BUSN660

250 words reply agree or disagree to each questios

Q1.

have to admit when I first read this topic, I thought it would be an easy discussion, but it turned out to be more complicated than anticipated. According to our textbook, "forecasting" is a specific term that refers to prediction applied to time series data (Hall et al., 2012, p131).  Similarly, the Corporate Finance Institute (n.d.) defines forecasting as the practice of predicting what will happen in the future by taking into consideration events in the past and present.  Both definitions of forecasting implied the use of data to estimate the future. For example, a company could use historical sales data to forecast future profits.

In the same way, our textbook defines "prediction" as a general term that refers to any attempt to assess the value of something (Hall et al., 2012, p131).  Furthermore, prediction uses data mining and probability to forecast or estimate more granular, specific outcomes (OneModel, n.d.). In both cases, the definition of "prediction" implies the act of estimating a future event by any number of means.  Based on both definitions, readers could infer that a prediction may be found in part or solely on data, observations, experience, opinions, or others.  For example, the company can use historical data to predict a new product's sale levels that will introduce to the market next year.  Another way to look at is that using data and statistical tools; a company can forecast employees' turnover over the next five years. However, adding opinions to the mix could help predict which employees are most likely to leave the company.

In conclusion, when a future occurrence is estimated based solely on data and statistics, it can be called a forecast.  However, a future event calculated using data, statistics, and/or nonscientific methods; is a prediction.  That is why people forecast the weather and predict the economy.

VR

Rommel Blanco

References

Corporate Finance Institute. (n.d.). Forecasting. https://corporatefinanceinstitute.com/resources/knowledge/finance/forecasting/

Hall, D., Jones, R., & Raffo, C. (2012). Business Studies (I. Chambers & D. Gray, Eds; 3rd ed.). Causeway         Press Ltd.

OneModel. (n.d.). AI Academy: What's the difference between forecasting and predictive modeling?https://www.onemodel.co/blog/ai-academy-forecasting-vs-predictive-modeling

Q2.
In his book Keeping Up with the Quants, Thomas Davenport defines forecasting as "the estimation of some variable of interest at some specified future point in time as a function of past data (Davenport & Kim, 2013, p. 4)". What this entails is that when forecasting something, one makes a prediction based on past data. Our textbook offers future sales or the economic growth rate as examples of forecasting, as a manager can use previously accumulated data to obtain such forecasts (Bell & Zaric, 2012, p. 131).

Our textbook defines prediction as trying to estimate an unknown value, such as someone’s weight (Bell & Zaric, 2012, p. 131). The key distinction between forecasting and prediction, in my opinion, is that prediction is almost a guess, while forecasting is a guess based on data that has been thoroughly analyzed with a model. Forecasting is a form of predictive analytics, which aim to predict the future using data from the past (Davenport & Kim, 2013, p. 3). A manager needs to understand the difference to be able to assess the reliability of the information in front of them. If the manager is facing a prediction, then they know it could be less reliable than a forecast.

I read an online Harvard Business Review article which highlighted the importance of the forecast to the firm, especially when it comes to its strategy. By forcing managers to develop contingency plans, even if what it predicts does not occur, it increases the readiness of the firm to confront potential opportunities and issues (Foley & Khavkin, 2019).

REFERENCES

Bell, P.C., & Zaric, G.S. (2012). Analytics for Managers with Excel. Taylor & Francis Group.

Davenport, T.H., & Kim, J. (2013). Keeping Up with the Quants: Your Guide to Understanding and Using Analytics. Harvard Business Review Press.

Foley, C.F., & Khavkin. (2019). How companies should prepare their forecasts. Harvard Business Review. https://hbr.org/2019/04/how-companies-should-prepare-their-forecasts?autocomplete=true