What is Business Statistics?

Business statistics takes the data analysis tools from elementary statistics and applies them to
business. For example, estimating the probability of a defect coming off a factory line, or
seeing where sales are headed in the future. Many of the tools used in business statistics are
built on ones you’ve probably already come across in basic math: mean mode and median,
bar graphs and the bell curve, and basic probability. Hypothesis testing (where you test out an
idea) and regression analysis (fitting data to an equation) builds on this foundation.

Basically, the course is going to be practically identical to an elementary statistics course.

There will be slight differences. The questions will have a business feel, as opposed to
questions about medicine, social sciences or other non-business subjects. Data samples will
likely be business-oriented. Some subjects usually found in a basic stats course (like multiple
regression) might be downplayed or omitted entirely in favour of more analysis of business
data.

1. Introduction to descriptive statistics for displaying and summarizing business data.

2. The use of probabilities and random variables in business decision models.

3. Probability distribution.

4. Statistical inference as a decision-making tool.

5. Sampling of business data.

6. Simple linear regression and correlation.

7. Time series analysis.

8. Use of index numbers in economic data.

Business managers use statistics as an aid to making decisions in the face of uncertainty.
Statistics can be used for making sales projections, financial analysis of capital expenditure
projects, constructing profit projections for a new product, setting up production quantities,
and making a sampling analysis to determine the quality of a product. Using statistics
provides real data about complex situations rather than making decisions based on
unsubstantiated hunches.

APPLICATION OF STATISTICS IN BUSINESS

1. MARKETING
As per Philip Kotler and Gary Armstrong marketing “ identifies customer needs and
wants , determine which target markets the organisations can serve best, and designs
appropriate products, services and Programs to serve these markets”. Marketing is all
about creating and growing customers profitably. Statistics is used in almost every aspect
of creating and growing customers profitably. Statistics is extensively used in making
decisions regarding how to sell products to customers. Also, intelligent use of statistics
helps managers to design marketing campaigns targeted at the potential customers.
Marketing research is the systematic and objective gathering, recording and analysis of
data about aspects related to marketing. IMRB international, TNS India, RNB Research,
The Nielson, Hansa Research and Ipsos Indica Research are some of the popular market
research companies in India. Web analytics is about the tracking of online behaviour of
potential customers and studying the behaviour of browsers to various websites. Use of
Statistics is indispensable in forecasting sales, market share and demand for various types
of Industrial products. Factor analysis, conjoint analysis and multidimensional scaling are
invaluable tools which are based on statistical concepts, for designing of products and
services based on customer response.

 Data Source

The most basic use of statistics in marketing is as a source of data. Statistics provide
demographic information such as the number of potential customers in a geographical
 area, their ages, income levels and consumer preferences. Used as part of competitor
analysis, statistics can identify the major competitors, their market share and trends in the
longevity of their products. Industry sector data helps marketers understand the trends
governing supply and demand of the product category and fluctuations in its popularity.

 Marketing Mix Modeling

The use of marketing mix modeling helps marketers identify the correct combination of
marketing communications channels to use to reach the target market and provide the best
return on the marketing investment. Modeling works by analysing information and using
the technique of statistical regression to determine the effectiveness of sales on the
market. The formula for modeling includes creation of a model using sales volumes and
value as a dependent variable, and then using various marketing channels to represent the
independent variables.

 Market Tracking

Statistics are applied in market tracking to measure customer satisfaction, brand loyalty
and support, and to assess the relationship of the marketer’s company with its customers.
To implement a market-tracking program, the marketer needs access to company as well
as industry statistics. The tracking program then analyzes the sales statistics across all
brands in the market to ascertain which brand enjoys the highest levels of customer
support and loyalty.

 Cross-sell Parameters

Marketers use statistics on household parameters to target buyers for customized

promotions or to cross-sell secondary products. For example, Walmart’s loyalty card
gives the store the ability to record all purchases of baby powder by its customers. By
analyzing the statistics generated by these records, Walmart is able to identify those
households that buy baby powder but do not buy other baby products. This makes it
possible to target those households as potential customers for a new brand of organic
body powder, because they appear to use powder but do not have babies in the home.

2. FINANCE
Financial statistics include all numerical data that summarizes past behaviour or forecasts
future behaviour of an individual financial security, a group of securities, or markets in a
broad geographic region. It is useful to first categorize these statistics into one of three areas.
Global or national statistics examine the behaviour of business or economic conditions that
influence the value of securities in general. Market or industrial statistics track the activity of
a specific set of securities linked by a common trading market or industry classification.
Company-specific statistics examine performance of individual firms.

 GLOBAL/NATIONAL FINANCIAL STATISTICS

 ECONOMIC INDICATORS.

One broad class of global or national statistics is the series of economic indicators. These
indicators assess where the economy is within the current business cycle and provide
information useful to forecast the likelihood of improvement or deterioration, or to confirm
the economy's current status. The National Bureau of Economic Research tracks several
hundred measures of economic activity that are correlated with the status of the national
economy. Economic indicators are typically split into three categories. Leading economic
indicators correlate with patterns of future economic activity. For example, profit margins
and the formation of new businesses tend to improve or deteriorate in advance of other
symptoms of a change in the overall status of the economy. Coincident indicators assist in
confirming of the economy's current status. Examples of these indicators are comprehensive
levels of employment and industrial production. Finally, lagging indicators confirm that the
economy has passed through a particular phase of the business cycle. Such indicators react
after the change in economic condition has already been established. The average duration of
unemployment is one example of a lagging indicator.

 GROSS DOMESTIC PRODUCT.

There are many other examples of global economic statistics that have immediate relevance
to financial analysis. One commonly followed statistic is the forecasted growth rate in gross
domestic product (GDP). As an aggregate measure of overall output of a national economy,
GDP growth is a highly anticipated figure. Many of the subcategories of GDP, such as
government spending and exports, are closely followed as well.

 EXCHANGE RATE STATISTICS.

A more pervasive and continuous source of financial information is found in exchange rate
statistics. An exchange rate is the price of one country's currency in terms of another's. For
example, if the U.S. dollar can be exchanged for 5 French francs, then residents in either
country can quickly assess the value of real or financial assets in the other country. Since this
data is so important to international trade and capital flows, exchange rate statistics are
widely reported in many periodicals and newspapers on a daily basis.
  INTEREST RATES.

Another set of statistics that are broadly followed in financial markets throughout the world
are those associated with interest rates. Interest rates represent the price of money in a
particular currency. This price includes a premium for expected inflation and another
premium for risk of default. One common method of reporting interest rates is the yield
curve. The yield curve represents the relationship between the maturity of a debt instrument,
typically bonds, and the rate of return implied by its current price. A yield curve represents a
relevant comparison of yields between different securities with different maturities only if the
securities have similar default risk. As a result, the most common yield curve statistics relate
to government bonds within a particular country. These statistics are frequently reported in
tabular form with yields on various securities sorted by maturity. The same information is
also commonly depicted in a graph.

3. ECONOMICS
Economic statistics is a topic in applied statistics that concerns the collection, processing,
compilation, dissemination, and analysis of economic data. It is also common to call the data
themselves 'economic statistics', but for this usage see economic data. The data of concern to
economic statistics may include those of an economy of region, country, or group of
countries. Economic statistics may also refer to a subtopic of official statistics for data
produced by official organizations (e.g. national statistical services, intergovernmental
organizations such as United Nations, European Union or OECD, central banks, ministries,
etc.). Analyses within economic statistics both make use of and provide the empirical data
needed in economic research, whether descriptive or econometric. They are a key input for
decision making as to economic policy. The subject includes statistical analysis of topics and
problems in microeconomics, macroeconomics, business, finance, forecasting, data quality,
and policy evaluation. It also includes such considerations as what data to collect in order to
quantify some particular aspect of an economy and of how best to collect in any given
instance.

Statistical data and methods render valuable assistance in the proper understanding of the
economic problem and the formulation of economic policies. Most economic phenomena and
indicators can be quantified and dealt with statistically sound logic.

In fact, Statistics got so much integrated with Economics that it led to development of a new
subject called Econometrics which basically deals with economics issues involving use of
Statistics.
Statistics is a data interpretation tool used for collecting, classifying and analyzing data. It is
an indispensable tool for an economist to understand various business and economic
problems and formulate policies to tackle with them.

In economics, we analyze behaviour of different groups such as consumers, producers,

government and come out with intuitions, models, and observations. However, it is the data
that enables an economist to claim such observations as exact and precise.

Broadly speaking, statistics helps in:

 analysing various economic problems such as inflation, unemployment etc. by

looking at numbers, trends over the years.
 Summarising mass data like income, consumption etc. into measures like per capita
income and per capita consumptions which are more explanatory of how an economy
is performing.
 Assessing relationship between different economic variables such as population and
poverty, price and demand.
 Evaluating the impact of various government campaigns like family planning
programme, various poverty alleviation programmes etc.
 Predicting change that might happen in a factor due to changing some other factor.
For instance, predicting how inflation would be affected if money supply is increased
in the economy.
 Decision making at micro level i.e. firms, households etc. with regard to production,
consumption etc.

4. DATA MINING

Data Mining is used in almost all fields of business.

In Marketing, Data mining can be used for market analysis and management, target
marketing, CRM, market basket analysis, cross selling, market segmentation, customer
profiling and managing web based marketing, etc.

In Risk analysis and management, it is used for forecasting, customer retention, quality
control, competitive analysis and detection of unusual patterns. In Finance, it is used in
corporate planning and risk evaluation, financial planning and asset evaluation, cash flow
analysis and prediction, contingent claim analysis to evaluate assets, cross sectional and time
series analysis, customer credit rating, detecting of money laundering and other financial
crimes. In Operations, it is used for resource planning, for summarising and comparing the
resources and spending. In Retail industry, it is used to identify customer behaviours, patterns
and trends as also for designing more effective goods transportation and distribution policies,
etc.

Data mining got its start in what is now known as “customer relationship management”
(CRM). It is widely recognized that companies of all sizes need to learn to emulate what
small; service-oriented businesses have always done well – creating one-to-one relationships
with their customers. In every industry, forward-looking companies are trying to move
towards the one-to-one ideal of understanding each customer individually and to use that
understanding to make it easier for the customer to do business with them rather than with a
competitor. These same companies are learning to look at the lifetime value of each customer
so they know which ones are worth investing money and effort to hold on to and which ones
to let drop.

Statistics is a component of data mining that provides the tools and analytics techniques for
dealing with large amounts of data. It is the science of learning from data and includes
everything from collecting and organizing to analyzing and presenting data. Statistics focuses
on probabilistic models, specifically inference, using data.

While the aims of statistics and data mining are similar, it is estimated that there are very few
statisticians to deal with the demands of data analysts. The two types of statistics prevalent
are descriptive and inferential. Descriptive statistics organize and summarize the data for the
sample. The methodology of using these summaries to conclude from entire data sets is
called inferential statistics. Data mining is essentially available as several commercial
systems. Today, data mining is widely used in nearly every industry. For example, financial
data analysis is usually systematic, as the data is highly reliable. Typical cases of financial
data analysis include loan payment prediction, customer credit policy analysis, classification
and clustering of customers for targeted marketing, detection of money laundering, and other
financial crimes.

Data mining has a more significant role to play in the retail industry since it collects data
from various sources like sales, customer purchasing history, goods transportation,
consumption, and services. In the retail industry, it helps in identifying customer behaviors;
designing and constructing data warehouses based on the benefits of data mining;
multidimensional analysis of sales, customers, products, time and region; effectiveness of
sales campaigns; customer retention; product recommendation, and cross-referencing of
items.
5. HUMAN RESOURSE MANAGEMENT
Human resource management is a process to manage people within an organization. Since
employees are the most valuable asset for any organization, HR’s focus on developing
strategies to improve employee experience remains in high priority. That’s where the need to
understand industry trends rise. Human Resource departments are inter alia entrusted with the
responsibility of evaluating the performance, developing rating systems, evolving
compensatory reward and training system, etc. All these functions involve designing forms,
collecting, storing, retrieval and analysis of a mass of data. All these functions can be
performed efficiently and effectively with the help of statistics. HR analytics doesn’t collect
data about how your employees are performing at work, instead, its sole aim is to provide
better insight into each of the human resource processes, gathering related data and then
using this data to make informed decisions on how to improve these processes.

HR Analytics Software

HR Analytics software is essential to keep track of your workforce. It helps in collating and
maintaining data across various office locations, departments, roles, etc. Here are some key
advantages of using HR Analytics software:

 Ease of use: These tools or platforms are very user-friendly and don’t require lengthy
training sessions or certifications. You can use demo videos or help videos if you run
into any issues.
  Data analytics: Data is centrally collated and displayed on dashboards. You can look
at historical and current data across several parameters such as tenure, roles,
reporting, etc. This helps managers in making informed decisions.
 New features: These tools or software are frequently updated with new features in
terms of usability, security, reporting, etc. You can customize your platform to reflect
your brand colors, needs, and requirements.

CONCLUSION

There is a crucial role of statistics in business decision analysis. In a competitive market

environment, a business cannot survive merely by making decisions based on instinct, guess
work and approximations. Acquiring scientific data and information, and analyzing that
information accurately can help to make more profitable decisions for the business
organization. An organization that is strong in the core area of decision making is likely to
achieve greater success for its stakeholders in the long run, have less risk exposure, and have
a lower chance of missing lucrative opportunities. The important elements to consider when
using statistics in business decision analysis, particularly in process improvement, are the
accuracy of collected data and information, the choice of statistical design or statistical model
to analyze that data, the clear presentation of findings and conclusions, and finally,
managerial recommendations on how to take corrective measures based on these findings and
conclusions.