Business Statistics

By

Sara Meshram

Report submitted for the Fulfillment of Paper for the Fifth Semester: Individual Project
(December 3, 2022)

B.A. Liberal Arts

Interdisciplinary School of Science (IDSS)
Savitribai Phule Pune University
 Savitribai Phule Pune University
Interdisciplinary School of Science (IDSS)
B. A. Liberal Arts
(October-March 2022)

Business Statistics

by
Sara Meshram

Report Submitted for the Fulfillment of Paper for the Fifth Semester

Submitted on
December 3, 2022
- Acknowledgement -

I would like to first express my gratitude towards IDSS, SPPU for giving me the opportunity to do this
project. I would like to thank Mr. Vishram Dhole, Mrs. Vaishali Naik, Mrs. Shivani Singh for giving
such clear guidelines, I could complete my project with zero obstacles.
- Content -

● Introduction

● Research

Introduction to Statistics

Types of Data and Data sources

Importance of Statistics in Business

What is Business Statistics

Case Study - Small business - Mosambi

● Conclusion

● References
- Introduction -

Statistics is defined as the practice of collecting and analyzing numerical data in large quantities,
especially for the purpose of inferring proportions in a whole from those in a representative sample.
numerical information expressed in quantitative terms.
It’s also called a branch of mathematics dealing with the collection, analysis, interpretation, and
presentation of masses of numerical data : a collection of quantitative data.

In the beginning, it may be noted that the word ‘statistics’ is used rather curiously in two senses: plural
and singular. In the plural sense, it refers to a set of figures or data. In the singular sense, statistics refers
to the whole body of tools that are used to collect data, organize and interpret them and, finally, to
draw conclusions from them. It should be noted that both the aspects of statistics are important if the
quantitative data are to serve their purpose. If statistics, as a subject, is inadequate and consists of poor
methodology, we could not know the right procedure to extract from the data the information they
contain. Similarly, if our data are defective or that they are inadequate or inaccurate, we could not
reach the right conclusions even though our subject is well developed.

We can highlight the major characteristics of statistics as follows:

​ (i) Statistics are the aggregates of facts. It means a single figure is not statistics.
For example, the national income of a country for a single year is not statistics but the same for
two or more years is statistics.
​ (ii) Statistics are affected by a number of factors. For example, the sale of a product depends on
a number of factors such as its price, quality, competition, the income of the consumers, and so
on.
​ (iii) Statistics must be reasonably accurate. Wrong figures, if analyzed, will lead to erroneous
conclusions. Hence, it is necessary that conclusions must be based on accurate figures.
​ (iv) Statistics must be collected in a systematic manner. If data are collected in a haphazard
​ manner, they will not be reliable and will lead to misleading conclusions.
​ (v) Collected in a systematic manner for a predetermined purpose
​ (vi) Lastly, Statistics should be placed in relation to each other. If one collects data unrelated to
each other, then such data will be confusing and will not lead to any logical conclusions. Data
should be comparable over time and over space.
- Types of Data and Data sources -

Statistical data are the basic raw material of statistics. Data may relate to an activity of our interest, a
phenomenon, or a problem situation under study. They derive as a result of the process of measuring,
counting and/or observing. Statistical data, therefore, refer to those aspects of a problem situation that
can be measured, quantified, counted, or classified. Any object, subject phenomenon, or activity that
generates data through this process is termed as a variable. In other words, a variable is one that shows a
degree of variability when successive measurements are recorded. In statistics, data are classified into
two broad categories: quantitative data and qualitative data. This classification is based on the kind of
characteristics that are measured.

1. Quantitative data are those that can be quantified in definite units of measurement. These
refer to characteristics whose successive measurements yield quantifiable observations.
Depending on the nature of the variable observed for measurement, quantitative data can be
further categorized as continuous and discrete data.

Obviously, a variable may be a continuous variable or a discrete variable.

​ (i) Continuous data represent the numerical values of a continuous variable. A continuous
variable is the one that can assume any value between any two points on a line segment, thus
representing an interval of values. The values are quite precise and close to each other, yet
 distinguishably different. All characteristics such as weight, length, height, thickness, velocity,
temperature, tensile strength, etc., represent continuous variables. Thus, the data recorded on
these and similar other characteristics are called continuous data. It may be noted that a
continuous variable assumes the finest unit of measurement. Finest in the sense that it enables
measurements to the maximum degree of
precision.
​ (ii) Discrete data are the values assumed by a discrete variable. A discrete variable is the one
whose outcomes are measured in fixed numbers. Such data are essentially count data. These are
derived from a process of counting, such as the number of items possessing or not possessing a
certain characteristic. The number of customers visiting a departmental store everyday, the
incoming flights at an airport, and the defective items in a consignment received for sale, are all
examples of discrete data.

2. Qualitative data refer to qualitative characteristics of a subject or an object. A characteristic is

qualitative in nature when its observations are defined and noted in terms of the presence or
absence of a certain attribute in discrete numbers. These data are further classified as nominal
and rank data.

(i) Nominal data are the outcome of classification into two or more categories of items or units
comprising a sample or a population according to some quality characteristic. Classification of
students according to sex (as males and 5 females), of workers according to skill (as skilled, semi-skilled,
and unskilled), and of employees according to the level of education (as matriculates, undergraduates,
and post-graduates), all result into nominal data. Given any such basis of classification, it is always
possible to assign each item to a particular class and make a summation of items belonging to each
class. The count data obtained are called nominal data.
(ii) Rank data, on the other hand, are the result of assigning ranks to specify order in terms of the
integers 1,2,3, ..., n. Ranks may be assigned according to the level of performance in a test. a contest, a
competition, an interview, or a show. The candidates appearing in an interview, for example, may be
assigned ranks in integers ranging from I to n, depending on their performance in the interview. Ranks
so assigned can be viewed as the continuous values of a variable involving performance as the quality
characteristic.

Data sources could be seen as of two types, viz., secondary and primary. The two can be defined as
under:

​ (i) Secondary data: They already exist in some form: published or unpublished -
in an identifiable secondary source. They are, generally, available from
published source(s), though not necessarily in the form actually required.
​ (ii) Primary data: Those data which do not already exist in any form, and thus have to be
collected for the first time from the primary source(s). By their very nature, these data require
fresh and first-time collection covering the whole population or a sample drawn from it.
- Importance of Statistics in Business -

There are three major functions in any business enterprise in which the statistical methods are useful.
These are as follows:

​ (i) The planning of operations: This may relate to either special projects or to
the recurring activities of a firm over a specified period.
​ (ii) The setting up of standards: This may relate to the size of employment,
volume of sales, fixation of quality norms for the manufactured product,
norms for the daily output, and so forth.
​ (iii) The function of control: This involves comparison of actual production
achieved against the norm or target set earlier. In case the production has fallen short of the
target, it gives remedial measures so that such a deficiency does not occur again.

The field of statistics is concerned with collecting, analyzing, interpreting, and presenting data. In a
business setting, statistics is important for the following reasons:

Reason 1: Statistics allows a business to understand consumer behavior better using descriptive
statistics.

Reason 2: Statistics allows a business to spot trends using data visualization.

Reason 3: Statistics allows a business to understand the relationship between different variables using
regression models.

Reason 4: Statistics allows a business to segment consumers into groups using cluster analysis.
Most of us use the word “statistics” with apparent familiarity. We may know enough about the basics
of statistics to understand a baseball player’s batting average or read a news report about political polls.
However, any effort to answer the question, “What is business statistics?” requires a deeper
understanding of statistics.

In short, when seeking to understand business statistics or statistical techniques in business and
economics, we must operate from a foundation of the more precise methodology of statistics. Broadly
speaking, this means dealing with “gathering, selecting, and classifying data; interpreting and analyzing
data; and deriving and evaluating the validity and reliability of conclusions based on data.”

Applying the science of statistics to the more specific field of statistical analysis for business is more
crucial than ever in an era heavily defined and driven by data. Businesses and organizations are
constantly working to make sense of and utilize much of the 2.5 quintillion bytes of data being
generated worldwide each day. The only way for any business to do that effectively is to rely on
statisticians trained in statistical techniques in business and economics.
What Is Business Statistics?

The most simple and straightforward answer to this question is that business statistics is the
application of standard statistical methods in business environments. The application of statistical
techniques in business and economics includes and builds on most of the basic concepts in the field of
statistics, including:

● Mean
● Mode
● Median
● Bar Graphs
● Bell Curves
● Basic Probability
● Hypothesis Testing
● Regression Analysis

If sales are lagging, a statistician employing statistical techniques in business and economics can help
isolate the problem and identify solutions. For example, the analysis might indicate ineffective
marketing, which then can be remedied through more effective market research and analysis, better
projections, and improved messaging and advertising strategies.

Even issues that seem more personal and less likely to be remedied by statistics often can be addressed
through creative use of statistical analysis for business. For example, if employee efficiency or even
morale seems low, statistics can help identify inefficient business practices or trends unnecessarily
burdening the staff. Addressing these issues not only helps improve business performance but also
communicates concern and value to a company’s primary resource: its people.

Enhanced understanding and utilization of business statistics also equip senior company leadership.
Many businesses find early success because of the entrepreneurial instincts of an individual or group
but eventually struggle in new seasons and when facing new challenges. Early methodologies and
decision-making processes don’t always translate as a business enters new stages. Often the application
of statistical techniques in business and economics under the guidance of statisticians can help leaders
overcome these barriers and make better decisions for the company’s present and future.

- Case Study -

Whether small or big business, they all need optimum research, apt strategies, and along with it a
planning of statistical data. Here, I am going to be talking about some data and experiments a small
business owner implemented and tried to make her business visible and grow.
A small business called Mosambi - sells quirky in demand decorative products like polaroid pictures,
spotify placards, boarding passes and recently they have launched a line of new products as well. This
business was started by Suchitra Koldekere and the co-founder is Shubham Bhattad, he only recently
invested in and joined this small business. They both are currently co-founders.

When Suchitra first started, she conducted a survey and an experiment to see whether she would have
people buying her products. Her being an economics student, she had knowledge about statistical
experiments.
Her problem statement and objective was to determine whether the buying tendency of people
towards her products is dependent on Age, Profession and Gender.
I conducted a similar survey and here are the steps and afterwards are the results.

The overall approach was to

● Identify the problem statement
● Collect data from the primary source
● Data analysis
● Hypothesis testing by Chi-square method to check the significance of the variable
● Concluding from the result of the statistics

Statistical method followed:

Chi-Square test of independence:

TheChi-Square test of independence is used to determine if there is a significant relationship between

two nominal (categorical) variables. The frequency of each category for one nominal variable is
compared across the categories of the second nominal variable. The data is displayed in a contingency
table where each row represents a category for one variable and each column represents a category for
the other variable. For example, we wanted to examine the relationship between gender (male vs.
female) and buying propensity (likely, indifferent & unlikely). The chi-square test of independence is
used to examine this relationship. The null hypothesis for this test is that there is no relationship
between gender and buying propensity. The alternative hypothesis is that there is a relationship
between gender and buying propensity.

Observed values Likely Unlikely Total

Under 30 15 28 43

Above 30 17 11 28

Total 32 39

Expected values Likely Unlikely Total

Under 30 19.38028 43
23.61972

Above 30 12.61972 15.38028 28

Total 32 39 71

Likely Unlikely Total

Observed
Expected
 Under 30
-4.38028 4.380282

Above 30
4.380282 -4.38028

Unlikely
Observed- Likely

Expected Squared

Under 30
19.18687 19.18687

Above 30
19.18687 19.18687

Unlikely
(O-E)^2/E Likely

Under 30
0.99002 0.812324

Above 30
1.520388 1.247498

Chi square Value - 4.57023

Calculated Value - 3.8414

Conclusion

​ Parameter: Age
We have sufficient evidence to prove that Age and Buying propensity are related to each other
​ Parameter: Gender
We do not have sufficient evidence to prove that gender and Buying propensity are
related to each other.
​ Parameter: Occupation
We have sufficient evidence to prove that occupation and Buying propensity are related to each
other.
- Conclusion -

There are many reasons a business uses statistics in its practice. The first reason is that in the use of
statistics, the business will have to track and understand its numbers and information. The collection
of this data is a good opportunity for the business owner to understand the performance of the
business.

It is important for a business to understand how they are profiting and how customers are interacting
with their products or services alongside different marketing tactics the company is using. This is
important for a business as a good use of these statistical tools will allow it to make the necessary
changes in the business in order to increase revenue and profit.

Another reason for using statistical tools will be for the company to identify trends in itself or with
regard to the industry it is in as a whole. The company may also look at the trend and decide to develop
marketing strategies that focus on those slower sales months in order to improve the profitability of the
business in those times.

Last but not least, another reason can be for the business to make a prediction about the future
according to the trend it observes from the data. While there are different possibilities in the future and
it is difficult to have certainty, analyzing existing data can give the company a sense of what may happen
in the future and the possibility of those events happening which may be beneficial or challenging.
With that knowledge in mind, the company can make adjustments if needed or have contingency plans
ready should those unfavorable events happen.

There are more reasons for a business to use statistical analysis tools. The most important aspect is how
the competition in industries is fierce and the more data and knowledge a company can get, the higher
chance it can stay in business and profit in the long term.
- References -

https://www.statology.org/importance-of-statistics-in-business/
https://www.slideshare.net/aakashkulkarni3/introduction-to-business-statistics-28959775