Page 80 - DCOM102_DMGT101_PRINCIPLES_AND_PRACTICES_OF_MANAGEMENT

Principles and Practices of Management

Notes There are numerous factors known as indicators such as interest rates, stock prices, level of
employment, and many others which are frequently employed to measure the extent of
economic activity in a nation. However, the single-most important indicator is the gross
national product (GNP). GNP is the value of goods and services produced in the country
affects the conditions of many organisations in an economy:
(a) Extrapolation: The simplest form of economic forecast is that of extrapolation, which
is simply a projection of the current trend into the future. An example of extrapolation
is shown in Figure 4.2.
Figure 4.2: Extrapolation

3.5

3

2.5

2

1.5

1

0.5
00 0.5 1 1.5 2 2.5
x
(b) Lead and lag method: In this method, the historic behaviour of various indicators is
studied. An illustration of Lead and lag method is shown in Figure 4.3.

Figure 4.3: Lead and Lag Method

Lead 20% CSG 80% Lag

50% Site 50%

80% Department 20%

100% Individual 0%

(c) Econometrics: This is a mathematical approach in which the main variables are joined
together in a series of equations. It can then be forecasted on the basis of the
assumptions developed from these equations.

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