Trying to make long-term plans in economics and business usually involves making estimations about the future on the basis of extrapolations of the past. Trends can be identified which may for a short time be accurate, but using data from the past is dangerous because data cannot be expected to forecast something that has not yet happened.

It would be especially dangerous for a firm to rely on forecasting on its own, without careful and strategic planning. If a firm followed this route it would at some point be faced with an unpredictable set of events, for which its forecasts has no response. So planning is about trying to control the outcome of events, whereas forecasting is to do with predicting outcomes by making educated guesses about the future.

This is not to say that forecasting is a thing to beware of, more that to rely on it alone leaves organisations prone to the effects of change.

Long-range planning is therefore about deciding on courses of action that an organisation should take in the future. It is less about cutting risk than making sure that the organisation takes the right kind of risks, bearing in mind the possible consequences.

Systematic forecasting now takes place in most organisations. It usually involves the setting of medium term plans and goals. Often this means planning for the next five years. In order for systematic plans to be useful to an organisation, they must be detailed and attempt to be precise in their judgements. Because of this the methodology (or way in which it is carried out), has become sophisticated.

Forecasting inevitably involves analysing historic data, such as sales, costs, share prices, interest rates and so on, in order that future values can be predicted. The data may be about the economic market as a whole, the specific industry that an organisation operates in, or the organisation itself.

Time series analysis is about taking this data and 'breaking' it down into its component parts from which it is easier to extrapolate or predict future values. As a result, it is about identifying the underlying trend within the data. This may in fact be exactly the information that the organisation needs in order to carry out its long-term planning.

The kinds of questions that the firm is seeking answers to when it looks into the trends and fluctuations affecting its markets are outlined below:

• How well is our business performing?
• Is the firm's performance improving or weakening?
• Are we out-performing or under-performing our sector?
• How affected is our firm by changes in our sector?
• Are we impacted strongly by changes in other sectors?
• How does change in the whole economy affect the firm?