Statistics in Business: Understanding Assumptions and Applications

Data and Data Sets

• Data refers to facts that are collected, analyzed, and interpreted for various purposes.
• Data sets are more useful to organizations and can be categorized into:
  • Numerical data sets
  • Bivariate data set
  • Multivariate data set
  • Categorical data set
  • Correlation data set

Statistics as a Field of Study

• Statistics is a meta-science or metalanguage that aims to collect, analyze, summarize, and interpret data.
• Statistics is an ongoing process to make an idea more accurate and acceptable to serve as a bridge between initial and informed business judgment.

Branches of Statistics

• Descriptive statistics:
  • Purpose: Help describe and summarize the parameters of the population or statistics of the sample.
  • Measure of central tendency: Mean, median, mode
  • Measure of variability: Range, percentiles, variance, standard deviation
• Inferential statistics:
  • Purpose: Inferential statistics is used to estimate parameters and test hypotheses with data from samples.
  • This can lead to the generalization of data to the population.

Basis in Choosing Statistics to Use

• Type of data: Determine whether data is categorical or numerical.
• Research question: Clearly define the research question and objective.
• Sample size: Consider the size of the sample.
• Assumptions: Understand the assumptions of the statistical test.
• Nature of relationship: Identify the type of relationship being explored.
• Relevance: Statistics should be directly related to the business or study.
• Accuracy: Use reputable and reliable sources.
• Timeliness: Use up-to-date or latest data.
• Comparability: Compare statistics from various sources.
• Interpretability: Ensure statistics are easy to understand and interpret.

Application of Statistics in Business

• Statistics is a branch of mathematics that deals with the collection, analysis, interpretation, and presentation of numerical data.
• Statistics in business involves applying statistical methods to analyze business data, aiding in decision-making.
• Roles and business: Statistics is important for understanding consumer behavior, spotting trends, measuring performance, operational planning, setting standards, and control.

Significance of Statistics in Business

• Reason 1: Understand consumer behavior using descriptive statistics.
  • Example: Grocery store analysis using mean, median, and standard deviation.
• Reason 2: Statistics allows a business to spot trends using data visualization.
• Reason 3: Statistics allows a business to understand the relationship between different variables using regression models.
  • Example: Regression model to predict sales based on TV and online advertising.
• Reason 4: Statistics allows a business to segment consumers into groups using cluster analysis.

Some Statistical Methods that Play a Role in Business

• Measures of Central Tendency: Summarize a collection of data points into a single value that represents the "center" of the data.
  • Mean
  • Median
  • Mode
• Correlation: Measures the strength and direction of the relationship between two variables.
  • Positive correlation
  • Negative correlation
• Index Numbers: Compare the value of a variable over time or across different locations.
• Time Series: Analyze and interpret data points collected at successive time intervals.
  • Purpose: Make a valuable prediction, explain what drives observed changes, and identify cycles and durations.