Use of methodology of forecasting the business activity results of corporate amalgamation

Modern market conditions even more often make businesspersons to do their business jointly with science, using its achievements in the field of forecasts, calculations of efficiency and planning. In turn, the science should develop more and more new tools and their combinations for better analysis not only environment of business, but also its internal indicators. At the present, there are enough various methods and models for calculation of any indicator you may need.

First stage of any forecast has to answer the questions concerning company’s activity. For example: «What products (goods) or services and in what volume are produced?», «Whether innovative approaches to create demand and sales promotion of goods or services are applied or not?», «What are the features of the existing system of management?», «What is the market share and a place of a company in branch?», «What is the level of competitiveness on market?», «What type of strategy does the company use?» and «What is the expenses structure?»

While estimating features of the existing system of management, the strategy that is used, the sizes, production, expenses structure, it is possible to determine the critical parameters significantly influencing company’s activity in the future. These parameters will be those main assumptions, which will form the basis of the forecast of company’s development.

It is useful to begin with data based on the past. Calculation of previous sales volume and other components of the reporting will provide with useful information for carrying out future forecast. However, the knowledge of the past doesn't mean knowledge of the future. The selected characteristics have to be estimated at a forecasting stage. For example, if sales level of the company is inseparably linked with the economy of the region, it is necessary to make the economy development forecast in general. So, if financial forecasting is based on assumptions, it is necessary to find several alternatives. Only after that it is possible to rely on the forecast, but carefully.

There may not be any perfect and exact forecast of the company’s development, but the set of all possible options of development will be defined.

The main methods of forecasting are as follows:

• -    the methods of statistics, (such as the average weighed and finding the trend of a dollar rate) and dynamic methods;

• -    the method of expert evaluations (Method «Delfi», ABC - analysis, XYZ method);

• -    the modeling methods (SPSS, Statistica, Forecast Expert, Excel).

The choice of these methods of forecast is explained by that they are well-known, are used in practice during long period of time and give smaller percent of an error – 10-15%.

Let’s consider each of the methods in more detail.

The methods of statistics. One of the most widespread statistic features is the average weighed. In calculating the average weighed, the weight that allow to receive the summarizing indicator in numerator of a formula are used. In a denominator of a formula the sum of scales is used. In some calculations, the weight can artificially be added to an indicator. For example, when various cars in several parameters are tested (safety, comfort, profitability, etc.). To compare various cars among them it is necessary to receive the average estimate. But different parameters are of different importance. The comfort and safety can be more important than fuel consumption. In this case each of the parameters is appropriated some weight in order to get more important parameter and less important parameter that influence the general assessment in different extent.

Dynamic methods. One of such methods is «The situational centers» - a kind of information systems of decision-making support. A main component of this method is a means of dynamic modeling which allows to find out possible consequences of different events and answer the question: «What will be, if…?». The forecasting allows to receive the scenario of development on the basis of the analysis of the current situation, and also to define possible consequences: «What will be if I do that…?» or «What will be if there is such event…?» [1]. Such modeling needs an availability of a licensed program at the company, and it may cost a lot.

The method of expert evaluations . ABC – analysis is a method that allows to classify resources of firm according to degree of their importance. In the base of this method is the Pareto principle, it means that 20% of all goods give 80% of profit. ABC analysis — the analysis of commodity reserves by dividing them into three categories:

A — the most valuable, 20% — assortment; 80% — sales

B — intermediate, 30% — assortment; 15% — sales

C — the least valuable, 50% — assortment; 5% — sales

Depending on the purposes of the analysis any number of groups can be allocated. Most often allocate 3, and 4-5 groups are more rare. The ABC analysis means ranging of an assortment according to different parameters. The analysis is based on the principle of an imbalance. Such method allows visually, and, in numerical indicators to trace overall performance of both separate types of goods and services, and company in general [2].

XYZ method allows to make classification of the company resources depending on nature of their consumption and accuracy of forecasting of changes in their requirement during a certain cycle. The algorithm can be presented in four stages:

• 1)    Determination of variation coefficients for the analyzed resources.

• 2)    Grouping of resources according to increase of variation coefficient.

• 3)    Distribution according to the categories X, Y and Z.

• 4)    Graphical representation of the results of the analysis [3].

As a result of using such method of forecasting the real value of variation coefficient for different groups can differ because of such factors as seasonality of sales, a trend, deficiency, etc.

Therefore the XYZ method is often carried out together with ABC analysis that allows to allocate groups more exactly, according to their features [4].

Another method of expert evaluations is method «Delfi». It was developed in 1950 — 1960 in the USA for forecasting of future developments in science and their influence on methods of war (Olaf Helmer, Norman Dalkey, and Nicholas Rescher are considered as authors of this method). An essence of this method in using of a series of consecutive actions – polls, interview, brain storms – to achieve the maximum consensus when making the correct decision. The analysis by the method «Delfi» is carried out in several stages, and the results are processed by statistical methods

Subjects of this method are as follows: groups of researchers, each of which answers individually in writing; the organizational group — brings opinions of experts together.

Stages: The preliminary; The main; The analytical. [5]

On the one hand, such method is one of the most objective of expert because the decision is made by the large number of the experts who are in different areas, different cities, different countries and they can't affect each other’s opinions. But on the other hand complexity and duration of this method requires an availability of a certain time minimum. Moreover, in such conditions of hard competition the decision-maker doesn’t have enough time for making a decision.

Key Performance Indicators (KPI) — indicators of the company’s divisions activity which help in achievement of strategic and tactical targets, and also allow to evaluate company’s condition [6].

The KPI are not the KSF (Key Success Factors). The KSF are the elements of increase of company’s cost and value. KPI just use these elements for the further analysis of their efficiency. The correct determination of KPI can be found in the ISO 9000:2008 standard [7]. There the word «performance» divides into two terms: productivity and efficiency. According to the standard, productivity — is extent of the planned results achievement (ability of the company to orient on the result), and efficiency — a ratio between the reached results and the spent resources (ability of the company to realization the purposes and plans).

The founder of evaluation system of results achievement is Peter Druker (Peter Ferdinand Drucker (1909 — 2005)). According to Druker, chiefs have to avoid «time traps» when they are involved in current daily tasks solution process because it may lead to that they start forgetting to carry out the tasks directed on the results achievement.

Key Performance Indicators can be divided into the following:

• -    Late — show the activity results after the period of time.

• -    Outstripping — give the opportunity to manage situation within the reporting period for the purpose of achievement of the defined results after expiration.

Considering principles of using KPI it’s necessary to pay attention on different points of view. For example, Kaplan and Norton’s in their work recommend to use no more than 20 KPI. Hope and Fraser suggest to use no more than 10. For divisions Panov recommends to use no more than 10-15 KPI, otherwise managers will be busy with planning. The best recommendation from the existing is the rule «10/80/10». It means that the company has to have about 10 key indicators of productivity, about 80 industrial indicators and 10 key indicators of efficiency [8].

The modeling methods. For forecasting of a time row they use the computer programs. It allows to automate the most part of operations in creation of the forecast, and also allows to avoid the mistakes connected with data input. Such program applications can be used locally (on one computer only), and Internetapplications (for example, available in the form of the website). Among the most popular local applications it is necessary to mark such programs as SPSS, Statistica, Forecast Expert. And to forecast the match results it’s recommended to use the SportStatic ([9], [10]).