Industry and Product Line Supply, Demand and Price Forecasting

The forecasting referred to in this section specifically concerns micro-forecasting of product supply and demand, pricing, industry capacity, sales etc not macro economic forecasting or financial forecasting using financial models or simulation models. Carey Fawcett does not do macro economic forecasting and financial modeling is covered in a separate section.

In the last few years, because of the explosion in new computer and communications technologies and the development of Chaos Theory, many businesses have abandoned doing their own forecasting and rely instead on fast reactions to changing circumstances. However, unless your business is truly at the cutting edge of new technologies, and probably less than 1% are, then forecasting is an essential component of the Strategy Development process. Even those who are at the forefront of implementing new technologies should develop industry forecasts and apply some simple tests to verify their practicality. For example, the rate at which broadband capacity was being increased in 1999 and 2000 was clearly going to result in massive over capacity even using the most optimistic expectations for usage growth. However, for the vast majority of businesses and industries technological change occurs gradually and can be dealt with rationally as part of the forecasting process.

A second problem with attitudes to forecasting, is the idea that forecasting involves making accurate predictions about an event or outcome and that since, in the vast majority of instances, this is extremely unlikely to occur, there is no point in making forecasts. In reality, all forecasts are based on a variety of assumptions or sub-forecasts, each of which, has a certain probability of occurring, and any single forecast is the combination of the most likely events for each sub-forecast. Any prediction therefore has a probability associated with it and the probability is very seldom 100% certain.

Forecasting is thus an exercise in recognizing causality and assigning probabilities to different outcomes and, provided these causal factors are explicitly identified, the most likely outcome can be adjusted as causal factors change.

Although, in business environments, stability is impossible in the same sense that scientific laws are constant, the changes in the environment tend to take place very gradually over time.

It is therefore possible to identify what is causing change and to assess the probability of particular rates of change and even of particular events occurring and their likely effect upon your business.

Carey Fawcett employs a variety of different forecasting techniques, including simulation modeling, and will utilize the most effective technique for a particular purpose such as product line forecasting, industry growth, technological change. In particular Carey Fawcett has developed proprietary techniques for assessing the potential impact of new products (New Product Assessment). These techniques can be used to forecast the market performance of a new product from either an offensive or defensive standpoint.