Huaneng Power International Inc. Raising Capital in Global Markets Harvard Case Solution & Analysis

Huaneng Power International Inc.Raising Capital in Global Markets Case Solution 

Forecasting

Forecasting can be explained as predicting the future based on educated guess work or using some statistical techniques. Forecasting has been popular in businesses and the investors and managers have all been very fond of using popular forecasting techniques to determine earnings potential of actions. Many researchers have worked on forecasting and it can be defined as following;
“Forecasting is an important part of decision making, unless insurance or hedging is selected to deal with the future”(Armstrong, 1988).
Forecasting has become crucial in the current era of the business when things are expected to change so quickly, therefore forecasting has also become more complex and requires more resources but still businesses value the forecasting which is evident from the fact that companies hire specialists and purchase latest technologies to benefit from forecasting techniques.It also shows that the costs incurred in forecasting are not greater than the benefits received.
There have been several factors that have increased importance of forecasting within organizations to increase in recent years, which are following;

• Complexities in Organizations

The businesses have grown and are becoming very complex. Some of the examples of growing complexities include different markets being served and different types of products being offered, therefore making the forecasting practice more difficult

• Environmental Changes

Factors such as technology are developing and growing, as a result businesses benefit from this growth.Therefore, more complex forecasting methods are required as new variables are introduced in the market. Other environmental factors include demand structures and etc.
Nowadays organizations try to develop systematic decision making processes involving use of explicit reasoning for entity’s actions and therefore,making a formalized forecasting system where actions can be supported with logical reasoning. These forecasting systems require forecasting experts as well as forecasting managers for understanding and practically applying these techniques.
It can be said that forecasts bring value to the organization if they are used in decision making. On the other hand,the importance of using forecasting has always been accepted and therefore,researchers carry repeated researches to investigate the issue in techniques famous researches include following; Armstrong, 1988; De-Roeck, 1991; Mahmoud, 1992. However, the most empirical researches related to forecasting have remained within the issues in methodologies, whereas the issues regarding the application of the forecasting methods are yet not much researched.
"It is virtually impossible to work with real organizations or even simply reading the business press without realizing that the gap between the development of forecasting techniques and their application is huge" (P Schultz, 1992)
Risk and uncertainty are the vital parts of forecasting. It is important for the forecaster to consider the degree of uncertainty relating to forecasts. To reduce the uncertainty, several steps can be taken however,the data needs to be complete and correct to make the forecast as correct as possible.

Use of Forecasting Techniques
Managers use different techniques for preparing budgets, which are later used in the planning of volume for production, inventory levels and the, labor hours and financing requirements. The management is usually operating with some degree of uncertainty and risk. Therefore, it is the role of management to prepare forecasts that allow the company to assess the risks undertaken by a company.Forecasts usually form the foundation for planning and decision making. Sales forecasts are the most important aspects of any financial management activity, including budget-making, profit assessment and acquisition or merger analysis.
Forecasts are needed in all departments of the company such as a marketing, production, purchasing, manpower, and financial planning. Also, the top management needs the forecasting data for planning the long-term strategies of an organization.
Forecasting can be applied in different fields as future estimates are useful. However,not everything can be predicted with accuracy, as factors that are related to the variable being forecasted need to be known. If no factors can be determined upon which our variable are dependent on,then our prediction may not be reliable...................

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