Page 30 - DMGT302_FUNDAMENTALS_OF_PROJECT_MANAGEMENT

Unit 2: Project Analysis and Selection

demand of products at national level facilitates governmental decisions for imports, exports, Notes
pricing policy etc.
4. International Level: Companies operating in multinational markets would require similar
forecasting of demands for its products, trends in consumption etc at international level
Managerial Economists play a leading role in masterminding these forecasts at firm,
industry, national and international levels. Time horizon of these demand forecasts usually
varies from 1 to 5 years and in rare instances up to 10 years.

Did u know? Longer-term forecasting is also undertaken to determine trends in technology
development so as to choose the technology for backing up and funding its research and
development.

Self Assessment

Fill in the blanks:
1. ....................... is also utilized when prices are set for health insurance and health services
that some people cannot afford.
2. ....................... is also undertaken to determine trends in technology development so as to
choose the technology for backing up and funding its research and development.
3. Rationing occurs when a state determines who is eligible for ....................... Assistance
insurance.
4. ....................... and demand analysis of various types are undertaken to meet specific
requirements of planning and decision-making.
5. ....................... exercise should not be expensive in terms of efforts and costs.

2.5 Criteria for a Good Forecasting Method

A good forecasting method should have the following attributes:
1. Accuracy in forecast: Accuracy in forecast is measured in terms of past forecasts against
current sales and by the percentage of deviation form actual demand. It is important to not
only check the accuracy of past forecasts but also the validity of assumptions in practice.
Forecasts being future-oriented, cannot be always accurate although accuracy is the most
important criterion.

2. Plausibility of forecasts: Forecasts of demand must be reasonable, consistent and plausible.
Assumptions made should stand scrutiny and techniques adopted must be commensurate.
Explanatory note on these aspects must be available in the write-up on methods and
methodology employed in forecasting.
3. Economy of forecasts: Forecasting exercise should not be expensive in terms of efforts and
costs. Additional costs of ways and means for improving the accuracy of forecasts should
not exceed the extra gain expected.

4. Quick Results: Method of forecasting chosen should be capable of yielding quick and
useful results, If method selected takes fat too long a time to yield accurate forecast, it may
not be conducive for taking quick and effective decisions. Always remember not to make
best enemy of ‘good’.
5. Availability and Timeliness: Methodology of forecasting should be such that it can easily
be updated when changes occur in the demand relationships.

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