the next three years, given the growth of your revenues in the past three years. That is why it is called straight-line style.
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Linear Regression
It seems complicated to understand the possibility of linear regression in preparing a list of your future expectations unless we give an example of it:
Linear regression is a line drawn based on a relationship between two variables. This line can be drawn according to the sales and profit variables. If they are directly proportional, the business company’s expectations are moving according to steady and successful steps.
On the other hand, if sales are high, for example, and profits are low, there may be some imbalance, perhaps in increasing the scope of the organisation's expenses disproportionately with its revenues. Once you know this, you can expect bad results in the future unless you create solutions.
Unlike quantitative forecasting, the qualitative prediction strategy is imprecise because it uses soft data that does not rely on fundamental constants or information based on recent developments such as artificial intelligence.
To create strategies or forecasts based on quantitative forecasting, all companies must get acquainted with experts' estimates and read their thoughts about the upcoming financial future according to the type of industry or trade.
However, although qualitative forecasting does not give predictions very close to correct, it is widely used in crises or disasters and short-term forecasts. As an example of the above, it is expected that sales and revenues will decline in light of the Corona pandemic, and its strategy includes two models:
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Delphi Method
Delphi method or system is the preparation of an analytical perspective based on topics and data collected from specialists in some fields, not to mention essential opinion polls at a particular time, to make a set of decisions in the company's financial issues.
In particular, following financial forecasting techniques based on strategic analysis will see results in managing financial reserves, setting the marketing budget, and managing employee payroll. Nevertheless, strategic analysis needs a straightforward methodology to gain experience in it; that is, some specialised training programs, such as forecasting training Online must be attended.
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In-store Research
It means market research and building specific goals based on this urge (such as trying a particular product or service under certain conditions) and anticipating or making the next selling strategy. However, this form takes a long time to prepare, especially since it has to be based on genuine reviews and surveys.
Finally,
Often, strategic forecasting is the first guide for most companies to make them take their steps towards success and control the competitive market, primarily if the study is based on one previously mentioned method and model.
Simply put, it has become necessary to harness most human resources to build correct future expectations that contribute to proactive actions that benefit your business and your company.
