Planning and Forecasting are two essential functions of the various activities and functions performed in management. Both these functions are integral for any organization and help in the growth and development of an organization.
Various other functions within an organization are dependent on the process of Planning and Forecasting. Planning and Forecasting are closely related to each other.
Both these functions are key steps in the decision-making process.
They determine the possibilities in a company based on its past and present performance. Any future predictions in a company are based on the process of Planning and Forecasting.
Though both these functions are related and help achieve the desired results, there is a major difference between these functions. While planning relies on information and objectives, forecasting relies on assumptions and guesses.
Key Takeaways
- Planning is setting goals, defining strategies, and outlining steps to achieve desired outcomes; forecasting is estimating future outcomes based on historical data or trends.
- Planning is proactive and intended to shape future events; forecasting is reactive and predicts future events.
- Planning focuses on creating a roadmap to achieve specific objectives; forecasting focuses on predicting future outcomes and anticipating potential risks.
Planning vs. Forecasting
Planning refers to setting goals, identifying the steps needed to achieve those goals, and determining the resources and timelines required to complete the necessary tasks. Forecasting involves predicting future trends or events based on past data or other information.
Comparison Table
| Parameter of Comparison | Planning | Forecasting |
|---|---|---|
| Meaning | Planning refers to the process of knowing the future goals and determining the future course of action. | Forecasting refers to the process of predicting the company’s performance in the future based on past and present trends. |
| Based on | The process of planning is based on information, objectives and performance. | The process of forecasting is based on assumptions, populations, and guesses. |
| Stresses upon | Planning stresses the facts and the expectations. | Forecasting stresses the facts. |
| Responsibility | Planning is the responsibility of the President, CEO, or top-level managers. | Forecasting is the responsibility of the company’s analysts, experts, or specific managers. |
| Related to | Planning is related to the future course of action. | Forecasting is related to predicting the future performance of the company. |
| Focus | The focus of planning is to understand the future and prepare accordingly. | The focus of forecasting is to make predictions about trends and the company’s performance. |
What is Planning?
Planning is one of the most integral tasks in managing any company or business. It is one of the basic activities needed in any organization, regardless of size.
The planning process helps to decide how and when things should be done. Planning helps decide a future course of action, which helps a business reach its goals and objectives.
It helps to bridge any differences between the present and the future. It helps to understand better what steps are needed in the future and further helps to make provisions to achieve the necessary changes.
The process of planning relies on relevant information and facts. These facts are carefully gathered and analyzed.
Based on these facts, future decisions are made that can help to achieve the goals and objectives of a business. Thus with the help of proper planning, a firm can achieve a competitive edge in the market.
It can look into the future and make better and well-informed decisions.
What is Forecasting?
Forecasting is a very commonly used business activity performed in all organizations. It helps any organization to stay prepared for any uncertainties of the future.
Businesses employ managers to perform this activity. A lot of businesses hire experts or analysts to perform this activity.
Forecasting is the term given to the process wherein a business tries to predict its future trends and performance based on past and present trends and performances. The process uses all kinds of past and present data to analyze and predict future trends. The process of Forecasting relies on guesses and judgments.
Experienced managers use their knowledge and judgment to predict or forecast the future trend of a business. A misjudgment or any error while making a guess can lead to a forecasting error, which might impact a business’s overall performance.
Moreover, no accurate forecasting technique can give an exact idea of future performance and trends. An example of how forecasting is used in a business is to understand how to plan their budgets for the next year or to set aside any anticipated expenses for the future.
Main Differences Between Planning and Forecasting
- Planning refers to understanding a company’s future goals and objectives and laying down the future course of action for the company. On the other hand, Forecasting refers to predicting the company’s future performance, keeping past and present performance in mind.
- Planning focuses on understanding the future and taking actions based on that understanding while on the other hand, Forecasting focuses on making predictions of company trends.
- Planning relies on relevant information, facts, objectives, and performance, while on the other hand, Forecasting relies on assumptions, populations, and guesses.
- The President, CEO, or top-level managers of the company do the planning. On the other hand, Forecasting is done by analysts, experts, or specific managers employed by the company.
- Planning lays stress on facts and expectations. Forecasting lays stress on the facts.
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=649097
- https://www.sciencedirect.com/science/article/pii/S0925527315002078
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