CHAPTER 1
-tradition (“We’ve always done it this
Decision Making
Responsibility of managers 
-Plan
-coordinate
-organize
-lead their organizations to better
performance
Ultimately, managers’ responsibilities
require that they make:
1. Strategic decision
-involve higher-level issues
-organization’s overall goals and
aspirations for the future
-usually the domain of higher-level
executives
-have a time horizon of three to five
years.
2. Tactical decision  -can involve anything from simple
-concern how the organization should
achieve the goals and objectives
-responsibility of midlevel
management
-span a year and thus are revisited
annually or even every six months.
3. Operational decisions  happened in the past.
-affect how the firmrun from day to
day
-the domain of operations managers,
who are the closest to the customer.
Regardless of the level within
the firm, decision making can be
defined as the following process:
1. Identify and define the problem.
-most critical
2. Determine the criteria that will be used
to evaluate alternative solutions.
3. Determine the set of alternative
solutions.
4. Evaluate the alternatives.
5. Choose an alternative.
Approaches to making decisions:
way”)
-intuition (“gut feeling”)
- rules of thumb (“As the restaurant
owner, I schedule twice the number of
waiters and cooks on holidays”)
Business Analytics Defined
CHALLENGES
- Uncertainty
-enormous number of alternatives that
we cannot evaluate them all
Business analytics
-Scientific process of transforming data
into insight for making better decisions
-used for data-driven or fact-based -
more objective than other alternatives for
decision making.
reports to the most advanced optimization
techniques
3 broad categories of techniques: 
1.Descriptive analytics -encompasses the
set of techniques that describes what has
-Examples:
-data queries (A data query is a request
for information with certain characteristics
from a database.)
-reports, descriptive statistics, data
visualization including data dashboard
(collections of tables, charts, maps, and
summary statistics that are updated as new
data become available. ), some data-mining
techniques(use of analytical techniques for
better understanding patterns and
relationships that exist in large data sets)
and basic what-if spreadsheet models.
2. Predictive Analytics
-Consists of techniques that use
models constructed from past data to
predict the future or ascertain the impact
of one variable on another. 
-Linear regression, time series analysis,
some data-mining (often used in predictive
analytics), and simulation (use of
probability and statisticsl to study the
impact of uncertainty on a decision), often
referred to as risk analysis.
3. Prescriptive analytics 
-indicates a course of action to take -
the output is a decision. 
-prediction + a rule=prescriptive model
Examples:
 optimization models (give the best
decision subject to the constraints of
the situation.)
 rule-based model
-rely on a rule or set of rules
 portfolio models in finance
use historical investment return data
to determine which mix of investments will
yield the highest expected return while
controlling or limiting exposure to risk.
 supply network design models in
operations
-provide plant and distribution center
locations that will minimize costs while still
meeting customer service requirements
 price-markdown models in retailing
 simulation optimization
-combines the use of probability and
statistics to model uncertainty with
optimization techniques
 decision analysis  Veracity- has to do with how much
-used to develop an optimal strategy
  utility theory
-assigns values to outcomes based on
the decision maker’s attitude
 big data
-no universally accepted definition
-any set of data that is too large or too
complex to be handled by standard data-
processing techniques and typical desktop
software
Volume
-data must be stored, and this storage
has led to vast quantities of data.
-a terabyte = 1,024 gigabytes
Velocity
-Real-time capture and analysis of data
present unique challenges both in how data
are stored and the speed with which those
data can be analyzed for decision making.
Variety
Text data- collected by monitoring
what is being said about a company’s
products or services on social media Audio
data - collected from service calls
Video data - by in-store video cameras
are used to analyze shopping behavior.
uncertainty is in the data.
Hadoop- an open-source programming
environment that supports big data
-provides a divide-and-conquer
approach to handling massive amounts of
data
MapReduce- a programming model used
within Hadoop that performs the two major
steps:
1. map step- divides the data into
manageable subsets and distributes it
to the computers in the cluster (often
termed nodes) for storing and
processing.
2. reduce step- collects answers from the
nodes and combines them into an
answer to the original problem. 

Data security- the protection of stored data
from destructive forces  -better understanding of consumer
Business Analytics in Practice
-involves tools as simple as reports and
graphs to those that are as sophisticated as
optimization, data mining, and simulation.
In practice, companies that apply
analytics often follow a trajectory
advanced analytics
-predictive and prescriptive
Financial Analytics
-applications of analytics in finance are
numerous and pervasive.
Predictive models -used to forecast
financial performance, to assess the risk of
investment portfolios and projects, and to
construct financial instruments such as
derivatives.
Prescriptive models - used to construct
optimal portfolios of investments, to
allocate assets, and to create optimal
capital budgeting plans. 
Simulation- often used to assess risk in the
financial sector
Human Resource (HR) Analytics
-relatively new area of application for
analytics The HR function is charged with
ensuring that the organization
1. has the mix of skill sets necessary to
meet its needs
2. is hiring the highest-quality talent and
providing an environment that retains it,
3. achieves its organizational diversity
goals.
Google refers to its HR Analytics function as
“people analytics.” 
Marketing Analytics
-one of the fastest-growing areas for
the application of analytics
behavior through the use of scanner data
and data generated from social media has
led to an increased interest in marketing
analytics. 
Health Care Analytics
-The use of analytics in health care is
on the increase because of pressure to
simultaneously control costs and provide
more effective treatment.
-Descriptive, predictive, and
prescriptive analytics are used to improve
patient, staff, and facility scheduling;
patient flow; purchasing; and inventory
control
-The use of prescriptive analytics for
diagnosis and treatment is relatively new,
but it may prove to be the most important
application of analytics in health care.
Supply-Chain Analytics
-The optimal sorting of goods, vehicle
and staff scheduling, and vehicle routing
are all key to profitability for logistics
-Companies can benefit from better
inventory and processing control and more
efficient supply chains. Analytic tools used
in this area span the entire spectrum of
analytics. 
Analytics for Government and Nonprofits
-Government agencies and other
nonprofits have used analytics to drive out
inefficiencies and increase the effectiveness
and accountability of programs. 
-Likewise, nonprofit agencies have
used analytics to ensure their effectiveness
and accountability to their donors and
clients.
Sports Analytics
-has gained considerable notoriety
since 2003 when renowned author Michael
Lewis published Moneyball.
Web Analytics
-analysis of online activity, which
includes,visits to web sites and social media
Chapter 2
Overview of Using Data: Definitions and
Goals
Data -facts and figures collected, analyzed,
and summarized for presentation and
interpretation
variable - quantity of interest that can take
on different values
observation - set of values corresponding
to a set of variables
variation- difference in a variable measured
over observations (time, customers, items,
etc.).
decision variables- under direct control of
the decision maker
random variable, or uncertain variable-
quantity whose values are not known with
certainty
Types of Data
Population and Sample Data
-Data can be categorized in several
ways based on how they are collected and
the type collected.
Collection of Data
*population - not feasible
*sample- collect data from a subset of the
population
Quantitative data- numeric and arithmetic
operations, such as addition, subtraction,
multiplication, and division, can be
performed on the
categorical data- arithmetic operations
cannot be performed on the data
-We can summarize categorical data by
counting the number of observations or
computing the proportions of observations
in each category
Cross-sectional data- collected from several
entities at the same, or approximately the
same, point in time.
Time series- collected over several time
periods.
- frequently found in business and
economic publications.
-help analysts understand what
happened in the past, identify trends over
time, and project future levels for the time
series.
Sources of Data
statistical studies 
*experimental study- a variable of interest
is first identified
-Then one or more other variables are
identified and controlled or manipulated to
obtain data about how these variables
influence the variable of interest
Example: learn about how a new drug
(another variable) affects blood pressure
( variable of interest)
*non-experimental study / observational
-make no attempt to control the
variables of interest.
Example: survey
Sorting and Filtering Data in Excel
-easily identify patterns
Kapag isosort mo base sa march 2010
Step 1. Click Data bar
Step 2. Click sort
Step 3: select all the data
Step 4: In the first Sort by dropdown menu,
select Sales (March 2010)
Step 5: In the Order dropdown menu,
select Largest to Smallest
Kapag gustoi lang makita sales ng Toyota
Step 1. Click Data bar
Step 2. select all the data
Step 3: Click auto filter
Step 4: Click on the Filter Arrow   in
column B, next to Manufacturer
Step 5: select all hanggang mawala na lahat
ng check
Step 6: icheck ay yung toyota lang
Conditional Formatting of Data in Excel
-can make it easy to identify data that
satisfy certain conditions in a data set.
Kapag gusto ihighlight yung negative
Step 1. Click home bar
Step 2. select all the data (nung sales lang)
Step 3: Click conditional formatting
Step 4: click highlight cell rules
Step 5: click less than
Step 6: tapos itrype mo dun sa space 0%
Creating Distributions from Data
-help summarize many characteristics
of a data set by describing how often
certain values for a variable appear in that
data set. Distributions can be created for
both categorical and quantitative data, and
they assist the analyst in gauging variation.
frequency distribution - a summary of data
that shows the number (frequency) of
observations in each of several
nonoverlapping classes(bins)
Bilangin ang hirap hahaha
Relative Frequency and Percent Frequency
Distributions
frequency distribution- number
(frequency) of items in each of several
nonoverlapping bins
relative frequency =  the fraction or
proportion of items belonging to a class
relative frequency distribution - a tabular
summary of data showing the relative
frequency for each bin.
percent frequency distribution
- summarizes the percent frequency of
the data for each bin.
- can be used to provide estimates of
the relative likelihoods of different values
for a random variable
Frequency Distributions for Quantitative
Data
The three steps necessary to define the
classes for a frequency distribution with
quantitative data are as follows:
1. Determine the number of
nonoverlapping bins.
2. Determine the width of each bin.
3. Determine the bin limits.
Number of Bins
Bins- formed by specifying the ranges used
to group the data.
RECOMMENDED= 5-20 BINS
SMALL NO. OF DATA = 5-6 BINS
LARGE NO. OF DATA= more bins are
usually required
-The goal is to use enough bins to show the
variation in the data, but not so many that
some contain only a few data items
Width of the Bins
larger number of bins = smaller bin
width
Bin Limits
must be chosen so that each data item
belongs to one and only one class
lower bin limit- smallest possible data value
upper bin limit- largest possible data value
assigned to the class.
show that four values—12, 14, 14, and 13—
belong to the 10–14 bin
histogram -graphical summary can be prepared
for data previously summarized in either a
frequency, a relative frequency, or a percent
frequency distribution.
horizontal axis= variable of interest
Vertical = frequency
Skewness- lack of symmetry, is an important
characteristic of the shape of a distribution
 cu mulati
ve
frequency distribution
-uses the number of classes,
class widths, and class limits developed for
the frequency distribution
-shows the number of data items with
values less than or equal to the upper class
limit of each class
Measures of Location
*Mean (Arithmetic Mean)
- a measure of central location for the
data. average
*Median- value in the middle when the
data are arranged in ascending order
(smallest to largest value)
*Mode- value that occurs most frequently
in a data set
*geometric mean - a measure of location
that is calculated by finding the nth root of
the product of n values.
-often used in analyzing growth rates
in financial data. In these types of
situations, the arithmetic mean or average
value will provide misleading results.
Measures of Variability
*Range- simplest measure of variability
*Variance- measure of variability that
utilizes all the data.
- based on the deviation about the
mean, which is the difference between the
value of each observation  and the mean.
*Standard Deviation -defined to be the
positive square root of the variance
*coefficient of variation -how large the
standard deviation is relative to the mean.
- usually expressed as a percentage.
Analyzing Distributions
* percentile- value of a variable at which a
specified (approximate) percentage of
observations are below that value. The pth
percentile tells us the point in the data
where approximately p% of the
observations have values less than the pth
percentile; hence, approximately (100 − p)
% of the observations have values greater
than the pth percentile.
*Quartiles
-It is often desirable to divide data into
four parts, with each part containing
approximately one-fourth, or 25 percent, of
the observations. These division points are
referred to as the quartiles and are defined
as follows:
interquartile range, or IQR -difference
between the third and first quartiles
*z-score- allows us to measure the relative
location of a value in the data set. More
specifically, a z-score helps us determine
how far a particular value is from the mean
relative to the data set’s standard
deviation.
*Empirical Rule -to determine the
percentage of data values that are within a
specified number of standard deviations of
the mean. Many, but not all, distributions
of data found in practice exhibit a
symmetric bell-shaped distribution.
Identifying Outliers-  one or more
observations with unusually large or
unusually small values
-Standardized values (z-scores) can be
used to identify outliers. Recall that the
empirical rule allows us to conclude that for
data with a bell-shaped distribution, almost
all the data values will be within 3 standard
deviations of the mean. Hence, in using z-
scores to identify outliers, we recommend
treating any data value with a z-score less
than −3 or greater than +3 as an outlier.
Box Plots
- is a graphical summary of the distribution
of data. A box plot is developed from the
quartiles for a data set
Measures of Association Between Two
Variables
scatter chart - a useful graph for analyzing
the relationship between two variables
* Covariance is a descriptive measure of
the linear association between two
variables.
* correlation coefficient measures the
relationship between two variables, and,
unlike covariance, the relationship between
two variables is not affected by the units
of measurement for x and y.
CHAPTER 3

Effective Design Techniques
*data-ink ratio- One of the most helpful
ideas for creating effective tables and
charts for data visualization
*Tables -The first decision in displaying
data is whether a table or a chart will be
more effective. In general, charts can often
convey information faster and easier to
readers, but in some cases a table is more
appropriate. Tables should be used when:
1. reader needs to refer to specific
numerical values.
2. reader needs to make precise
comparisons between different values and
not just relative comparisons.
3. values being displayed have different
units or very different magnitudes.
* crosstabulation, which provides a tabular
summary of data for two variables.
*Charts (or graphs) are visual methods for
displaying data.
*A scatter chart is a graphical presentation
of the relationship between two
quantitative variables. As an illustration,
consider the advertising/sales relationship
for an electronics store in San Francisco. On
10 occasions during the past three months,
the store used weekend television
commercials to promote sales at its stores.
*Line charts are similar to scatter charts,
but a line connects the points in the chart.
Line charts are very useful for time series
data collected over a period of time
(minutes, hours, days, years, etc.)
*Bar and column charts
Bar charts use horizontal bars to display the
magnitude of the quantitative variable. 
Column charts use vertical bars to display
the magnitude of the quantitative variable.
-Bar and column charts are very
helpful in making comparisons between
categorical variables.
*Pie charts are another common form of
chart used to compare categorical data.
However, many experts argue that pie
charts are inferior to bar charts for
comparing data.
* bubble chart is a graphical means of
visualizing three variables in a two-
dimensional graph and is therefore
sometimes a preferred alternative to a 3-D
graph. 
* heat map is a two-dimensional graphical
representation of data that uses different
shades of color to indicate magnitude. 
Advanced Data Visualization
Advanced Charts
* parallel-coordinates plot, includes a
different vertical axis for each variable.
Each observation in the data set is
represented by drawing a line on the
parallel-coordinates plot connecting each
vertical axis. The height of the line on each
vertical axis represents the value taken by
that observation for the variable
corresponding to the vertical axis.
*A treemap is useful for visualizing
hierarchical data along multiple
dimensions.
*geographic information system (GIS),
which merges maps and statistics to
present data collected over different
geographic areas. Displaying geographic
data on a map can often help in
interpreting data and observing patterns.
data dashboard is a data-visualization tool
that illustrates multiple metrics and
automatically updates these metrics as new
data become available.