European Journal of Scientific Research - EuroJournals

421 Cihat Polat
strategic management literature, giving no clear picture of the potential value and usability of such a
tool in strategic decision-making context. This points out the necessity of a comprehensive and
thorough review and discussion of the topic in order (iii) to clarify the issue and make a conceptual
framework. To do this, the paper extracts and filters some of the relevant information in the literature
and puts them together in order to present a brief and comprehensive picture. In this manner, the paper
attempts (iv) to fill some of the gap in the literature by pointing out to the potential of forecasting as a
strategic tool and highlighting its functionality in various macro and micro environmental and strategic
decision areas, which is not adequately discussed either in the forecasting or strategic management
literature. It also draws a theoretical frame of to what extent forecasting can be utilised in various areas
and presents a judgemental outline within this theoretical view. Thus, the paper also attempts (v) to
draw the attention of both practitioners and academicians to ‘forecasting’ as a strategic decision tool. It
additionally points out new application and evaluation areas for both strategic managers and
forecasting researchers, and suggests potentially productive directions for future research.
The paper is organised in six main parts. The second part discusses the forecasting in the
strategic context. The third and fourth parts discuss the potentials of forecasting with respect to the
internal and external environments of a company, respectively. The fifth part discusses the criticism of
forecasting to strategic decision context. Finally, the last part contains the summary and conclusion.
‘Forecasting’ in the Strategic Management Context
Surviving in highly competitive markets and adapting to new states require both strategic thinking and
utilising all the available information about the future, as well as that about the present. Nevertheless, it
may not always be readily available the information required about the future. Even though it is
possible to obtain a part of those data and/or information (e.g. inflation figures, growth forecasts,
exchange rates) from external sources, firms mostly produce and obtain the required data (e.g. the
amount of future stocks, cash flows, market shares) themselves within their own bodies. Moreover,
firms, themselves, may also have to produce some of the external data needed (e.g. inflation rates and
exchange rates) for themselves, which could normally be obtained from external providers otherwise.
Strategic management is applied in three different levels: Corporate, business, and functional
levels (Hill & Jones, 1992). In fact, the functional level management is the main management unit
where the strategies in a company are put into action. In strategy formation, the business and corporate
level managers need and use the information being fed from the functional level. Forecasting activities
can take place anywhere in these three levels based on the managerial needs and forecasting problems.
However, as we get from top to bottom of managerial levels, the more intensive and more frequent
forecasting function is utilised.
On the other hand, strategic decisions mainly focus on creating ‘competitive advantages’ and
differ from other daily or operational decisions from several aspects. Some of the characteristics of
strategic decisions are that (i) they are made less frequently than (e.g. daily) operational decisions; (ii)
they are generally more costly (in terms of the decision-making process e.g. may require longer time
and more money, and the alternative costs) to make compared to other type of decisions; (iii) the
consequences may be too severe for the firm; (iv) it generally requires background work and longer
time to make; (v) they may normally require more and detailed information (e.g. data and (full)
analysis of the situations, which may not be a pre-condition for ordinary daily decisions). The
decisions such as market segmentation, new product development, application of new manufacturing
process, selection of a new distribution channel, and application of a new marketing mix, all can be
considered as strategic decisions. In addition to these, some decisions may be an ordinary type but
might have strategic consequences (e.g. making a new purchase agreement and finding a new supplier
for a company in a critical industry where the number of suppliers might be very limited, which may
completely change the cost of production or may provide sustained raw material supply). Similarly, the
major decisions directed at obtaining substantial cost reductions can significantly contribute to gaining
competitive advantages and, that is why, can be considered as a strategic type.