Every business must be aware of the important data that it needs in order to make critical business decisions. In order to forecast the occurrence of uncertain events, previous data are projected into the future. This could assist companies in evaluating decision impacts and future effects of current decisions.
For instance, new equipment is bought despite uncertainty regarding product demand, inventory is ordered without knowledge of future sales, investments are made without knowledge of future earnings, etc. In order to predict the future with confidence and accuracy in the midst of ambiguity, forecasting is crucial.
Qualitative Forecasting Methods:
These techniques involve gathering viewpoints and assessments of people who are thought to be the most knowledgeable about the organization’s ongoing initiatives or long-term goals. For instance, marketing executives or product managers frequently have access to information on demand trends and customer plans. The marketing and sales staff are probably familiar with specific clients or a particular retail market segment because they interact with them frequently. Management typically keeps track of larger market data on trends by product line, region, client groups, and other factors.
The ability to include both empirical facts and subjective experience as inputs is an advantage of qualitative forecasting techniques. The ability to integrate various kinds of information and ultimately produce a forecast is a feature of the human mind.
A disadvantage of qualitative forecasts is since every person has a unique set of information, experiences, and perspectives on the world, gut predictions will probably vary from person to person. Furthermore, they are less conducive to logical analysis and are less grounded in measurable evidence. Data that has been quantified has a clearer meaning than words that are ill-defined and subject to misinterpretation. Additionally, there is a factual foundation for improving the following time if the projections turn out to be erroneous.