Application of Statistics in Business
Posted by: Dilip D | Business Analyitics
The field of statistics has numerous applications in business. Because of technological advancements, large amounts of data are generated by business these days. These data are now being used to make decisions. These better decisions we make help us improve the running of a department, a company , or the entire economy.
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. Also, 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.
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.
Statistical data and methods render valuable assistance in the proper understanding of the economic problem and the formulation of economic policies. Most economic phenomena and indicators can be quantified and dealt with statistically sound logic.
In fact, Statistics got so much integrated with Economics that it led to development of a new subject called Econometrics which basically deals with economics issues involving use of Statistics.
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.
Human Resource Management or Development
Human Resource departments are inter alia entrusted with the responsibility of evaluating the performance, developing rating systems, evolving compensatory reward and training system, etc. All these functions involve designing forms, collecting, storing, retrieval and analysis of a mass of data. All these functions can be performed efficiently and effectively with the help of statistics.
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 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.