Question 2 [25] CASE STUDY: FORECASTING The management team at ABC Company needs a forecasting exercise to prepare for a very uncertain future. They need to predict or foresee events or conditions that may occur in the near future as their external analysis indicates that they are heading towards an uncertain future. ABC Companys managerial team used extrapolation as they analysed how they performed in the past in order to determine how the company will perform in the near future. They project trends of the past to the future to assist in making managerial decisions. Although extrapolation assisted the management team to indicate trends, they are uncertain about the validity of such an extrapolation as changes in the external environment suggest that the future cannot be determined but what happened in the past. They realised that ABC company needs to consider changes so as to be ready for what may happen in the external environment. Organisations in South Africa are confronted with an uncertain future due to unrest, high fuel prices, skilled workforce leaving the country, an economy that does not create enough jobs, stringent laws that make economic activities difficult and numerous taxes to mention a few. This situation calls for forecasting. You were tasked to consider forecasting tools and to recommend the most appropriate forecasting tool to be used. You considered three forecasting tools: scenarios, the Delphi technique, simulation and virtual reality. You decided that the best tool for ABC Company would be to develop three scenarios to showcase how scenarios as a forecasting tool could be used in strategizing for the future.

Question 2.1 [19]

Advise ABC Company to use the scenario method as a forecasting tool. In your advice, motivate why scenarios would benefit the forecasting task. You must use the following format (note the marks allocated):

Introduction: Describe the need for the advice as discussed in the case study. (5)

Reasoning: Provide detailed information on the scenario as a forecasting tool and why it is a more appropriate tool to use for ABC Company. (14)

Question 2.2 [6]

Recommending: Task: To provide advice, you need to provide three scenarios. The scenarios should capture three possibilities: the most probable scenario (realistic) a pessimistic scenario (negative) an optimistic scenario (positive) Method Read the case study first to ensure that you: Know what is meant by forecasting tools and the techniques that could be used as described in the textbook. Know the difference between internal and external environment to understand what is meant by external environment. Know in detail the meaning of all scenarios described in the textbook as a forecasting tool. Identify and synthesise at least five needs for the advice.