= Witttan BuaKe | 1 Understand the concent of ANOVA and experimental designs Compute and interpret the result of randomized block design 18 Compute and interpret tne result of completely randomized m__Compute and interpret the result of factorial design (two-way design (one-way ANOVA) ANOVA) TAT STICS IN ACTION: TATA MOTORS LTD Motors Ltd, widely known as TELCO, established in 1945, Js one of india’ olgest automobale manufacturing companies. [tis e leader in commercial vehicles in eech seyment, and is one among the top trree in the passenger vehicles market with winning jucis in the compact, midsize car, and utily-vehicies segments, The company i the world’s fourth langest truck manufacturer and ‘norils second largest bus manufacturer: | Tata Motors secured the Daewoo Commercial Vehicles Company, South Koreas second largest trick maker i 2004. The next it acquired & 21% stake ia Hispano Carrocera, @ reputed Spanish Dus and coach manufacturer, with an option te acquire the _ Temamning stake 25 wel In 2006, the compariy entered Into a joint Venture wits the Braai-nased Marcopoio. In the same year It also él info a joint venture with the Thonburi Automotive Assembiy-Plant Company of Thalencl fo manufacture anc market the: con © pans pick-up vehicles in Thaiand, Table 12.1 shows the prot after tax of the company from 1995 to 2007 Table 12.1 Profit ater tax of Tata Motors Utd from 1995-2007 (in ition rupees) Fier 19951996 1997 1998 1999 2000 200i 30022003 3004" 9005 70068 2007 | Poit 31895 50582 76236 29466 9785 7120 ~S0034 5373 3001.1 81034 123695 15,2888 191346 after tax {fo milion nape) ce: Proest (3.1, Cet for Monitoring Idan Heonory Pt Lil Munn aceesed August 2008, reproduced with permission, Tata Motors unveiled "Teta Nanc,” 2 Rs onelakn car (excluding VAT and transportation costs) n January 2008, The Tata Nena ted to shift thousands of twovwheeler owners into car owners Because of is aflordable price. The merket segmentation of the Pyssenger car segment by region § as show! in Table 12.2 >>>‘An experimental eso fhe logical construction ofan “epporivart io tos fypathess in whleh De researcher emer controls or manipulates one oF fore variables: 392 ausiness Statistics nee ace ie oe o 73 "Nano for segments of the recs : sisting ¢ Table 12.2 Region wise marketshare of passenger cars Segment _ Share (6) North 43 12.1 INTRODUCTION Inthe previous chapter, we discussed the various techniques of analysing data from two samples (taken from two populations). These techniques were related to means and proportions. In teal life, thete may. bbe situations when instead of comparing two sample means, a researcher has to compare three or ‘more than three sample means (specifically, more than two). researcher may have to test whether the three or more sample means computed from the three populations are equal. In other words, the null hypothesis can be, that three or more population means are equal as against the alternative hypothesis that these population means are not equal. For example, suppose that a researcher wants to measure work attitude of the employees in four organizations. The researcher has prepared a questionnaie ‘consisting of 10 questions for measuring the work attitude of employees. A five-point rating scale is used with I being the lowest score and 5 being the highest score. So, an employee can score 10 as the ‘minimum score and 50 as the maximum score. The null hypothesis can be set as all the means are equal (there is no difference in the degree of work attitude of the employees) as against the alternative hypothesis that atleast one of the means is different from the others (there is significant difference in the degree of work attitude of the employees). 12.2 \NTRODUCTION TO EXPERIMENTAL DESIGNS ‘An experimental design isthe logical construction of an experiment to test hypothesis in which the researcher either controls or manipulates one or more variables. Some of the widely used terms while discussing experimental designs are as follows: Independent variable: In an experimental design, the independent variable may be either treatment variable or a classification variable. ‘Treatment variable: This isa variable which is controlled or modified by the researcher inthe experi= ment, For example, in agriculture, the different fertilizers or the different methods of cultivation are the treatments, Classification variable: Classification variable can be defined as the characteristics ofthe experimen- tal subject that are prosent prior to the experiment and nota result of the researcher's manipulation of contro. Experimental Units: The smallest division of the experimental material to which treatments are applied and observations are made are referred to as experimental units. Dependent variable: In experimental design, a dependent variable is the response to the different levels of independent variables, Ths is also called response variable. Factor: A factor can be referred to asa set of treatments ofa single type. In mos situations, a research ‘er may be interested in studying more than one factor. For example, a researcher in the field of adver- tising may be interested in studying the impact of colour and size of advertisements on consumers,taken »may srthe null hesis ‘sure te is the ative ance bite ‘eat 7 _Ttadtion, the researcher may be interested in knowing the difference in average responses to three | erent colours and four diferent sizes ofthe advertisement, This i referred to as two factor ANOVA 12.3 ANALYSIS OF VARIANCE some assumptions. Each population should have a normal “Ssrbution with equal variances, For example, if there are population, vatiances of each popule- UA tat iss = 92 = 05 == a2, Bach sample taken from the population should be randomly avn and should be independent of each other. 2 analysis of variance, the total variation in the sample data ean be on account of two compos _ etl namely, variance between the samples and variance within the samples Vivianes bowen fenton and two-way classification, In fact, _ b the researchers. This chapter will focus © types of experimental designs, namely, "completely randomized design, randomized block design, and factorial design, ANOVA is based on tte following assumptions: | Samples are drawn from normally distributed populations {Samples are randomly drawn ftom populations and are independent of each other * Populations from which samples are drawn have equal variances. ‘124 COMPLETELY RANDOMIZED DESIGN (ONE-WAY ANOVA) _ Completely randomized design contains only one independent variable, with two or more treatment _Inels or classifications. Incase of only two treatment levels or clasiiatons, the design would be _fhesame as that used for hypothesis testing for two populations in Chapter 11. When there is » ease of _ thes or more classification levels, analysis of variance is used to. analyse the data. Suppose a researcher wants to test the stress level of emplayees in three different organizations | fr conducting this research, he has prepared a questionnaire with a five-point rating seale with 1 Feig the minimum score and 5 being the maximum score. The researcher has administered the ques- __flomaie and obtained the mean score for three organizations. The researcher eould have used the & _ for ¢ test for two populations if there had been only two populations. In this case, there are three | Fepeltions, so there is no scope of using test ar test fr testing the hypotheses I this exes ene, way analysis of variance technique can be effectively used to analyse the data. One-way analysis of __fwianee can also be used very effectively inthe ease of comparison among sample means taken frora | foe than two populations, Suppose if & samples are being analysed by a researcher, then the null and alternative hypotheses "canbe set as below: a= The alteratve hypothesis can be set as blow. Hi Notall yy are equal = 1,2, 3... 8) The mul hypothesis inde that al poplition mans fr all eels of ements ae egal _ Hone population mean is diferent rom another, the mall hyptbens i eeeted ad te acres _ hypothesis is accepted. In onevay atalyss of variance, testing of hypothesis is carried out by partitioning the ttl vai son oft cta in to pars. The rs partis the variance betwen the samples nd te eto She variance within the samples. The vciancebetwoen the samples canbe stdin ene ‘in analysis ‘of valianca, the: ‘otal erition sn the ‘ione Way enaisisofvariaics! sea 9 pss a be ‘arried out by partioning the {otal Yanaton oF the dats i two parts The fst part the vvatenos between he sompes anda second part sine var ance win the samples. The ‘etionce etween the samples Cen be atte to testes effects and varance within the Samples can be atrnuted te xoecimenta erors Chapter 12 | Analysis of Varance and Experimental Designs 393.FIGURE 12.1 Partitioning the total sum fof squares ofthe variation {or completely randomized ‘design (one-way ANOVA) ‘ha vata“ etwsat soe srs: measures the differ. fence belween the serie ‘ean of each group and the ‘rand meen. The grand mean ‘5 the overal mean and can 5o obtained by addng al the “jadual observations of the Columns aed tien dvi this total by the Nuinber of toa absaretons 394 Business Statistics SSC (sum of squares va ‘between columns) SST (total sum of squares) SSE (sum of squares within samples) effects and variance within the samples can be atributed to experimental errors. As part ofthis process, the total sum of squares can be divided into two additive and independent paris as shown in Figure 12.1 'SST (total sum of squares) = SSC (sum of squares between columns) + SSE (sum of squares within samples) 12.4.1 Steps in Calculating SST (Total Sum of Squares) and Mean Squares in One-Way Analysis of Variance |As discussed above, the total sum of squares can be partitioned in two parts: sum of squares between ‘columns and sum of squares within samples. So, there are two steps in calculating SST (total sum of squares) in one-way analysis of variance, in terms of calculating sum of squares between columns and sum of squares within samples. Let us say that the observations obtained fork independent samples is ‘based on one-criterion classification and can be arranged as shown in the Table 12.3 below: where (1) Calculate variance between columns (samples): This is usually referred to as sum of squares between samples and is usually denoted by SSC. The variance between columns measures the difforence between the sample mean ofeach group and the grand mean. Grand mean is the over- all mean and can be obtained by adding all the individual observations of the columns and then dividing this total by the total number of observations. The procedute of calculating the variance between the samples is as below: ‘TABLE 12.3, Observations obtained fork independent samples based on one Observations 1 2 3 Sum Tee eTnot and. sis the (©) Next, the grand mean is caleulated. The grand mean is ealeuated as ne ahh (6) InStep 3, the difference between the mean of each sample and grand meun i ealeulated, that is, we calculate ¥ ~¥,¥, ~¥,.., RF {d) In Step 4, we multiply cach of these by the number of observations in the corresponding ‘sample, square each of these deviations and add them. This will give the sum of the squares between samples (6) Inthe last step, the total obtained in Step 4 is divided by the degrees of freedom, The degrees of freedom is one less than the total number of samples. If there are k samples, the degrees of freedom will be v =~ 1. When the sum of squares obtained in Step 4 is divided by the ‘number of degrees of freedom, the result is called mean square (MSC) and is an alternative term for sample variance. SSC (sum of squares between columns) =) ",(%, where fis the number of groups being compared, n, the number of observations in group j, ¥, the sample mean of group j, and ¥ the grand mean, and ‘MSC (mean square) = _ Calculate variance within columns (samples): This is usually referred to as the stim of squares within samples. The variance within columns (samples) measures the difference within the sem- ples (intra-sample difference) due to chance. This is usually denoted by SSE. The procedure of calculating the variance within the samples is as below: (8) In calculating the variance within samples, the first step is to calculate the mean of each sample. From Table 12,3 this is ¥,¥. wun (b) Second step is to calculate the deviation of each observation in & samples from the mean ‘values ofthe respective samples. (©) Asathird step, square all the deviations obtained in Step 2 and ealeulate the total ofall these squared deviations. (@) As the last step, divide the total squared deviations obtained in Step 3 by the degrees of free- dom and obtain the mean square. The number of degrees of freedom can be calculated as the difference between the total number of observations and the mumber of samples. If there are 1m observations and & samples then the degrees of freedom is v = n — ‘SSE (sum of squares within samples) = 0 ()~ where x, isthe ith observation in group j , the sample mean of group j,k the number of groups heing compared, and m the total number of observations in all the groups. SSE and MSE (mean square) = “= \whete SSE is the sum of squares within columns and 1 ~ k the degrees of freedom (total ‘number of observations ~ number of samples) (0) Cateulate total sum of squares: The total variation is equal to the sum of the squared difference between each observation (sample vale) and the grand mean ¥. This i often referred to as SST (otal sum of squares. So the foal sum of squares can be calcalated as beiow: SST (total sum of squares) = SSC (sum of squares between columns) + SSE (sum of squares within samples) VS 6-H, - FTG, -5 The vation’ wii Coles amples) mesures the a ‘erence witwn. the saiipes “linke-sambie ciference) cue to chance The usiaay denote by SSE SSuswae Q Seu Ete RUT arate eae to the sum of the ference between each. abservabon (sample velo) and the grand mean Ths softer relrred loasSST tealsim squares) Chapter 12 | Analysis of Variance and Experimental Designs 395.FIGURE 12.2 Rejection and non-ejection region (acceptance region) when using ANOVA to test ull hypothesis 396 Busnes Statistics a SST (total sum of squares) = DC, net one in rv, Ft gran ne munbe of rue eg co Jacl chs cto nner of inasign ta he grows wd MS mean sq) SSE whee SST theo tn ages and ns dapat Benda (Qabe of obsvaons —) 12.4.2 Applying the F-Test Statistic [As discussed, ANOVA can be computed with three sums of squares: SSC (sum of squares between columns), SSE (sum of squares within samples), and SST (total sum of squares) As discussed in the previous chapter (Chapter 11), Fs the rato of two variances. Incase of ANOVA, F value is obtained by dividing the treatment variance (MSC) by the error variance (MSE). So, incase of ANOVA, F value is calculated as bélow: F test statistic in one-way ANOVA Msc MSE ‘where MSC isthe mean square column and MSE the mean square error, ‘The F test statistic follows F distribution with k — 1 degrees of freedom corresponding to MSC in the numerator and n~ k degrees of freedom corresponding to MSE in the denominator. The nul hypothesis is rejected if the calculated value of Fis greater than the upper-tal critical value F,, with ‘k= I degrees of freedom in the numerator anc — k degrees of freedom in the denominator. Fora given level of significance a, the rules for acceptance or rejection of the null hypothesis are shown below: For a given level of significance c the rules for acceptance or rejection ofthe null hypothesis Reject H if calculated F > F, (Upper tail value of F), otherwise do not reject, Figure 122 exhibits the rejection and non-rejection region (acceptance region) when using ANOVA to test the null hypothesis 12.4.3 The ANOVA Summary Table ‘The result of ANOVA is usually presented in an ANOVA table (shown in Table 12.4). The entries in the table consist of SSC (sum of squares between columns), SSE (sum of squares within samples) and SST(total sur of squares); corresponding degrees of freedom k 1m — and, n ~ 1; MSC (mean square column) and MSE (mean square error); and F value. When using software programs such is MS Excel, Minitab, and SPSS, the summary table also includes the p value, The p value allows a researcher to make inferences dicctly without taking help fom the critical values ofthe F distribution, Non-rejection region (acceptance region) Rejection regionTABLE 12.4 ANOVA Summary Table oad Source of Sum of Degrees of Mean squares F Value variation squares _fieedom Berween 8c Columns SSC k= MSC = > (Treatment) Within SSE Columns SSE nk MSE= (Error) ed Total SST_n=1 athe ined alue shal Foods Lid is a leading mamufucturer of biseuits. The company has _ launched @ new brand in the four metros; Delhi, Mumbai, Kolkata, and ‘Cheansi. After one month, the company realizes that there is a difference | nthe retail price per pack of biscuits across cities. Before the launch, the | tompany had promised its employees and newly-appointed retailers that | } ‘te biscuits would be sold ata uniform price in the country. The difference ‘price can tamish the image of the company. In order to make a quick inference, the company collected data about the price from six randomly selected stores across the four cities. Based on the sample information, the price per pack of the biscuits (in rupees) is given in Table 12.5: TABLE 12.5 Price per pack of the biscuits (in rupees) iathaiiseatameat | 9 8 2 op ws 17 2 9 Bs os 2 0m 7 20 25 19 18S oan 2s 2 ” 20 _ Use one-way ANOVA to analyse the significant difference in the prices. Take [85% as the confidence level PeEeaE | Solution ‘The seven steps of hypothesis testing can be performed as below: ; Step 1: Set null and alternative hypotheses The null and alternative hypothesis can be stated as below: Hy Mk = t= Hm by and Hy: Allthe means are not equal Step 2: Determine the appropriate statistical test ‘The appropriate test statistic is F test statistic in one-way ANOVA given as below Msc MSE where ‘MSC = mean square column, ‘MSE = mean square error ‘Step 3: Set the level of significance Alpha has been specified a 0.05, Step 4: Set the decision rule Fora given level of significance 0,05, the rules for acceptance of rejection of mull hypothesis are as follows: Reject H, ifcalculated F> F,, (upper-tail value of F), otherwise, do not reject H,, Chapter 12 | Analysis of Variance and Experimental Designs 397398 Business Statistics In this problem, for the numerator and the denominator the degrees of freedom are 3 and 20 respectively. The critical F-value is Fp, * 3.10. ‘Step 5: Collect the sample data ‘The sample data is as shown in Table 12.6, TABLE 12.6 Sample data for € cample 12.1 “Dalit Manat Rona Chema 2 19 18 2 22 195 ” 20 as 19 185 215 2 20 v 0 a Step 6: Analyse the data From the table T= 7 +0, + T+ T= 132 + 75+ 106 + 123: Fae +8, +8, +8,)/4 = 19.95833 and SSC (um o squares between cotuns) = 35, —¥Y » 6(22 19,9583)" + 6(19.5833—-19.9583)* + 6(17.6666~19.9583)" + 6(20,5833 ~ 19,9583)" = 25,0104 + 0.8437 + 31,5104 + 2.3497 = 59.7083 SSE (sum of squares within samples) =, 4(%,-¥,) = (22-22)' + (22.5-22)' + (215-22) + 22-229 + (225-227 + QLS~22) Hort (21~20.5833)+ (20~20,5833)" + (21.5-20.5833)° + (20-20.58337 + (21~20.5833)" + (20 20,5833)" 9.25 SST otal sum of squares) = SS (x, -¥ (22-19.95833)? + (22.5-19.95833)° + (21.5-19.95833)* + + (20 ~ 19,95833)' + (21-19.95833)? + (20~-19.95833)" = 68.9583 5 MSC (mean square) = 25° = 2-783 19,9007 SSE _ 9.25 MSE (mean square) = S9>-= 9 = 0.4625 MSC _19.9025 _ 45 55 MSE” 0.4625 Figure 12.7 exhibits the ANOVA table for Example 12.1‘eedom TABLE 12.7, le for Example 12.1 Source of Sum of Degreesof Mean squares FValue ee —_____ ssc columns (treatment) Within SSE columns (error) Total ssT 24 ‘Step 7: Arrive ata statistical conclusion and business implies At95% confidence level, the eitical value obtained from the Fable iF, =3.10. The calculated value of F is 43.03, which is greater than the tabular value (critical ‘value) and falls in the rejection region. Hence, the null hypothesis is rejected and the altemative hypothesis is accepted. ‘Thore is enough evidence to believe that there is a significant difference in the prices across four cities. So, he management must initiate corrective steps to ‘ensure thatthe prices should remain uniform. This must be done urgently to pro- tect the credibility ofthe fin, 124.4 Using MS Excel for Hypothesis Testing with the FStatistic for the Difference j in Means of More Than Two Populations MS Excel can be used for hypothesis testing with F statistic for difference in means of more than ‘wo populations, One can begin by selecting Data/Data Analysis, The Data Analysis dialog box will _ ‘pear on the screen, From the Data Analysis dialog box, select Anova: Single Factor and click OK _ (Figure 12.3), The Anova: Single Factor dialog box will appear on the screen. Enter the location of __ the samples in the variable Input Range box. Select Grouped By ‘Columns’ Place the value of ce ind click OK (Figure 12.4). The MS Excel output as shown in Figure 12,5 will appear on the sereen _ 124.5 Using Minitab for Hypothesis Testing with the F Statistic for the Difference in the Means of More Than Two Populations Minitab can also be used for hypothesis testing with F statistic for testing the difference in the means of more than two populations. As a first step, select Stat from the mena bar. A pull-down menu will ‘ppeat on the screen, from this menu select ANOVA. Another pull-down menu will appear on the _ Steen, from this pull-down menu select One-Way Unstacked. The One-Way Analysis of Variance Anava: Two-Factor With RepBation ‘Anova: Two-Factor Without Replication Correlation Covariance Descriptive Statistics | exponential Smocthing F-Test Two-Sample for Variances Fourier Analysis |Histooram Chapter 12 | Analysis FIGURE 12.3, IMS Excel Dato Analysis dislog box Vasiance and Experimental Designs 399a eee FIGURE 12.4 MS Excel Anove: Single Factor cialog box gy x 5 a 5 Eniae e [anova Single Factor 2 ‘T |suwary 4 = Court Sum — Average Variance [Coun 1 oe OD [Column 2 517s tases OBtt6s? 7 |eelumm 3 8108 17 95567 0 S55867 @ [Column 4 igs 2.58559 0.44687 3 30 11 ANOVA, [12 | Sowee of Varaton |__55 WSF Psae Fert 13 Between Groups 62.7003 3 19SUTE GUS 651E 0S 508807 FIGURE 12.5, 14 |wihin Groups 925m 0.4625, MS Excel output for 7 Example 12.1 16 Fatal waigseng 99 Gialog box will appear on the sercen (Figure 12.6). By using Select, place samples in the Responses (in separate columns) box and place the desired Confidence level (Figure 12.6). Click OK, Minitab will calculate the F and p value forthe test (shown in Figure 12.7). es Responses fin separate columns}: SaaS Store residuals F Store tts Confidence level: [FSO sows | ceca camel FIGURE 12.6 Minitab One-Way Analysis of Variance dialog box Hep | OK. Cancel 400 Business Statistics‘One-way ANOVA: DeIhi, Mumbal, Kolkata, Chennai surce DF ss sp Factor 9 59.708 18,903. 43.03 0,000 Brox 209.280 0.482, Total 23. 68.950 3+ 0.6001 ReSq = 86.59 Risglads) = 8a.57e Tndividuel 95% CTs For Mean Based on Pooled stew Neen stay 22,000 0.447 49.583. 0.201 47.667 0.759, 20.565 0,665 qo iss ao aes Pooled sev = 0.680 1246 Using SPSS for Hypothesis Testing with the F Statistic forthe Difference in Means of More than Two Populations Trpothesis testing with F statistic for difference in means of mote than two populations can be Beformed by SPSS. The process begins by selecting Analyse/Compare Means/One-Way ANOVA. One-Way ANOVA dialog box will appeat on the screen (Figure 12.8). Note that cities are coded ig numbers. Delhi, Mumbai, Kolkata and Chennai are coded as 1,2, 3,4 respectively, Place Price the Dependent List box and Coding (cites with coding) in the Factor box and click Options. The secaivg | Elteetanarandon aftecs amogeraty or vaace tae a oer Chapter 12 | Analysis of Varance and Experimental Designs FIGURE 12.7, Minitab output or Example 12.1 FIGURE 12.8 SPSS One-Way ANOVA dialog box FIGURE 12.9 SPSS One-Way ANOVA Options clalog box 401ese hoo | | areeer | rserr | ora] saver | tneser | tran | s050 an] 6 ease | arian | a aime | 2n00 | 250 sou | ot tres | asus | sox | roses |_vron |_ 2250 RcURETe Gl win ues 20 | 20 «| SSPSS output for Example 12.1 Te caso | 23 ‘One-Way ANOVA: Options dialog box will appear on the sereen. In this dialog box, from Statistics, click Deseriptive and click Continue (Figure 12.9). The One-Way ANOVA dialog box will reappear ‘on the sereen. Click OK. The SPSS output as shown in Figure 12.10 will appear on the sereen, SELF-PRACTICE PROBLEMS E 2 a T2AT, Use the following data to perform one-way ANOVA TEA3.A company Is in the process of launching @ new produ ————— ‘Before launching, the company wants to ascertain the status Factor 1 Factor? Factor 3 Factor 4 ofits product as & second alternative. For doing so, the con B 7 2 18 pany prepared a questionnaire consisting of 20 questions o# a five-point rating seale with ! being “strongly disagres” and e s 26 1 5 being “strongly agree” The company administered this 3B Iso 16 {questionnaire to 8 randomly selected respondents from five a ie asl 15 potential sales zones, The scores obtained from the respon: ‘ents are given in the table, Use one-way ANOVA to analyse 15 vous 16 the significant difference in the scores. Take 90% as the com 4 ls 30 7 fidence level, ‘Use a= 005 to test the hypotheses for the difference - 2 _ in means, Sales Sales Sales Sales Sales 12A2,_ Use the following data to perform one-way ANOVA, ‘2 zone3 zoned zone 1 Fasor | Far? aor Facor€ Par 5 ‘ Us 122 3 10 121 or 65 65 60 ism ssa aioe oe at ec tom nia en a) oo re eee ea ae ee eo ee a oe aoa a mo 8 9 2 8 @ : ia eter auas mcr (he a= 00 we paces for iam 12.5 RANDOMIZED BLOCK DESIGN We have already discussed that in one-way ANOVA the total variation is divided into two components | variations between the samples of columns, du fo treatments and variation within the samples, due} | error. There is possibility that some of the variation, which was attributed to random error may nol ‘be due to random error, but may be due to some other measurable factors. If this measurable factors | included in the MSE, it will result in an inerease in the MSE. Any increase in the MSE woutd res ina small F value (MSE being a denominator ia the F-value formula), which would ultimately leado J the acceptance of the null hypothesis, 402 Business StatisticsLike the completely randomized design, randomized block design also focuses on one independent ‘wrable of interest (treatment variable). Additionally, in randomized block design, we also include ‘toe more variable referred to as “blocking variable” This blocking variable is used to control the _fonfounding variable. Confounding variables, though not controlled by the researcher, ean have an _iipecton the outcome of the treatment being studied. In Example 12.1, the selling price was different “atthe four metros. n this example, some other variable which isnot controlled by the researcher may impact on the varying prices. This may be the tax policy of the state, transportation cost, ete luding these variables in the experimental design, the possiblity of controlling these variables Gan be explored. The blocking variable i a variable which a researcher wants to control but isnot 8 teament variable of interest. The tem blocking has an agriculture origin where “blocking” refers 10 lock of land. For example, if we apply blocking in Example 12.1, under a given cicumstance, ech ‘ef the four prices related to four metropolitan cites will constitute a block of sample data. Blocking vides the opportunity for a researcher to compare prices one to one. In case of a randomized block design, variation within the samples can be partitioned into two “prs s shown in Figure 12.1, _ _ So, in randomized block design, the total sum of squares consists of three parts: ST (otal sum of squares) = SSC (sum of squares between columns) + SSR (sum of squares between tons) + SSE (sum of squares of errors) 125.1 Null and Alternative Hypotheses in a Randomized Block Design _ Whasalready boon diseussod that ina randomized block design th total sum of squares consists of three ‘its, In light ofthis, the null and alternative hypotheses for the treatment effect can be stated as below: ___ Suppose if'e samples are being analysed by a researcher then null hypothesis can be stated as: status con Hy? My = t= My == Sand The altemative hypothesis canbe set a below: ol this ‘All treatment means are not equal For blocking effect, the null and alternative hypotheses can be stated as below (when F rows are being analysed by a researcher): econ Hy = Maney ‘The alternative hypothesis ean be set as below: H,; All blocking means are not equal ‘SSC (sum of squares between columns) SST (orl sum of auaes) SSE (oun of ues within sample) vee fete cael aed wanted variance abt valance al oe todliference. between. Bock See aree mens gore are enor (SSE) e Oe Figure 12.11 Partitloning the SSE ia randomized block design Chapter 12 | Analysis of Variance and Experimental Designs 403.404 Business Statistics Formulas for calculating SST (total sum of squares) and mean squares in a randomized block design SSC (sum of squares between columns) =" (%)— 7)" where cis the mimber of treatment levels (columns), rthe numberof observations in each treatment level (numberof blocks), %, the sample mean of group j(Columa means), and ¥ the grand mean and Mscimean squae)= SSE were SSC isthe sum of squares between columns and c~ 1 the degrees of freedom (number of ol umns~ 1). ‘SSR (sum of squares between rows) = 6% - 5)" ‘where cis the numberof treatment levels (column, r the numberof observations in each treatment level (numberof blocks), F, the sample mean of group (row means), and ¥ the grand mean SSR and MsR(mean square) = > where SSE isthe sum of squares within columns, and r— 1 the degrees of freedom (numberof row3~ 1) SSE (oun of squares of erors) = 3S (4)~ where cis the number of treatment levels (columns), r the number of observations in each treatment level (number of blocks), 7, the sample mean of group / (row means), x, the sample mean of group j (column means), x, the ith observation in group j, and ¥ the grand mean SSE noraorl where SSE is the sum of squares of errors and n—r—e+ 1 = (c~ 1\r~ 1) = degrees of freedom (number of observations ~ number of rows ~ number of columns + 1). Here, re =n = number of observations. and (MSE (mean square) = 12.5.2 Applying the F-Test Statistic |As discussed, the total sum of squares consists of three parts: SST(total sum of squares) = SSC (sum of squares between columns) + SSR (sum of squares between rows) + SSE (sum of squares of errors) Tn case of two-way ANOVA, F value can be obtained as below’ Fetes statistic in randomized block design P Msc. Tennis ‘whore MSC is the mean square column and MSE the mean square err. With cI, degrees of redor for numerator norseti=(e~Iyr-=1), degrees of freedom for denominator MSR Fes) HSE ane set) ~ MISE where MSR is the mean square ow and MSE the mean square or With =1-=degres of isedom for numerator ans morsest=(e1ir~1), degrees of fieedom for denominator. Fora given evel of saifieanee cules for aceptanceor ejection ofall ypotesisaeas below: Fora given teve of sgnifiance a, rules for acceptance oF reestion of null hypothesis Reject H, if F, Otherwise, do not reject H, ‘tates ” Fo 12.5.3 ANOVA Summary Table for Two-Way Classification ‘The results of ANOVA are usually presented in an ANOVA table (shown in Table 12.8). The entries in the table consist of SSC(sum of squares between columns), SSR (sum of squares between rows), SSE |TABLE 12.8 ANOVA Summary table for two-way eassiication ‘Source of variation Sum of Degrees of Mean squares ares freedom Scare ‘Sum of squares between columns sc» SSC et Sumofsquares SSR py SSR MSR netween rows, MSR= =~ Five TigE between rl MSE Sum of squares of SSE (e~1Yr~1) SSE errors MBBS eG TD (=D Towser nat {fit of stunes of eros), SST (otal sum of squares); corresponding degress of freedom fe~ 1, {fDi Ge ~ De 1) and (x= 1); MSC (mean square column); MSR Geen square row) and MSE p (fean square cron; F values in terms of Fad F, -As discussed needs block design ‘en using software programs such as MS Excel, Minitab, and SPSS, summary able ie includes p Re, The vale allows researcher make inferences dretly without aking help from the ertical ‘alues of the F distribution. fry rages ay cme wan der ioe EXAMRBTS TADS Prolocopy paper manufacturing business. The company hus decided ta lige fot esta ie prodit nice ares ered ie ne | ‘nla adhe south are. Theconpanyakecs one ae Bleren St, S2 53,54 and ris purpose Thee oe Aby these ve salesmen (in hound rpoe) and “tt regions is given in Table 129 | TABLE 129 fe ale geeateaby tv sesnen in | thousand rupees) and total sales in afferent regions (in thousand rupees) Salesmen | Region “S12 $3. $4 S3_ Regions ‘oral | Noth 24-3036 23-2135 | Central 2232 27 25 31137 Soh 23-28-25 22 32130 | Salesmen's Tout 6 95% as confidence level for testing the hypotheses, ‘The seven steps of hypothesis testing can be performed as below: Step 1: Set null and alternative hypotheses (ea null and alternative hypotheses can be divided into two parts: For treatments (columns) and for blocks (rows). For treatments (colurms), null an alteative hypotheses can be sated a below: Hy MH, H;-All the treatment means are not equal and Chapter 12 | Analyss of Variance and Experimental Designs 405,406 usness Statistics For blocks (rows), null and alternative hypotheses can be stated as below: Hens and 11; Alle block means ae ot equal Step 2: Determine the appropriate statistical test Fest statisti in andomized block design Fea MSE cm SE ‘where MSC is the mean square column and MSE the mean square error. with e~ 1, degrees of freedom for numerator Se eee yeas mene oe mn Fran MSE MSE ee teense oe nee ee age tees ene Meee lee I) sper of feedom fr dene. ‘Step 3: Set the level of si Let = 0.05. ‘Step 4: Set the decision rule Fora given level of significance 0,05, the rules for acceptance ot rejection of ull, hypothesis are as follows Reject Hy if Ftaes™ Feat For treatments, degrees of freedom = (c~ 1 For blocks, degrees of freedom = (r—1) = 3 =I For error, degrees of freedom = (c~ 1)(r—1)=4*2= 8 otherwise do not reject H, ps4 Step 5: Collect the sample data ‘Sample data is given in Example 12.2. The treatment means and block means are shown in Table 12.10 as follows: TABLE 12.10 Treatment means and block means for sales data Region -Si_~=«S2SC«SBSCSA~SC«SS—C Block Nonh 243026 7 cel 27 274 South a ee 2588022) 2) 26) Treamen Teamest 3) 3g ag aan ahs 24S Stop 6: Analyse the data ‘SSC (sum of squares between columns) = FSC + G1.65~268} [oe + (30-26.8)' + (26-26.8)" + (23.33-26.8)" = 183.066 SSR (sum of squares between ros) 6S, 25[@7-268)' + 214-268) + 026-268))] =52 SSE (sum of squares of errorsslow: ofnull ans are (24 ~ 23 ~ 27 + 26.8)* + (22 - 23 - 274 + 26.8) 3 + (23 = 23-26 + 26.87 Hot ©] 62 ~ 31.6666 ~ 27 + 26.8)* + (1 ~ 31.6666 ~ 27.4 + 26.9) + (32 — 31,6666 ~ 26 + 26.8)° 2.1333 Drow SST (total sum of squares of errors) (24-26.8)' +(22-26.8)' +(23-26, 8 +(32-26.8)° +(31-26.8) +(32-26.8) Mse = —SSE___ 12.1333 ci64 erect secs Ps MSC ott ang eee MSE 1.5166 he, = MR 26 HSE * Tse The ANOVA summary le fr Exanple 2.2 shawna Te 12.1 ANOVA Summary table for Exemple 12.2 Source of Sum of Degrees of Mean -FYalue variation squares freedom Sumof SSC 1-4 squares berween columns Sumof SSR squares 26 Fant between Sumof SSE ($-)3-1) MSE= squares 8 13166 of errors Tol SST. ‘Step 7: Arrive at a statistical conclusion and business implication ‘05% confidence level, critical value obtained ftom the F table is Fy, = 3.84 and Fas 47 446. ‘The calculated value of F for columns is 30.17, This is greater than the tabu Jar value (3.84) and falls in the rejection region. Hence, the null hypothesis is rejected and alternative hypothesis is aevepted, ‘The calculated value of F for rows is 1.71. This is less than the tabular value (4.46) and falls in the acceptance region. Hence, the null hypothesis is accepted and alternative hypothesis is rejected. ‘There is enough evidence to believe that there is a significant difference in the performance of five salesmen in terms of generation of sales, On the other hand, there is no significant difference in the capacity of generating sales for the Chapter 12 | Analysis of Variance and Experimental Desions 407FIGURE 12.12 MS Excel Data Analysis calog box FIGURE 12.13: IMS Excel anova: Two-Factor \Witnout Replication cislog, box 408 ausiness Statistics three regions, The result that indicates a difference in the sales volume generation capacity of the three regions may be due to chance. Therefore, the management should concentrate on individual salesmen rather than concentrating on regions. 12.5.4 Using MS Excel for Hypothesis Testing with the FStatistic in a Randomized Block Design MS Excel ean be used for hypothesis testing with F statistic in randomized block design. First select Data/Data Analysis. The Data Analysis dialog box will appear on the screen, From this Data Analysis dialog bos, select Anova: Two-Factor Without Replication and click OK (Figure 12.12). ‘The Anova: Two-Factor Without Replication dialog box will appear on the screen. Enter the location of the sample in Input Range, Place the value of exand click OK (Figure 12.13). The MS Exel output as shown in (Figure 12.14) will appear on the screen. 12.5.5 Using Minitab for Hypothesis Testing with the F Statistic in a Randomized Block Design Minitab can be used for hypothesis testing with F statistic in randomized block design. The first step is to select Stat from the menu bar. A pull-down menu will appear on the sereen, from this mem, select ANOVA, Another pull-down menu will appear on the screen, from this pull down menu, select ‘Two-Way, ‘The Two-Way Analysis of Variance dialog box will appear onthe sereen (Figure 12.16), By using Select, place Sales volume generation in Response, region in the Row factor, and different salesmen in the Column factor. Place the desired confidence level in the appropriate box (Figure 12.16). Click ‘OK, Minitab will calculate the F and p value forthe test (shown in Figure 12.17), : es Desenptive states Exponential Smocthng _FrTestTwo-Sampl for Variances “Fourier Analysis {Histogram _ ‘Anova: Two Factor Without Replication put Input Rene! |soraigrss Dkabets pha: (08 utp options ‘© Qutput Range: @ New Worksheet Bly: © New Workbookfeneration nnagement ‘regions, mized inst select his Data ¥ 12.12), “location ‘eloutput ized first step 'u, select 3yusing alesmen, ), Click FlguRE 12.14 WMS Exel ouput for Baampie 12 Centra] Cental 2s Cental 25 s4 40 Cantal as P44 Sou Si South ae 12 [South Bs FIGURE 12.15 = 7 Arangement ot dt n Me jSeah__f st Minitab sheet for rand Block destgn ce Response: [Estes Rowteewr —[Fesics ———~ F- Dlepay means Cat fact: T Display means © Store residuals Stree Contdence level © Ftadaive modet Figure 12.16 icons) Minitab Two-Way Analys YYaniance dialog box Chapter 12 | Analyss of Valance and Experimental Designs mized is of 409‘Two-way ANOVA: Sales volume generation versus Region, Salesmen source DF 8800S Region 2-—§.200 2.6000 1.71 0.200 Salesnen 4 183.057 45.7667 30.18 0.000 Error 8 (12.133. 1.5167 FIGURE 12.17 Torl = 14 200.400, Mintad output for Example 12.2 + 1.292 RSq= 99.95 Rsq{ed)) = 69.408 ‘When using Minitab for randomized block design, data should be arranged in a different manner (as shown in Figure 12.15), The observations should be “stacked” in one column. A second column should be created for row (block) identifiers and a third column should be ereated for column (treat- ment) identifiers (Figure 12.15), SELF-PRACTICE PROBLEMS ~ 12B1, The table below shows data in the form of a randomized Use a randomized block design analysis to examine: CS (1) Signifcan difference inthe treatment level. Block ‘Treatment level @) Significant difference inthe block level feel 1 2 3 4 5 ‘Take 90% as the confidence level for testing the hypoth- 6 18 19 19 24 ses, Ee 1283. A researcher has obtained randomly selected sales data ee ee Sear eo ts eam, Cony Company 2, Company 3, and Company 4, These data nm 2m mM 2 2 fare arranged in a randomized block design with respect sm wnat to company and region. Use a randomized block design ese eerie analysis to examine: ts annie ack xan xin ro i hmapuisottedt Ch Sie ice be test ve (1 Simitn ies nse es fat @) Significant diferenes in the block level (2). Significant difference in average sales of three differ- Tike 95 a conec evel resin the ype Sete: 1262, Tet el shows da nr nized Hck 05 for esting the hypotheses. design Take a= no ‘Treatment level Com- Com Com- Com aarp pany 1 pany 2 pany 3 _pany4 fel 2 a 4 “ —2_3_4 5 “Region! 2632 2 poe ee one Region? 28 3545 7 pace Region 33 so B52 68 85 557 90 12.6 FACTORIAL DESIGN (TWO-WAY ANOVA) LST RNUGSN) —n some ee suntions researcher hs to explore two oF more tentments simultaneously This Gerace Fe ge Me ye of experimental design is efered to as ctrl desi. na fcr design vo of mare tet ar ate Cea Seen varies are studied simultaneously. For example, in the previo example, we had disused Sele Rloted Sesto the variation in performance of salesmen du to one blocking vaable, region. Salesmen performance foal design ay also depend upon various other variables such as support provided by the company, attitude of 2 parla Salesman, support fom the dealer network, support rom the ee, eA these oa \avables (and many eter tariables depending upon the station) canbe included inthe experiment Sesign an ean be stud simultaneous Inti section, we wil study the factorial design with 0 Katie sean, Rucee Factorial design has many advantages over completely randomized design. If we use completely es randomized design for measuring the effect of two treatment variables, we will have to apply two com> ‘action affect of te resumen vonebles. plete randomized designs. Factorial design provides a platform to analyse both the treatment variables 410 business Statisticsmltaneously in one experimental design. In a factorial design, a researcher ean control the effect of pl treatment variables. In addition, factorial design provides an opportunity to study the interac qneffect of two treatment variables. Its important to understand that the randomized block design eenrates on one treatment (column) and control for a blocking effect (row effect), Randomized k design does not provide the opportunity to study the interaction effect of treatment and block. is feilty is available only in factorial design, .1 Null and Alternative Hypotheses in a Factorial Design Atvo-vay analysis of variance is used to test the hypothesis ofa factorial design having two factors. Unlipht ofthis, the null and alternative hypotheses for the treatment effect ean be stated as below: ‘Hg All the row means are equal. 11; All the row means are not equal H,: All the column means ate equal H,; All the column means are not equal, Hy; Interaction effects are zero, Hi Interaction effect is not zero (present), 126.2 Formulas for Calculating SST (Total Sum of Squares) and Mean Squares in a Factorial Design (Two-Way Analysis of Variance) ‘SSC (sum of squares between columns) = 7 (, et isthe mmber of column treatments, rthe numberof rw treatment, n the numberof abserva- ineach ell, ¥, the sample mean of group j and ¥ the grand mean ssc MSC (mean square) = > ere SSC isthe sum of squares between columns and c~ 1 the degrees of freedom (number of col- s-1). ‘SSR (sum of squares between rows) = ne}, (F— fee cis the number of column treatments, r the number ofrow treatments, the number of observa sin each cell, 3, the sample mean of group i (row means), and ¥ the grand mean MSR (mean square) = SS% jchcell, the sample mean of group (row means), z, the sample mean of group j (column means), emean of the cell corresponding to ith row and jh column (cell mean), and ¥ the grand mean SSI ‘MSI (mean square) e=b SS ste sm of squares intion and 1) dees o ean S56 (am ofsquresenor) = LEE Cu isthe rmberf cl ean, rh nue oo teen the mer fobs fin each cell, the individual observation, the mean of the cell corresponding to ih row and umn (cell mean) SSE rela) ee SSE isthe sum of squares of errors and re(n ~ 1) the degrees of freedom, MSE (mean square) = SST (otal sum of squares) = Yu a Chapter 12 | Analysis of Variance ond Experimental Designs #11Statistics \whete cis the numberof column teatments, rhe numberof row treatments, nthe numberof obser ons in each call, the individual observation, ¥ the grand mean. Sst and MST (mean square) = where SST isthe fla sum of squares and N~ 1 the degrees of fteedom (ttal number of obser tions ~ 1. 12.6.3 Applying the F-Test Statistic ‘hs cused the total um of gure consis of fur parts: SST (ol sum of ques) = SSC (aun Sfsquesbetgoen columns SSR (am of aguas between rows) Iu of oqunes intra] Fan Otnerwise, do not reject Hy 12.6.4 ANOVA Summary Table for Two-Way ANOVA ‘The result of ANOVA. for a factorial design is usually presented in an ANOVA table (shown in « ‘Table 12.12).The entries in the table consist of SSC (sum of squares between columns), SSR (sum TABLE 12.12 Source of Sum of squares Degrees of freedom Mean squares variation Sumof ssc. squares sc between columns Sumof SSR rt sauaresbe- mse ~ SSR ‘een oS sumof Sst ©-DU-0 squares interaction Sumot SSE reo) squares of Total SSI _MSI r= Fores : MSEee “tale inferences directly without taking help from the critical values of the F distribution, CBstiseary Stel and fron Mil isa leading seel rod manvfacharing somany of Cahatisgach, The company produces S-metre long stel rods, ‘20 used in the contin of building. The company has four nes which manufacture steel rods in three shifts. The company’s lity contol ofcer wants to tet whether there is any diferencia sxe length ofthe iron rods by shifts or by machines. Data given Safle 12.13 is organized by machines and shifts obtained through a tion sampling proces. Employ a two-way analjis of variance and ‘deeming whether there ae any significant dllferences in effets, Take 0005, (um ction) TABLE 12.13 Length ofthe ron rod in diferent shits ana produced by different machines Tenet on “ctnes “Sug Sup? sup 3 en ein koe sor 812806 bos 8051 198788749 19 17 796 199 198798 22 a2 17 8258089 825 818816 19788773 115 17-474 an an ‘The seven steps of hypothesis testing can be performed as below: Step 1: Set null and alternative hypotheses ‘The null and alternative hypotheses can be stated as below Row effect: ‘Hg Allthe row means are equal 2H: All the row means are not equal. Column effect: H,: All the column means are equal Hz All the column means are not equal Interaction effect: H,; Interaction effects are zero, K, j: Tmeraction effec not zero (present), Step 2: Determine the appropriate statistical test Fetes statistic in two-way ANOVA, Foemeteine = MSE MSE ‘where MSC is the mean square column and MSE the mean square error with e~1, degrees of freedom for numerator and Squires between rows), SSI (sum of squares interaction), SSE (sum of squares of errors), SST. gal sum of squares); corresponding degrees of freedom (¢~ 1); (r~ 1); (e~ 1)(r= 1); re(n— I) and = 1); MSC (mean square column); MSR (mean square row); MSI (mean square interaction) and SE (mean square error); F values in ers OF Fy. Fuga? APO Fae SORWATE Programs such as {MSExee, Minitab, and SPSS, calculate p-value test inthe ANOVA table, which allows a researcher to Chapter 12 | Analysis of Variance ang Experimental Designs 413re(n ~ 1) degrees of freedom for denominator. MSR ‘MSE ‘where MSR is the mean square row and MSE the mean square error with 71, degrees of freedom for numerator and re(n~ 1) degrees of freedom for denominator, _ MSI Fracions ee) SE Frat wire MSI isthe mean square interaction and MSE isthe ran square ero. with (r= 1Xe~1), degrees of freedom for numerator and re(n1) degrees of freedom for denominator. jet the level of significance 105 Set the decision rule For a given level of significance the rules for acceptance or rejection of the null hypothesis are Rejoot Hy Fase. unr otherwise, do not reject, For treatments, degrees of freedom = (c— 1) = (3~ 1)=2 For blocks, degrees of freedom = (r= 1)=(4~1)=3 For interaction, degrees of freedom =(e— IXr~1)=2*3=6 For error, degrees of freedom re(— I)=4 «3x2 ‘Step S: Collect the sample data ‘The sample data is given in Table 12.14: TABLE 12.14 Sample data for Example 12.3 and computation of diferent Length of the iron red Machines Shift Shi? Shift 3 i 1 812 Sil 04 sou 8.12 8.06 Bos 8.06 sul 806, 80965 ¥,=807 8075S A 188 789 uw 7.96 195 298 Hy = 7.9533 78666 ¥, =7.9433 79211 i 3 a2 sn | 825 a9 826 816 8.2077 4 Se c we e 7.7566 179 73877 | < 8.0033 h f = Grand mean = 7.99085 2 f 2 kh os fStep 6: Analyse the data ‘SSR (sum of squares between rows) = ne = 3x 3) | 8.0755 7.99055)° + (7.9211 - 7.99055)! + (8.2077 — 7.99055)? +(7.7577- 7.9055) = 1.02077 =x 4)[(6.003- 799088) + (799 ~ 1.900857 + (7.9783 ~ 7990559] 100376 S51 (oun of sures intecton = SS, 5 x | {8:06 = 8.0755 — 8,003 + 7.99055)" + (8.0966 — 8.0755 - 799 + 7.99053)" + -~ +(7.7266 ~ 7.7577 ~ 7.9783 + 7.99055)? = 0.02527 SSE (sum of squares errors) = YY (a, — [* 12 — 8.06)? + (8.01 ~ 8,06)? 4---+ (7.74 ~ 7.7266) +(.71~ 7.7266 = 0.0568 SST (total sum of squares) = YY (1_ = [8:12 ~ 7.99055) + (8.01 ~ 7,99055)°+---+ (7.74 — 7.99055)? 47.71 ~ 7.99055) = 1106889 Ss _ 1.02077 3 340256 SSC _ 0.00376 MSC (mean square) = >=" el o.00188 MSR (mean square) Sst 12527 (= e-) 6 =0.004211 SSE__ 0.05680 MSE (mean square) = Fitadaitive mode! FIGURE 12.22 Minitad Two:Way Analysis of Vanance dialog box ‘Two-way ANOVA: Mean length versus Machine, Shift Source oF 85 us Foo Machine 3 1.02077 0.940256 143.77 9.000 Shite 2 0.00976 0.001878 9.79. 0.464 Tnteraction 6 0.02527 0.004211 1.78 0.146 Error 24 0.08680 0.002367 Total 35 1.10659 $= 0.04865 R-Sq = 94.97% R-Sqladj) = 92.51% Individual 95% CIs For ean Based on Pooled stbev Machine Mean a 8.07556 2 yes2Ll 3 8.2078 4 1sM8 Individual 95% CIs For Mean Based on Pooled stDev shige Mean + 2 8.00333 2 7.99000 3 T9733 (= om 7,950 7.978 8.000 8.025 , 2 rr2). By ‘SELF-PRACTICE PROBLEMS Seana faa AG: (el town) ANOVA on he dt aged inh fom aia maagens he cam pany also considered the edu- Heulate oF bwo-vay factorial desig bela Cation level ofthe employees Based on et quien, pee EE offers were alo divided into thre cagorce seek tint 2 Postgraduates, and doctorates. The compeny eae a erm the effecivenes ofthe taining pre ye 2 Rloyes across designation and educational els Then chained from randomly selected employees verse nee oe categorie are given belo 27 aa eamenr2 tn Sie Zan Rood 2% 25 Se eee Fw» 2 034 = il 2 a Graduate 40 4939 [PCD Pesorm twostay ANOVA analysis onthe data aeaged in 220 | formoFa two-way factorial dover ber’, Bos A 3 6 a = Pot 39a alifcaion D Sratfeaton grunts 4 gS Bo a x 8 Teaimen2 ~ 18 30 43 Moo ee L348 Dociomte 38 483g voy R F981 som om 133 —— nee EPCS. 4 company organized a training programme for ‘tories of officers: sales managers, zonal mana three cat- gers, and whether there a Employ a two-way analysis of van ance and determine ie Significant differences in effects. Take TABLE 12.16 | come of five compar the Tata Group in six randomly see Dec 1998 3558 3320.7 202.4 1797 2041.6 Mar2001 1100.4 3406.3 5623, 21429 271 Jun 2002 sas 3493.2 3704 14262 1942.3 = Sep 2003 931.2 83749 493.7 e218 2106.4 Dec 2004 983.6, 10,908,3 079 Lie one-way ANOVA to analyse the significant difference in the ines, Take 95% as the confidence level Chapter 12 | Analysis of Van Quarters vaya Glohal-- Tata Chemicals Tata Cope “Tata Tea L maton nel, Cn milion Led Gin it. cations Ladin font Seances) on rapees) milion pees) rupees) td ince and Experimental Designs 419FIGURE 12.24 MS Excel output exhibiting summary Statistics and ANOVA table for Example 12.4 420 business Statistics Solution ‘The seven steps of hypotheses testing can be performed as below: ‘Step 1: Set null and alternative hypotheses ‘The null and alternative hypotheses can be stated as below: Hy y= B= B= =H and Hi All the means are not equal Step 2: Determine appropriate statistical test ‘The appropriate test statistic is F-test statistic in one-way ANOVA, MSC MSE ‘where MSC is the mean square column and MSE the mean square error. ‘Step 3: Set the level of significance Alpha has been specified as 0,05. So, confidence level is 95%. ‘Step 4: Set the decision rule For a given confidence level 95%, rules for acceptance or rejection of null hypothesis Reject Hyp FF canany > Fy (Upper-tail value of F), otherwise, do not reject H, In this example, for the numerator and denominator, the degree of freedom is 4 and 25, respectively. The critical F value is Fy. 2<~ 2.76. ‘Step 5: Collect the sample dat ‘The sample data is shown in Table 12.17: ‘TABLE 12.17 Sample data for Tata Group Example 124 ‘Quarters Avaya Glo- Tata Chemi- Tata Coffee Tata Com- Tata Tea Dalconnect cals Lid Led ‘munications Lid (in Lid (i mile (in million — (in million Lad in mil- milion __ Hon ray rripees) leon rupees) _ rupees) _ Dee 1998 aoa «17297 2081.6 Mar 2001, 503 21429 2373.1 Jun 2002 3704 14262 1942.3 ‘Sep 2003 493.7 8218 21064 Dee 2004 109083 «60799200 2419.7 Sun 2006 7600.7 5866 ——9810_— 26558 | Step 6: Analyse the data ‘The MS Excel analysis of the data is shown in Figure 12.24 GaSe aT ee Son 771 . tei 4s & ‘uss sei Saaaae Se Lewin oun ne 1 1a seueias Step 7: Arrive at a statistical conclusion and business implication ‘At 95% confidence level, the critical value obtained from the table is Pas, = 2.76. The calculated value of Fis 22.34, which is greater than the tabular value (critical value) and falls in the rejection, Henee, the null hypothesis is rejected and the alternative hypothesis is accepted. ‘Therefore, there is a significant difference in the average quarterly income ‘of companies._ Aresearcher wants to estimate the average quarterly dlference in the net _t2ks of five companies of JK group. Due to some reasons, he could not _ obtain the data on average net sales of these companies. He has taken net _ tes ofthe five companies for six randomly selected quarters as indicated Table 12.18, a | Sree: Prowess prision i Net sales of five companies of JK group in different randomly selected quarters Quaion JK Lahn) JE Paper lad JK Pham JR Sameas JEG | Caneel ten een Tete Ted —___iln perce” _atontpesy gee tm BRT sed 899 TBS Sa ee | a2mn2 9mas 4609 bm ina htm 99 aise ete mato 20838836 were ssh Dono us 138759 12 ass | (V3.1), Centre for Monitoring Indian Economy Pv i asessed Noverber 2008, reproduced with) Use one-way ANOVA to analyse the significant difference in the av- ige quarterly net sales. Take 90% as the conti Solution ‘The seven steps of hypothesis testing can be performed as below: Step 1: Set null and alternative hypotheses ‘The ml and alteratve hypotheses ean bested as below Ha dhe =W == and H{:Allthe means ae not equal Step 2: Determine the appropriate statistical test ‘Tho appropriate test stats is Fest statisti in one-way ANOVA, Msc MSE where MSC isthe mean square column and MSE. the meaa square error Step 3: Set the lve of significance For esting the hypotheses, alpha hasbeen specified a8 0.05 (t= 005) Step 4: Se the decision rule Fora given level of significance (r= 0.05), rules for acceptance or rejection of thea hypothesis, Reject Ay if Foamy > Fy (Uppertail value of F), otherwise, do not reject H, The degree of freedom for numerator and denominator is 4 and 25, respee- tively. The ertical F value is Fy, 4, = 2-18 ‘Step 5: Collect the sample data ‘The sample data is given in Table 12.19: TABLE 12.19 ‘Sample data for Example 12.5 Quarters JK Lakshmi JK Paper JK Pharm JK Sm JK Tred Cement Lid Lid (in achem Lid thetiew Ld Inds. Led (in milton milion Gin milton (in milton in milion wees) rupees) rupees) __ rupees) rupees) Dec 1999 1460.4 29991735 toa2 26802 Mar2001_ 951.1 156.7 1064 2785.2 Chapter 12 Analysis of Variance and Experimental Designs(Quarters JK Lakshmi JK Paper JK Pharm. JK Synthetics JK Tyre & Comen Lad Lid(n achem Lid Li inion Inds Lad finmion maton (nmion rupees) inion pees) ries) rapes) | pee. Twain 9824 M09 aT 3712 Jmn2003 8529 SISK SIS 32306 fm 2008 1208316896 80498 SIHSA Deczine 118231543750 ae a Step 6: Analyse the data ‘The MS Excl anal ofthe data i shown in Figure 12.25, Be A z c 20 = S Taro Shae Poa E 3 [summary a oa ergs oe Seam Sea Tea aus alm? Eo as08 tiaras coum 3 & m2 "Wer dese Erase waver tres? S203 605 Weer (Sn Vaan SSF SF rate Fat URE 1225 Somes cea Sasa Sram) eee VIEW Tae Seal out ening Inn Ger’ esr 2 anes eae J ame 8 ‘Step 7: Arrive at a statistical conclusion and business implication ‘The critical value obtained from the table is F,,,.,= 2-I8.The computed value of Fis obtained as 30.47, This computed value (30:47) is greater than the critical value (2.18) and falls in the rejection region. Hence, null hypothesis is rejected ‘and alternative hypothesis is accepted. 4 'At90% confidence level, there isa significant difference between the net sales of five companies ofthe JK group. The researcher is now 90% confident that there exis significant difference between the net sales of five companies of JK group. 212.6 A leading shoe manufactrer has 300 showrooms asross the county. The See company want (o know the average difference in also these showrooms Taleo wants to know the average sales difference between salesmen, For scertning the productivity of different salesmen, the company has adopt fda pratice of feng one salesman for three months at one showroom ‘The company randomly selected five showrooms and five salesmen from cach ofthe showrooms. Table 12.20 exhibits the average sales (in thousand rupees) fom showrooms andthe individual conrbution ofthe Fie sales | tren place at diferent showrooms apts 12.20 | BEA sorte yf stsmen arses fom ferent shonroons (thousand pee) eee. Shomvom 1 Showroom 2 Showroom 5 salesman 55 2 50 Salesman? 56 10 ~ | saesman3 58 68 9 6 | Sinmns @ % ok 2B 1 40 422 Business StatisticsUse a randomized block design analysis to examine (1) Whether the salesmen significantly differ in productivity? (2) Whether there is a significant difference between the average sales of showrooms? ‘Take 99% as confidence level for testing the hypotheses ‘The seven stops of hypothesis testing can be performed as below: ‘Stepl: Set null and alternative hypotheses ‘The mull and alternative hypotheses ean be divided in two par (showrooms) and for raws (salesmen), For columns (showrooms), null and alternative hypotheses ean be stated as below: ‘or columns: Hy =H =H =H, and ‘A, Allthe column means are not equal For rows (salesmen), null and alternative hypotheses can be stated as below: Hy My =H, =H =e = ls and 17: All the row means are not equal ‘Step 2: Determine the appropriate statistical test Fest statistic in randomized block design Msc MSE where MSC is the mean square colin ané MSE the mean square erro wit)” e~ 1, dagres of freedom for numertor and nore t=(e~1)r1, degrees freedom for denominator Foster eek MSE sshere MSR isthe mean square row and MSE the mean square eror with 71, degrees of fsedom fr numerator and n=r—e+1 =(e~1i(r~ 1), degrees of feedom for denominator. Stop 3: Set the level of significance Level ofsianifeane ais taken a5 0.01. Frat Step 4: Set the decision rule For a given level of significance 0.01, rules for acceptance or rejection of null hypothesis Reject Hy if Fcges > Fyueur Otherwise do not reject H, Step 5: Collect the sample data ‘The sample data is given in Table 12.21. TABLE 12.21 Columa means and row met Example 126 Showrooms \ ose Salesmen Show Sho Show. Show Show. Book —_ ENE room room3__room4 room 5_means_ Salesman 1 n 45 85 614 Salesman 2 0 50 88 626 Salesman 3 68 5s 9 63 Salesman 4 7 2 so 08 Salesman $ B 41 or 614 Treatment means _S82__70.6_ 46.688, Chapter 12 | Analisis of Variance and Experimental Designs 423,FIGURE 12.26 MS Exce! output exhibiting summary Satistes and ANOVA table for Baarmple 12.6 424 business Statistics Step 6: Analyse the data Figure (2.26 exhibits the MS Excel output for Example 12.6, Itshows the column descriptive statistics, row descriptive statistics, nd the ANOVA table. Step 7: Arrive at a statistical conclusion and business implication At 1% lew) of sigifcancc, the critical value obtained from the table is Fanage 477 ‘ite calculated value of F for columns is 99.54, The caloulated value of F (99.54) is preter than the critical value of F (4.77) and falls inthe rejection region. Hence, nll hypothesis is rejected and alternative hypothesis is accepted. Calculated value of F for rows is 0.25. This is less than the tabular value (4.77) and fll inthe aceptance repion Hence, nul hypothesis is accepted and altera- tive hypothesis is rected. a BOLTS Soo E = “anor Facar Wiha Fepizan Ff SUMMARY ~~ Count Sun — Breage Varo beim So aad Ron? saa ee ard = lRow’ sa) ei aed 5 JRow au we ad 7 IRows svar ea ad a 3 [conn 3 at ay F301 Column 2 535376 3a} a {cok 3 oe Te [coun saat mast 8 13 cluen ee ee eT, i OE Sosae Varn SS aS —F —Frate Fo ove GS 1 owe oN ST cour Sie 4 toate sosmm ase arr fro min 1618518 iia ea ‘There is enough evidence to believe that there isa significant difference in the five showrooms in terms ofthe generation of sales volume. There is no signif- cant difference in the sales volume generation capacity of the five salesmen. The result which we have obtained in terms of difference in sales volume generation capacity of the five salesman may he due to chance. So, the management should concentrate on the different showrooms in order to gencrate equal sales from all the showrooms. Example 12.7) Te vice president of a frm that enjoys market monopoly is concerned about the entry of a multinational firm in the market. He wants to analyse the brand loyalty forthe firm’s produets, The firm has randomly selected 10, ‘customers and obtained their scores on a brand-loyalty measuring question- naire. This questionnaire consisted of 10 questions with each question rated ‘on a one to seven rating scale. The scares obiained by ten different custom rs for five different products are arranged in a randomized block design as shown in Table 12.22: TABLE 12.22 Sees coined by ten ciferent customers for ve eiferentprodts Gisomers Product. Produ B Product © Product Product 1 a a a 2 > er ee 3 82 ®t 4 ep ee 5 8 8 8 9 osthe customers? Take = gn Se°2N steps of hypothesis testing can be performed as follows: fev I: Set wall and alternative hypothecce Gi full and altemative hypotheses ean ee divided in two parts: For columns (Products) and for rows (customers), For columns (products), null and altemative hypotheses can be stated as below: Ayn, SM =H, and 72: All the column means are not equal For rows (customers), null and altematine ‘hypotheses can be stated as below: cara and Al the row means are not equal PRB 2 Determine the appropriate statistical ese “est statistic in randomized block design MSC Frama ena) = MSE, ota Where MSC isthe mean square column and MSE the mean square error, wih €~ Is depres of fedom for mumernter ane (C~ er 1, degres of fredom for denominator, MSR’ noriet and Fractions fan ot T= C~ Dir 1), degrees of freedom for denominator. Step 3: Set the level of significance Level of significance ris taken as 0.05, ‘Step 4: Set the decision rule ff given level of significance 0.05, rules for acceptance or rejection of mull hypothesis: Rejeet if e > Far Otherwise, do nt reject H, ‘Step 5: Collect the sample data ‘The sample data is given in Table 12.22 Step 6: Analyse the data {iste 12.27 exhibits the Minitab output and Figure 12.28 exhibits the partial MS Excel for Example 12,7, Step 7: Arrive at mand business implication At 506 level of significance, the eneal vane obtained from the table is Fy Foreolumns, the calculated value of Fis 38.29. Calculated value of F (35.29) Hees nat the extical value of F (263) and ak in the rejection region, Hence, nll hypothesis is rejected and siege hypothesis is accepted Cheote 12 Anais of Variance and Experimental Desians a5FIGURE 12.27 Minitab output exhibiting ANOVA table and summary slatisties for Example 127 FIGURE 12.28 Partial MS Excel output ‘exhibiting ANQVA table for Example 12.7 426 Business Statistics Example 12. = ‘Two-way ANOVA: Scores versus Customers, Product Source DF 38 4S F P Customers 9 54.8 6.089 0.65 0.749 Product © @:1326.8 331.700 95.29 0.000 Error 36 338.4 © 9.400 ‘Total 49 1720.0 $+ 3.066 RSq= 80.99% R-Sq(adj) = 73.22% Custoners Individual 95 CIs For Mean Based on Pooled StDev Mean --=----+~ a 50.0 52.5 55.0 For rows the calculated value of Fis 0.65, This value is less than the tabular ‘value (2.15) and falls in the acceptance region. Hence, null hypothesis is accepted and the alternative hypothesis is rejected. NOVA ‘Source iverson SSS F ovale For Rows. (Columns nor Tolal 348 3 Useses DEAT7EA 0740315 216260747) 328 4) 331,735 26723, 6 36e-12 263253209) =e S84 i720) 8 ‘There is enough evidence to believe that there is a significant difference in terms of mean scores for five different products. There is no significant diffe: cence in terms of scores obtained by 10 different customers. The result that we ‘ensuring customers loyalty for different products, Bl i cpiy pcan far oc nda tem ot Bere oe Gini nd nb heme nae elec sie wana poel waa Ase Ate toe ee coopay reed elas a HATS rcp ar ed by Ber mace mt Sacre ons pea dsc! tr ie or a far are He 1S sees ts ony cere‘TABLE 12.23 Length of randomly selected copper rods arranged ina two-way factorial design Length of the copper rod 1 110 1.05 1s 1.06 La 095 Los. Lut Los Lu Operators 4 1.08 Lt | 1.09 1 110 101 1 10s 3103 101 104 102 1.06 Lu 107 095 Take «= 0.05 and use the information given in Table 12.23 t0 perform, a twosway ANOVA to determine whether there are significant differences in effects, The seven steps of hypothesis testing can be performed as below Step 1: Set null and alternative hypotheses ‘The null and alternative hypotheses can be stated as below: Row effect: 11; Allah row means ae equa. HY: All the row means are not equal 17; All the column means are equal 11; All the column means are not equal Interaction effect: H,; Interaction effects are zee. AY Ineracton effet isnot zero (present) Column effect: Step 2: Determine the appropriate statistel test FFs statistic in tvorway ANOVA fs gem a8 Fastin = MSE MSE ‘here MSC is the mean square column and MSE the mean square error with e~1, degrees of freedom for numerator and re(n~ 1), degrees of freedom for denominator, MSR 0 MISE \where MSR js the mean square row and MSE is the mean square error with 1, degrees of freedom for numerator and re(n~ 1), degrees of freedom for denominator 5 MSI otitis) SE ‘where MSI is the mean square interaction and MSE the mean squate error with (r= 1e~1), degrees of freedom for numerator and, re(n~ 1) degrees of freedom for denominator Chapter 12 | Analysis of Variance and Experimental Designs 427FIGURE 12.29 Mintab output exhibiting ANOVA table and summary Statisties for Example 12.8 FIGURE 12.30 Parti MS Excel output exhibiting ANOVA table for Example 128 428 usinass Statics ‘Step 3: Set the level of significance Level of significance ais taken as 0.05. ‘Step 4: Set the decision rule For a given level of significance a, rules for acceptance or rejection of null hypothesis Reject Hy if Faciua F ‘Step 5: Collect the sample data ‘The sample data is given in the Table 12.23. Step 6: Analyse the data ‘The analysis is presented in the form of Minitab output (Figure 12.29) and partial MS Excel output (Figure 12.30) sauar Otherwise, do not reject Ff, ‘Two-way ANOVA: Rod length versus Operator, Plant Source DF 38 us. F Pe Operator 2 0.034617 0.0173083 10.22 9.000 Plant 3 0.005308 0.017694 1.05 0.384 Interaction § 0.053317 0,0088861 5.25 0.001 Error 36 0.060950 0.016931 Total 47 0.154192 $= 0.04115 R-Sq= 60.47% R-Sqlad}) = 48.39% Individual 95 CIs For Mean Based on Pooled StDev operator Mean Qperetorl 1.10750 Operetor2 1.06625 Operator3 1.04250 + 1.050 1.080 = 1.110 1.140 Individual 95% CIs For Mean Based on Pooled stDev Plant Mean ~ Gvalior plan 1.08500 Indore plant 1.07750 Nagpur plant 1.05667 Raipur plant 1.06917 1.04 1.060.080 1.100 [Nova ‘Source of Varian SS | _MS___F _ Pueiio Fam [Sample To67 2 0017abe) 7022573) 0.00030 3 259485 [Columns (0.006308) 3 (0.001769) 1 046119, 0.384297 2.86828] interaction a.053317 5 D.OOS8eS § 248564 0.000S7 2.363751 ‘within ‘oen9s a6) O.oot68s otal aretigg a7) Step 7: Arrive at a statistical conclusion and business implication ‘At 95% confidence level, the eritical value obtained from the table is Pry,» 3.26, Fyag yp 287 aNd Foo, go 2.36, ‘The ealcllated value of F tor rows is 10.22. This is greater than the tabular value (3.26) and falls in the rejection region, Hence, the null hypothesis is rejected and alternative hypothesis is accepted,‘The calculated value of F for columns s 1.05. This sles than the tabular value (2.87) and falls inthe acceptance region. Hence, the null hypothesis is accepted and alterna tive hypothesis is rejected, Calculated value of F for interaction is 5.25. This is greater than the tabular value (2.36) an falls in the rejection region. Henc., ll hypothesis is rejected and alterna- tive hypothesis is accepted. ‘The result indicates that thee isa significant aifference in length of the copper rods with respect to operators. The plant-wise differ ce in the length of copper rods produced isnot found to be significant, Additionaliy, interaction between plants and ‘operators is also found to be significant, The significant interaction effect indicates thatthe combination of operators and plants results in difference in the average rod length. So, the management must focus on operators frst to check the difference in the length. The combination of plant and operators mus also be considered to control the differences in the length ofthe copper rods. SUMMARY| “An experimental design isthe logical construction of the experie ‘et to test hypotheses in which researcher either controls or ‘manipulates one or more variables Analysis of variance or ANOVA isa technique of testing a hypothesis about the significant differ- ‘ec in several population means. In analysis of variance (one-way | casifcaton), the total variation in the sample data ean be div ited info two components, namely variance between the samples “ted variance within the samples. Variance between the samples is, _stibuted tothe difference among the sample means. This variance ‘sdue to some assignable causes, One-way ANOVA is used to ana- je the data from completely randomized designs. Like completely randomized design, randomized block {esin also focuses on one independent variable of intrest (teat- tent variable). Additionally, in randomized block design, we also fnclde one more variable referred to as “blocking variable.” This Blocking variable is used to control the confounding variable. Confounding variables are not being controlled by the researcher fut can have an impact on the outcome of the treatment being KEY TERMS | studied. In case of a randomized block design, variation within the samples can be partitioned in two parts: unwanted va ance attributed to difference between block means (block sum of square) (SSR); variance attributed to random error sum of squares errors) (SSE), In some real-life situations, a researcher has to explore two for more treatments simultaneously. This type of experimental design is referred to as factorial design. Ina factorial design, two or more treatment variables are studied simultaneously. Factorial ‘design provides a platform to analyse both the treatment variables simultaneously at the same time in one experimental design. In 1 factorial design, a researcher can control the effect of mul- tiple treatment variables. In addition, factorial design provides ‘an opportunity to study the interaction effect of two treatment variables. The total sum of squares consists of four parts: SSC (sum of squares between columns), SSR (sum of squares between rows), SSI (sum of squares interaction), and SSE (sum of squares of errors), Asiis of variance, 393 ‘Cassitcaton variable, 392 Completely randomized design, 393 Derendnt variable, 392 NOTES | DISCUSSION QUESTIONS | Factor, 392 Factorial design, 410 Experimental design, 392 Experimental units, 392 Independent variable, 392 Randomized block design, 403, ‘Treatment variable, 392 ‘wwnectatamotors.com/our_world/profile php, accessed August 2008. | Explain the concept of using experimental designs for hypothesis testing 2. Define the following terms: + Independent variable + Treatment variable ‘+ Classification variable + Experimental units + Dependent variable 3. What do you understand by ANOVA? What are the major assumptions of ANOVA? 4, Whats the concept of completely randomized design and under what circumstances can we use completely random= ized design for hypothesis testing? 429 Chapter 12 | Analysis of Variance and Experimental Desions5, Explain the procedure for calculating SSC (sum of squares between columns) and SSE (sum of squares within samples) in completely randomized design 16. Discuss the concept of randomized block design? Under ‘what cireumstances can we adopt randomized block design? Explain your answer in light of blocking variable and eon founding variable. 1. Explain the procedure of ealeulating SSC (sum of squares Detween columns), SSR(sum of squares between rows), NUMERICAL PROBLEMS | and SSE (sum of squares of errors) in a randomized block design. 8. Explain the difference between completely randomized design and randomized block design. 9. What do you understand by factorial design? Explain the ‘concept of interaction in a factorial design. 10, Explain the procedure of calculating SSC (sum of squares between columns), SSR (sum of squares betwoen rows), SSL (sum of quares interaction) and SSE (sum of squares of ero) 1. There are four cement companies A, B,C, and Din Chatispath Company “A” is facing a problem of high employee turnover. ‘The personnel manager of this company believes that the low job satisfaction levels of employees may be one of the reasons “Tor the high employee turnover. He has decided to compare the {ob satisfaction levels ofthe employees of his plant with those of ‘the three other plans. He has used a questionnaire with 10 ques- tions on « Likert rating scale of 1 to 5. The maximum scores ‘that can be obtained is 50 and the minimum score is 10, The personnel manager has taken a random sample of 10 employees from each ofthe organizations withthe help of a professional research organization. The scores obtained bythe employees are sven inthe table below. Organi Organi-. Organi-. Organi- sation zation B_ zation C_ zation D 2 OMB 38 6 oS % 40 Bite cass 39 mw 2B 38 » Mo» 7 eee eae 4 2) ot 36) 8 2 2S 38 2 3338 39 bie ea) 3 Use one-way ANOVA to analyse the significant difference in the job satisfaction scores. Take 99% asthe confidence level 2. A company has launched a new brand of soap “brand 1” in the market, Three different brands of three different companies already exist in the market. The company wants to know the ‘consumer preference for these four brands. The company has randomly selected 10 consumers ofeach of the four brands and used I to4 rating scale with 1 being the minimum and 4 being ‘the maximum, The scores obtained are tabulated below: Pie ey eee 430° ausiness Statistics Brand! Brand? Brand 3 Brand 4 oo mete20) 18 25 2 OM 20 4B 25 26 eee 23 27 MO 26 ee ee Use one-way ANOVA to analyse the significant difference in the consumer preference scores, Take 95% as the confidence level A consumer durable company located at New Delhi hes launched a new advertisement cempaign for a product, The company wants to estimate the impact ofthis campaign on dif- ferent classes of consumers. For the same purpose, the company has divided consumer groups into three classes based on occu potions, These are service clas, business clas, and consultants For measuring the impact of the advertisement campaign, the company has used a questionnaire, which consists of 10 ques: tions, ona I to 7 rating seale with 1 being minimum and 7 being ‘maximum. The company bas randomly selected 8 subjects (espondents) from each of the classes. $o, a subject can score ‘minimum of 10 and maximum of 70. The scores obtained from the theee lasses of consumers are given below: Subject lass Ce a 40 a 38 2 2 a 40 3 48 4s a 4 48 4s 4 5 45 48 “1 6 “4 2 48 7 46 46 45 8 2 44 46 Use one-way ANOVA to determine the significant dif. ference in the mean scores oblained by diferent consumers. Assume = 0.05 A company has employed five different machines with five dif: ferent operators working oni turn-by-turn. The table given below shows the number of units produced on randomly selected days by five machines with the concerned operator working onislock selected respondents belonging to four age groups and asked 4 simple question, “Are you satisfied with this product?” Respondents were also classified into four regions. On the basis of four different age groups and regions, 48 customers were randomly selected. The company used a nine-point rat- ing scale. The data given below represents the responses of the 67s Use a randomized block design analysis to examine ) Whether the machines ar significantly differnt in terms of per- formance? 2) Whether there is a significant difference betwoen the the dif= ferent temperatures in terms of production? ‘Take 95% asthe confidence level ‘A company wants to ascertain the monthwise productivity ofits salesmen. The sles volume generated by five randomly selected salesmen in the fist five months is given in the following table lemen S12 SESS snes “an om 36 28 Rb 28 2% Ro Mar ~w 20M DB Ape 2M R40 2 May 2% 38 30 36 35 Use a randomized block design analysis to examine: ) Whether the salesmen are significantly different in terms of per- formance? _ () Whether there is significant difference between five months in | terms of production? Take 90% as the confidence level 4, company wants o measure the satisfaction level of consumers for a particular product. For this purpose, the company has “South 8 3 707038 2) Whether thor isa significant difference between the machines? 6 © 4 6 | Take 999% as the confidenes level. Hs 8 5 4 ‘A woolen threads manufacturer recently purchased three new *° : ‘machines, The company wants to measure the performance of 6 as these three machines a three diferent temperatures (in terms of | Gas unit production per day), The following table depicts the perfor Asegoms Gg gs mance of the three machines at three different temperatures on randoraly selected days: es ae aaa 6 6 5 8 Machines “MI M2 MB OS 8 6 6 6 7 8 7 Tempera 6 8 5s 6 Ti Rb BR 2 2 sas Employ two-way ANOVA to determine whether there are ‘any significant differences in effects. Take 0 = 0.05, 8. A water purifier company wants to launch a new model ofits popular product. The company has divided its potential eustom. es into three eategories, “middle clas,” “upper-middle class ‘and “upper class.” Potential customers are further divided among thtee states of India, “Gujarat,” “Delhi,” and “Punjab” For determining the purchase intention of the potential random= ly selected consumers, the company has used a simple question, “Does this new product appeal to you?” The questionnaire is administered to 36 randomly selected customers from differ- ent classes and states. The company has used a five-point rat- ing scale. The table given below depicts the responses ofthese randomly selected potential consumers: Gujarat Delhi Punjab Upper 3 aa css 4 ee 4 a 3 s 2 Upper 3 aa middle a4 Customer clases class ar 3 5.2 Middle 4 a class g 545 5 ie? 3 42 Chapter 12 | Analysis of Variance and Experimental Desions 431Employ a two-way ANOVA and determine whether there Methods ‘Motivational Medi- Holidays eeu saihan inane nceae meee onl Neetnel M Has | 9. Black Pearl is a leading tyre manufacturing company in Pune. —~ os as Gn cen em cot oea aa of branding, profitability, and market share. As a downside, the Marketing 40 oe management has realized thatthe highly competitive and stress- 35 3538 fal environment has reduced its employee morale, For boosting 6 me ‘employee morale, the company has opted for three methods ‘motivational speeches, meditation, and holidays with pay. The ‘company researchers measure the success a the three-point pro- 30 2 9 gramme after taking random samples from three departments, pepartments Finance 31 2» 30 ‘marketing, finance, and production. The researchers have used x Ss ‘2 questionnaire (10 questions) on a five-point rating seale, So, the maximum score can be 50 and minimum score can be 10. 32 2» 3 ‘The scores obtained from 36 randomly selected employees are as shown in the given table: 2 330 Production 31 32 3 2B 29° 2s Employ a two-way ANOVA and determine whether there ste any significant differences in effects, Take a= 0.05 FORMULAS | Formulas for calculating SST (total sum of squares) and mean squares in one-way analysis of variance SSC (sum of squares between columns) = ya, ~¥) wher is int pi td moo 6 nerf ohio Ff 3, a ope memo poop, ¥ he ed ssc - nc en qa) = S8° re ore pre leon ‘SSE (sum of squares within samples) =) 1 (x, he sample mean of group je mumble trop ng omar and to ube ‘where x, isthe th observation in eroup ‘observations in all the groups, \where SSE is the sum of squares within columns, and n ~ the degees of freedom (otal numberof observations-number of samples) SST (lotal sum of squares) = YY 2 (x, =) here x, is the th observation in group j, = the grand mean, kthe numberof groups being compared, and nthe total number of observations inall the groups Sst nat ‘where SST is the sum of squares within columns and n ~ | the degrees of freedom (number of observations ~ 1) F-test statistic in one-way ANOVA and MST (mean square) Msc MSE \where MSC is the mean square column and MSE the mean square error Formalas for caleulating SST (total sum of squares) and mean squares in a randomized block design Sa-5 where ris the number of teamentevels (columns, nthe mmber of observations in each weatment lve (ounber of rows), F, dhe sample ‘mean of group j, and ¥ the grand mean. SSC (sum of squares between columns) 432 ausiness Statisticsssc MSC mean sq) = SSS = SSC isthe sum of squares between columns and e~ I he degres of eadom (number af umns ~ Seq -¥ “tise cis the numer of reste eves columns), rth munber of observations in each treatment eve (number oro), the sample Jf group (ow means), and the grand mean. SSSR (sum of squares between rows) SSR MSR (mean square) = SSE is the sum of squares within columns and r~ 1 the degrees of freedom (Number of rows ~1). -E+xy Ss amet egasteron)> EE, - ‘ths cis dhe mumber of reatment levels columns, the number of observations in each treatment level (numberof rows) the sample of group (Row means), Z, the simple mean of group, x, the ih observation in group f and = the grand mean SSE ‘MSE (mean square) = noreeel Where SSE is the sum of squares of erors and n =r c++ 1 = (€~I)(r-1) the degrees of freedom (aumber oF observations — numberof eol- Jimny — number of rows + 1), Here, re = n = numberof observations. Past statistic in randomized block design 3 Ms SS MSE MSC i the mean square column and MSE the mean square error ©~ 1, degrees of freedom for numerator and n-ne 1 =(e=1Xr~ 1), degrees of freedom for denominator. use ] encee em ‘sre MSR is the mean square row and MSE the mean square eror hr 1, depres of freedom for numerator and normc%1=(e= 1p 1) degres of feedom for denominator ‘Formulas for calculating SST (total sum of squares) and mean squares in a factorial design (two-way ‘and ‘SSC (sum of squares between columns) = ">. (, ~ ¥ =F cis the numberof column treatments the number of row reatments, nthe mmber of observations in each el, the sample mean rot P foup and ¥ the grand mean. ssc MSC (mean square) = SSE “there SSC is the sum of squares between columns and c~ 1 the degrees of freedom (number of columns 1), SSSR (sum of squares between ows) = "°2% — 3)" P Where cis the number of column treatments, r the number of row treatments, n the ‘number of observations in each cell, X, the sample mean |Soup (ow means) and th grand mean, a sR nen ag = $88 | ss SSRs the sum of gure between ows and = the degres of eed (Number of ows 1) SSt (sum of squares interaction) = RDG, — Pte cis the numberof column treatments the number of row treatments nthe numberof observations in each cell, ¥, he sample mean ‘froup i (row means), Z, the sample mean of group (column means), F, the mean ofthe cel corresponding to ithrow and jth column Fell mean), and ¥ the grand mean Sse el MSE (mean square)= —SSE__ e a aa (r-e-1) | ere SSE isthe sum of squares of errors and (r~I)(e~ 1) the degrees of frcedom. ale Chapter 12 | Analysis of Variance and Experimental Designs 433,SSE (sum of squares errors) ‘where eis the number of column treatments, the numberof row treatments, the numberof observations in each cll x, the individu observation, and, the mean of the cll corresponding to throw andh column (cel mean) SSE ren) and (MSE (mean square) = fer SSE sum faqs ofero andi) the dees of eda, SIE ie che nner oem wetments he umber of tasinen ie suber of brats in each el via Sewing an! 7 Ge pads SST (total sum of squares) sst and (MST (mean square) > where SST is the total sum of square and N'~ 1 the degrees of freedom (total number of observations ~ 1). F-test statistic in two-way ANOVA Fmt = AEA toto SE “where MSC isthe mean square column and MSE the mean square error With ¢~ 1, degrees of feedom for numerator ro(n- 1) degrees of freedom for denominator. se Frsttoo = SE MSE ‘where MSR is the mean square row and MSE the mean square errr, with r= degrees of freedom for numerator re(01~ 1) degrees of freedom for denominator. MSI MSE ‘where MSI isthe mean square interaction and MSE the mean square error with (r= 1){¢~1) degrees of freedom for numerator and re(n~ 1) degrees of freedom for denominator, For a given level of significance o, the rules for acceptance or rejection of null hypothesis are as follows Reject Mepis” F ‘otherwise do not reject CASE STUDY | TABLE 12.01 2: Tyre Industry in Indias A History of Over 75 Years eee ie A Blea a OP ‘Market segmentation for different categories of tyres Introduction Segment ‘Share by No. 6) ‘The Indian government has been placing high emphasis on the Commercial vehicles 30 building of infrastructure inthe country. This has given atremen~ passenger car 3B ddous filip to the development of road infrastructure and trans- port, After liberalization, there has been a remarkable increase in Uiliy vehicles 4 the numbers of vehicles on Indian roads. As a direct result of this, Farm tyres 8 a heavy demand for tyres has been forecast in the near future. 2/3 wheelers Indian tyre manufacturing companies have stated re-enginecring their businesses and are ooking at strategic tie-ups worldwide to rect this demand,' Table 12.01 shows the market segmentation for different categories of tyres 434 Business Statistics ‘Source: wernt. ascested August 2008, repreduced with permission,‘vidual ividual WRF Ltd, Apollo Tyres Ltd, Ceat Ltd JK Industries Ltd, Good- ‘Yar Dunlop, etc. are some of the major players in the market. “MRE Lidis the leader in the market. The company is involved in ‘manufacturing, distribution, and the sales of tyres, tubes, and ‘ps for vatious vehicles. CEAT, established in 1958, isa part the PRG group. CEAT is also a key player in the market and fers a wide range of tyres for almost all segments like heavy iy tucks and buses, light commercial vehicles, earthmovers,, ‘tks, tractors, trailers, cars, motorcycles, and scooters, ete, Apollo Tyres Lid is also a dominant player in the truck, bus, light commercial vehicle categories. In January 2008, the any announced an investment of Rs 12,000 million to set _papessenger car radial plant in Hungary to eater to the needs of European and the North American market, It aequired Dun- bp Tyre International along with its subsidiaties in Zimbabwe “tid the UK in April 2006!, Apollo Tyres CMD, Mr Onkar Singh ar, optimistically stated, “We believe that alliances offer the _ ore: of many companies working together forthe benefit ofthe ‘isomer. This ultimately is for the greater good of the market ‘the individual companies."? AK Industries Ltd isthe pioneer in launching radial tyres in Radial tyres eost 30% more but are technologically supe- orto conventional tyres. JK Tyres is the key player in the four tieler tyre market. In 1922, Goodyear tyre and rubber company Akon, Ohio USA entered the Indian market, Goodyear India has _Fiocered the introduction of tubeless radial tyres in the passen- er car segment, Dunlop India Lid is also a leading player in the : orry Over Chinese Imports April_and December 2006, $50,000 trucks and bus ‘vere imported from China when compared to just over 3 ‘nits during the financial year 2005-2006, The increase in ents of low-priced tyres from China has become a sore point Tian tyre manufacturers, Indian manufacturers are relying on be superior quality of Indian tyres to fight this batt. Mr Arun K. OTES | 11, Frowess (V3.1), Cente for Monitoring Indian Economy Prt. Ld, _ Mumbai, accessed August 2008, reproduced with permission. [2 vonvubuneindia.conv2003/20033000/bizm, accessed Agus 2008 Bajoria, President, IK Tyre and Industries Ltd angued “The quality ‘of an Indian tyre and Chinese tyre cannot be compated. Indian tyres are exported to around 80 countries around the world and we hhave no complaints from anywhere on the quality” With world class products under its stable, Indian tyre com panies are getting ready to cater to an estimated demand of 22 million units of car and jeep tyres; 57 million units of two- wheelers tyres; 6.5 million units of LCV tyres; 17 million units of HCV tytes by 2014-2015, Let us asstime that a researcher wants to compare the mean. net sales of four leading companies Applo Tyres Ltd, Ceat Ltd. JK Industries Ltd and MRF Ltd. The researcher is unable to ‘access the complete net sales data of these companies and has taken @ random sample of net sales for six quarters of the four companies taken forthe study, Table 12.02 shows the net sales (in million rupees) of four leading tyre manufacturers in randomly selected quarters. Apply techniques presented in this chapter to find out whether: (2) The companies significantly differ in performance? @) There is a significant difference between the quarterly sales of these companies? TABLE 12.02 Net sales of four leading tyre manufacturers for six randomly selected quarters, Apollo tres Ceat Led JK Net sales MRF Gunuilion Lid Industries Lid rupees) Lid “lun 1998 1689.7 27084-30213 5787 Sep 2000 2983.1 24321-26754 2854.7 Dec 2002 4041.6 27228 38714 S198 Mar2004 51479 39264 46115 6208.7 Jun 2005 $680.9 40277 5626.7 7951.2 Mar 2006 74585 4843.6 —_6250.8__8796 ‘Source: Prowes(V 3.1), Cer for Motoring nian Ecogamy rt. Lik Mun ba, accessed August 2008, prused wth pets, 3. www.thehindubusinesstine.com/2007/07/20/sto- ries!2007072050461400.him, accessed August 2008, 4. wwwindiastateom, accessed August 2008, reproduced with permission, Chapter 12 Anaysi Of Variance and Experimental Designs 435,