Describe the various applications of probability in different areas of business –

Finance, Marketing, Operations, Logistics, and Managerial Decisions

Probability theory is an integral part of the statistical approach that brings together,
descriptive and inferential statistics — probability deals with uncertainty or chance, or
likelihood.

Probability distributions can be used to determine the best course of action from a variety of
possibilities in finance, Marketing, and Operations. These outcomes can be branched into
different results - worst-case, likely and best-case.

Decision-makers use probability in business, to calculate the long-term gains, losses and
risks to take. Probability helps decision-makers take a closer look before making the
decision.

In the manufacturing industry, the probability is used to decide the possibility of the
profitability of a new product. putting into consideration, competition from different
manufacturers, current market demand, market value and manufacturing costs. It also
helps to measure market reaction to the new products as well as determine possible
products defects and successes.

A probability distribution is a useful tool for evaluating financial risk. Consider, for example,
an organisation that wants to consider entering a new business, and the company needs to
determine the number of possible buyers of the product. The probability distribution shows
a 70 per cent chance that inhabitants of the location considered will be interested in buying
the product. This result helps the manufacturer decide if he can produce the product and if
it will be profitable after costs are deducted.

In marketing, the probability is used for sales forecasting to calculate their expected volume
of sales within a period of time such as quarterly, yearly, monthly, or even daily.
Technically, it is impossible to predict specific figures but marketing executives use the
numbers to determine their future sales expectations. The use of probability helps them
gain a better understanding of their sales plan after considering all the possible barriers and
obstacles.

In logistics, the logistics regression is used to determine the occurrence of an event using
data from a previous event. It deals with situations in which the observed outcome is 1 or 0.
This helps organisations base their business strategies on the predictable outcomes while
still aware of the alternative possibilities.

Sources

1. The Role of Probability Distribution in Business ....

https://smallbusiness.chron.com/role-probability-distribution-business-management-
26268.html