Forecasting and Prediction

Forecasting entails a procedure of scrutinizing and revealing the future condition of an operation being carried out. Forecasting considers both previous and current information in an attempt to predict future events. Forecasting involves a forward-looking process as well as predetermining future trends and its effects on a firm. Forecasting can be carried out in two ways, quantitative and qualitative. Quantitative forecasting tries matching prior records and data to come up with forecasts. The process applies time series and regression analysis (Kungu, 2018). Qualitative forecasting attempts to make forecasts relying on an expert judgment from individuals with experience. An example of forecasting is meteorology in weather forecasting whereby meteorologists forecast the future weather pattern with regard to the information they collected previously like temperatures and wind speeds.

Prediction, on the other hand, refers to statements attempting to point out the possible results as well as subsequent events.  Predicting is actually indicating the events that will occur in the future without necessarily relying on previous information. It is a process entailing in-sample observations. Predictions are often subjective and intuition bias. An example of predicting is estimating the future price of a used car on the basis of prior data of previous vehicles sold in the area.

It is important for managers to identify the difference between forecasting and predicting since they are both skills carried out at different levels of management. Consultancy, statistics, as well as economists, entail collecting vast amounts of data, analyzing it and forecasting the future (Toppr, 2020). Also, they apply scientific methods and procedures to try to gain maximum accuracy, which are essential for managers to learn. Managers’ expertise and knowledge is important in forecasting and predicting as aspects of guessing and observing are involved.

References

Kungu, E. (2018, July 23). Difference Between Forecasting and Prediction. Retrieved from DifferenceBetween.net: http://www.differencebetween.net/science/difference-between-forecasting-and-prediction/

Toppr. (2020). Concept of Forecasting. Retrieved from toppr: https://www.toppr.com/guides/business-management-and-entrepreneurship/planning/concept-of-forecasting/