Qualitative Forecasts

Surveys and opinion polls are often used to make short term forecasts when quantitative data are not available. These qualitative techniques can also be useful for supplementing quantitative forecasts that anticipate changes in consumer taste or business expectations about future economic conditions. They can also be invaluable in forecasting the demand for a product that the firm intends to introduce. Let us briefly examine forecasting based on followings:1. Surveys 2. Opinion polling 3. Soliciting a foreign perspective

1. Survey Technique
The rationale for forecasting based on surveys of economic intentions is that many economic decisions are made well in advance of actual expenditures. For example, businesses usually plan to add to plant and equipment long before the expenditures are actually incurred. Consumers decision to purchase houses, automobiles, TV sets, washing machine, furniture, vacations, education, and other major consumption items are made months or years in advance of actual purchases. Similarly government agency prepared budgets and anticipate expenditures a year or more in advance. Surveys of economic intentions, thus, can reveal and can be used to forecast future purchases of capital equipment, inventory change, and major consumer expenditures. Some of the best-known surveys used to forecast economic activity in general and economic activity in various sectors of the economy are: Surveys of business executives plant and equipment expenditure plans. These are conducted periodically by CMIE, the ministry of commerce, the ministry of statistics, SEBI, CII and FICCI. For example, the CMIE survey accounts for more than 50 percent of expenditures on new plant and equipment, is conducted yearly,

and is published on-line by Prowess and CapEx (CMIE database). The ministry of commerce survey is even more comprehensive: it is conducted annual and is published in its Annual Report and annual economic survey. Surveys of plans for inventory change and sales expectations. These are conducted periodically by the ministry of commerce, FICCI, CII, CMIEs Prowess, and they report on business executives plans for inventory changes and expectation about future sales. Surveys of consumers expenditure plans. These are conducted periodically by the directorate of economics and statistics, central statistics organization, and CMIE, and they report on consumer intentions to purchase specific products, including homes consumer appliance, and automobiles. These results are often used to forecast consumer demand in general and the level of consumer confidence in the economy. In general, the record of these surveys has been rather good in forecasting actual expenditures, except during periods of unexpected international political upheavals, such as war or threatened war. When used in conjunction with other quantitative methods, surveys can be very useful in forecasting economic activity in specific sectors of the economy and for the economy as a whole. India firms spend a significant amount of money each year to ask more than 500 lac consumer for their opinion on a large variety of product and services. A growing number of consumers, however are refusing to participate in market research surveys because of the time involved, the loss of privacy, and the pressure from salespeople operating under the guise of market research. This led to increasing difficulties in obtaining representative sample and to a trend toward greater use of observational research.

2. Opinion poll
Although the results of published surveys of expenditure plans of business, consumers, and government are useful, the firm usually needs specific forecasts of its own sales. The firms sales are strongly dependent on the general level of economic activity and sales for the industry as a whole, but they also depend on the policies adopted by the firm. The firm can forecast its sales by polling expert within and outside the firm. There are several such polling techniques: Executive polling. The firm can poll its top management from its sales, product, finance, and personnel departments on their views on the sales outlook for the firm during the next quarter or year. Although these personal insights are to a large extent subjective, by averaging the opinion of the experts who are most knowledgeable about the firm and its products, the firm hopes to arrive at a better forecast than would be provided by these experts individually. Outside market expert could also be polled. To avoid a bandwagon effect (whereby the opinions of some experts might be overshadowed by some dominant personality in the midst), the Delphi method can be used. Here, experts are polled separately, and then feedback is provided without identifying the expert responsible for the particular opinion. The hope is that through this feedback procedure the expert can arrive at some consensus forecast. Sales force polling. This is a forecast of the firms sales in each region and for each product line; it based on the opinion of the firms sales force in the field. Those are the people closest to the market, and their opinion of the future sales can provide valuable information to the firms top management. Consumer intentions polling. Companies selling automobiles, furniture, house hold appliances, and other durable goods sometimes poll a sample of potential buyers on their purchasing intentions. Using the result of the poll, the firm can forecast its national sale for different levels of consumers future disposable income.

3. Soliciting a foreign perspective

Many Indian firms sell an increasing share of their output abroad and face rising competition at home and abroad from foreign firms. Thus, it becomes increasingly important for them to forecast changes in markets and products abroad because these affect not only the firms export but also its competitiveness at home. To get such an international perspective, an increasing number of Indian firms are forming councils of distinguished foreign dignitaries and business people, especially in Europe. The purpose is to get global perspective on evolving events resulting from economic unification in Western Europe, restructuring in Eastern Europe, and economic linearization in emerging market or developing countries. The rationale is that there is no better way to forecast and figure out what is going to happen in Europe than to solicit the ideas of government and business leader who live there. For example, general motors in U.S. found in European advisory council useful in preparing for the first decade of the new century. IBM calls on its advisory councils in Europe, Asia, and Latin America to help develop strategic plans. The advantage of such foreign councils is that they do not have to spend time reviewing budgets or handling others fiduciary duties such as succession planning, but can devote their full attention to international issues that can have enormous impact on the firms future as a global competitor, firms boards are usually so taken p with immediate concerns and are so lacking in knowledge of development that they are unable to fully evaluate the global situation. The input of such foreign councils becomes an invaluable tool to get a global perspective and plan longer-term domestic and foreign strategies.