Organizations use strategic forecasting to support decisions about their future business and marketing strategy. Strategic forecasting uses historical data on sales of a product or service, and makes predictions about the trend of future sales to create an estimate of future demand. That demand estimate provides the basis for developing strategies for other resources such as employee levels, manufacturing capacity, product development and marketing budgets. The forecast helps the organization to align its business with future demand. It can then make informed decisions on whether to expand or rationalize the business.
The rapid rate of change in global markets and in technology makes strategic forecasting difficult. According to Microsoft, organizations should take the viability of their existing product range into account, as well as opportunities that might develop from the introduction of new products or technologies.
Analysts and research firms issue regular reports on market trends in a range of industries. These reports provide valuable, authoritative input to strategic forecasting. Telecommunications industry analysts Frost & Sullivan offer a service based on partnership with clients. The service utilizes the firm’s market trend reports to highlight growth opportunities for clients and provide guidance on technology, partnership and product decisions.
Product life cycle analysis plays an important role in strategic forecasting. Products move through a cycle: introduction, maturity, growth and decline. The forecast must take into account the product’s likely cycle position for the forecast period. If an organization’s portfolio consists mainly of products in the later stages of the cycle, it will have to make investments in product development to succeed in future markets.
Strategic forecasting techniques are evolving. An article in the "Journal of Business Strategy" outlines an approach to strategic forecasting that takes account of market segmentation techniques. The author's argument is that markets are not homogeneous. Within different segments, growth rates, customer preferences and market share vary. A forecast that aggregates predictions from different segments is likely to be more accurate than a forecast based on total market predictions.
A strategic forecast predicts the market opportunity an organization will have in the future. To take advantage of the opportunity and make a profit, planners must identify the costs and investment needed to succeed. They must estimate the marketing budget, the prices and the cost of sales required to take different levels of market share, as well as the investment required in new product development and manufacturing capacity to meet forecast demand.