There are two main approaches used for market forecast:
- Interviewing of market players and asking them what they are thinking on future market size, supply structure, etc., and
- Making statistical & mathematical forecast model based either on past growth or on any future indicators that correlate with target market growth rate.
First way of forecast is good for smaller markets with stable past growth, limited number of drivers, and low number of players (suppliers and customers).
However it doesn’t work for highly-fragmented market with many products, numerous players, and different drivers. It also doesn’t work at economic crisis – when most of players want to hear someone’s forecast rather than they have any own vision. Another challenge is when various players give too different estimations for market’s future – suppliers are usually over-optimistic, while customers are more constrained in their forecast.
Statistic-mathematical models based on past growth are also good for stable markets – while at crisis this method doesn’t work. Taking into account some future indicators (that may be forecasted reliably) correlated with target market’s growth is better solution.
Since the beginning of the current global crisis more and more companies understand that traditional forecast based on past growth or expert opinion is useful only in stably emerging economies. Global economy in crisis, as well as economy in national, regional and corporate levels, is example of unstable and «chaotic» systems. Furthermore, traditional forecast does not provide adequate assistance in such systems. New methods are expected.
We actively use such advanced methods as chaos theory, catastrophe theory, tensor analysis, graphs theory, game theory, case based reasoning, genetic algorithms, etc.
Not to limit the vision with only one foresight we usually provide forecast in three main scenarios – optimistic, realistic and pessimistic. They differ in macroeconomic indicators, growth rates, etc. – and thus they provide three different views of how the target market may develop at these or those conditions.
Typical forecast done with us looks like:
- Description of changeable indicators that define this or that scenario;
- Assumptions for target market in each of three scenarios; and
- Calculations for market future size – done on the basis of changeable indicators and assumptions.