Using statistics provides real data about complex situations rather … However, the application of statistics is both an art and a science and should not be used as the sole basis for making decisions. Managers must have an awareness of these changes and incorporate them into their decisions. A common use of statistics is to measure performance. Statistics can be used for making sales projections, financial analysis of capital expenditure projects, constructing profit projections for a new product, setting up production quantities, and making a sampling analysis to determine the quality of a product. Economic environments are constantly changing and so are consumer behaviors and tastes. On the basis of the statistical technique used, statistics may be broadly divided into two categories: In Business – It helps to make swift decisions by providing useful information about customer trends and variations, cost customer trends and variations, price customer trends and variations etc. An analysis of historical data will show the volume of soybeans or corn produced over a range of weather patterns in a particular geographical area. See instructions. Larger samples would produce a better quality of results, but larger samples cost more money and are sensitive to the law of diminishing returns. International Association for Statistical Education: Applications of Statistics in the Business World, Ege University: Importance of Statistics in Many Different Fields. What is Statistics ? Sorry, you have Javascript Disabled! Thank you . To see this page as it is meant to appear, please enable your Javascript! For example, you might gather data about a small number of product units to make an estimate about the quality level of an entire batch of production; this is known as statistical sampling and is used to determine whether to accept or reject a batch. Another use could be the analysis of the production output of an employee to find out if the worker is meeting the desired productivity standards. For example, you might analyze the previous sales of all products sold to make estimates about the volume of future sales under specific economic conditions. Of course, the farmer wants to maximize the number of bushels produced under good or bad weather conditions; each weather condition has a certain probability of occurring. Helps in Sound Decision making by providing accurate estimates about costs, demand, prices, sales etc. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. While using statistics to make decisions is helpful, it has limitations. Helps in business planning on the basis of sound predictions and assumptions. Managers analyze past data to find statistical trends and make predictions about the future. I have found your article very informative and interesting. James Woodruff has been a management consultant to more than 1,000 small businesses. It allows comparison of two or more products, business units, sales teams etc. Introduction to Business Statistics 1. BUSINESS STATISTICS - WHAT AND WHY?Definition of Statistics-Statistics is the study of how to collect, organize, analyze, and interpret numerical informationfrom data.Types of StatisticsDescriptive statistics involves methods of organizing, picturing and summarizing informationfrom data. to extract relevant information for the purpose of decision making. Statistics is simply the study of numerical data, facts, figures and measurements. It’s worthy. From the statistical analysis, a break-even model is constructed to determine the volume of sales necessary for the product to succeed. From this statistical model, the farmer can make an informed decision about which product to plant. As an example, consider the farmer who has to decide whether to plant soybeans or corn. Using historical data to construct statistical models for forecasting does not take into consideration any causal changes in the marketplace. When interpreting the results of statistical analysis, exercise judgment based on your own real-life experience and other qualitative factors that are not incorporated into the mathematical model. The purpose of this topic is to: • appreciate why managers need to understand basic statistical methods • understand the inherent difficulties in collecting data • distinguish between ‘good’ and … When properly used, statistical methods make the decision-making process much easier. Business managers use statistics as an aid to making decisions in the face of uncertainty. Statistics can be used for making sales projections, financial analysis of capital expenditure projects, constructing profit projections for a new product, setting up production quantities, and making a sampling analysis to determine the quality of a product. Statistics is used to convert raw numerical data into useful information for relevant users. 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