DANGEROUS QUEST FOR CERTAINTY IN MARKET FORECASTING

Over the past 4 years, the Pharmaceutical Division of CIBA-GEIGY has developed a series of market forecasts in probabilistic terms, explicitly incorporating the principal uncertainties affecting the future sales of new pharmaceutical products. Such probabilistic forecasting methods have now been applied successfully by many pharmaceutical companies, including CIBA-GEIGY, Hoffmann-La Roche, and Sandoz. At CIBA-GEIGY this forecasting process has assisted the Divisional Management Committee with various business decisions, and in particular with capacity expansion planning. The benefits of this approach have been aptly described by the member of that committee responsible for production worldwide, Dr. Hans M. Götz, 'Since we have used the probability curve for active substance requirements, the most valuable result has not been that we get now any better single number, such as mean, mode or any other figure, but that we have the curve at all. No longer do production people and market forecasters accuse each other because of a wrong" figure. Both sides are aware of the uncertainties and therefore their dialogue has become more constructive. Decisions are made and the results are reviewed in light of the curve that represents our best judgment when action is required. Thus our principal benefit has been the improvement in the quality and co-ordination of management effort in production planning and resource allocation.' This paper explains in detail the steps needed to prepare a probabilistic market forecast and demonstrates how such a forecast can yield significantly different and better production capacity decisions and improved insight into the related process of market planning. © 1979."