Abstract
This article explores the influence of the external operating environment (EOE) on the accuracy of performance forecasting (APF) in large manufacturing firms (LMFs) in Kenya. The objective was to assess if any aspects of the EOE influenced measures of APF. APF, in manufacturing operations, is seldom derived accurately. However, since LMFs tend to hire skilled personnel, this survey presumes that these qualified forecasters ensure APF when preparing future budgets. EOE has been known to influence the behavior of operations resulting in either adverse or favorable organizational performance. The study identified EOE factors that impact organizational performance and tested these against measures of APF. Regression analysis was applied using data collected through a structured questionnaire administered among randomly selected LMFs. Results indicated that there was evidence that EOE had an influence on some measures of APF and the established forecasting techniques (FTs), objective, judgmental and combined forecasting.
Highlights
In business, change is inevitable and organizations that don’t accept change and that make adjustments to their business model based on changes have a high degree of underperformance or even failure
The research question which this paper examines is: What is the influence of the EOE on accuracy of performance forecasting (APF) and forecasting techniques (FTs) in large manufacturing firms (LMFs), in Kenya? The research focus included identifying APF predictors that are influenced by the EOE and examining the impact of the EOE on the relationship between a FT and APF
EOE had a partial influence on APF under Growth in Market Share (GMS) through Competitors as follows: GMS = 38.374 – 5.212 Competitors (0.004) (0.013)
Summary
Change is inevitable and organizations that don’t accept change and that make adjustments to their business model based on changes have a high degree of underperformance or even failure. There are events or situations that affect the way a business operates These events or situations, called environmental factors, can have either a positive or negative impact on a business. Internal environmental factors are events that occur within an organization. External environmental factors are events that take place outside of the organization and are harder to control. Since a business does not operate in a vacuum, it has to act and react to what happens outside the factory and office walls. These external factors or influences that happen outside the business will tend to affect the main internal functions of the business and possibly the objectives of the business and its strategies. As enterprises always operate under conditions of uncertainty, management wishes to limit this uncertainty by predicting changes in factors that influence operational performance and assigning, with some level of accuracy, expected sales volume, price, cost and interest rates
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