1.

1 WHAT IS BUSINESS - #30 analyzes past performance

ANALYTICS? Prescriptive analytics
- #24 uses optimization techniques

Analytics is the use of: data,

EXAMPLE: When to reduce the price and
information technology, statistical analysis,
by how much?
quantitative methods, and mathematical or
computer-based models to #26 help
Descriptive analytics: examine historical
managers gain improved insight about their
data for similar products (prices, units sold,
business operations and make better, fact-
advertising)
based decisions.
Predictive analytics: predict sales based
on price
Business Analytics Applications
Prescriptive analytics: #27 find the best
● Management of customer
sets of pricing and advertising to maximize
relationships
sales revenue
● Financial and marketing activities
● Supply chain management
● Human resource planning 1.4 DATA FOR BUSINESS
● Pricing decisions ANALYTICS
● Sport team game strategies
DATA
Importance of Business Analytics - collected facts and figures
There is a strong relationship of BA with: Examples of using DATA in business:
profitability of businesses ● Annual reports
revenue of businesses ● Accounting audits
shareholder return ● Financial profitability analysis
Enhances understanding of data. ● Economic trends
Vital for businesses to remain competitive. ● Marketing research
Enables creation of informative reports. ● Operations management
performance
1.2 EVOLUTION OF BUSINESS ● Human resource measurements
ANALYTICS
● Operations research Four Types Data Based on Measurement
● Management science Scale:
● Business intelligence Categorical (nominal) data
● Decision support systems ● #19 Data placed in categories
● Personal computer software according to a specific characteristic
● Categories bear no quantitative
1.3 SCOPE OF BUSINESS relationship to one another
Examples:
ANALYTICS
● customer’s location (America,
Descriptive analytics
Europe, Asia)
#6 - uses data to understand past and
● employee classification (manager,
present
supervisor, associate)
Predictive analytics
#2 Ordinal data - #22 delivery time
● Data that is ranked or ordered - package weight
according to some relationship with - purchase price
one another
● No fixed units of measurement 1.5 DECISION MODELS
Examples:
● college football rankings Model:
● survey responses ● An abstraction or representation of a
real system, idea, or object
Interval data ● Captures the most important
● #14 Ordinal data but with constant features
differences between observations ● Can be a written or verbal
● No true zero point description, a visual display, a
● Ratios are not meaningful mathematical formula, or a
spreadsheet representation
Examples:
● temperature readings #5 A decision model is a model
● SAT scores used to understand, analyze, or facilitate
decision making.
Ratio data
● Continuous values and have a Types of model input
natural zero point ● Data
● Ratios are meaningful ● uncontrollable variables
Examples: ● decision variables (controllable)
● monthly sales
● delivery times Types of model output
● performance measures
DATABASE ● behavioral measures
#18 - collection of computer files containing
data Descriptive Decision Models
● #12 Simply tell “what is” and
INFORMATION describe relationships
-#21 comes from analyzing data ● Do not tell managers what to do

#10 Metrics are used to quantify Predictive Decision Models

performance. ● #23 often incorporate uncertainty to
Measures #28 are numerical values of help managers analyze risk.
metrics. ● Aim to predict what will happen in
Discrete metrics involve counting the future.
- on time or not on time ● #11 Uncertainty is imperfect
#4 - number or proportion of on time knowledge of what will happen in the
deliveries future.
Continuous metrics are measured on a
continuum
 ● Risk is associated with the
consequences of what actually
happens.
Prescriptive Decision Models
● help decision makers identify the
best solution.
● #8 Optimization - finding values of
decision variables that minimize (or
maximize) something such as cost
(or profit).
● #20 Objective function - the
equation that minimizes (or
maximizes) the quantity of interest.
● #9 Constraints - limitations or
restrictions.
● Optimal solution - #29 values of
the decision variables at the
minimum (or maximum) point.
Deterministic prescriptive models
● #13 have inputs that are known with
certainty.
#1 Stochastic prescriptive models
● have one or more inputs that are not
known with certainty.
#16 Algorithms are systematic procedures
used to find optimal solutions to decision
models.
#15 Search algorithms are used for
complex problems to find a good solution
without guaranteeing an optimal solution.
1.6 PROBLEM SOLVING AND
DECISION MAKING
● BA represents only a portion of the
overall problem solving and decision
making process.
Six steps in the problem solving process
1. Recognizing the problem
● #7 Problems exist when there is a
gap between what is happening and
what we think should be happening.
● For example, costs are too high
compared with competitors.
2. Defining the problem
● #17 Clearly defining the problem is
not a trivial task.
● Complexity increases when the
following occur:
● large number of courses of action
● several competing objectives
● external groups are affected
● problem owner and problem solver
are not the same person
● time constraints exist
3. Structuring the problem
● #21 Stating goals and objectives
● Characterizing the possible
decisions
● Identifying any constraints or
restrictions
#3 4. Analyzing the problem
● Identifying and applying appropriate
Business Analytics techniques
● Typically involves experimentation,
statistical analysis, or a solution
process
5. Interpreting results and making a
decision
● Managers interpret the results from
the analysis phase.
● Incorporate subjective judgment as
needed.
● Understand limitations and model
assumptions.
● Make a decision utilizing the above
information.
6. Implementing the solution
● Translate the results of the model
back to the real world.
● Make the solution work in the
organization by providing adequate
training and resources.