European Journal of Scientific Research - EuroJournals

Forecasting as a Strategic Decision-Making Tool: A Review and Discussion with
Emphasis on Marketing Management 438
Political and Legal Environment
Political and legal factors sometimes create very major threats and opportunities for companies such as
regulation and deregulation of industries and privatisation of public firms has done in the countries like
UK, Turkey and East European countries. As the regulation of advertising in the tobacco and alcoholic
beverages created threats for the companies in these industries, the deregulation of telecommunication,
airline, and banking industries created new opportunities for many companies (in many countries
including USA, UK, and Turkey). Forecasting can be used to predict the likely directions of the future
developments so that company can make itself ready and strategic management have more time to
adapt to and consider new conditions. The company can use new opportunities faster than their
competitors.
Global Environment
The changes in the global environment are also important for companies in maintaining their
competitive power. New economic and/or political blocks such as the birth of Asian Tigers (Taiwan,
Japan, South Korea and, maybe, other south eastern countries, North American Free Trade Agreement
(NAFTA), and European Union (EU) may bring both new threats and new opportunities for
companies. Just after the Soviet Union collapsed in the late 80’s, many American and European
companies were already in operation in the region. The same is true for the new process, called
globalisation. Even if not in the same level as the big multinational corporations can get benefit of the
process through the free flow of capital in the world, the process also created many new opportunities
for many medium-sized companies. Even many local companies have grown up to national and
international sizes. Therefore, the analysis and prediction of global changes are highly important for
companies to create new opportunities and forecasting plays a significant role in this.
Criticism of Forecasting’s Applicability
As it is the case in many other managerial methods, it is also possible to see some criticism of the
applicability of (especially statistical) forecasting methods and the applicability of the forecasts
produced to strategic management. The main criticism is related to the key assumptions in statistical
forecasts that the past data contains information about the future and the patterns in the data are
expected to repeat themselves, which are expected be captured by statistical methods. However, due to
the rapid changes in technological, economic, political, social, and environmental factors, statistical
forecasts are expected to be most effective for a one-to-two year period. On the other hand, the
magnitude of the pressures from those major changes tends to negate the validity of these forecasts.
Also, since statistical forecasts assumes that the past will be repeated, they are seldom accepted as the
sole basis for strategic planning and decision making (Hegeman, 1974: 4-289 - 4-290). In spite of some
of these criticism can be credited to some extent, most of them are not valid due to the following
reasons:
1) One and two year periods are critical in formulating and implementing future strategies. The
data and information produced by the forecasting system has the highest value for strategic
managers and, in fact, this is the time for managers to observe if strategic plans are carried out
smoothly. Therefore, the contribution of forecasting can not be ignored.
2) Forecasting methods (statistical and simulation type techniques) can capture and explain the
system dynamics and their effects. For instance, the forecasting system can focus on what
intervening price cycles the industry will experience rather than what the price maybe in ten
years.
3) Statistical forecasts are mostly adjusted and combined with judgemental forecasts. Therefore,
the patterns and expectations that are not revealed in the statistical forecasts can still be
reflected to the forecasts. Today, judgemental forecasting has been a very major research area