PROJECT REPORT

“A STUDY ON CAUSAL FORECASTING

TECHNIQUES”

Submitted to :- Submitted by:-

Dr. ANURIKA VAISH SAURABH KUMAR SHARMA
IMB2018002
 Executive summary

An essential part of management in any organization is how effectively it does

planning for the future using forecasting techniques to determine future
inventory, costs, capacities, and interest rate changes. Forecasting as has been
explained as a planning tool that helps the management in its attempt to cope
with the uncertainty of the future, relying mainly on data from the past and
present analysis of trends. Forecasting starts with certain assumptions based on
the management's experience, knowledge and judgment. Any error that may
creep in while making the assumptions will result in a similar or magnified error
in forecasted results. More accurate a forecast is, better are the decisions that
depend upon it. Inaccuracy in the forecasts lead to too much or too little
capacity, besides being very costly. No future event should be forecasted unless
the forecast results in a change in present action. In this paper I would attempt
to define various situations where different causal method of forecasting can be
applied in order to attain satisfactory and saving results.
 1. Introduction

In virtually every decision they make, executives today consider some kind of
forecast. Sound predictions of demands and trends are no longer luxury items,
but a necessity, if managers are to cope with seasonality, sudden changes in
demand levels, and price-cutting manoeuvres of the competition, strikes, and
large swings of the economy. Forecasting can help them deal with these
troubles; but it can help them more, the more they know about the general
principles of forecasting, what it can and cannot do for them currently, and
which techniques are suited to their needs of the moment.
To handle the increasing variety and complexity of managerial forecasting
problems, many forecasting techniques have been developed in recent years.
Each has its special use, and care must be taken to select the correct technique
for a particular application. The management as the forecasters trying to find a
possible technique should have better understanding of the range of forecasting
possibilities, this will enable a company’s forecasting efforts to show results that
are to the effects of high returns.

The Theory Behind-:

When a management is looking to forecast it generally assumes that when
asking the team to prepare a specific projection, the request itself provides
sufficient information for team to go to work and do the job. This is almost
never true. Successful forecasting begins with a collaboration between the
manager and the teams looking to have a projection with their aimed targets as
well as future, past and present trends of their surrounding.
There are certain question that arise while a team or a management is trying to
develop a prediction using the forecasting techniques.
A. Why do we need it and how can we use the data to grow?
This question determines the accuracy and power required of the techniques,
and hence governs selection. Deciding whether to enter a project may require
only a rather gross estimate of the size of the market, whereas a forecast made
for budgeting purposes should be quite accurate. The appropriate techniques
differ accordingly. Again, if the forecast is to set a “standard” against which to
evaluate performance, the forecasting method should not take into account
special actions, such as promotions and other marketing devices, since these are
meant to change historical patterns and relationships and hence form part of the
“performance” to be evaluated. Forecasts that simply sketch what the future will
be like if a company makes no significant changes in tactics and strategy are
usually not good enough for planning purposes. On the other hand, if
management wants a forecast of the effect that a certain marketing strategy
under debate will have on sales growth, then the technique must be
sophisticated enough to take explicit account of the special actions and events
that follows with the change in strategy of the organisation. Techniques vary in
their costs, as well as in scope and accuracy. The manager must fix the level of
inaccuracy he or she can tolerate—in other words, decide how his or her
decision will vary, depending on the range of accuracy of the forecast.
B. Using the past data to PREDICT the future: -
Changes brought into the system i.e. new products, new competitive strategies,
etc lower the similarity of past and future. Over the short term, recent changes
are unlikely to cause overall impact on the predictions, but over long term their
effects are likely to increase.
 2. LITERATURE SURVEY
There are three basic types—Qualitative techniques, time series analysis and
projection, and causal models.
The first uses qualitative data (expert opinion, for example) and information
about special events of the kind already mentioned, and may or may not take the
past into consideration.
The second, on the other hand, focuses entirely on patterns and pattern changes,
and thus relies entirely on historical data.
The third uses highly refined and specific information about relationships
between system elements, and is powerful enough to take special events
formally into account. As with time series analysis and projection techniques,
the past is important to causal models.
These differences in the data collection as well as the predictive methods imply
that the same type of forecasting technique is not appropriate to forecast, a all
stages of the life cycle of a product, for example, a technique that relies on
historical data would not be useful in forecasting the future of a totally new
product that has no history.

In this paper I would primarily be focussing on the Causal method of

forecasting taking in case studies/examples of different scenarios where these
methods can be used/applied in a same organisation and how they give data’s
that are useful for the organisation within the plethora of data available.
 A. BUYING INTENTION-
Buying intentions are used as a forecasting method for sales of existing products
and services. The internet is playing a very important role for the business
activities worldwide today, while creating a very high volume of business
transactions, it has also found a new strategy as marketing tools. Buying
intention are inexpensive to acquire and easily understood by the managers,
which has made way for it to be used widely. For example, a consumer durable-
goods producer can use the buying intention measure to help anticipate major
changes that needs to be brought in the production and marketing plan
accordingly, while it can also be useful in estimating demand for new product.
While the buying intention measures has a wide range of application, The
research attempts to forecast the purchase intentions of the target segment based
on level of internet shopping experience where a frequency of purchase from
internet, preferable mode of payment and new products buying frequency is
present. it is to be noted that there are several ways of studying and handling the
research objectives. The present study fall under the category of descriptive
studies as the nature of problem is to determine the relationship among the
different variables. This type of research is also called survey based study. The
major strength of survey research has its wide scope and ability to collect the
detailed information from a sample of large population.
Two commonly used methods to forecast sales from intentions predict that the
proportion of consumers who will purchase will equal
1) the mean intent (transformed to lie between zero and one to represent the
mean probability of purchase), or
2) the proportion of respondents indicating a positive purchase intent
(Morwitz.1996).

To test the value of intentions, I sought situations where they are expected to be
useful. Automobile sales meet the key conditions where intentions are expected
to be useful. The automobile purchase decision is an important one and the
typical consumer plans this purchase. Of course, some consumers might
encounter new conditions that would change their plans (such as the loss of a
job, or loss of a car due to theft or accident), but, given an adequate sample,
these effects are not expected to be large over a one-year forecast horizon.
The results we taken from a survey done a large monthly magazine cars
magazine WHEELZ.COM for this study.

Questionnaire on Brand Equity

Dear Respondents, We are doing this research on “THE IMPACT OF BRAND
EUITY OF MARUTI SUZUKI CARS ON BUYING BEHAVIOUR OF
CUSTOMERS” we would highly appreciate if you could spend 10 minutes to
answer the following questions. This study is for academic purpose only. No
information shall be disclosed anywhere.
Given below are various statements to seek your opinion on the content of this
questionnaire. Put one of the numbers 5, 4, 3, 2 and 1 against each statement to
indicate the degree of your agreement or disagreement to the given statement
Strongly Agree Agree = 4 Neutral = 3 Disagree = 2 Strongly
=5 Disagree = 1

Following statements will measure the Customer Based Brand Equity of

MARUTI SUZUKI.
Sr. No. Characteristics Response
A Brand Awareness
1 I Easily Recall the brand MARUTI SUZUKI when it comes to purchase
new car compared to other competitive brands.
2 Some characteristics of this brand come to my mind.
3 I am familiar with the brand Maruti Suzuki.
4 I can recognize the brand Maruti Suzuki quickly among other
competing brands.
B BRAND LOYALTY
5 I consider myself to be loyal to Maruti Suzuki.
6 If in future, I want to buy the new car this brand would be my first
choice.
7 I would love to recommend Maruti Suzuki to my friends & relatives.
8 I will buy Maruti Suzuki even if it increases the price of its car.
9 I am satisfied by my choice of purchasing Maruti Suzuki Car.
10 I am satisfied with the overall performance of Maruti Suzuki.
C Perceived Quality
11 I trust the quality the Maruti Suzuki Brand.
12 The products/spare parts of the Maruti Suzuki brand would be of very
good quality.
13 The Maruti Suzuki Brand offers excellent features.
14 I think that Maruti Suzuki cars have best performance in their all
segments of cars.
D Brand Association
15 The Brand Maruti Suzuki has very unique brand image, compared to
other competing brands in the market.
16 I respect & admire people who are having the Maruti Suzuki Cars.
17 I like the Brand Image of the Maruti Suzuki.
18 I like & trust the Maruti Suzuki.
Very Likely = 5 Likely = 4 Undecided = 3 Unlikely = 2 Very Unlikely = 1
Buying Intention:

19 If in the future, I would buy the new car the MARUTI SUZUKI would be
my first choice.

1. Gender :

a. Male [ ]

b. Female [ ]

2. Occupation:

a. Service [ ]

b. Business/Self – employed [ ]

c. Housewife [ ]

d. Others, please specify ____________________

3. Age Group:

a. Below 30 Years [ ]

b. 30 – 40 Years [ ]

c. 41 – 50 Years [ ]

d. Above 50 Years [ ]

4. Monthly Income:

a. Below Rs.20,000/- [ ]

b. Rs.20,000 – Rs.40,000/- [ ]

c. Rs.40,000 – Rs.60,000/- [ ]

d. Above Rs.60,000/- [ ]
Methods that Use Past Sales to Adjust for the Bias in Intentions. Intentions, by
themselves, provide only a crude way to predict sales. For new products,
intentions are sometimes used directly to forecast sales. However, when sales
figures are available, it is sensible to calibrate intentions against them. In other
words, we look at a category of intenders (e.g., “we are certain we will buy a car
in the next six months”) and determine what percent actually did purchase in
that period. This relationship is then extended to the period to be forecast.

I used 2 methods that relate intentions data to sales in the subsequent time
period.
1. Multiple intender groups: In the multiple intender groups method, we
assumed that the intent behaviour sales rate for respondents in each intender and
non-intender group is equal to the corresponding rate for the previous time
period. This method was used to forecast sales of durable goods in Morwitz and
Schmittlein (1992).
2. Intender/non-intender groups: Morwitz and Schmittlein (1992) found that
forecast accuracy could be improved over multiple intender groups by
computing one intent-behaviour conversion rate for all those who indicated that
they intended to purchase and one for non-intenders. The intender/non-intender
groups method could be better than multiple intender groups because pooling
across the different intender groups increases the accuracy in the estimated
intent-behaviour conversion rate.
However, the intender/non-intender groups method could be worse than
multiple intender groups because it gives up some richness in distinguishing
different intender groups

RESULTS
Discriminant Analysis was applied to find out the results. It is the appropriate
statistical technique when the dependent variable is categorical and the
independent variables are quantitative. It was conducted to determined weather
three predictors namely Brand Awareness, perceived quality and brand
association.

TEST OF EQUALITY OF GROUP MEANS.

WILKINS F dF1 df2 Sig.
 Brand Awareness 0.792 80.888 2 578 0.01
Percieved Quality 0.882 5.671 2 578 0.01
Brand Association 0.805 22.598 2 578 0.01
The High values of F statistics show that the Brand Awareness v/s Brand
Association has a very close relation ship which would say that from the
proposed hypothesis that the sales which in the time series has shown an
increase and the subsequent analysis shows that there will be a positive increase
in the growth of sales. This study has be implemented by marketers to assess the
real market positioning of a brand in terms of the customers buying intention.
Marketers can find the market potentiality of their brand in a new market also
through this research apart from finding out problems in the existing market in
terms of the predictors so that appropriate marketing policies can be
implemented to tap the market.

Economic Input - Output Models for Cost & Time Over-runs.

The point to be carefully observed here is that many construction projects they
are often not well planned. The improper financial estimation and cash flows
are very common reason hampering the timely and within estimated costs of
projects and usually leads to failure of a project but also gives birth to other
cost-time overrun related dilemmas. The reasonable Cost estimation and
scheduling are among the core values of a project's success and these should be
analyzed carefully & monitored throughout the course of a project for its
successful completion within schedule cost and time for deliverance of its
objectives. Not taking proper care of their immense importance, the most
project managers frequently do not follow these core values resulting in cost
and time overruns. It is fairly common to observe projects having cost-time
overruns and it is very common in nearly all construction industry of the globe
due to one or more reasons. However, in developing countries the cost & time
overruns in projects has become a rather grave matter and in some cases the
cost-time overrun exceeds more than 100% of their original cost-time
calculation. This is due to various causative factors that have been explained in
similar studies. In practice, many public infrastructure works undergo delays
and cost overruns. The infrastructure-based works are highly customized and
extremely dependent upon the correct selection of site and technical
requirements. It is worth mentioning that not many contractors are able to carry
out such infrastructure project. As a result, competition is generally limited as
far as public infrastructure projects procurement is concerned. The literature
commonly finds that only about three to six companies compete in competitive
 bidding for public infrastructure bidding under NHAI or the Metro rail
construction (the biggest public infra projects going around in India)

Depicting cost over-runs in 388 nos. (62%) projects out of 754 NHAI road
construction projects under taken in last 10 months (Source :- Press Information
Bureau, Government of India, Ministry of Road Transport & Highways)

Nos. of %age of
Sr. No. Projects Project
Projects Completed Over and 564 74.8
1 above scheduled or budgeted cost
2 Projects Completed within 122 16.1
scheduled or budgeted cost
3 Projects Completed below the 68 9.01
scheduled or budgeted cost

DESCRIPTIVE STATISTICS PROJECT COMPLETION PERIOD OVER-

RUNS % AGE WISE (PCPORPW)
Mean PCPORPW 456.7118
Standard Error 10.52287
Median 505
Mode 0
Standard Deviation 120.4397
Sample Variance 14505.72
Kurtosis 5.200724
Skewness 1.80347
Range 700
Minimum PCPORPW 0
Maximum PCPORPW 700
Sum PCPORPW 17123.24
Count of Projects 131
Largest (1) PCPORPW 700
Smallest (1) PCPORPW 0

Using Linear Multiple Regression with the independent factors i.e. Design,
Planning and Scheduling Related (DPSR), Financial Constraint Related (FCR),
Social Problem Related (SPR), Technical Reasons (TR), Administrative
Reasons (AR), Scope Increase (SI), Specifications Change (SC), CER-Cost
Escalation Related reasons (CER), Non Availability of Equipment or Materials
(NAEM), Force Majeure (FM) and putting dummy variable (explanatory or
indicative variable) as regression value one and has been inserted for projects
which suffer cost/time overruns and a few project which does not observe
cost/time overruns

General Form of Multiple Regression Model Equation-

Whereas, â (Beta) is the Constant or intercept, â01 the Slope (Beta coefficient)
for X1= DPSR- Design,Planning and Scheduling related Problems, â2 is the
Slope (Beta coefficient) for X2=FCR- Financial Constraints related Problems,
â3 is the Slope (Beta 3 coefficient) for X3=SPR- Social Problems related
Factors, â4 is the Slope (Beta coefficient) for X4=TR- Technical Factors, â5 is
the Slope (Beta coefficient) for X5=AR- Administrative Factors, â6 is the Slope
(Beta 6 coefficient) for X6=SI/D- Scope increase or change factors, â7 is the
Slope (Beta coefficient) for X7=SC-Specifications change factors, â8 is the
Slope (Beta coefficient) for X8=CER- Cost Escalation related factors, â9 is the
Slope (Beta coefficient) for X9=NAEM- Non availability of materials or
equipment related factors and â10 is the Slope (Beta coefficient) for X10 = FM -
Force majeure related factors.

Y (Predicted PCORPW) = â0 * 0.41 + âX1 *0.255 DPSR + âX2 * 0.156 FCR +

âX* 0.357 SPR + âX4* 0.172 TR + âX * 0.339 AR + âX6 * 0.135 SI/C + âX
*0.014 SC + âX8 * 0.259 CER + â X * 0.202 NAEM + âX10 * 0.101 FM.

The analysis of actual data of 754 road construction projects shows delays and
cost overruns being significant and 564 projects. The delay and cost overruns
play a vital role in the determination of the success rate of such projects. It is
important to identify and address the construction features making the project
run over and above the planned cost and competition responsible for such
overrun in cost and time are also required to and make accountable. The
dependent construction features of delay and cost overrun now been used in the
regression development research for cost over runs and time over runs
separately and the independent values have been captured in term of percentage
cost and time over run. In order to develop economic model liner regression has
been carried out by using Microsoft Excel software and for carrying out
comparison between the predicted and the actual values of percentage cost and
time over run. The predicted values worked out by the help of regression
models and hence it is concluded that the proposed cost overrun and time
overrun models are accurate with a probability of 83%. This accuracy level of
prediction obtained in the form of project cost and duration in the form of
equations are the same as actually worked out in the monitoring reports and
through the use of models.

Life Cycle Analysis in the construction industry

THE INTERNATIONAL STANDARDIZATION FOR THE LIFE

CYCLE ASSESSMENT (LCA)
The LCA methodology is based on a series of international standards and
procedures, standards of environmental management called ISO 14040, that
existing regulatory concepts to serve as a basis for understanding and
implementing of LCA. However, before the emergence and appearance of this
series of standards, at the beginning of the year 1990, the Society of
Environmental Toxicology and Chemistry (SETAC) had already published it’s
first works along this line of research. The first publications, packed with
diagrams, brought as a central theme the entrances and exits of life cycle
inventory, covering many inventory components, as for example: origin of raw
materials (location, quality, contamination etc.), energy spending,
manufacturing processes, distribution, transportation, maintenance, reuse,
recycling and waste management. Such considerations were very important for
the advancement of life cycle assessment. Shortly thereafter, the United Nations
Environment Programme-UNEP has published several reports, atlases and
newsletters. As a good example, the fifth Global Environment Outlook
assessment GEO5 was published, which is a detailed report on the environment,
development and human well-being, providing analysis and information for the
public and political powers in general. One of the many points the document
makes is a warning (questioning) that the world population is living far beyond
the possibilities developed. The document notes that the human population is
now so large that the amount of natural resources needed to sustain it is beyond
what our planet is able to provide.

Finally, as a consequence of these first initiatives, the environmental

management standards 14040 series, used nowadays and governing the life
cycle assessment (LCA) as mentioned below:

1. ISO 14041:1998 Environmental management --Life cycle assessment

--Goal and scope definition and inventory analysis

2. ISO 14042:2000 Environmental management --Life cycle assessment

--Life cycle impact assessment;

3. ISO 14043:2000 Environmental management --Lifecycle assessment

--Life cycle interpretation;

4. ISO 14044:2006 Environmental management --Life cycle assessment

--Requirements and guidelines;

5. ISO 14045:2012 Environmental management --Eco-efficiency

assessment of product systems --Principles, requirements and guidelines;

6. ISO 14046:2014 Environmental management --Water footprint

--Principles, requirements and guidelines;

7. ISO/TR 14047:2012 Environmental management --Life cycle assessment

--Illustrative examples on how to apply ISO 14044 to impact assessment
situations.

ISO series standards 14040, 14041, 14042 numbers and 14043 ended up being
condensed to only two documents, ISO 14040 and ISO 14044, aiming to
facilitate their application

ASPECTS CONNECTED TO THE USE OF LCA

According to ISO 14040, the LCA is a technique that aims to enable a correct
assessment of the environmental aspects and potential impacts associated with a
product, consisting of four distinct analysis steps,

1) Definition of the goal and scope;

2) Establishment of life cycle inventory (LCI);

3) Valuation of the impact of the life cycle (VILC);

4) Interpretation of results.

For an assessment of the impact of the life cycle, there are basically two
methods 1) Problem-oriented (mid points), where the approach involves the
environmental impacts associated with climate change, acidification,
greenhouse gas, eutrophication, potential for destruction of the ozone layer and
human toxicity, and may be evaluated using methods such as CML baseline ,
EDIP 97 & EDIP 2003 and IMPACT 2002 ;

2) Damage-oriented (end points), classifying the cash flows on various

environmental themes, modelling the damage that each theme gives to human
beings, the environment and natural resources, and for this use, for example, the
methods Eco indicator 99 and IMPACT 2002 +.

In the step of interpretation, significant problems are identified and results are
evaluated to reach conclusions and make recommendations, then generating a
final report which is the last element to complete a LCA. This methodology
enables the study of the environmental aspects and potential impacts caused
throughout the life of a product, i.e. the ‘cradle’ to ‘grave’, from the
procurement of raw materials, through production, to use, to reach its dismount.

POSITIVE AND NEGATIVE POINTS OF THE

LCAMETHODOLOGY
The life cycle assessment represents an efficient methodology, which works to
provide a higher level of sustainability in the sector of the civil construction, in
all its phases .As a good example of the importance of using this type of
methodology applied, note that the construction sector in China is already
responsible for more than one third of its total energy consumption. Therefore,
there is no doubt that the reduction of the environmental impact of the
construction sector would be of utmost importance to achieve a more
sustainable development. A construction can become more sustainable, for
example, through the use of a smaller quantity of natural resources, in addition
to the use of materials with low environmental impact and the implementation
of renewable energy to reduce environmental loads, energy and water
consumption, promoting greater sustainability in buildings.

Advantages

1. The detailed analysis of specific processes;

2. Comparisons between products;

3. Identifying process improvements.

Disadvantages

1. Subjectivity in the selection of boundaries;

2. Lack, in many cases, of more complete data;

3. Great expense of time and financial resources;

4. Uncertainty generated

(sources- Application of Life Cycle Assessment (LCA) in Construction Industry by

Antonio Domingos Dias Ferreira Fernando B. Mainier)