Class Exercise

3. An insurance company is estimating the risk model

based on customer age is defined as R = ae^bx, where a
is a fixed constant and b is a constant that depends on
the customer age, x is the age in each category. They
categorizes age into 5 categories as: age<=10 with
b=0.05, 10<age<=20 with b=0.02, 20<age<=30 with
b=0.01, 30<age<=40 with b=0.03, and age>40 with
b=0.08. Sketch the graphs for each model and interpret
them.
Class Exercise
4. A tablet manufacturer is preparing to set the price of
a new model. It examines the demand and cost
structure and determines the following model to
represent the relationship between demand and price
as D = 50 + 2P. The finance dept. estimates that the
total cost is represented by C = 100 + 0.3D. Develop a
model for the total profit in terms of the price P.
Implement using excel and python.
Class Exercise
5. A firm installs 1500 ACs that needs to be check every 6
months. The firm can hire a team from its logistic
department at a fixed cost of INR 480000. The team will check
each unit for INR 1200. The firm can also outsource this at a
cost of INR 1360 inclusive of all charges.
a) For the given number of units, which is a better option?
b) Find the break-even volume and characterize the range of
volumes for which it is more economical to outsource.
Class Exercise
6. ROI is a profit divided by investment. In marketing,
ROI is determined as incremental sales times gross
margin minus marketing investment, all divided by
marketing investment. Suppose that a company plans
to spend Rs. 300000 to place search engine ads and
expects Rs. 1500000 in incremental sales. Its gross
margin is estimated to be 45%.
Develop a spreadsheet to compute the marketing ROI.
Use the spreadsheet to predict how ROI will change if
the incremental sales is wrong.
Problem Solving with Analytics
• Recognizing a problem
• Defining the problem
• Structuring the problem
• Analyzing the problem
• Interpreting Results and Making a Decision
• Implementing the Solution
Recognizing a Problem
Problems exist when there is a gap between
what is happening and what we think should
be happening.
• For example, costs are too high compared
with competitors.
Defining the Problem
• Clearly defining the problem is not a trivial task.
• Complexity increases when the following occur:
– large number of courses of action
– the problem belongs to a group and not an
individual
– competing objectives
– external groups are affected
– problem owner and problem solver are not the same
person
– time limitations exist
Structuring the Problem

• Stating goals and objectives

• Characterizing the possible decisions
• Identifying any constraints or restrictions
Analyzing the Problem

• Analytics plays a major role.

• Analysis involves some sort of
experimentation or solution process, such as
evaluating different scenarios, analyzing risks
associated with various decision alternatives,
finding a solution that meets certain goals, or
determining an optimal solution.
Interpreting Results and Making a
Decision
• Models cannot capture every detail of the real
problem.
• Managers must understand the limitations of
models and their underlying assumptions and
often incorporate judgment into making a
decision.
Implementing the Solution

• Translate the results of the model back to the

real world.
• Requires providing adequate resources,
motivating employees, eliminating resistance
to change, modifying organizational policies,
and developing trust.
MS Excel as Business Analysis Tool
• Managers use statistical tools to analyze various
problems
• Excel supports a wide range of statistical tools
• Hence this facilitates decision making in the
organization
Data Analysis using Excel/Python
How to perform calculations in Excel
1. Data Tab
2. Sorting
3. Filter
4. Group and Ungroup
5. Subtotal
Case Study 1
Ram is the Assistant Manager of sales dept. of a company. His company
wants to find the list of customers who frequently order their products
and promote their products to target these customers. The company
executives are aware of the fact that repeat purchases result in more
proportion of sales and involve less cost than getting sales order from
new customers. Till recently, their company had been working on small
scale. They had only isolated legacy information system installed for
each department. This resulted in the information being isolated within
a department and took long time for some information to be shared.
Fortunately for Ram, an information system with DBs and data mining
and up-scale facilities where installed in the recent past.
Case Study 1 (cont.……..)
Now, this means that instead of sitting for hours and manually sorting
out and marking the names of customers who order these activities
can be done by a computer terminal using the DB of customers in the
computer in few minutes. Also, the results are more accurate without
human errors. The number of people frequently ordering their
products is determined by statistical techniques.
Following is the list of customers of the company for the last 1 year.
Table below shows how analytics can be used to gain inferences. The
data mining tools discovered the statistical patterns in the data which
could use complex statistical techniques.
S. No. Customer Name City Date of purchase Sales in INR
1 Srikanth Mumbai 07/12/2014 4000
2 Anil Kolkata 29/12/2014 3500
3 Rahul Delhi 14/01/2015 2000
4 Vijay Kolkata 12/02/2015 2200
5 Srikanth Delhi 16/02/2015 4000
6 Pooja Mangalore 17/03/2015 3000
7 Yatin Kochi 14/04/2015 1900
8 Mukta Chennai 16/04/2015 4000
9 Gargi Chennai 16/05/2015 2200
10 Suresh Delhi 18/06/2015 3500
11 Vikrant Mumbai 29/06/2015 1900
12 Lakshmi Mumbai 15/07/2015 2000
13 Mallika Kolkata 29/07/2015 3600
14 Mukta Bhopal 27/08/2015 1400
15 Amol Jaipur 25/09/2015 3800
16 Rashi Lucknow 21/10/2015 3900
17 Atharva Lucknow 29/11/2015 2600
Case Study 1 (cont.…….)

Questions:
1. Find the sales amount of repeat customers.
2. Find the total sales.
3. Find the list of redundant customers.
4. Find the Diwali sales which took place during Oct.
and Nov. and has a discount of 10% on MRP.
Python Basics
Data types:
Type Description Examples
int Integer value 100, 296, -98
float Floating point type can be represented in 8.5, 2.63, -7.47e^3
scientific notation, 1 e^3=1000
bool Boolean value True, False

Comment: Any command starting with “#” is not executable

Strings: In Python strings are expressed in double (“_”) or
single (‘_’) quotes.
Python Basics
• Arithmetic operators:
Operator Description
+ Addition
- Subtraction
* Multiplication
/ Division
// Floor division, ignores the fractional part
** Raises the power
% Modulus, returns the remainder
Python Basics (cont.…..)
• Self – Increment Operators

Operator Example Equivalent Representation

+= x+=2 x=x+2

-= x-=2 x=x-2

*= x*=2 x=x*2

/= x/=2 x=x/2

%= x%=2 x=x%2
Lists and Tuples in Python
• There are two basic types of ordered sequences in
Python: list and tuples. Both stored ordered values but
have a crucial difference: list are mutable and tuples
are immutable.
• Lists are used when we need to modify , remove or
append values.
• Tuples are used when we need to only read the
values.
Python Packages (word file already
shared)
• NumPy
• Pandas
• SciPy
• Matplotlib
• Seaborn
• Bokeh
• Tensor Flow
• Pytorch
• Scikit Learn
Class Exercise
A new product sales scenario is characterized by a formula
called Gompertzian curve S=aebe^ct . Develop a spreadsheet
for calculating sales using this formula for t = 0 to 160 in
increments of 10 when a=15000, b= -8, and c= -0.05. Also
implement the above problem in python by reading input
from the excel file.
Class Exercise
• For the given data create a line chart, bar chart and a
scatter diagram using excel and python. Also draw the
charts by reading data from excel file.
Location Sales
Delhi 12547
Kolkata 14697
Mumbai 26000
Bengaluru 28941
Lucknow 3654
Udaipur 9687
Ranchi 10011
Class Exercise

A company forecasts its net revenue for the next three years
as INR 1728000, INR 2135800, INR 2939850. Find the net
present value (NPV) of these cash flows assuming a discount
rate of 4.2% using excel and python. Also, read the data
from the excel sheet and calculate NPV.
Class Exercise
A pharma manufacturer has projected net profits for a new drug that is
being released to the market over the next five years:
Year Net profit
1 -3000000
2 -1450000
3 500000
4 1250000
5 5300000

A fixed cost of Rs. 800000 has been incurred for R & D (in year 0). Use a
spreadsheet to find the NPV of these cash flows for a discount rate of
3%.
Class Exercise
The data of an organization which has the sales to the following
industry are given in the table below. Find the total revenue from each
industry and the grand total.
INDUSTRY SALES UNITS SALES PRICE (₹)
A 3467 73.5
B 4156 430.84
C 1537 159.6
B 664 38.25
A 995 48.63
D 2478 189.67
C 4058 28.41
A 7051 57.08
D 2400 222.22