Why You Don’t Have to Skip Identifying Trends and Opportunities in the Industry?

As a result of the transformational changes that have taken place in the world, there is an objective need to apply new methods of management, planning, and regulation of economic processes. Here is more about the importance of trend analysis. 

The purpose of identifying trends

One of the reasons for the crisis in the company is the lack or low level of long-term planning, underestimation of entrepreneurs’ market opportunities and potential, low degree of analysis of the external business environment, overestimation of the benefits of immediate benefits against long-term interests and prospects. Today, the instability of environmental factors requires companies to make detailed forecasts of their strategic and current activities, considering the threats and opportunities for further development and achievement of goals. For this purpose, a trend analysis is conducted.

Market conditions are a complex, fast-changing phenomenon. It consists of many individual phenomena and actions. Its development of which is formed under the influence of many circumstances. The market is inherently prone to spontaneity and therefore exposed to random and constant fluctuations: cyclical and seasonal, very flexible in its development, sensitive to changes in socio-economic nature, and depends on political and psychological factors, rumors, and panic. Therefore, the system of indicators of commodity market conditions should include indicators of dynamic processes inherent in the market, namely trends, stability, and cyclicality of the market, which are part of market analysis and should be studied in conjunction with other indicators of market conditions. 

How to identify market trends for your business planning?

Planning as a management function allows companies to navigate correctly in a market environment, helps make the right management decisions, and increases the likelihood of achieving the desired success. Planning depends on practical analysis of the external environment, objective assessment of their positions, joint efforts, and the participation of all constituent organizations. Also, this function involves choosing a goal, developing a way to achieve it, and promoting it. In the study of time series, the question of the regularities of the trend development over a long time occupies a vital place. The pattern in the change in the levels of a series of dynamics in some cases is quite clearly manifested. In others, it can be obscured by fluctuations caused by various reasons, including random ones.

The following methods of smoothing the time series are used to identify the main trend in the development of a phenomenon:

  • The method of interval enlargement, in which the initial series of dynamics is replaced by another series of dynamics containing absolute or average indicators already for the enlarged intervals. For example, a series containing monthly output data can be converted to a quarterly data series.
  • The moving average method. The essence is to replace unlimited data with arithmetic averages for particular periods. The calculation of the averages is carried out by the sliding method, that is, by gradually excluding the first level from the accepted sliding period and including the next one.
  • Analytical alignment. With this approach, the change in the indicator under study is associated only with time; it is believed that the influence of other factors is insignificant or indirectly affected by the time factor. A correctly chosen growth curve model should correspond to the nature of the change in the trend of the phenomenon under study. The growth curve allows you to get leveled or theoretical values of the levels of the time series. These are the levels that would be observed in the case of a complete coincidence of the dynamics of the phenomenon with the curve.