What are Business Statistics?
Business statistics is the science of using data to make good decisions when faced with uncertainty. Several departments typically make use of business statistics, such as finance, marketing and customer service. Statistical techniques commonly found in businesses include using descriptive statistics, probability, binomial and normal distributions, hypotheses tests, confidence intervals, linear regression and correlation.
Managers frequently use business statistics when forecasting or making decisions that involve a level of uncertainty. It takes a certain amount of skill and training in order to interpret and apply business statistics. Business majors within the U.S. are usually required to complete a course in business statistics before graduation. Understanding and applying business statistics can give managers and businesses a competitive advantage.
Businesses that use statistics have a competitive advantage when making decisions backed by data. For instance, if a manager believes that an item will be obsolete in the future and wants to slash its price in half to sell out, he may find after performing a linear regression that the product will sell out at full price within two months. If he slashes the prices now, the company would be reducing its profit margin for no reason. In addition, managers typically compute the mean, or average, when they should also consider the mode or median. Outliers could be present, making the mean and the decisions based on that number inaccurate.
The most common departments that use business statistics include finance, marketing and customer service. The finance department benefits from using business statistics in order to perform financial statement analysis, forecasts and correlations. The marketing department can use it for forecasting sales and demand, as well as looking for trends and finding the probability of a certain event occurring. Customer service can increase their performance by using business statistics for determining which retention offers or techniques are working best, as well as reviewing the performance of personnel.
Techniques used for business statistics vary depending on the organization. Business schools teach their students descriptive statistics, probability, binomial and normal distributions, hypotheses tests, confidence intervals, linear regression and correlation. Descriptive statistics includes calculating and knowing when is the most appropriate time to use the mean, median and mode. Probability and distributions are used for determining how likely an event will occur. Hypotheses tests, confidence intervals, linear regression and correlations are usually used when making predictions or testing if a theory is true.
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