TABLE OF CONTENTS The act of preparing for the future implies forecasting. In our personal lives, such predictions are usually made on an informal, subjective basis. If they turn out to be wrong we can usually adjust our personal circumstances. The same degree of flexibility does not generally exist in our working lives as decisions are usually of a more formal nature and of greater consequence.
The nature of managerial decision-making involves forecasting future conditions which might be for an important one-off decision e.g. the company may be considering expanding by acquisition, diversifying into a totally new market or modernising its production processes. Such decisions tend to be long-term and strategic, rather than operational. In such situations, because of the importance of decisions being made, forecasting should receive careful consideration, meaning an investment of resources in the forecasting process (see Wright, 2004, p. 97).
Managerial decisions are not always strategic and much of a manager's time is taken up with day-to-day operational issues, which although not of the same magnitude as strategic decisions, are nonetheless important to the manager because of the proportion of time they occupy. Management requires forecasting information to assist when making operational decisions, although the required time horizon for such forecasts is shorter than for strategic decisions. For example, for the marketing manager to set monthly sales targets, operational expense or advertising budgets, he or she may require regular short-term forecasts for each product, broken down according to product type, size, colour, sales-person's territory, channel of distribution...
