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Forecasting in Business

Since the passing of the first food and drug law, food spent millions or billions of dollars on the development of
laws and regulations have evolved from: a product that might not sell.
The process of attempting to forecast the future is not
1. concern about food fraud, to
new. Most ancient civilizations used some method for pre-
2. concerns about food safety, to dicting the future. In the twenty-first century, computers
3. protection of the nutritional integrity of food, to with elaborate programs are often used to develop models
to forecast future economic and business activity. Con-
4. truth in labeling, to, most recently,
temporary models of economic and business forecasting
5. concern about the relationship between health and have been developed in the last century. Forecasting mod-
food. els are considerably more statistical than they were hun-
dreds of years ago when the stars and mystical methods
Many amendments to the Food, Drug, and Cosmetic Act
of 1938 and other food-related laws and acts have been were used to predict the future. Almost every large busi-
passed by Congress and will continue to be enacted in ness or government agency performs some type of formal-
ized forecasting.
response to future technological changes and develop-
ments. Manufacturers of food, drugs, cosmetics, and their Forecasting in business is closely related to under-
related products must comply with the law. Penalties for standing the business cycle. The foundations of modern
violations include seizure of illegal goods, injunctions, forecasting were laid in 1865 by William Stanley Jevons,
restraint of shipments that violate the law, and criminal who argued that manufacturing had replaced agriculture
prosecution of those responsible for the violation. as the dominant sector in English society. He studied the
effects of economic fluctuations of the limiting factors of
SEE ALSO Consumer Advocacy and Protection
coal production on economic development.
Forecasting has become big business around the
BIBLIOGRAPHY world. Forecasters try to predict what the stock markets
Food, Drug and Cosmetic Act of 1938. Essential Documents in will do, what the economy will do, what numbers to pick
American History; Essential Documents, 1492–Present.
1–24. EBSCO Publishing. in the lottery, who will win sporting events, and almost
anything one might name. Regardless of who does it, fore-
Meier, Kenneth J., Garman, E. Thomas, and Keiser, Lael R.
(2003). Regulation and consumer protection: Politics, bureau- casting is done to identify what is likely to happen in the
cracy and economics (4th ed.). Mason, OH: Custom Thom- future so as to be able to benefit most from the events.
son.
U.S. Food and Drug Administration. (n.d.). The 1938 Food, QUALITATIVE FORECASTING
Drug, and Cosmetic Act. Retrieved February 20, 2006, from MODELS
http://www.fda.gov/oc/history/historyoffda/section2.html
Qualitative forecasting models have often proven to be
most effective for short-term projections. In this method
Phyllis Bunn of forecasting, which works best when the scope is lim-
Laurie Barfitt ited, experts in the appropriate fields are asked to agree on
a common forecast. Two methods are used frequently.

Delphi Method. This method involves asking various
FORECASTING IN experts what they anticipate will happen in the future rel-
BUSINESS ative to the subject under consideration. Experts in the
Business leaders and economists are continually involved automotive industry, for example, might be asked to fore-
in the process of trying to forecast, or predict, the future cast likely innovative enhancements for cars five years
of business in the economy. Business leaders engage in this from now. They are not expected to be precise, but rather
process because much of what happens in businesses to provide general opinions.
today depends on what is going to happen in the future.
For example, if a business is trying to make a decision Market Research Method This method involves surveys
about developing a revolutionary new automobile, it and questionnaires about people’s subjective reactions to
would be nice to know whether the economy is going to changes. For example, a company might develop a new
be in a recession or whether it will be booming when the way to launder clothes; after people have had an opportu-
automobile is released to the general public. If there is a nity to try the new method, they would be asked for feed-
recession, consumers will not buy the automobile unless it back about how to improve the processes or how it might
can save them money, and the manufacturer will have be made more appealing for the general public. This

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