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In business, a regression analysis is a statistical technique for estimating the relationships among variables. It includes many techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables. In this instances, sales volume and hours worked can be plotted on a regression line. This allows managers to see a relationship between the two variables as it relates to sales volume. Depending on the result, or trend, managers are better able to forecast future sales growth (Freedman, 2005).
Another very common sales forecasting technique is that of trend projections. When numerical data are available, a trend can be plotted on graph paper to show changes through time. In this instance, sales volume growth can be depicted on the graph to show either a growing, or declining trend. If desired, the trend line can then be extended or "projected" into the future on the basis of the recent rate of...
This trend analysis will project on future sales growth using a historical average to better help managers determine future sales opportunity (Bianchi, 1999).
In conclusion, forecasts play a vital role in a business. They help align both management and employees to a common and often difficult goal. It helps inspire individuals in a manner that is productive for both the employee and the individual. In order to be effective however, they must also be realistic and free from many of the common biases associated with forecasting. Through the use of both trend projections and regression analysis, business can make better informed decisions that ultimately help the business and society at large.
References:
1) Freedman, David. Statistical Models: Theory and Practice, Cambridge University Press (2005)
2) Bianchi M., Boyle M., Hollingsworth D. (1999), "A comparison of methods for trend estimation," Applied Economics Letters, 6: 93 -- 109
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