STATISTICS : INTRODUCTION AND ITS USE IN MANAGERIAL DECISION MAKING (CHAPTER – 1

)
- GAURAV GOYAL (LECTURER)
03/10/10

1

CONTENTS
   

INTRODUCTION BROAD CLASSIFICATION WHAT IS STATISTICS? CHARACTERISTICS OF STATISTICAL DATA

 STATISTICAL METHODS:CLASSIFICATION

 OPERATION RESEARCH MODELS  SOME STATISTICAL TECHNIQUES  ADVANTAGES OF QT TO

MANAGEMENT  QT IN BUSINESS AND MANAGEMENT

03/10/10

2

INTRODUCTION

BEFORE INDUSTRIAL REVOLUTION AFTER INDUSTRIAL REVOLUTION ision based on past experience and intuition Decision making got complicated and quantitative techn

REASONS 1. Complexity of today’s managerial activities em since customers 2. Availabilitythe owner. were known to of different type of tools for quantitative analysis of 3. requirement of high speed computers eded since choice and Availability of customer was known. to apply the quantitative techni uired since manager used to work with the workers at the shop floor level. t required since progress was recorded daily at the work centre. uired by the owner for decision making were known to him.

03/10/10

3

BROAD CLASSIFICATION
QUANTITATIVE TECHNIQUES

STATISTICAL TECHNIQUES

OPERATION RESEARCH (OR PROGRAMMING) TECHNIQU

03/10/10

4

WHAT IS STATISTICS?

MISCONCEPTION tion, analysis, interpretation refer it as a group of data but actually it People sometimes and presentation of numerical data.

APPLICATION nce of statistics is based on for prediction and forecasting using data a Provides tools mathematical thought and derivation.

03/10/10

5

CHARACTERISTICS OF STATISTICAL DATA
 Must be aggregate of facts  Should be affected to a marked  

 

extent by multiplicity of causes Must be enumerated / estimated to a certain standard of accuracy. Must have been collected in a systematic manner for a predetermined purpose. Must be placed in relation to each other Must be numerically expressed.
03/10/10

6

STATISTICAL METHODS:CLASSIFICATION
STATISTICAL METHODS

DESCRIPTIVE STATISTICS INDUCTIVE STATISTICS STATISTICAL DECISION THEORY

1.Data collection 2.Presentation

1.Statistical Inference1. Analysis of Business Decision 2.Estimation

03/10/10

7

CONTINUED……
collection of data.

s to summarize a class’s examination effort and uses those to reach conclusions ab

APPLIED STATISTICS

ount for randomness and uncertainty and then used to draw inferences about the po

03/10/10

8

DESCRIPTIVE STATISTICS(EXAMPLE)

03/10/10

9

INFERENTIAL STATISTICS (EXAMPLE)

lbs manufactured with the newsample of . 200 bulbs lifetime is unknown . A filament Average is manufactured with the new filament .

rage is used to

estimate the population average . The sample data provide a sample

average lifetime of

76 hours per

03/10/10

10

STATISTICAL DECISION THOERY
 Deals with analyzing complex

business problems with alternative courses of action and possible consequences.  Relies on: a) nature of problem  b) decision environment
STATE OF DECISION CONSEQUENCES

Certainty Risk Uncertainty Conflict

Deterministic Probabilistic Unknown Influenced by opponent
03/10/10

11

OPERATION RESEARCH MODELS  MODELS BASED ON PURPOSE
 

DESCRIPTIVE MODEL

EXPLANATORY MODEL

be the behaviorUsed ato explain behavior of system by establishing relationship bet 1. of system based on certain information. roblem situation more vividly including the alternative choices.

for a inventory item for a stated period by keeping relationof demand levels and t explain variations in productivity by establishing record among the factors su

03/10/10

12

OPERATION RESEARCH MODELS  MODELS BASED ON PURPOSE
 

PREDICTIVE MODEL

PRESCRIPTIVE MODEL

redict status of a system for the near future based on data. 1.Provides norms in comparison of alternative solutions to select the be

redict stock prices for any given level of earning per share (EPS).

03/10/10

13

OPERATION RESEARCH MODELS  MODELS BASED ON DEGREE OF ABSTRACTION
PHYSICAL MODEL
 

GRAPHIC MODEL

SCHEMATIC MODEL

ooks like the 1real thing, either reduced in sizemodel depicting sequence of activ .A model showing relationship inA a or scaled up. 1. graphical manner. 2 . MORE ABSTRACT than the Physical model. 2 . MORE ABSTRACT than the Graphical

ng maps, plant layout a flow , chart., organisation . chart e.g. charts airplane model program whose main features are depic e.g computer etc

03/10/10

14

OPERATION RESEARCH MODELS  MODELS BASED ON DEGREE OF ABSTRACTION
 

ANALOG MODEL

MATHEMATICAL MODEL

ith physical models, and are not replica of the problem situations. 1.Represents the systems by using mathematical symbols a , works like the system it .represents. 2 MOST ABSTRACT n schematic.

e.g. children toys, model rail-roads the . input-output model of the national eco e.g. etc

03/10/10

15

OPERATION RESEARCH MODELS  MODELS BASED ON DEGREE OF CERTAINTY
 

DETERMINISTIC MODEL

PROBABILISTIC MODEL

ion of

each course .of action results ineach course known pay-off. result in more 1 Situations in which unique and of action can

near programming, transportation and assignment models. model, decision-theory model e.g. simulation

03/10/10

16

OPERATION RESEARCH  MODELS MODELS BASED ON SPECIFIC BEHAVIOR CHARACTERISTICS
 

STATIC MODELS

DYNAMIC MODEL

icular set ofto make conditions and optimal change in aat every decision . on-maker has fixed a sequence of do not decisions short-term periodpoint rega only one decision required for a. period. on changes over a period of time

urces for a particular product, Linear programming etc e.g. product development, dynamic programmi

03/10/10

17

Link for Excel

http://www.free-training-tutorial.com/format-cells.htm
 

03/10/10

18

03/10/10

19

OPERATION RESEARCH  MODELS MODELS BASED ON SPECIFIC BEHAVIOR CHARACTERISTICS
 

LINEAR MODELS

NON - LINEAR MODELS

in which each component 1.If one or linear behavior. in a model exhibits a non-line exhibits a more components

e.g. Z = 5 + 3x

e.g. Z = 5x2 + 3xy + y2

03/10/10

20

OPERATION RESEARCH  MODELS MODELS BASED ON PROCEDURE OF SOLUTION
 

ANALYTICAL MODELS

SIMULATION MODELS

and .Is the experimentation on a mathematical structure of real life asystem. sol 1 solved by known mathematical or analytical techniques to yield general 2.Done by inserting specific values of decision variables into the given stru

ar programming, game . theoryeffect ofinventory control models etc counters based on e.g test models, different number of service

03/10/10

21

Measures of Location
sMean sMedian sMode sPercentiles sQuartiles

If the measures are computed for data from a sample, they are called sample statistics. If the measures are computed for data from a population, they are called population parameters.

A sample statistic is referred to as the point estimator of the corresponding population parameter.

03/10/10

22

Mean
 The mean of a data set is the

average of all the data values. x  The sample mean is the point estimator of the population mean µ .

03/10/10

23

Sample Mean

x

x=

∑x
n

Sum of the values Sum of the values of the n observations of the n observations

i

Number of Number of observations observations in the sample in the sample

03/10/10

24

Population Mean µ

µ=

∑x
N

Sum of the values Sum of the values of the N observations of the N observations

i

Number of Number of observations in observations in the population the population

03/10/10

25

Sample Mean
n Example: Apartment Rents Seventy efficiency apartments were randomly sampled in a small college town. The monthly rent prices for these apartments are listed on the next slide.

03/10/10

26

Sample Mean
n Apartment Rent Sample Data
445 440 465 450 600 570 510 615 440 450 470 485 515 575 430 440 525 490 580 450 490 590 525 450 472 470 445 435 435 425 450 475 490 525 600 600 445 460 475 500 535 435 460 575 435 500 549 475 445 600 445 460 480 500 550 435 440 450 465 570 500 480 430 615 450 480 465 480 510 440

03/10/10

27

Sample Mean
∑x x=
n
445 440 465 450 600 570 510 615 440 450 470 485 515 575 430 440 525 490 580 450 490 590 525 450 472 470 445 435
i

34,356 = 70
435 425 450 475 490 525 600 600 445 460 475 500 535 435

=490.80
460 575 435 500 549 475 445 600 445 460 480 500 550 435 440 450 465 570 500 480 430 615 450 480 465 480 510 440

03/10/10

28

Median
n The median of a data set is the value in the middle when the data items are arranged in ascending order. n Whenever a data set has extreme values, the median is the preferred measure of central location. n The median is the measure of location most often reported for annual income and property value data. n A few extremely large incomes or property values can inflate the mean.

03/10/10

29

Median
n For an odd number of observations: 26 18 27 12 14 27 19 12 14 18 19 26 27 27 the median is the middle value. Median = 19 7 observations in ascending order

03/10/10

30

Median
n For an even number of observations: 26 18 27 12 14 27 30 19 12 14 18 19 26 27 27 30 8 observations in ascending order

the median is the average of the middle two values. Median = (19 + 26)/2 = 22.5

03/10/10

31

Median
Averaging the 35th and 36th data values: Median = (475 + 475)/2 = 475
425 440 450 465 480 510 575 430 440 450 470 485 515 575 430 440 450 470 490 525 580 435 445 450 472 490 525 590 435 445 450 475 490 525 600 435 445 460 475 500 535 600 435 445 460 475 500 549 600 435 445 460 480 500 550 600 440 450 465 480 500 570 615 440 450 465 480 510 570 615

Note: Data is in ascending order.

03/10/10

32

Mode
n The mode of a data set is the value that occurs with greatest frequency. n The greatest frequency can occur at two or more different values. n If the data have exactly two modes, the data are bimodal. n If the data have more than two modes, the data are multimodal.

03/10/10

33

SOME STATISTICAL TECHNIQUES CENTRAL TENDENCY  MEASURES OF
1.MEAN: Computed by dividing sum of the values of observations by the number of items. 2.MEDIAN: Item which lies exactly midway between the lowest and the highest value when data is arranged in ascending or descending order. 3.MODE: It is the central value that occurs most frequently.
03/10/10

34

SOME STATISTICAL TECHNIQUES DISPERSION  MEASURES OF

The difference between the maximum and the minimum value of a distribution is called the measure of dispersion. 1.SKEWNESS: the measure of the direction and degree of symmetry are called measures of skewness 2.KURTOSIS: The measure of peakedness in a distribution is called Kurtosis.
03/10/10

35

SKEWNESS AND KURTOSIS

03/10/10

36

SOME STATISTICAL TECHNIQUES  CORRELATION
àIt measures the degree to which the change in the dependent variable is associated with change in the independent variable.  REGRESSION ANALYSIS àUsed for determining the causal relationship between 2 variables.  TIME SERIES ANALYSIS àConsists of a set of data recorded over successive periods of time. àMeasures the effect of the following
03/10/10

37

SOME STATISTICAL TECHNIQUES  TIME SERIES ANALYSIS
àConsists of a set of data recorded over successive periods of time. àAnalysis is done on the above data taking the periodic changes, cyclical changes, seasonal variations and random variations into consideration.
 

03/10/10

38

ADVANTAGES OF QT TO MANAGEMENT
     

Definiteness Condensation Comparison Formulation of policies Formulating and testing hypothesis Prediction

03/10/10

39

QT IN BUSINESS AND  MANAGEMENT MANAGEMENT
 

  

i) Marketing: analysis market research information Statistical records for building and maintaining an extensive market Sales forecasting ii) Production Production planning, control and analysis Evaluation of machine performance
03/10/10

40

QT IN BUSINESS AND iii) Finance, MANAGEMENT Accounting and
 

       

Investment: financial forecast, budget preparation financial investment decisions Selection of securities Auditing function iv) Personnel labour turnover rate employment trends performance appraisal wage rates and incentive plans
03/10/10

41

QT IN BUSINESS AND  ECONOMICS MANAGEMENT

measure of GNP.  determination of business cycle.  comparison of market prices etc.  analysis of population  formulation of appropriate economic policies  RESEARCH AND DEVELOPMENT  development of new product lines  optimum use of resources
03/10/10

42