Budgeting Basics and Beyond by Shim Jae K. Siegel Joel G. Shim Allison I. & Joel G. Siegel & Allison I. Shim

Author:Shim, Jae K., Siegel, Joel G., Shim, Allison I. & Joel G. Siegel & Allison I. Shim
Language: eng
Format: mobi, epub
Publisher: Wiley
Published: 2011-09-15T21:00:00+00:00

Qualitative Approach

The qualitative (or judgmental) approach can be useful in formulating short-term forecasts and can also supplement the projections based on the use of any of the quantitative methods.

Four of the better-known qualitative forecasting methods are executive opinions, the Delphi method, sales-force polling, and consumer surveys.

Expert Opinions

The subjective views of experts from sales, production, finance, purchasing, and administration are averaged to generate a forecast about future sales. Usually this method is used in conjunction with some quantitative method, such as trend extrapolation. The management team modifies the resulting forecast, based on their expectations.

The advantage of this approach is that the forecasting is done quickly and easily, without need of elaborate statistics. Also, the jury of executive opinions may be the only means of forecasting feasible in the absence of adequate data.

The disadvantage, however, is groupthink, a set of problems inherent to those who meet as a group. Foremost among these problems are high cohesiveness, strong leadership, and the insulation of the group. With high cohesiveness, the group increasingly conforms through peer pressure that stifles dissension and critical thought. Strong leadership fosters group pressure for unanimous opinion. Insulation of the group tends to separate the group from outside opinions, if given.

Delphi Method

In the Delphi method group technique, a panel of experts are questioned individually about their perceptions of future events. The experts do not meet as a group, which reduces the possibility that consensus is reached because of dominant personality factors. Instead, the forecasts and accompanying arguments are summarized by an outside party and returned to the experts, along with further questions. This continues until a consensus is reached.

This type of method is useful and quite effective for long-term forecasting. Because it is done in questionnaire format, it eliminates the disadvantages of groupthink. There is no committee or debate; the experts are not influenced by peer pressure to forecast a certain way.

Low reliability and lack of consensus from the returns are cited as the main disadvantages of the Delphi method.

Sales-Force Polling

Some companies use as a forecast source salespeople who have continual contact with customers. They believe that the salespeople who are closest to the ultimate customers may have significant insights regarding the state of the future market. Forecasts based on sales-force polling may be averaged to develop a forecast, or they may be used to modify other quantitative and/or qualitative forecasts that have been generated internally in the company.

The advantages of this forecast are:

It is simple to use and understand.

It uses the specialized knowledge of those closest to the action.

It can place responsibility for attaining the forecast in the hands of those who most affect the actual results.

The information can be broken down easily by territory, product, customer, or salesperson.

The disadvantages include salespeople's being overly optimistic or pessimistic regarding their predictions, as well as inaccuracies due to broader economic events that are largely beyond their control.

Consumer Surveys

Some companies conduct their own market surveys regarding specific consumer purchases. Surveys may use telephone contacts, personal interviews, or questionnaires as a means of obtaining data.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.