BUSINESS STATISTICS

UNIT-1
 STATISTICS:
 MEANING:
 The term statistics mean that the numerical
statement as well as statistical methodology.
 When it is used in the sense of statistical data
it refers to quantitative aspects of things and
is a numerical description.
 Example: Income of family, production of
automobile industry, sales of cars etc.
 Their quantities are numerical.
 But there are some quantities which are not
in themselves numerical but can be made so
by counting.
 The gender of a baby is not a number, but by
counting the number of boys, we can
associate a numerical description to sex of all
new born babies.
 For example when we say that 60% of all live-
born babies are boy this information then
comes within the realm of statistics.
 DEFINITION:
 Statistics can grouped under two heads – ‘Statistics as a
data” and “Statistics as a methods”.
 STATISTICS AS A DATA:
a) Statistics are numerical statement of facts in any
department of enquiring placed in relation to each other. -
Powley
b) By statistics we mean quantities data affected to a marked
extent by multiplicity of course. - Yule and Kendall
c) By statistics we mean aggregates of facts affected to a
marked extent by multiplicity of causes, numerically
expressed, enumerated or estimated according to
reasonable standard of accuracy, collected in a systematic
manner for predetermined purpose and placed in relation to
each other. - H. Secrist
 CHARACTERISTICS OF THE STATISTICS.
 Statistics are aggregate of facts
 Statistics are affected to a marked extent by
multiplicity of causes.
 Statistics are numerically expressed
 Statistics should be enumerated / estimated
 Statistics should be collected with
reasonable standard of accuracy
 Statistics should be placed is relation to each
other.
 STATISTICS AS A METHODS:
 Definition
a) “Statistics may be called to science of counting” - A.L.
Bowley
b) “Statistics is the science of estimates and probabilities”. -
Boddington
c) According to Dr. Croxton and Cowden “Statistics may be
defined as the collection, presentation, analysis and
interpretation of numerical data”.
d) “Statistics is a science which deals with the method and of
collecting, classifying, presenting, comparing and
interpretating the numerical data collected to throw light on
enquiry”. - Seligman
 APPLICATION OF STATISTICS IN BUSINESS AND OTHER DISCIPLINES:
 IN MANAGEMENT
 Statistics is essential for a country.
 Different policies of the government are based on statistics.
 Statistical data are now widely used in taking all administrative decisions.
 Suppose if the government wants to revise the pay scales of employees
in view of an increase in the living cost, statistical methods will be used to
determine the rise in the cost of living.
 Preparation of government budgets mainly depends upon statistics
because it helps in estimating the expected expenditures and revenue
from different sources. So statistics are the eyes of administration of the
state.
 Applications of statistics pervade virtually every area of activity in
business and industry such as Marketing, Finance, Operations, Human
Resource Management, Production, Financial analysis, distribution
analysis, market research, research and development, manpower
planning and accounting etc.
 Marketing
 As per Philip Kotler and Gary Armstrong marketing “
identifies customer needs and wants , determine which
target markets the organisations can serve best, and
designs appropriate products, services and Programs to
serve these markets”
 Marketing is all about creating and growing customers
profitably.
 Statistics is used in almost every aspect of creating and
growing customers profitably.
 Statistics is extensively used in making decisions regarding
how to sell products to customers.
 Intelligent use of statistics helps managers to design
marketing campaigns targeted at the potential customers.
 Marketing research is the systematic and objective
gathering, recording and analysis of data about aspects
related to marketing. IMRB international, TNS India, RNB
Research, The Nielson , Hansa Research and Ipsos Indica
Research are some of the popular market research
companies in India.
 Web analytics is about the tracking of online behaviour of
potential customers and studying the behaviour of browsers
to various websites.
 Use of Statistics is indispensable in forecasting sales, market
share and demand for various types of Industrial products.
 Factor analysis, conjoint analysis and multidimensional
scaling are invaluable tools which are based on statistical
concepts, for designing of products and services based on
customer response.
 Finance
 Uncertainty is the hallmark of the financial world.
 All financial decisions are based on “Expectation” that is best
analysed with the help of the theory of probability and statistical
techniques.
 Probability and statistics are used extensively in designing of new
insurance policies and in fixing of premiums for insurance policies.
 Statistical tools and technique are used for analysing risk and
quantifying risk, also used in valuation of derivative instruments,
comparing return on investment in two or more instruments or
companies.
 Beta of a stock or equity is a statistical tool for comparing
volatility, and is highly useful for selection of portfolio of stocks.
 The most sophisticated traders in today’s stock markets are those
who trade in “derivatives” i.e financial instruments whose
underlying price depends on the price of some other asset.
 Operations
 The field of operations is about transforming
various resources into product and services in the
place, quantity, cost, quality and time as required
by the customers.
 Statistics plays a very useful role at the input stage
through sampling inspection and inventory
management, in the process stage through
statistical quality control and six sigma method, and
in the output stage through sampling inspection.
 The term Six Sigma quality refers to situation where
there is only 3.4 defects per million opportunities.
 Information Systems
 Information Technology (IT) and statistics
both have similar systematic approach in
problem solving.
 IT uses Statistics in various areas like,
optimisation of server time, assessing
performance of a program by finding time
taken as well as resources used by the
Program.
 It is also used in testing of the software.
 Data Mining
 Data Mining is used in almost all fields of
business.
 In Marketing, Data mining can be used for market
analysis and management, target marketing,
CRM, market basket analysis, cross selling,
market segmentation, customer profiling and
managing web based marketing, etc.
 In Risk analysis and management, it is used for
forecasting , customer retention, quality control,
competitive analysis and detection of unusual
patterns.
 In Finance, it is used in corporate planning and risk
evaluation, financial planning and asset evaluation,
cash flow analysis and prediction , contingent claim
analysis to evaluate assets, cross sectional and time
series analysis, customer credit rating, detecting of
money laundering and other financial crimes.
 In Operations, it is used for resource planning , for
summarising and comparing the resources and
spending.
 In Retail industry, it is used to identify customer
behaviours, patterns and trends as also for
designing more effective goods transportation and
distribution policies, etc.
 IN THE FIELD OF ECONOMICS:
 The role of statistics is very vital in Economics. Economics
cannot be successful without statistics.
 We think of any part of Economics and cannot proceed without
Statistics; May it be demand, supply, wages, interest, prices,
profits, rents savings, investments, unemployment etc.
 Various laws such as law of consumption, of returns or
distribution of incomes and profits are often used in Economics.
 We use it in Economics in measurement of correlation,
analysing demand and supply, forecasting through regression,
interpolation and time series analysis. We also use Index
Numbers.
 Statistical data and techniques of statistical analysis have to
immensely useful involving economical problem such as wages,
price, time series analysis, demand analysis
 IN THE FIELD OF PLANNING:
 Planning is mainly a part of economics.
 We have to make different planning for different components
for different periods. In almost all the spheres, whether those
are individual, joint or any government decisions, nothing can
be done without success and success cannot be attained
without planning and planning cannot be undertaken without
statistics.
 Adequacy of data cannot be proved without statistics.
 To go for an economic plan in a country, the data about
population, consumption, prices, investments, saving,
incomes and expenditure has to be known and then analysed
for demand forecasting using various statistical methods.
 A plan cannot be successful if its analysis is not undertaken
properly.
 IN THE FIELD OF PHYSICAL AND NATURAL SCIENCES:
 In physical and natural sciences like Physics, Chemistry,
Engineering, Botany, Astronomy, Zoology and Medicine etc.
the statistics is of immense importance these days.
 In Botany and Zoology its use has increased many fold these
days.
 In inheritance of stature, Sir Frances Galton used various
methods of analysis in his own work “Regressions”.
 Similarly Sir Karl Pearson stated that theory of heredity is
also based on statistics.
 A periodical data of a patient w.r.t temperature, blood
Pressure, weight, and heart beats, a doctor decides about
the medicines to be given to his patient.
 IN THE FIELD OF SOCIAL SCIENCES:
 Statistics has made impact on social sciences like History,
Political Science, Education, Psychology, Sociology and Logic
etc.
 Even in mathematics, many theories have been drawn from
statistics.
 To name a few, Binomial Method, Linear programming,
Probability, Sampling and Least square method are there.
 As far as Education is concerned, government opens or allows
opening various institutions on the basis of data obtained about
number of institutions present, and increasing in population.
 That means it also plays important part in collection of data
about birth and death rate i.e. number of births and deaths
during a period.
 Birth rate also depends upon the no. of marriages taking place
each year and other such factors.
 STATISTICS IN MATHEMATICS:
 Statistics is an essential part of mathematics. In other
words, it is related as well as entirely depends upon
mathematics.
 Probability is the foundation of the theory of probability.
 But now a day it is turned into the most advanced
mathematical theory of Integration and Measures.
 With the increasing use of mathematics and statistics is
building new ways for the development of statistics i.e.,
known as Mathematical statistics.
 Statistics is an essential branch of mathematics. Applied
mathematics is a part of statistics that is specialized in
data.
 STATISTICS IN TRADE
 Trade without statistics is pretty tough and can be
overwhelming for traders.
 It helps the trades to make a wise decision in
uncertain situations.
 We know that business is full of risk, and
uncertainties anything can happen at any stage.
 That’s why it is crucial to forecast every step in
business.
 Our past record helps us to do forecasting
efficiently and effectively.
 We take all the recent statistics into account to predict
future situations for the company.
 Remember that statistics just a number, we have to
anticipate them with careful otherwise it can be a reason to
failure of the business.
 In term of business demand, supply and trend are the crucial
aspects. We can anticipate all these aspects with the help of
statistics.
 It also helps in determining the prices of various products.
 At last, statistics help in running the business smoothly. It
also helps in reducing the uncertainty; thus, it helps in the
success of the business.
 STATISTICS IN RESEARCH WORK
 Research work is all about statistics.
 Research worker job is to present the data before the
community.
 The research worker uses statistical methods to solve
particular problems under differing conditions.
 Statistics is the basics of every research activity.
 In other words, research can’t be possible without
statistics.
 In fact, the researcher should have excellent statistics
skills to be a good researcher.
 It helps to keep the interest of the researcher in the
research work.
 IN ASTRONOMY
 Astronomy is one of the oldest branches of statistical study;
 It deals with the measurement of distance, sizes, masses and
densities of heavenly bodies by means of observations.
 During these measurements errors are unavoidable so most
probable measurements are founded by using statistical
methods.
 For example, the distance of moon from the earth is measured.
 Since old days the astronomers have been statistical methods
like method of least squares for finding the movements of stars.
 The theory of Gaussian “Normal Law of Error” for the study of
the movement of stars and plants is developed by using the
“Principle of Least Squares”.
 
 IN PSYCHOLOGY
 In education and psychology, too, statistics
has found wide applications,
 For example, to determine the reliability and
validity of a test, “Factor Analysis”, etc.
 So much so that a new subject called
“Psychometry” has come into existence.
 IN BANKING
 Statistics play an important role in banking.
 The banks make use of statistics for a number of
purposes.
 The banks work on the principle that all the people
who deposit their money with the banks do not
withdraw it at the same time.
 The bank earns profits out of these deposits by
lending to others on interest.
 The bankers use statistical approaches based on
probability to estimate the numbers of depositors
and their claims for a certain day.
 Accounting is impossible without exactness.
 But for decision making purpose, so much
precision is not essential the decision may be
taken on the basis of approximation, know
as statistics.
 The correction of the values of current
asserts is made on the basis of the
purchasing power of money or the current
value of it. In auditing sampling techniques
are commonly used.
 An auditor determines the sample size of the
book to be audited on the basis of error.
 LIST OF FIELDS OF APPLICATION OF STATISTICS
 A number of specialties have evolved to apply statistical theory and
methods to various disciplines mentioned below.
 Actuarial science is the discipline that applies mathematical and
statistical methods to assess risk in the insurance and finance industries.
 Biostatistics is a branch of biology that studies biological phenomena
and observations by means of statistical analysis, and includes medical
statistics.
 Business analytics is a rapidly developing business process that applies
statistical methods to data sets (often very large) to develop new
insights and understanding of business performance & opportunities
 Chemometrics is the science of relating measurements made on a
chemical system or process to the state of the system via application of
mathematical or statistical methods.
 Demography is the statistical study of all populations. It can be a very
general science that can be applied to any kind of dynamic population,
that is, one that changes over time or space.
 Econometrics is a branch of economics that applies statistical
methods to the empirical study of economic theories and
relationships.
 Environmental statistics is the application of statistical methods to
environmental science. Weather, climate, air and water quality are
included, as are studies of plant and animal populations.
 Epidemiology is the study of factors affecting the health and illness of
populations, and serves as the foundation and logic of interventions
made in the interest of public health and preventive medicine.
 Geostatistics is a branch of geography that deals with the analysis of
data from disciplines such as petroleum geology, hydrogeology,
hydrology, meteorology, oceanography, geochemistry, geography.
 Operations research (or Operational Research) is an interdisciplinary
branch of applied mathematics and formal science that uses methods
such as mathematical modeling, statistics, and algorithms to arrive at
optimal or near optimal solutions to complex problems.
 Population ecology is a sub-field of ecology that deals with the
dynamics of species populations and how these populations
interact with the environment.
 Psychometrics is the theory and technique of educational and
psychological measurement of knowledge, abilities, attitudes,
and personality traits.
 Quality control reviews the factors involved in manufacturing
and production; it can make use of statistical sampling of
product items to aid decisions in process control or in
accepting deliveries.
 Quantitative psychology is the science of statistically
explaining and changing mental processes and behaviors in
humans.
 Reliability Engineering is the study of the ability of a system or
component to perform its required functions under stated
conditions for a specified period of time
 Statistical finance, an area of econophysics, is an empirical
attempt to shift finance from its normative roots to a positivist
framework using exemplars from statistical physics with an
emphasis on emergent or collective properties of financial
markets.
 Statistical mechanics is the application of probability theory,
which includes mathematical tools for dealing with large
populations, to the field of mechanics, which is concerned with
the motion of particles or objects when subjected to a force.
 Statistical physics is one of the fundamental theories of physics,
and uses methods of probability theory in solving physical
problems.
 Statistical thermodynamics is the study of the microscopic
behaviors of thermodynamic systems using probability theory
and provides a molecular level interpretation of thermodynamic
quantities such as work, heat, free energy, and entropy.