World leader and the largest in the advertising and marketing corporation, WPP, has decided to cut its full year growth outlook forecast after the discovery that clients have cut on spending for advertising due to the economic crisis. http://online.wsj.com/article/SB10001424052970203897404578077941669547434.html?KEYWORDS=marketing
WPP has has looked into expanding into more international markets. Currently making more than two third sales in Latin America the Middle East, Central and Eastern Europe and Asia Pacific, WPP’s goal is to increase sales by forecasting for the next three and four years. However, their forecasting hasn’t been 100% accurate recently after showing that the markets in Brazil have slowed by 1.9% in their third quarter from 3.6%, sales in North America have dropped .4% and a 2.1% decline in Europe (Bender). In August, WPP ended up changing their forecasts of high expectations to lower growth expectations that advertising needs from clients would decrease, which ended up decrease particularly in the health care, call center and public affairs market. Even in their most popular time of client expectancy was at an all time low in September.
I believe that there have been many challenges for many companies to forecast the growth rates in the market with the current economic crisis which has set many companies back. Large companies such as Fannie Mae, GMC, Bank of America and many more major corporations primarily in the financial sector have had the greatest impact.
The question is, if forecasting isn’t providing a beneficial outlook for the future of a business, what else can businesses do to try to predict their future outlook within the market place? With the economies aggregate behavior of employment, output, and prices shifting since 2008, is cutting off the full year growth outlook such as WPP has decided to do, the best option?
2 thoughts on “Forecast Schmore-cast: Is Forecasting pointless in today’s economy?”
I think that forecasting is absolutely necessary in any business. However, there is not just one factor to look at when forecasting. Past figures (sales, numbers, etc.) is vital, but in today’s economy there is more to be considered. If markets have slowed down in certain areas then that’s one factor, if there is less advertising for products then that in turn effects sales– and should be considered while forecasting. There are several other factors that should be looked at to forecast the most appropriately. While forecasting is just an “idea” of how sales (or whatever is being forecasted) will be for a given period, it is without a doubt beneficial and important in any business. I personally do not think that cutting off the full year growth outlook as WPP has decided to do is a smart move on its part. I think that WPP should keep forecasting and just consider other factors to help make their forecast as accurate as possible.
In my opinion I believe that forecasting depends in the area of business one is concentrated in. If you’re selling tangible products it is very important to forecast because if a company is out of stock on a very popular product, they will be losing a lot of potential costumers and future costumers. Company’s need to prepare for all sorts of occasions, not only during the holiday season, but for new releases of products. As companies selling intangibles, in particular the service industry, it will be tough to forecast. They can market themselves and even give coupons to people for them to come to their business, but that does not mean that the customers will come and then they will overstaff when it is unnecessary and lose money. I’m not trying to say that forecasting is unnecessary or pointless but if done correctly, it will greatly benefit the company.