Page 58 - DMGT521_PROJECT_MANAGEMENT

Unit 4: Project Analysis and Selection

4.4.3 Levels of Demand Forecasting Notes

Demand forecasting can be at the level of a firm or an industry or at the national or national or
international level:
1. Firm Level: If the exercise aims at forecasting demand of firms products locally at state,
region or national level, it is a micro-level of demand forecasting. Sometimes, forecasts
are required for company products in specific industry or market segment.
2. Industry Level: Such a demand forecasting exercise focuses on an industry as a whole for
the region and/or national level. These forecasts may be undertaken by a group of
companies or by industry/trade associations.
3. National Level: Demand forecasts at national level include parameters like national income,
expenditure, index of industrial and/or agricultural production etc. Estimating aggregate
demand of products at national level facilitates governmental decisions for imports, exports,
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? Demand forecasting is the activity of estimating the quantity of a product or
service that consumers will purchase. Demand forecasting may be used in making pricing
decisions.

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.

4.5 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.

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