SPBA 102

POSTGRADUATE COURSE
MBA

FIRST YEAR
FIRST SEMESTER

CORE PAPER - II

QUANTITATIVE AND RESEARCH

METHODS IN BUSINESS

INSTITUTE OF DISTANCE EDUCATION

UNIVERSITY OF MADRAS
MBA CORE PAPER - II
FIRST YEAR - FIRST SEMESTER QUANTITATIVE AND RESEARCH
METHODS IN BUSINESS

WELCOME
Warm Greetings.

It is with a great pleasure to welcome you as a student of Institute of Distance

Education, University of Madras. It is a proud moment for the Institute of Distance education
as you are entering into a cafeteria system of learning process as envisaged by the University
Grants Commission. Yes, we have framed and introduced Choice Based Credit
System(CBCS) in Semester pattern from the academic year 2018-19. You are free to
choose courses, as per the Regulations, to attain the target of total number of credits set
for each course and also each degree programme. What is a credit? To earn one credit in
a semester you have to spend 30 hours of learning process. Each course has a weightage
in terms of credits. Credits are assigned by taking into account of its level of subject content.
For instance, if one particular course or paper has 4 credits then you have to spend 120
hours of self-learning in a semester. You are advised to plan the strategy to devote hours of
self-study in the learning process. You will be assessed periodically by means of tests,
assignments and quizzes either in class room or laboratory or field work. In the case of PG
(UG), Continuous Internal Assessment for 20(25) percentage and End Semester University
Examination for 80 (75) percentage of the maximum score for a course / paper. The theory
paper in the end semester examination will bring out your various skills: namely basic
knowledge about subject, memory recall, application, analysis, comprehension and
descriptive writing. We will always have in mind while training you in conducting experiments,
analyzing the performance during laboratory work, and observing the outcomes to bring
out the truth from the experiment, and we measure these skills in the end semester
examination. You will be guided by well experienced faculty.

I invite you to join the CBCS in Semester System to gain rich knowledge leisurely at
your will and wish. Choose the right courses at right times so as to erect your flag of
success. We always encourage and enlighten to excel and empower. We are the cross
bearers to make you a torch bearer to have a bright future.

With best wishes from mind and heart,

DIRECTOR

(i)
MBA CORE PAPER - II
FIRST YEAR - FIRST SEMESTER QUANTITATIVE AND RESEARCH
METHODS IN BUSINESS

COURSE WRITER

Dr. B. Devamaindhan
Associate Professor in Management Studies
Institute of Distance Education
University of Madras
Chennai - 600 005.
(Lessons 1-10)

Dr. P.S. Manjula

Assistant Professor in Management Studies
University of Madras
Chennai - 600 005.
(Lesson 11-16)

COORDINATION AND EDITING

Dr. B. Devamaindhan
Associate Professor in Management Studies
Institute of Distance Education
University of Madras
Chennai - 600 005.

Dr. S. Thenmozhi
Associate Professor
Department of Psychology
Institute of Distance Education
University of Madras
Chepauk Chennnai - 600 005.

© UNIVERSITY OF MADRAS, CHENNAI 600 005.

(ii)
 MBA DEGREE COURSE

FIRST YEAR

FIRST SEMESTER

Core Paper - II

QUANTITATIVE AND RESEARCH

METHODS IN BUSINESS
SYLLABUS

UNIT I: INTRODUCTION

Probability - Rules of probability- Probability distribution: Binomial, Poisson and Normal

Distributions, their applications in Business and Industrial Problem- Baye’s Theorem and
its applications - Decision Making under risk and uncertainty: Maximax, Maximin, Regret
Hurwitz and Laplace Criteria in Business and Decision Making - Decision tree.

UNIT II: RESEARCH METHODS

Research - Definition - Research Process - Research Design – Definition- Types Of

Research Design - Role of Theory in Research - Variables in Research – Objectives -
Hypothesis -Types of Data: Preliminary Vs Secondary- Methods of Primary Data Collection:
Survey, Observation, Experiments - Construction Of Questionnaire - Questionnaire
Schedule- Validity and Reliability of Instruments - Types of Scales: Nominal, Ordinal, Interval
- Types of Attitude Measurement Scales – Sampling Techniques: Probability And Non
probability Techniques- Optimal Sample Size determination.

UNIT III: DATA PREPARATION AND ANALYSIS

Data Preparation - Editing –Coding- Data Entry- Data Analysis- Testing Of Hypothesis
Univariate and Bivariate Analysis -Parametric And Nonparametric Tests and Interpretation
of Test Results- Chi-Square Test- Correlation: Karl Pearson’s Vs Correlation Coefficient
and Spearman’s Rank Correlation- Regression Analysis - One Way and Two Way Analysis
of Variance.

(iii)
UNIT IV: MULTIVARIATE STATISTICAL TECHNIQUES

Factor Analysis -Discriminant Analysis- Cluster Analysis -Conjoint Analysis -Multiple

Regression- Multidimensional Scaling- Their Application In Marketing Problems -Application
of Statistical Software For Data Analysis.

UNIT V: REPORT WRITING AND ETHICS IN BUSINESS RESEARCH

Research Reports- Different Types -Report Writing Format- Content of Report- Need For
Executive Summary- Chapterisation -Framing the Title of the Report- Different Styles Of
Referencing -Academic Vs Business Research Reports - Ethics In Research.

REFERENCE

1. Anderson, Sweeny, Williams, Camm and Cochran, Statistics for business and
Economics, Cengage Learning, New Delhi, 12th Edition, 2012

2. Cooper, D.R., Schindler, P. And Business Research Methods, 11th Edition, Tata-
McGrew Hill,2012.

3. Cooper, D.R., Schindler, P. and Sharma, J.K., Business Research Methods,11 th

Edition, Tata-McGraw Hill, 2012.

4. Johnson, R.A., and Wichern, D.W., Applied Multivariate Statistical Analysis, 6th Edition,
PHI Learning Pvt. Ltd., 2012.

5. Kumar, R., Research Methodology: a Step-by-Step guide for Beginners, Sage South
Asia, 2011.

6. Srivastava, T.N. and Rego, S., Statistics for Management, 2nd Edition, Tata McGraw
Hill, 2012.
 MBA DEGREE COURSE

FIRST YEAR

FIRST SEMESTER

Core Paper - II

QUANTITATIVE AND RESEARCH

METHODS IN BUSINESS

SCHEME OF LESSONS

Sl.No. Title Page

1. Probability - An Introduction 1

2 Probability Distribution 13

3 Decision Analysis 23

4 An Introduction to Research 38

5 Research Design and Research Hypothesis 51

6 Types of Data 67

7 Sampling Techniques 82

8 Attitude Measurement and Scaling Techniques 94

9 Correlation & Regression 109

10 Chisquare Test and ANOVA 123

11 Factor Analysis & Discriminant Analysis 137

12 Cluster and Conjoint Analysis 149

13 Multiple Regression and Multi-Dimensional Scaling 165

14 Research Reports 180

15 Report Formats and Referencing 198

16 Research Ethics 222

(iv)
 1

LESSON 1
PROBABILITY – AN INTRODUCTION
Learning Objectives

After completing this lesson, you will be able to

 Define the concept of probability

 Explain the types of probability

 List out the rules of probability

 Discuss Baye’s theorem

Structure
1.1 Introduction

1.2 Concept of probability

1.3 Basic Concepts

1.4 Types of Probability

1.5 Basic Probability Rules

1.6 Baye’s theorem

1.7 Worked Examples

1.8 Summary

1.9 Key Words

1.10 Review Questions

1.11 Suggested Readings

1.1 Introduction
The concept of probability which originated in the seventeenth century has become one
of the most fascinating subjects in recent years. So many people use the concept of probability
in their daily lives without actually being aware of it. For example, we often find people making
statements as “It is likely that it may rain”, “It is possible that the price of shares may go down
further”, etc, probability has become a part of our everyday lives.
2

1.2 Concept of probability

We live in a world dominated by uncertainty. Change is the only permanent phenomenon.
We can never predict the nature and direction of change in our lives. There is a perceived need
to be accurate and prepared in the uncertain environment. Our need to cope with this unavoidable
uncertainty of life has led to the study of probability theory. In simple words, probability is the
likelihood or chance that a particular event will or will not occur. The probability of a certain
event is 1 and the probability of an impossible event is 0.

1.3 Basic Concepts

1.3.1 Experiment

It is a process which produces outcomes.

1.3.2 Event

It is the outcome of an experiment. If we toss a coin, we may obtain either a head or tail.

1.3.3 Compound Events

The joint occurrence of two or more simple events is known as compound event. In an
experiment in which two coins are tossed, the event of obtaining “:one head and one tail” is a
compound event as it consists of two events (i) one head occurrence (ii) one tail occurrence.

1.3.4 Independent and Dependent Events

Two events are said to be independent events if the occurrence or non-occurrence of one
is not affected by the occurrence or non-occurrence of the other.

Two or more events are said to be dependent if the occurrence of one event influences
the occurrence of other event.

1.3.5 Mutually Exclusive Events

Two or more events are said to be mutually exclusive if the occurrence of one implies that
the other cannot occur.

1.3.6 Collective Exhaustive Events

A list of events can be termed as collective exhaustive when the outcome of an experiment
consists of all possible events that can occur in the experiment.
 3

1.3.7 Equally likely Events

Two or more events are said to be equally likely if each has an equal chance of occurrence.
For example, in an unbiased coin tossing experiment, both the outcomes have an equal chance
of occurrence.

1.3.8 Sample Space

It is the set of all possible outcomes of an experiment.

1.3.9 Complementary Events

The complement of an event is the set of all the outcomes in a sample space that are not
included in the event.

1.4 Types of Probability

Probability is of four types. They are Marginal probability, Union probability, Joint probability
and Conditional probability.

1.4.1 Marginal probability

It is also called as unconditional probability. It is the simple probability of the occurrence

of an event. It is denoted by P(E), where E is an event.

1.4.2 Union Probability

If E1 and E2 are two events, then union probability is denoted by P(E1  E2). It is the
probability that event E1 will occur or event E2 will occur or both event E1 and E2 will occur.

1.4.3 Joint probability

It is denoted by P (E1  E2) and is the probability of the occurrence of E1 and E2.

1.4.4 Conditional probability

It is denoted by P(E1 / E2) and is the probability of the occurrence of E1, given that E2 has
already occurred.
4

1.5 Basic Probability Rules

1.5.1 Rule of Addition

If there are two events E1 and E2, then the general rule of addition is given by

P (E1 U E2) = P(E1) + P(E2) – P(E1  E2)

1.5.2 Rule of Multiplication

If there are two events E1 and E2, then the general rule of multiplication is given by

P (E1  E2) = P (E1) P (E2 / E1)

1.6 Baye’s theorem

The Baye’s theorem is named after the British mathematician Rev. Thomas Bayes and is
based on the conditional probability.

Let A1 and A2 are the set of events which are mutually exclusive and exhaustive events.
Let B be an event which intersects each of the A events, then probability of event A1 given event
B is

P (A1 / B) = P (A1 and B) / P (B)

Similarly the probability of event A2, given B is

P (A2 / B) = P (A2 and B) / P (B)

Where P (B) = P (A1 and B) + P (A2 and B)

P (A1 and B) = P(A1) x P(B/A1) and

P (A2 and B) = P (A2) x P (B/A2)

In general let A1, A2 ….. Ai …… An be a set of n mutually exclusive and collective exhaustive
events. If B is another event such that P (B) is not zero, then

PB / A1 A1 
PA1 / B  k

 PB / A PA 
i 1
1 1
 5

Probabilities before revisions by Baye’s rule are called prior probability because they are
determined before the sample information is taken into account. A probability which has
undergone revisions in the light of sample information is called a posterior probability, since it
represents a probability calculated after this information is taken into account.

1.7 Worked Examples

1. In a simultaneous throw of two dice, find the probability of getting a total of 5?

Solution

In a two dice throwing experiment, there can be the following 36 outcomes.

(1,1) (1,2) (1,3) (1,4) (1,5) (1.6)

(2,1) (2,2) (2,3) (2,4) (2,5) (2.6)

(3,1) (3,2) (3,3) (3,4) (3,5) (3.6)

(4,1) (4,2) (4,3) (4,4) (4,5) (4.6)

(5,1) (5,2) (5,3) (5,4) (5,5) (5.6)

(6,1) (6,2) (6,3) (6,4) (6,5) (6.6)

The possible ways of getting a total of 5 are given by (1,4), (2,3), (3,2), (4,1).

Probability = 4/36

2. A store receives 3 red, 6 white and 7 blue shirts. Two shirts are drawn at random.
Determine the probability that (a) Both shirts are while
(b) Both shirts are blue
(c) One shirt is red and other is blue
(d) One shirt is white and other is blue.

Solution

Total number of shirts received by store = 3+6+7 = 16

Out of 16 shirts, 2 can be drawn in 16 C 2 = 16 x 15/1 x 2 = 120 ways

Total possible number of outcomes = 120

6

a) Let E1 be the event that both the shirts are white. Out of 6 white shirts, 2 white shirts
can be selected in 6 C2 ways = 12 ways.

Probability that both shirts are white = 15 /120

b) Let E2 be the event that both the shirts are blue.

Out of 7 blue shirts, 2 blue shirts can be selected in 7 C2 ways, that is,

= 7 x 6 /1 x 2 = 21 ways

Probability that both shirts are blue = 21/120

(c) Let E3 be the event that one shirt is red and the other is white.

Out of 3 red shirts and 6 white shirts, 1 red and 1 white shirt can be selected in
3C1 X 6 C1 ways, that is, in 18 ways.

Probability that one shirt is red and other is blue = 18/120

d) Let E4 be the event that one shirt is white and the other is blue, Out of 6 red shirts
and 7 white shirts, 1 white and 1 blue can be selected in 6 C1 x 7 C1 ways, that is, in
42 ways.

Probability that one shirt is white and other is blue = 42/120

3. From a well shuffled pack of 52 cards, a card is drawn at random. Find the probability
that it is an ace or a heart.

Solution

Let E1 be the event of getting an ace and E2 be the event of getting a heart from a pack of
52 cards.

Number of aces =4

Number of hearts = 13

Number of ace or heart = 1

4 13 1
P (E1) = ; P (E2) = ; P (E1,  E2) =
52 52 52

P(E1  E2) = P (E1) + P (E2) – P(E1  E2)

 7

4 13 1 16
   
52 52 52 52
4. A company is interested in understanding the consumer behavior of a city. It has
selected a sample of 300 consumers and asked a simple question. “Do you enjoy
shopping?” Out of 300 respondents, 200 were males and 100 were females. Out
of 200 males, 120 responded “Yes” and out of 100 females. 70 responded “Yes”.
Find the probability that

(i) respondent is a male

(ii) respondent enjoys shopping

(iii) respondent is a female and enjoys shopping

(iv) respondent is a male and does not enjoy shopping.

Solution

200 2
i) Probability that a consumer is a male  
300 3

190 19
ii) Probability that the respondent enjoys shopping  
300 30

70 7
iii) Probability that the respondent is a Female and enjoys shopping  
300 30

80 4
iv) Probability that the respondent is a male and does not enjoy shopping  
300 15

5. A Company accepted a lot of 70 picture tubes of a color television. Out of 70 picture

tubes, 10 are defective.

i) If the two picture tubes are drawn at random, one at a time without replacement,
what is the probability that both picture tubes are defective?

ii) If they are drawn at random, one at a time with replacement, what is the probability
that both picture tubes are defective?
8

Solution
i) If the two picture tubes are drawn at random, one at a time without replacement,
then the required probability

= (Probability that first picture tube x (without replacing the first, second
is drawn and is defective) picture is drawn and is defective)

10 9
   0.018
70 69

ii) If two picture tubes are drawn at random, one at a time with replacement, then
the required probability

= (Probability that first picture tube is x (Replacing the first, the second
drawn and is defective) tube is drawn and is defective)

10 10
   0.020
70 70
6. The internal recruitment board of a company wants to recruit new employees. Before
recruitment, the company examines different categories of qualification of its
employees. The table given below indicates the four categories of qualification and
gender of the employees

Type Male Female Total

Matriculates 110 80 190

Graduates 60 80 140

Post Graduates 40 50 90

Ph.Ds 10 15 25

Total 220 225 445

If an employee is selected at random, what is the probability that

i) He is a male or a graduate?

ii) She is female or a postgraduate?

 9

iii) The employee is a matriculate or a graduate?

iv) The employee is a post-graduate or a Ph.D?

Solution

Let E1 be the event of selecting a male

E2 be the event of selecting a female
E3 be the event of selecting a matriculate
E4 be the event of selecting a graduate
E5 be the event of selecting a post-graduate
E6 be the event of selecting a Ph.D

220 224 190

PE1   , P E 2   , P E 3   ,
445 445 445

140 90 25
PE 4   , PE 5   , P E 6  
445 445 445
(i) Probability that the employee is a male or a graduate = P (E1 or E4)

= P (E1)+ P(E4) – P (E1 and E4)

220 140 60
    0.67
445 445 445

(ii) Probability that the employee is a female or a postgraduate

= P(E2 or E5) = P (E2) + P (E5) – P(E2 and E5)

225 90 50
    0.59
445 445 445

(iii) Probability that the employee is a matriculate or a graduate

= P(E3 or E4) = P{(E3) + P (E4) = 0.73

(iv) Probability that the employee is a post graduate or Ph.D

= P(E5 or E6) = P(E5) +P (E6) = 0.25

10

7. Assume that a factory has two machines. Past records show that machine 1 produces
30% of the items of output and machine 2 produces 70% of the items. Further 5%
of the items produced by machine 1 were defective and only 1% produced by machine
2 were defective. If a defective item is drawn at random, what is the probability that
the defective item was produced by machine 1 or machine 2?

Solution

Let A1 be the event of drawing an item produced by machine 1.

Let A2 be the event of drawing an item produced by machine 2.

Let B be the event of drawing a defective item produced either by machine 1 or 2.

P (A1) = 0.3

P (A2) = 0.7

P(B/A1) = 5% = 0.05

P(B/A2) = 1% = 0.01

Computation of Posterior probabilities:

Events Prior Conditional Joint Posterior (Revised)

Probability Probability Probability Probability
(1) (2) (3) (4) = (2) x (3) (5) = (4) / P(B)

A1 0.3 0.05 0.015 0.682

A2 0.7 0.01 0.007 0.318

Total 1.0 P(B) = 0.022 1.00

The probability that the defective item was produced by machine 1 = 0.682 = 68.2%

The probability that the defective item was produced by machine 2 = 0.318 = 31.8%
 11

1.8 Summary
Probability is the likelihood or chance that a particular event will occur. It is based on
some basic preliminary ideas such as experiment, event, independent events, mutually exclusive
and collectively exhaustive events. There are four types of probability namely marginal, union,
joint and conditional probability. The basic probability rules are also discussed in this lesson.
Baye”s theorem is an extended use of the concept of conditional probability. It allows revision
of the original probability with new information.

1.9 Key Words

 Baye’s theorem

 Collective Exhaustive Event

 Event

 Experiment

 Dependent Event

 Independent Event

 Mutually Exclusive Event

1.10 Review Questions

1) Define event and experiment. Give examples

2) A company has 140 employees of which 30 are supervisors. Eighty of the employees
are married and 20% of the married employees are supervisors. If a company
employee is randomly selected, what is the probability that the employee is married
and is a supervisor?

3) A manufacturing firm produces pads of bound paper. 3% of all paper pads produced
are improperly bound. An inspector randomly selects two pads of paper, one at a
time. Because a large number of pads are being produced during the inspection,
the sampling being done, in essence, with replacement. What is the probability that
the two pads selected are both improperly bound?

4) The contents of boxes i, ii and iii are as follows:

1 White, 2 black and 3 red balls.

12

2 White, 1 black and 1 red balls and

4 White, 5 black and 3 red balls.

One box is chosen at random and two balls are drawn from it. They happen to be
white and red. What is probability that they come from boxes i, ii or iii?

1.11 Suggested Readings:

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 13

LESSON 2
PROBABILITY DISTRIBUTION
Learning Objectives

After completing this lesson, you will be able to

 Define probability distribution

 Explain the types of probability distribution

 Discuss the application of probability distribution in business

Structure
2.1 Introduction

2.2 Probability Distribution

2.3 Binomial Distribution

2.4 Poisson Distribution

2.5 Normal Distribution

2.6 Worked Examples

2.7 Summary

2.8 Key Words

2.9 Review Questions

2.10 Suggested Readings

2.1 Introduction
In the previous lesson we discussed the basic concepts of probability and explained the
probability rules and Baye’s theorem. In this lesson let us explain the basics of probability
distribution and their types such as Binomial Distribution, Poisson Distribution and Normal
Distribution.

2.2 Probability Distribution

It is a distribution which shows how probabilities are distributed over the variables.
Probability is defined us the chance of occurrence of an event. The probability distribution can
be classified into discrete and continuous probability distribution.
14

2.3 Binomial Distribution

It is a discrete probability distribution which is based on Bernoulli process.

Consider the experiment of tossing a coin. If a coin is tossed, the outcome may be either
head or tail. So the sample space is (Head, Tail). Here the number of events is equal to
number of outcomes which is equal to 2. The occurrence of head will prevent the occurrence of
tail. Similarly the occurrence of tail will prevent the occurrence of head. This is an example of
two mutually exclusive and collectively exhaustive events. The probability of occurrence of
head/tail is 0.5.

In a trial of tossing a coin, the probability of success (p) is 0.5 and the probability of failure
(q = 1-p) is 0.5. If n repeated trials are performed, then the objective of the game may be to find
the probability of having x successes for the person. This experiment is termed as Bernoulli
process in which n repeated trials are performed with the following assumptions.

(a) In the experiment, there are only two mutually exclusive and collectively exhaustive
events.

(b) The probabilities of occurrence of the events of the experiment are the same in all
the trials.

(c) In all the n trials, the observations are independent of one another.

Based on these fundamentals, the binomial probability distribution is represented as follows:

P(x successes in n trials given P) = n C X P x q n- x

where x = 0,1,2,3 …. n

Where n = number of trials

p = probability of success in a trial

q = probability of failure in a trial = (1-p)

X = random variable representing number of success

2.4 Poisson Distribution

It is a discrete probability distribution. This is usually used to represent the number of
occurrence of an event in one unit of time. The shape of Poisson distribution is bell shaped
curve.
 15

The formula for Poisson distribution is

e   * x
P x   x  0,1,2,3......
x!

It is alternatively expressed as P (x,  ) where x is the random variable representing a

specific rate of occurrence of an event.

 = mean rate of occurrence of an event

= mean arrival rate

P (x ,  ) is the Probability that number of occurrences of the event per unit time.

2.5 Normal Distribution

Normal distribution is a continuous probability distribution. The behavior of many of the
real-life situations can be modeled as normal distribution.

Examples:
1. Monthly salary of employees in a locality

2. Mark of students in an entrance test

3. Height and Weight of Employees

The shape of normal distribution is bell shaped.

If the observations of a real-life problem follow the normal distribution with mean and
variance, then the random variable can be converted into a standard normal random variable
using the transformation z = (x   )/ 

The mean and variance of standard normal distribution are 0 and 1 respectively.

2.6 Worked Examples

1. If the coin is tossed for 10 times, what is the probability of having

a) 0 heads (b) 3 heads c) at most 2 heads (d) at least 3 heads.

16

Solution

The number of trials = 10 = n

The appearance of head is treated as a success.

p = 0.5

q = 1 – p = 0.5

a) P (X = 0,10,0. 5) = nCx * p x * qn-x = 0.0009766

b) P (x = 3,10,0.5) = n C3 p 3 q7 = 0.11719

c) P (X d < 2,10,0.5) = P (x = 0,10,0.5) + P (x =1, 10,0.5) +P(x = 2, 10,0.5)

= 0.0009766 + 0.009766 + 45 (0.0009766)

= 0.054684

d) P ( X>3, 10,0.5) = 1 - 0.054684

= 0.945316

2. Based on past experience, the quality control engineer of Heavy Electricals Limited
has estimated that the probability of commissioning each project in time at a client
is 0.9. The company is planning to commission 5 such projects in the forthcoming
year. Find the probability of commissioning

(a) no project in time

(b) two projects in time

(c) at most one project in time

(d) at least two projects in time.

Solution

The number of trials = 5

p = 0.9

q = 1 -0.9 = 0.1
 17

a) P (x = 0,5,0.9) = 5 C0 (0.9)0 (0.1)5

= 1 (0.1)5 = 0.00001

b) P (X = 2,5,0.9) = 5 C2 (0.9)2 (0,1)3

= 0.0081

c) P (x < 1, 5, 0.9) = P(x = 0,5,0.9) + P (X = 1, 5,0.9)

= 0.00001 + 5 C1 (0.9)1 (0.1) 4

P ( x > 2, 5, 0.9) = 0.00046

d) P (x = 7, 2, 5, 0.9) = 1 – 0.00046

= 0.99954

3. The Quality control assistant takes a sample of 25 units per hour interval at a particular
work station of a production line and inspects them one by one. Based on the past
experience, he has estimated that the probability of one unit will be defective is
0.04. Find the probability that

a) no piece in the sample is defective

b) 3 pieces in the sample will be defective

c) at most 2 pieces will be defective

d) at least 3 pieces will be defective

Solution

The probability that an inspected piece will be defective (p) = 0.04

 = n p = 25 x 0.04 = 1

a) P (x = 0,1) = e- l *  x /x! = 0.368

0.368
b) P (x = 3,1)   0.061
6
18

c) P (x < = 2,1)
0.368
= 0.368 + 0.368 +
6
= 0.368 + 0.368 +0.184

= 0.920

d) P (x > 3,1) = 1–0.920 = 0.08

4. The arrival rate of customers arriving at a bank counter follows Poisson distribution
with a mean arrival rate of 4 per 10 minutes interval. Find the probability that

a) exactly 0 customers will arrive in 10 minutes interval

b) exactly 2 customers will arrive in 10 minutes interval
c) atmost 2 customers will arrive in 10 minutes interval
d) atleast 3 customers will arrive in 10 minutes interval

Solution

 = 4 = arrival rate

a) P (x= 0,4) = 0.018

b) P(x= 2,4) = 0.018 x 16 /2 = 0.146

c) P (x < 2, 14) = (0.018 + 0.018 x 4 + 0.018 x 16/2 )

= 0.238

c) P (X > 3, 4) = 1 - (0.238) = 0.762

5. In a survey with a sample of 200 respondents, the monthly income of the respondents
follows normal distribution with its mean and standard deviation is as Rs. 10,000/-
and Rs. 2,000/- respectively. Assume the level of significance as 0.05.

a) What is the probability that the monthly income is less than Rs. 11,000? Find the
number of respondents having income less than Rs. 11,000/-.

b) What is the probability that monthly income is more than Rs. 12,000?

c) What is the probability that the monthly income is in between Rs. 7,000/- and Rs.
11,200?
 19

Solution

Let X be a random variable representing the monthly income of respondents.

Mean = Rs. 10,000, Standard deviation = Rs. 2,000/-

a) P (x < 11,000) = P ( z < 11,000-10,000) / 2000)

= p ( z < 0.5)

= (0.5 + 0.1915) where Area under standard normal

Distribution from the mean is 0.1915

= 0.6915

Number of respondents having

income less than Rs.11,000 = 200 x 0.6915

= 138.3 = (138 rounded off).

b) P ( x > 12000) = p ( z> 120000 – 10000) / 2000

= P ( z > 1)
= 1 – P (z < 1)
= 1 – (0.5 + 0.3413) = 1 – 0.8413
= 0.1587

c) P (7000 < x < 11200)

= P (x < 11200) - P ( x < 7000)

= P ( z < 0.6) – P ( z < – 1.5)

= P ( z < 0.6) – [1 – P ( z < 1.5) ]

= 0.7257 – (1 – 0.9332)

= 0.7257(–1) + 0.9332

= 0.659
20

Probability that the monthly income in between Rs.7000/- and Rs.11,200/- is 0.659

2.7 Summary
Probability distributions are of two types. They are discrete distribution and continuous
distribution. Binomial distribution, Poisson distribution and normal distribution are explained in
this lesson. Binomial distribution and Poisson distribution are discrete probability distribution
whereas normal distribution is a continuous probability distribution.

2.8. Key Words

 Binomial distribution

 Normal distribution

 Poisson distribution

2.9 Review Questions

1) An increasing number of consumers believe they have to look out for themselves as a
market place. According to a survey conducted by Raj Partners for a magazine, 60% of
all consumers have called on 800 or 900 telephone number for information about some
product. Suppose that a random sample of 25 consumers is contacted and interviewed
about their buying habits.

i) What is the probability that 15 or more of the consumers have called on 800 or 900
telephone number for information about some product?

ii) What is the probability that more than 20 of these consumers have called on 800
or 900 telephone number for information about home product?

iii) What is the probability that fewer than 10 of these consumers have called on or
900 telephone number for information about some product?

2) A Tamil magazine reported the results of a survey in which buyers were asked a series of
questions with regard to internet usage. The question asked was how they would use the
internet, If security and other issues could be resolved. 78% said they would use it for
browsing information, 75% said they would use it to send purchase orders and 70% said
they would use it for purchase order acknowledgements.
 21

Assume that these percentages hold true for all buyers. A researcher randomly samples
20 buyers and ask them how they would use the internet if security and other issues could
be resolved.

i) What is the probability that exactly 14 of these buyers would use the internet for
pricing information?

ii) What is the probability that all of the buyers would use the internet to send purchase
orders?

iii) What is the probability that fever than 12 would use internet for purchase order
acknowledgements?

3) On Monday mornings, the State Bank of India, Chepauk, Chennai has only one Teller
windows open for deposits and withdrawals. Experiences has shown that the average
number of arriving customers in a 4 minute interval on Monday mornings is 2-9 and each
teller can serve more than that number efficiently. These random arrivals at this bank on
Monday mornings are Poisson distributed.

i) What is the probability that on Monday morning exactly 6 customers will arrive in a
4 minute interval?

ii) What is the probability that no one will arrive at the bank to make a deposit or
withdrawal during a 4 minute interval?

iii) Suppose the teller can serve no more than 4 customers in any 4 minute interval at
this window on a Monday morning. What is the probability that during any give 4
minute interval, the teller will be unable to meet the demand? What is the probability
that the teller will be able to meet the demand? When demand cannot be met
during any given interval a second window is opened. What percentage of the time
will a second window have to be opened?

4) The average number of annual trips per family to amusement parks in Chennai is Poisson
distributed, with mean of 0.6 trips per year. What is the probability of randomly selecting
an Chennai family and find the following:

i) The family does not make a trip to an amusement park last year?

ii) The family took exactly one trip to an amusement park last year?

iii) The family took two or more trips to an amusement park last year?
22

iv) The family took there or fewer trips to amusement parks over a three year period?

v) The family took exactly four trips to amusement parks during a six year period?

5) The comprehensive strength of samples of cement can be modeled by a normal distribution

with a mean of 6000 kilograms per square centimeter and a standard deviation of 100
kilograms per squares centimeter.

i) What is the probability that a samples strength is less than 6250/cm?

ii) What is the probability that a sample’s strength is between 5800 and 5900 kg//cm?

iii) What strength is exceeded by 95% of the samples?

6) The sick leave time of employees in a firm in a month is normally distributed with a mean
of 100 hours and a standard deviation of 20 hours?

i) What is the probability that the sick leave time for next month will be between 50 to
80 hours?

ii) How much time should be budgeted for sick leave of the budgeted amount should
be exceeded with a probability of only 10%

2.10 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 23

LESSON 3
DECISION ANALYSIS
Learning Objectives

After reading this lesson, you will be able to

 Explain decision making under risk

 Discuss decision making under uncertainty

 Describe decision tree analysis

Structure
3.1 Introduction

3.2 Decision making U under uncertainty

3.3 Decision making under risk

3.4 Decision Tree Analysis

3.5 Worked Examples

3.6 Summary

3.7 Key Words

3.8 Review Questions

3.9 Suggested Readings

3.1 Introduction
In the previous lesson, the types of probability distribution such as Binomial, Normal and
Poisson distribution were discussed. Decision making is one of the vital functions in business
situations. In this lesson let us try to explain the decision making under risk and uncertainty.
Decision tree analysis is also discussed in this lesson.

3.2 Decision Making under Uncertainty

This is a situation in which the decision maker has no knowledge about the probability of
occurrence of different states of nature. Various methods are used to solve this type of problems.
24

i) Laplace Criterion

ii) Maximin Criterion or Minimax Criterion

iii) Maximax Criterion or Minimin Criterion

iv) Savage Criterion

v) Hurwitz Criterion

3.2.1 Laplace Criterion

It uses all the information by assigning equal probabilities to possible payoffs for each
action and then selects the alternative which corresponds to the maximum expected payoff.

3.2.2 Maximin Criterion or Minimax Criterion

Maximin Criterion consists of two steps.

i) Determine the minimum payoff for each alternative.

ii) Choose the alternative which corresponds to the maximum of above minimum
payoffs.

Minimax Criterion consists of two steps.

i) Determine the maximum possible cost for each alternative.

ii) Choose the alternative which corresponds to minimum above costs.

3.2.3 Maximax Criterion or Minimin Criterion

Maximax Criterion consists of two steps.

i) Determine the maximum possible payoff for each alternative.

ii) Select that alternative which corresponds to the maximum of above maximum
payoffs.

Minimin Criterion consists of two steps.

i) Determine the minimum possible payoff for each alternative.

ii) Select that alternative which corresponds to the minimum of above minimum payoffs.
 25

3.2.4 Savage Criterion

It is based on the concept of regret (opportunity loss). It is also called as the principle of
minimax regret. It includes three step procedures.

i) Determine the amount of regret for payoff each alternative for a particular event.
Regret amount for ith alternative when event j occurs is given by ith regret.

= (Maximum payoff – ith payoff) for jth event, if payoff represents profits (or)

= (ith payoff – maximum payoff) for jth event, if payoff represents costs.

ii) Determine the maximum regret amount for each alternative.

iii) Choose that alternative which corresponds to the minimum regrets.

3.2.5 Hurwitz Criterion

The basic step of this method is given below:

i) Choose an appropriate degree of optimism (or pessimism) of the decision maker.

Let a be the degree of optimism and (1 – a) be the degree of pessimism

where 0 < a < 1

ii) Determine the maximum as well as minimum payoff for each alternative and obtain
the quantities.

H = a (maximum) + (1 – a) (minimum) for each alternative.

3.3 Decision making under risk

It is a probabilistic decision situation in which more than one state of nature exists and
the decision maker has sufficient information to assign probability values to the likely occurrence
of each of these states. Knowing the probability distribution of state of nature the best decision
is to select that course of action which has the largest expected payoff value.

3.3.1 Expected Monetary Value

The most widely Criterion for evaluating various courses of action under risk is the Expected
Monetary Value (EMV) or Expected utility.

It is the weighted average payoff which is the sum of the payoffs for each course of
action multiplied by the probabilities associated with each state of nature.
26

3.3.2 Expected Opportunity Loss

It is defined as the difference between the highest profit (or payoff) for a state of
nature and the actual profit obtained for the particular course of action taken.

3.3.3 Expected Value of perfect Information (EVPI)

In decision making under risk each state of nature is associated with the probability of its
occurrences. However, if the decision maker can acquire perfect information about the
occurrence of various states of nature, then he will be able to select a course of action that
yields the desired payoff for whatever state of nature that actually occurs.

EVPI represents that maximum amount of money decision maker has to pay to get this
additional information about the occurrence of various states of nature before a decision has to
be made.

EVPI = (Expected profit (or value) with perfect information under certainty) -
Expected profit without perfect information

3.4 Decision Tree Analysis

Decision tree is a graphic display of various decision alternatives and the sequence of
events if they were branches of a tree. In constructing a tree diagram, it is convenient to use
the symbol rectangle to indicate the decision point and circle to the situation of uncertainty or
event. Branches coming out of a decision point are nothing but representation of immediate
mutually exclusive alternative acts open to the decision maker. Branches emanating from the
event point circle represent all possible situations.

3.5 Worked Examples

1. A food products company is contemplating the introduction of a revolutionary new
product with new packaging to replace the existing product at much higher price (S1) or a
moderate change in the composition of the existing product with a new packaging at a small
increase in price (S2) or a small change in the composition of the existing except the word
“New” with a negligible increase in price (S3). The three possible states of nature are (i) High
increase in sales (N1) (ii) No change in sales (N2) (iii) Decrease in sales (N3). The marketing
department of the company worked out the payoffs in terms of yearly net profits for each of the
strategies of three events. This is represented in the following table.
 27

State of Nature

Strategies N1 N2 N3

S1 7,00,000 3,00,000 1,50,000

S2 5,00,000 4,50,000 0

S3 3,00,000 3,00,000 3,00,000

Which strategy should the concerned executive choose on the basis of

i) Maximin Criterion

ii) Maximax Criterion

iii) Minimax regret Criterion

iv) Laplace Criterion

Solution

The payoff matrix is rewritten as follows:

States of Nature S1 S2 S3

N1 7,00,000 5,00,000 3,00,000

N2 3,00,000 4,50,000 3,00,000

N3 1,50,000 0 3,00,000

i) Maximin Criterion

S1 S2 S3

Column minimum 1,50,000 0 3,00,000

The maximin value = Rs. 3,00,000. Hence the company should adopt strategy S3.
28

ii) Maximax Criterion

S1 S2 S3

Column max 7,00,000 5,00,000 3,00,000

Maximax value = Rs. 7,00,000. Hence the company should adopt strategy S1.

iii) Minimax Regret Criterion

Develop an opportunity loss or regret matrix

a) Find the best payoff corresponding to each state of nature.

b) Subtract all other entries in that row from this value.

S1 S2 S3

N1 7,00,000 -7,00,000 = 0 7,00,000 – 5,00,000= 2,00,000 7,00,000-3,00,000= 4,00,000

N2 4,50,000 – 3,00,000 =1,50,000 4,50,000 – 4,50,000= 0 4,50,000 – 3,00,000= 1,50,000

N3 3,00,000-1,50,000 = 1,50,000 3,00,000 – 0= 3,00,000 3,000,000-3,00,000=0

Max. Opportunity Loss 1,50,000 3,00,000 4,00,000

Hence the company should adopt minimum opportunity loss strategy S1.

iv) Laplace Criterion

State of Nature S1 S2 S3

N1 7,00,000 5,00,000 3,00,000

N2 3,00,000 4,50,000 3,00,000

N3 1,50,000 0 3,00,000

Strategy Expected Return (Rs)

S1 1/3 (700000 + 300000 + 150000) 3,83,333.3

S2 1/3 (500000 + 450000 + 0) 3,16,666.66
S3 1/3 (300000 + 300000 + 300000) 3,00,000
 29

Since the largest expected return is from strategy S1, the executive must select strategy
S1.

2. The Parker flower shop promises its customers delivery within 4 hours on all flower orders.
All flowers are purchased on the previous day and delivered to parker by 8.00 A.M. in the
next morning. Parker’s daily demand for roses is as follows:

Dozens of Roses 7 8 9 10

Probability 0.1 0.2 0.4 0.3

It purchases roses for Rs. 10 per dozen and sells them for Rs.30. All unsold roses are
donated to local hospital. How many dozens of roses should Parker order each evening to
maximize its profits? What is optimum expected profit?

Solution

Marginal Profit = Selling Price – Cost = 30 – 10 = Rs. 20

Marginal Loss = Rs.10

Conditional Profit = Marginal Profit x (Rose Sold) – Marginal Loss x (Roses not Sold)

Conditional Profit = 20 D If Demand > Supply (or)

Conditional Profit = 20 D – 10 (S-D)

= 30 D – 10 S If Demand < Supply

D = Number of Roses sold within a Day

S = Number of Roses stocked.

30

State of Probability Conditional Payoff Purchase Expected Payoff

nature per day Purchase
(Demand per day
per day) (1) (2) (3) (4) (5) (1x2) (1x3) (1x4) (1x5)

7 8 9 10 7 8 9 10

7 0.1 140 130 120 110 14 13 12 11

8 0.2 140 160 150 140 28 32 30 28

9 0.4 140 160 180 170 56 64 72 68

10 0.3 140 160 180 200 42 48 54 60

Expected M.V 140 157 168 167

The flower shop should purchase 9 dozen roses every day

3. A Retailer purchases Cherries every morning at Rs.50 per case and sells them for Rs. 80
a case. Any case remaining unsold at the end of the day can be disposed of next day at
a salvage value of Rs.20 per case. Past sales have ranged from 15 to 18 cases per day.
The following is the record of sales for the past 120 days.

Cases Sold: 15 16 17 18

No. of Days: 12 24 48 36

Find how many cases the retailer should purchase per day to maximize his profit.

Solution

Find probability 12/120 = P 1 = 0.1, P2 = 0.2, P3 = 0.4, P4 = 0.3

Marginal Profit = – 50 + 80 = 30

Marginal Loss = 50 – 20 = 30

Conditional Probability = 30 Marginal Profit – 30 Marginal Loss

= 30 S if S > N
 31

= 30 S – 30 (N.S) if S < N

= 60 S – 30 N

Conditional Payoff

State of Probability Conditional Expected Payoff

Nature Payoff Purchase Purchase
(Demand per day per day
per week)
15 16 17 18 15 16 17 18
(1) (2) (3) (4) (5) (1x2) (1x3) (1x4) (1x5)

15 0.1 450 420 390 360 45 42 39 36

16 0.2 450 480 450 420 90 96 90 84

17 0.3 450 480 510 480 180 192 204 192

18 0.4 450 480 510 540 135 144 153 162

Expected Monetary Value 450 474 486 474

Retailer must purchase 17 cases of Cherries every morning.

4. A company manufactures goods for a market in which the technology of the product is
changing rapidly. The R & D Department has produced a new product which appears to
have potential for commercial exploitation. A further Rs.60, 000 is required for development
testing. The company has 100 customers and each customer might purchase at the
most one unit of the product. Market research suggests that a selling price of Rs.6000 for
each unit with total variable costs of manufacture and selling estimate are Rs. 2000 for
each unit. The probability distribution is given below:

Probability 0.1 0.1 0.2 0.4 0.2

Proportion of Customers 0.04 0.08 0.12 0.16 0.2

Determine the expected opportunity losses, given no other information than that stated
above and state whether or not the company should develop the product.
32

Solution

If “P” is the proportion of customers who purchase the new product, then conditional profit
is (6000-2000) x 100 P – 60000

= 4000 x 100P - 60000

= Rs. (4, 00,000 P – 60000)

Let Ni (i = 1, 2 ….5) be the possible states of nature, i.e., proportion of the customers
who will buy the new product and S1 (develop the product) and S2 (do not develop the product)
be the two courses of action.

State of nature Conditional profit = Rs.4,00,000 p – 60,000)

(Proportion Course of action
customers, P) S1 S2

0.04 4,00,000 x 0.04 – 60,000 = (-44,000) 0

0.08 4,00,000 X 0.08 – 60000 = (-28,000) 0

0.12 -12,000 0

0.16 4,000 0

0.20 20,000 0

Opportunity Loss Value: Subtract each payoff from the max payoff for that event.

State of Probability Conditional Profit Opportunity Loss

nature
S1 S2 S1 S2

0.04 0.1 -44,000 0 44,000 0

0.08 0.1 -28,000 0 28,000 0

0.12 0.2 -12,000 0 12,000 0

0.16 0.4 4,000 0 0 4,000

0.20 0.2 20,000 0 0 20,000

 33

Expected Opportunity Loss (EOL) Rs. 9,600 Rs.5,600

EOL for S1 = 0.1 x 44000 + 0.1 x 28000 + 0.2 x 12000

= 4400 + 2800 + 2400 = Rs. 9600

Since the company seeks to minimize the EOL, the company should select course of
action S2 with minimum EOL.

5. A certain piece of equipment can be purchased for a construction project at remote location.
The equipment contains an expensive part which is subject to random failure. Spares of
this part can be purchased at the same time the equipment is purchased. Their unit cost
is Rs.1, 500 and they have no scrap values. If the part fails on the job and no spare is
available, the part will have to be manufactured on a special order basis. If this is required,
the total cost, including down time of the equipment, is estimated as Rs.9000 for each
such occurrence. Based on previous experience with similar parts, the following probability
estimates of the number of failures expected over the duration of the project are provided
as given below:

Failure 0 1 2

Probability 0.80 0.15 0.05

Determine optimal EMV and optimal number of spares to purchase initially.

Solution

Let N1 (no failure), N2 (one failure) and N3 (two failures) be the possible states of nature.
Similarly let S1 (no spare purchased), S2 (one spare purchased) and S3 (two spares purchased)
be the possible courses of action or strategies.

The conditional costs for each pair of course of action and state of nature combination is
shown in the table.
34

State of Course of Purchase Emergency Total Cost

Nature action Cost Cost
(Spares (no. of spare Rs. Rs. Rs.
Required) purchased)

0 0 0 0 0

0 1 1500 0 1500

0 2 3000 0 3000

1 0 0 9000 9000

1 1 1500 0 1500

1 2 3000 0 3000

2 0 0 18000 18000

2 1 1500 9000 10500

2 2 3000 0 3000

Expected Monetary Value

State Probability Conditional Cost Weighted Cost

of
nature

S1 S2 S3 S1 S2 S3

N1 0.80 0 1500 3000 0.8(0)=0 0.8(1500)=1200 2400

N2 0,15 9000 1500 3000 0,.5(9000)=1350 225 450

N3 0.05 18000 10500 3000 900 525 150

EMV 2250 1950 3000

To minimize cost, course of action S2 should be chosen. If EMV is expressed as profit, then

EMV = EMV (S2) = - Rs.1, 950

Hence, the optional number of spares to be purchased should be one.

 35

3.6 Summary
A decision is made from among a set of alternative courses of action. Decisions under
uncertainly can be solved using Maximax strategy, Maximin strategy, Laplace Criterion, Hurwitz
Criterion and Savage Criterion. Decisions under risk can be solved using expected monetary
value criterion and expected opportunity loss. Decision tree analysis is explained at the end of
this lesson.

3.7 Key Words

 Decision tree

 Hurwitz Criterion

 Maximax Criterion

 Maximum Criterion

3.8 Review Questions

1) The research department of Hindustan lever has recommended to the marketing
department to launch a shampoo of three different types. The marketing manager has to
decide one of the types of shampoo to be launched under the following estimated payoff
for various levels of sales:

Estimated levels sales (units)

Types of shampoo 15000 10,000 5000

Egg of shampoo 30 10 10

Clinic of shampoo 40 15 5

Delux of shampoo 55 20 3

What will be the marketing manager’s decision if (i) Maximin, (ii) Minimax (iii) Maximax (iv)
Laplace and v) Regret criteria are applied?

2) The XYZ Company is faced with four decision alternatives relating to investments in a
capital expansion programme. Since these investments are made in future, the company
foresees difference market conditions as expressed is the form of states of nature. The
36

ollowing table summarizes the decision alternatives, the various steps of nature and the
rate of return associated with each state of nature.

Decision States of Nature

S1 S2 S3

D1 17% 15% 8%

D2 18% 16% 9%

D3 21% 14% 9%

D4 19% 12% 10%

If the company has no information regarding the probability of the occurrences of the
three states of nature, given the recommended decision for the decision criteria listed
below:

i) Maximax Criterion

ii) Maximin Criterion

iii) Minimax Regret Criterion

iv) Laplace rational Criterion

v) Hurwitz alpha Criterion (a = 0.75)

3) The estimates sales of proposed types of perfumes are as under:

Estimated levels sales (units)

(Units)

Types of Rs.20,000 Rs.10,000 Rs.5,000

perfumes

A 25 15 10

B 40 20 5

C 60 25 3
 37

a) For each of the following decisions, state the optimal action and specify the value
leading to its selection:

i) Maximin

ii) Maximax

iii) Laplace

iv) Minimax Regret.

b) What will be the optimal act if the pay off entries represents the costs instead of
sales?

4) Consider the following pay off (profit) matrix;

S1 S2 S3 S4

A1 5 10 18 25

A2 8 7 8 23

A3 21 18 12 21

A4 30 22 19 15

Solve this using Hurwitz Criterion with a = 0.75

3.9. Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia.

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
38

LESSON 4
AN INTRODUCTION TO RESEARCH
Learning objectives:

After studying this lesson, you should be able to

 Define the term research

 List out the steps in research process

 Discuss the criteria of good research

 Explain the types of research

Structure
4.1 Introduction

4.2 Meaning and Definition of Research

4.3 Objectives of Research

4.4 Features of Research

4.5 Importance of Research

4.6 Research Process/Steps

4.7 Ethics in Research

4.8 Scientific Research

4.9 Scientific Research Vs Non-Scientific Research

4.10 Classification of Research

4.11 Summary

4.12 Key Words

4.13 Review Questions

4.14 Suggested Readings

 39

4.1 Introduction
We are curious to know about ourselves, our institution, our society, our environment, our
planet, other planets and the universe. Numbers of questions go on arising in our mind. Whenever
we ask questions, we try to find out solution to them. Such seeking answers and solutions are
as old as human civilizations. Therefore, a systematic way for answer to a question or a solution
to a problem is called research. This lesson will give clear insight to the readers on research,
research process and the criteria of a good research.

4.2 Meaning and Definition of Research

In simple words the term research refers to a search for knowledge. In other words,
research is termed as an art of scientific investigation. It is also known as a scientific and
systematic research for information on particular topic or issue or problem.

Research is an endeavor to discover, develop and verify knowledge. It is an intellectual

act that begins with asking of questions and progressiveness through the critical examination
of evidence that is both relevant and reliable to revelation of truth. Research can be defined as
search for knowledge or as any systematic investigation, with an open mind to establish novel
facts, solve new or existing problems, prove new ideas, or develop new theories usually using
a scientific method.

The primary purpose of research is discovering, interpreting and the development of

human knowledge on a wide variety of advancement of human knowledge on a wide variety of
scientific matters of our world and the universe. Several social scientists, researchers and
thinkers have defined research in different ways:

In the encyclopedia of social science (1930) defines research as, “The manipulation of
things, concept or symbols for the purpose of generalizing to extend correct or verify knowledge,
whether that knowledge aids in construction of theory or in practice of an art”.

According to Redman and Mory (1923) defined “research is a systematized effort to gain
new knowledge.

According to Clifford Woody, “Research comprises, defining and redefining problems,

formulating hypothesis or suggested solutions; collecting, organizing and evaluating data; making
deductions and reaching conclusions and finally, carefully testing the conclusions to determine
whether they fit the formulating hypothesis”.
40

In the words of Pauline V. Young (1977) defines, “research as a scientific undertaking

which, by means of logical and systematic techniques, aims to: discover new facts or verify and
test old facts, analyze their sequence, interrelationships and causal explanations, develop new
scientific tools, concepts and theories which would facilitate reliable and valid study of human
behavior. This exhaustive all inclusive definition specifies all the major aims of research, viz,
discovery of new facts, verification and testing of old facts, analysis of inter relationships and
causal explanations and inter relationships and causal explanations and development of new
tools, concepts and theories.

4.3 Objectives of Research

The objectives of research are varied according to the study. Although every research
study has its own specific objectives, the research objectives may be broadly grouped as follows;

1. To gain familiarity with new or new insights into a phenomenon.

2. To accurately portray the characteristics of a particular individual, group, situation,

an event or a problem.

3. To analyze the frequency with which something occurs.

4. To examine a hypothesis of a casual relationship between two variables.

5. To extends knowledge of human beings, social life and environment.

6. To bring to light information that might never be discovered fully during the ordinary
course of life.

7. To establish generalizations and general laws and contributes to theory building in

various fields of knowledge.

8. To verify and test existing facts and theory and these help improving our knowledge
and ability to handle situations and events.

9. To find solution problems viz, health problems, socio-economic problems, human

relations problems in organisation, and so on.

10. To develop new tools, concepts and theories for a better study of unknown
phenomena.

11. To help national planning and thus contributes to national development, and so on.
 41

4.4 Features of Research

The features of a good research study aims to find out answers to questions through the
application of systematic and scientific way. Hence the following points must be ensured:

1. The purpose of the research must be clearly defined.

2. It gathers new knowledge from either primary or secondary source.

3. It requires systematic and accurate process.

4. It attracts experts to any investigation.

5. It is characterized as applying every possible test to verify data.

6. It eliminates personal feelings and references from the activity.

7. It endeavors to organize data in quantitative terms as far as possible.

8. Its scope should limits.

9. It requires coverage and hard work and

10. The research process should be pre-determined.

4.5 Importance of Research

The importance of research involves:

1. Research is scientific process

2. It leads to the solution to the existing problem.

3. It directs towards the development of new principles of theories, or modifies the

existing literature will be helpful in predicting future occurrences.

4. It is based on observable experiences or empirical evidences.

5. It is characterized by patience and unhurried activities.

6. It is carefully recorded and reported.

7. It is the task of experts in the related discipline of the study.

8. It is an intellectual task.
42

4.6 Research Process and Steps

Research is an endless quest for knowledge or unending search for truth. The success of
a research work, to a great extent, depends upon the motivation of both the researchers and
respondents. The research process involves the following steps:

1. Formulation of research problem / question.

2. Fix the objectives of the study.

3. Extensive literature survey.

4. Developing hypothesis.

5. Preparing the research design.

6. Determining sample design.

7. Collection of data

8. Execution of thesis.

9. Analysis of data.

10. Hypothesis testing

11. Generalization and interpretation and

12. Preparation of the report or presentation of results.

4.7 Ethics in Research

Research ethics refers to a set of values, standards, and institutional schemes that to
constitute and regulate scientific activity. The National Committee for Research Ethics in Norway
was appointed by the Ministry of Education, Norway in 1990. The important guidelines
recommended by the committee in given briefly:

1. The ethical guidelines are applicable to any branch of knowledge.

2. The research ethics embraces both personal and institutional morality.

3. The ultimate responsibility of research is to seek truth.

4. The ethical views and attitudes raise their awareness of conflicting standards and
promote good judgment.
 43

5. Research institutions and research bodies are facilitate free and independent in
research.

6. Research ethics help to promote the value of human life.

7. Data collected for one particular research purpose cannot automatically be used for
other research.

8. The requirements for professional independence and peer review are also universal.

9. The basic research standards should however be based on the general moral
standards of society.

4.8 Scientific Research

Scientific research is a systematic rational approach to seeking reality or facts. It mainly
eliminates the draw backs of the arbitrary method. It is objective, precise and arrives at conclusion
on the basis of verifiable evidences. The researcher qualifies and attitudes are more important
than the procedural steps. The researcher needs, the scientific imagination to construct
hypothesis, the analytical ability to device crucial experiments to test hypotheses, the
resourcefulness, manipulative skill and persistence to carry through the experiment, the
perspective which distinguishes the essential from the non-essential and the reasoning which
co-ordinates individual facts into a principle. He must also possess the spirit of originality.

Above all, the scientific method calls for scientific attitude. It is based on a complexity of
elements identified by Pauline V. Young namely,

1. Consistent thinking.

2. Unbiased devotes to collection and treatment of facts.

3. Overcoming personal preconceptions.

4. Avoiding, personal and vested interest.

5. Avoiding wishful thinking.

6. Stubborn determination to analyze one’s own way of thinking.

7. Faith in the universality of cause and effect.

8. Ardent curiosity, fertile imagination and love of experimental inquiry.

9. Ability to rise from failure with new sense of inquiry.

44

10. Self control patience and ability to overcome wishful thinking.

11. Compassion and understanding, without these knowledge could be very dangerous
and knowledge could be very dangerous and

12. Keeping an open mindedness.

The above said elements are components of the scientific attitude. These elements are
tending to correct not only factual error, but also mental, emotional and volitional frailties of a
researcher.

4.9 Scientific Research Vs Non-Scientific Research

Both Scientific research and non-scientific research are varying in the following ways:

Scientific Research Non-Scientific Research

1. It is more objective 1. It is more subjective

2. It is scientific with predetermined 2. It is carried out in a haphazard manner.

objectives

3. It measures the results more accurately. 3. It cannot measure the results.

4. It considers all the facts that are 4. It does not consider all the facts that are
pertinent to the problem at hand. pertinent to the problem at hand.

5. It involves a number of statistical 5. The sophisticated statistical tools may

techniques are applied to analyze not applicable.
the data.

4.10 Classification of Research

The classification of research is just an approach to differentiate the distinctive approaches
to research for the purpose of understanding. The important types of research are given in the
subheads:

Fundamental Research

It is also known as pure research or basic research. The Fundamental research is

undertaken for the sake of knowledge without any intension to apply it in practice. It aims at
extension of knowledge. It may leads to either discovery of a new theory or refinement of an
 45

existing theory or invention of new things. The findings of this research enrich the storehouse of
knowledge that can be drawn upon in the future to formulate significant practical researchers.
The findings of this research also formed the basis for innumerable scientific and technological
inventions. For example: Sir Isaac Newton’s contributions, Thomas Alva Edison’s contribution
etc.

Applied Research

It is carried out on to find out solutions to a real life problem facing a society or an industry
or a business house. Thus, it is the application of the existing theory on a particular issue.
Though the immediate purpose of an applied research is to find solution to a practical problem,
it may incidentally contribute to the development of theoretical knowledge by leading to the
discovery of new facts or testing of theory or to conceptual clarity. For example the Elton Mayo’s
Hawthrone Experiments, Nestle’s Maggi Noodles issues etc.

Difference between Fundamental Research and Applied Research

Both Fundamental research and applied research are differential in the following words:

Fundamental Research Applied Research

(i) It aims to contribute theory and (i) It aims to solve problem very immediately.
techniques of the discipline in long run.

(ii) It requires mainly technical judgment (ii) It requires also a sense of what the
situation and personalities can bear.

(iii) It seeks generalization, (iii) It often seeks individual cases without

the objective to generalize.

(iv) It tries to say why things happen, (iv) It tries to say how things can be changed.

(v) It attempts to get all the facts, (v) It attempts to get only the correct fact for
the situation.

(vi) It aims at publishing the research (vi) It aims at bringing out the actionable
report. points

(vii) The report in presented in technical (vii) The report is presented in common
language of the discipline.) language
46

(i) Other Types of Research: The majority of the research activities are classified into
fundament research and applied research for the purpose of understanding we discuss
the other types also:

a) Explorative Research: It is also known as formulate research. It is the preliminary

study of an unfamiliar problem about which the researcher has little or no knowledge.
It is similar to a doctor’s initial investigation of a patient suffering from an unfamiliar
malady for getting some clues for identifying it. It is ill structured and much less
focused on predetermined objectives. It is usually takes the form of a pilot study.
Though at are separate types of research, it is appropriate to consider it as the first
stage of a three stage process of exploration, description and experimentation.

b) Descriptive Research: This study aims to fact finding investigation with adequate
interpretation. It is the simplest type of research. It is more specific than an exploratory
study, as it has focus on particular aspects or dimensions of the problem studied. It
is designed to gather discipline information and provides information for formulation
more sophisticated studies. Required data are collected by using one or more
appropriate methods through observation, interviewing and mail questionnaire.

c) Diagnostic Research: This study is similar to descriptive towards discovering

what is happening, why it is happening and what can be done about. It aims at
identifying the causes of a problem and the possible solution for it. In other words,
diagnostic study is more directly concerned with casual relationships and with
implications for action.

d) Evaluation Research: It is also one of the methods of applied research. It is

made for assessing the effectiveness of social or economic programmes
implemented or for assessing the impact of developmental projects on the
development of the project area. For example the poverty alleviation programmes,
Government of India.

e) Action Research: It is also a type of evaluation study. It is a concurrent evaluation

study of an action programme launched for solving a problem or for improving an
existing situation. The success of the action research depends on the co-operation
of action implementing people and beneficiaries of the action programme.

f) Experimental Research: It is designed to assess the effects of particular variables

on a phenomenon by keeping the other variables constant or controlled. The nature
 47

of relationship between independent variables and dependent variables is perceived

and staled in the form of causal hypothesis. For example agricultural productivity,
here yield per hectare is dependent variable and the factors such as soil fertility
irrigation, quality of seed, manuring and cultural practices which influence the yield
are independent variables.

g) Analytical Research: It is a system of procedures and techniques of analysis

applied to quantitative data. It may consist of a system of mathematical models or
statistical techniques applicable to numerical data. It this study also aims at testing
hypothesis and specifying and interpreting relationships.

h) Historical Research: It is a study of past records, events and other information

sources with a view to reconstructing the origin and development of an institution or
a movement or a system and discovering the trends in the past. It also aims to draw
explanations and generalization from the past trends in-order to understand the
present and to anticipate.

i) Survey Research: It is popularly known as surveys. It is a fact finding study. This

method of research involves collection of data directly from a population or a sample
thereof at a particular time. It requires expert and imaginative planning, careful
analysis and rational interpretation of findings. The data may be collected by
observation or interviewing or mailing questionnaire.

j) Field Studies : are scientific enquiries aimed at discovering the relations and
interactions among sociological, psychological and educational variables in real
social structures and life situations like communities, schools, factories, organization
and institutions. The situation is selected and the relations among the attitudes,
values, perceptions and behaviors of individuals and groups in the selected situation
are studied.

k) Operations Research: It aims to the application of mathematical, logical and

analytical techniques to the solution of business problems of cost minimization or
profit maximization or optimization problems.

l) Market Research: It is the study of the structure and development of market for the
purpose of formulating efficient policies for production and marketing of goods and
services.
48

m) Empirical Research: It relies on experience and observation. In other words,

empirical research refers to a study made on experience and observation through
sensory organs. It is a data based research, coming up with conclusions which are
capable of being verified by observation or experiment.

n) Ex-post Facto Research: Is a systematic empirical enquiry. It provides a partial

solution to the time order problem. It is retrospective or after the event study. It
looks from the past to the present. It requires information about the past by asking
retrospective questions regarding an earlier period.

o) Conclusive Research : The exploratory research is based on the development of

some tentative hypothesis. The data are collected and analyzed based on the
objective of the study to test the derived hypothesis and based on the results, the
hypothesis are evaluated. After evaluating the hypothesis, a decision making
framework is formulated and various conclusions can be drawn. This process is
known as conclusive research. The experts in the field of research have generally
classified conclusive research into two categories both descriptive research and
experimental research. (please refer the subheads (b) and (f) for more reading)

p) Ethnographic Research: The term ethnography is rooted on cultural anthropology,

which denotes scientific description of people. The ethnographic research represents
an opportunity for companies wishing to move from production and sales orientation
to a market orientation that emphasizes beneficial for both to companies as well as
to the customers.

q) Motivation Research: This is a type of qualitative research aims at discerning the

underlying motives and desires, using an in-depth interview. It is concerned with the
determination of motivations underlying the consumer behavior. It involves the
techniques of research are sentence completion tests, word association tests, story
completion tests, etc.

r) Quantitative Research : this method of research is based on the measurement of

quantity or amount. It is concerned with qualitative phenomenon and phenomena
relating to quality or amount or kind.

s) Qualitative Research : This method aims to discover the underlying motives of

human behavior. It analyses the various factors which motivate people to behave in
a particular manner or which make people like, or dislike a particular thing. It relies
 49

on the collection of qualitative data. It includes fine major types of qualitative research,
phenomenology, ethnography, case study, grounded theory, and historical research.

t) Opinion Research: It is also known as attitude research. It a qualitative research

study to find out how people feel or what they think about particular subject or
institution.

u) Conceptual Research: This research is related with some abstract ideas or theory.
It is mainly used by philosophers and thinkers to develop new concepts or to
reinterpret existing ones.

4.11 Summary
Let us sum up, research refers to search for knowledge or searching knowledge from
known to unknown thing. In fact, research is an art scientific investigation. It is actually a voyage
to discovery or invention. When the unknown confronts us, more and more our inquisitiveness
makes us probe and attain understanding of the unknown. In this lesson, we had a insight on
objectives, features, criteria of a good research work. We have discussed both scientific and
non-scientific research, fundamental and applied research. Moreover different types of applied
research methods and difference between research methods and research techniques also.
This will give a very good understanding to the learners on types of research.

4.12 Key Words

 Non Scientific Research

 Research Ethics

 Research Process

 Scientific Research

4.13 Review Questions

1. What do you understand the term research?

2. Discuss the objectives of research.

3. State the features of research.

4. Describe the importance of research.

5. Explain the steps in research.

50

6. Enlist the criteria of a good research.

7. Explain the impact of ethics in research.

8. Explain the concept of scientific research.

9. Enlist and explain the types of research.

4.14 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 51

LESSON 5
RESEARCH DESIGN AND RESEARCH HYPOTHESIS
Learning objectives

After studying this lesson, you should be able to,

 List out the essentials of research design

 Discuss the contents of research design

 Explain the types of Hypothesis

 Discuss the types of research problems.

Structure
5.1 Introduction

5.2 Research Design

5.3 Essentials of Research Design

5.4 Types of Research Design

5.5 Advantages of Research Design

5.6 Research Problem

5.7 Types of Research Problem

5.8 Formulation of Research Problem

5.9 Evaluation of Research Problem

5.10 Research Hypothesis

5.11 Sources of Hypothesis

5.12 Types of Hypothesis

5.13 Rules for Constructing Hypothesis

5.14 Testing of Hypothesis

5.15 Worked Examples

5.16 Summary
52

5.17 Key Words

5.18 Review Questions

5.19 Suggested Readings

5.1 Introduction
The success of any research work is involves a goods research design. The function of a
research design is to ensure that the required data are collect and that they are collected
accurately and economically. It provides the glue that holds the research project together. A
design is used to structure the research, together. A design is used to structure the research, to
show how all of the major parts of the research project – samples, measures, treatments,
programs and methods of assignment-work together to try to address the central research
questions.

The Research problem or question in business research is one of the first research
methodological steps. In business or management the research question which the research
sets out to answer. Hence, the planning of research aims deciding the question or issue to be
studied, setting the objectives of the study and determining the means of achieving those
objectives. Moreover, it requires an intellectual curiosity, intelligence, imagination and vision
and knowledge of methodology on research.

Once the researchers find out the research problem they can make number of guesses.
The guesses, they make are the hypothesis which either solve the research problem or guide
them in future investigation. A hypothesis is a proposition – a tentative assumption which a
researcher wants to test for its logical or empirical consequences. Working hypothesis is more
useful when stated in precise and clearly defined terms. It may be stated that through a
hypothesis.

5.2 Research Design

Research design is the arrangement of condition for collection and analysis of data in a
manner that aims to combines relevance to the research purpose with economy in procedure.

According to Kerlinger, “a research design is a plan, structure and strategy of investigation

so conceived as to obtain answers to research questions or problems. The plan is the complete
 53

scheme or programme of research. It includes an outline of what the investigator will do from
writing the hypothesis and their operational implications to the final analysis of data”.

According to Thyer, “a traditional research design is a blue-print or detailed plan for how
a research study is to be completed operationalizing variables so they can be measured, selecting
a sample of interest to study, collecting data to be used as, a basics for testing hypothesis and
analyzing the results”.

5.3 Essentials of Research Design

The essential of a good research design involves:

i. It is a plan that specifies the objectives of the study and the hypotheses to be
tested.

ii. It is an outline that specifies the sources and types of information relevant to the
research questions.

iii. It is a blueprint specifying the methods to be adopted for gathering and analyzing
the data

iv. It is a scheme defining the domain of generalisability i.e, whether they obtained
information can be generalized to a larger population or to different situations.

5.4 Types of Research Design

Based on the fundamental objectives or purposes research design can be classified into
the following types:

i. Exploratory research design

ii. Causal research design

iii. Descriptive research design

iv. Experimental research design

v. Conclusive research design

i. Exploratory research design – it is characterized by its lack of structure and flexibility.

This research design is diagnostic in nature. Generally, it is used for the development of
hypothesis regarding potential problems and opportunities. This type of research provides insight
54

and understanding of the problems. The exploratory research methods include secondary data
sources, experts’ opinion, surveys, in-depth discussions, case studies and observation. In most
of the times, exploratory research is followed by conclusive research for more precise analysis
and conclusion.

ii. Causal research design: It is associated with the experiments on causal relationships
investigate the effect of one or more variables on one or more outcome variables on one or
more outcome variables. This types of research is determines if one variable causes another
variable to occur or change. The causal designs differ from descriptive designs in their greater
probability of the manipulation of causal researcher trees to determine if the manipulation of
one variable called the independent variable, affects another variable, called the dependent
variable. The causal methods includes natural experimentation, simulation and true experiments,

iii. Descriptive Research Design: It is characterized to describe the phenomena while

trying to determine the association among variables. It also seeks to predict future phenomena.
In this type of studies there is no clear hypothesis are actually more exploratory than conclusive.
To be of maximum value a descriptive study must collect data for a definite purpose. The
descriptive research includes case study method, statistical method, observation methods, and
survey method.

iv. Experimental Design: It is characterized to a blueprint of the procedure that enables

the researcher to test hypothesis by reaching valid conclusions about relationships between
independent and dependent variables. It refers to the conceptual frame work within which the
experiment is conducted. It includes methodological experiment is conducted. It includes
methodological experiment, pilot study, heuristic study, fact finding and boundary, simulation,
homological, theoretical, illustrative, it also involves both informal experimental design and formal
experimental design. The formal experimental design includes completely randomized design,
randomized block design; Latin squares design and factorial designs.

v. Conclusive Research Design: This type of research design is generally more formal
and structured as compared to exploratory research, it is used to provide information for the
evaluation of alternative courses of action. The conclusive research design includes descriptive
research design, longitudinal, case studies, causal and experimental research design.
 55

5.5 Advantages of Research Design

The preparation of research design has the following advantages:

i. It helps to save lot of researchers time.

ii. It enables resource planning procurement in sight time.

iii. It directs the researcher to execute research work systematically.

iv. It helps better documentation of research activities.

v. It builds up confidence in the researcher.

vi. It gives satisfaction to the researcher at the completion of every stage of the research
work.

vii. It ensures to complete the research work in time.

5.6 Research Problem

The first step in the research process consists of problem or question or opportunity
identification. The necessity is properly identified; the research problems cannot be over
emphasized. It is slightly said that “a well defined problem is half solved”.

A problem does not necessarily mean that something is seriously wrong with a current
situation that needs to be rectified immediately. A problem could simply indicate an interest in
an issue where finding the right answers might help to improve an existing situation. Thus
research problem is defined as “a problem as any situation where a gap exists between the
actual and the desirable ideal states”.

In other words research problem is the choice hypothesis that best states the objectives
of the research study. It is a more specific management question, which must be answered. A
research process that answers this question provides the manager with the desired information
necessary to make the decision the researcher is encountering.

The sources from which one may be able to identify research problems or understand
problem awareness are:

i. We critically study books and articles relating to the subject of our interest.

ii. Classroom discussions, seminars, conferences, workshops, symposiums and out

of class exchanges of ideas with fellow students.
56

iii. Professors also suggest many stimulating problems.

iv. Our daily experiences new learning’s.
v. Field visits, internship training and extension work provide exposure to practical
problems.
vi. Discussions with experts, researchers and business executives will help a researcher
to identify useful problems for research.
vii. Research on problem also suggests problems for further research.
viii. Sometimes new ideas may strike to news mind like a flash.

5.7 Types of Research Problem

In social sciences research problems may be classified into three according to distinct
varieties differing in form, content, and mode of verifications. They are:

(a) Empirical problems: when social science researchers answer questions or problems
on the basis of what they come to know through their sensory organs, these are expressed as
empirical problems. Here, the researchers base their conclusions and findings on what they
perceive or observe or sense in-order to verify, approve or reject relationship between two or
more variables.

(b) Analytical problems: this type of problems are not scientific. These are questions
whose answers depend on the meaning of the words in the sentences expressing them. Analytical
problems or statements are merely definitional and not empirical, essentially language and
conceptual problems and not factual and scientific problems. Answers to such problems depend
upon definition of the words in the sentences that express them.

(c) Normative problem : this types of problems are questions whose answers depend
primarily on value judgments. The value judgments are statements of what is desirable, preferred,
moral, imperative or obligatory; these may take either an evaluative or prescriptive form.

5.8 Formulation of Research Problem

The problem selected for research may initially be a vague topic. It requires intensive
reading of a few selected articles or books in order to understand the nature of the selected
problem. The research should read such selected literatures, think and reflect upon what is
read and digested. The researcher should also discuss with learned persons.
 57

a) Formulation of research problem means translating and transforming the selected

research problem into a scientifically researchable question. The problem formulation
process involves the following steps:

b) The title should be carefully worded. The problem under study, the native of its
elements and their inter relationship should be identified and structured into a frame
work. The objectives of the study problem have to be answered through the study.

c) When the objectives of the research or the general research questions have been
defined, the formulation moves to the next level investigative questions.

d) Formulative hypotheses are tentative propositions relating to investigative questions.

e) Then the formulation process is to define operationally in concepts involved in the

title, objectives investigative questions and hypotheses.

f) The operational definitions specify the measurement parameters of the variables.

g) Delimiting the scope and dimensions of the study. The purpose of this delimitation
is to avoid confusion and superficiality and promote clarification and successful
completion within time limits and available resources. The aspects that maybe
delimited are:

i. The objective of the study

ii. The geographical area to be covered by the study

iii. The reference period and

iv. The magnitude of the study.

5.9 Evaluation of Research Problem

Before the proposed research problem can be considered appropriate, several searching
questions should be raised. All the questions raised must be related to the problem. When the
following questions are answered in the affirmative can the problem be considered a good
one?

i. Is the problem researchable?

ii. Is the problem significant?

iii. Is the problem a new one?

58

iv. Is research on the problem feasible?

v. Am I competent to plan and carry out a study of this type?

vi. Are pertinent data accessible?

vii. Will I have the necessary financial resources to carry on this study?

viii. Will I have enough time to complete the project?

ix. Will I have the courage and determination to pursue the study in spite of the difficulties
and social hazards that may be involved?

x. Is the researcher generally interested in the problem?

5.10 Research Hypothesis

Hypothesis means a mere assumption or some supposition to be proved or disproved. In
other words, a hypothesis is a preliminary or tentative explanation or postulate by the researcher
of what the researcher considers the outcome of an investigation will be. According to William
C. Emory, hypothesis is defined as, “when propositions are propositions are combinations of
concepts designed by statement that may be judged true or false, it they refer to observable
phenomena”.

According to Fred N. Kerlinger defines, Hypothesis a conjectural statement of the relation

between two or more variables. Hypothesis are always in declarative sentence form and they
relate either generally or specially variables to variables.

It is clear, from the above viewpoints highlights the fact that hypothesis a tentative
proposition based on the observation of certain occurrence or happening.

5.11 Sources of Hypothesis

The hypothesis can be derived from various sources. They are:

i. Theory – it gives direction to research by stating what is known.

ii. Observation – it can be derived from observation.

iii. Analogies – are another sources of hypothesis.

iv. Personal life and experiences of persons.

v. Research findings of other studies.

 59

vi. The state of knowledge in any particular field of study.

vii. The cultural environment.

viii. The sociological, political and economic environment.

ix. The continuity of research in a field.

x. Exceptions to accept in a field.

5.12 Types of Hypothesis

The hypotheses are classified into different ways. They are:

(i) Descriptive Hypotheses are propositions that describe the characteristics of a variable.
It may be the size form, distributors, etc. The variables may be an object, person, institution,
organization, event, etc.

For example: The percentage of unemployment among arts graduates is higher than that
management graduates.

(ii) Relational Hypothesis describe the relationship between two variables. The
relationship suggested may be positive or negative or causal relationship.

For example: The democratic management style promotes motivation among executives.

(iii) Causal Hypothesis is one when one variable causes to an effect on another variable.
The first variable is called the independent variable and the latter the dependent variable. When
dealing with causal relationships between variables the researcher must consider the direction
is which such relationships flow.

(iv) Null Hypotheses states that no difference exists between the parameter and the
statistic being compared to it.

For example, there is no significant relationship between a family’s income level and
expenditure on recreation,

(v) Statistical Hypothesis are quantitative in nature in that they are numerically
measurable. They are derived from a sample.
60

For example, team A is better than Team B.

(i) Complex Hypothesis aim at testing the existence of logically derived relationships
between empirical formalities. The functions of many hypotheses are to create tools
and problems for further of such research otherwise very complex areas of
investigation.

(ii) Analytical Hypotheses are concerned with the relationship between analytic
variables. It occurs at the highest level of abstraction. These specify relationship
between changes in one property and specify relationship between changes in one
property and changes in another.

5.13 Rules for Constructing Hypothesis

The rules for construction of hypothesis consist of:

i. Search for variable measurements with most quantitative characteristics available.

ii. Make the variable scale properties both mutually exclusive and totally inclusive
categories.

iii. Always consider alternative operations which might be more appropriate for a given
variable.

iv. Analyze the variables through their relationships.

v. Link two or more formal prostitutions.

vi. Create new variables by comparing new conceptual frame.

5.14 Testing of Hypothesis

A number of steps are involved in testing of a hypothesis, they are:

i. Formulate a hypothesis

ii. Set up a suitable significance level

iii. Choose a test criterion

iv. Compute the statistics and

v. Make decision / inference

 61

5.15 Worked Examples

1. Consider the situation in which the monthly sales revenue of salesmen in a Company
follows normal distribution. The targeted mean of the monthly sales of the salesmen is Rs. 10
lakhs. The variance of the monthly sales revenues of the salesmen is Rs. 16 lakhs. A random
sample of 36 salesmen is taken from the normal population for which the mean monthly sales
revenue is found to be Rs. 10.5 lakhs. Check whether the sales revenue of the salesmen has
really declined at significance level of 0.05.

Solution

Mean = Rs. 10 lakhs

Variance = Rs. 16 lakhs
Sample size, n = 36

Sample mean = Rs. 10.5 lakhs

Ho: The sales revenue has really declined against targeted mean of Rs. 10 lakhs.

Std normal statistics = (Sample mean – pop. mean) x Sq. Root (Sample Size) / Std deviation

= (10.5.- 10 ) x 6 / 4

= 0 .75

For 0.05 level of significance table z value = 1.64

Since the calculated value (0.75) is less than the table value, null Hypothesis is accepted.

2. The annual sales of the dealers of a Company follow normal distribution. The targeted
mean of annual sales of dealers of the population is Rs. 50 lakhs. The variance of the
annual sales of the dealers of the population is Rs. 100 lakhs. The Regional Marketing
Manager feels that the performance of dealers has not changed from the population
mean. The mean annual sales of a random sample of 64 dealers is found to be Rs. 52
lakhs. Check whether the sales of the dealers has not changed from Rs.50 lakhs at a
significance level of 0.01.
62

Solution

Mean = Rs. 50 lakhs

Variance = Rs. 10 lakhs

Sample size n = 64, sample mean = Rs. 52 lakhs

Level of significance = 0.01

Z table value = 2.57

Ho: = mean = 50

Std normal statistics = (Sample mean – pop. mean) x Sq. Root (Sample Size) / Std deviation

= (52 – 50) x 8/10 = (2 x 8) / 10 = 1.6

The calculated value is in the accepted region, so null hypothesis should be accepted.

3. The Bill amount of purchases made by customers at a leading readymade shop follows
normal distribution with finite population size of 1,000. The targeted mean of the bill
amount of customers of the population is Rs. 10,000. The variance of the bill amount of
the customers of the population is Rs. 2, 50,000. The Shop Manager feels that the mean
bill amount of customers has declined from the targeted mean of Rs. 10,000 in the recent
past. A random sample of 81 customers is taken from the normal population for which the
mean bill amount is found to be Rs. 10,250. Check whether the mean bill amount has
declined from the targeted mean of Rs.10, 000 at a significance level of 0.05.

Solution

Population Size N = 10,000

Sample Size n = 81

Population mean = Rs. 10,000

Variance of population = Rs. 2, 50,000

Standard deviation of population = 500

Sample mean = 10,250

Significance level = 0.05

Table value of z = 1.64

 63

Null hypothesis : the population mean should be < 10,000

Std. normal statistics = (Sample mean – pop. mean) x Sqrt. (Sample Size) / Std. deviation
x Sqrt, (N-n / N-1)

= (10,250 – 10,000) x Sqrt. (81) / 500 x Sqrt. (1,000 – 81) / (1,000 – 1)

= 4.69

Table z value = 1.64

Since the Calculated z value is more than the table value. So, null hypothesis should be
rejected.

4. In the previous example, if sample size is 36, variance of the populations is Rs. 4, 90,000.
Check whether the mean bill amount has not changed from the targeted mean of Rs.
10,000 at a significance level of 0.01.

Solution

Population Size N = 1,000

Sample Size n = 36

Population mean = Rs.10, 000

Population variance = Rs.4, 90,000

Standard deviation of population = Rs. 700

Sample mean = Rs. 10,250

Significance level = 0.01

Table z value = 2.57

Null hypotheses mean = 10,000

Std. Normal Statistics = (Sample mean – Pop. Mean) x Sqrt. (Sample Size) / Std deviation
x Sqrt. (N-n / N-1)

= (10,250 – 10,000) x 6 / 700 x Sqrt (1,000 – 36) / (1,000 - 1)

= 2.181

Since the calculated z value lies between – 2.57 to 2.57. So, null hypothesis should be
accepted.
64

5. Twenty Four applicants for the position are interviewed by three administrators and rated
on a scale of 5 as to suitability for the position. Each applicant is given a suitability score
which is the sum of the three numbers. Although college education is not a requirement
for the position a Human Resource director felt that it might have some bearing on suitability
for the position. Raters made their ratings on the basis of individual interviews and were
not told the educational background of the applicants. Twelve of the applicants had
completed at least two years of college. Use the Mann Whiney U-test to determine whether
there was a difference in the scores of the two groups. Use a 0.05 level of significance.

Group A had an educational background of less than two years of college, while Group B
had completed at least two years of college.

Suitability Scores

Group A 7 11 9 4 8 6 12 11 9 10 11 11

Group B 8 9 13 14 11 10 12 14 13 9 10 8

Solution

Write the data of group A & B in ascending order.

SCORES RANKS

A B RANKS COMMON RANKS A B

4 1 1 1
6 2 2 2
7 3 3 3
8 8,8 4,5,6 5 5 10
9,9 9,9 7,8,9,10 8.5 17 17
10 10,10 11,12,13 12 12 24
11,11,11,11 11 14,15,16,17,18 15.5 46.5 15.5
12 12 19,20 18.5 18.5 18.5
13,13 21,22 20.5 41
14,14 23,24 22.5 45
TOTAL 105 171
 65

A useful check is to observe that the sum of the two rank sums must be equal to
N (N+1) / 2, where N is the total number observations
N (N+1) / 2 = 23 x 24 / 2
= 276 = 105+171

This serves as a check for internal consistency.

U1 = n1 x n2 + n1 (n1+1) / 2 - R1

= 11 x 12 + 11(11+1) / 2 - 105

= 132+66-105 = 93

U2 = n1 n2 + n2(n2+1) / 2 - R2

= 11 x 12 + 12(13) /2 - 171

= 132 + 78 - 171 = 39

If a table with critical values of U for n1 = 11 and n2 = 12 is available, we may use it. If not,
we perform the transformation of Z

Z = U – n1 n2 / 2 x 1/Sqrt. (n1 n2 (n1 + n2 - 1)) / 12

= 39 – (11 x 12) / 2 x 1 /Sqrt. (11 x 12 x (11 + 12 – 1)) / 12

= –1.74

Since, the calculated value is less than 1.96 @ 5% less of significance, the null hypothesis
is accepted. Hence there is no significant difference in the scores of the two groups.

5.16 Summary
Let us sum up this lesson Research design is the arrangement of condition for collection
and analysis of data in a manner that aims to combine relevance to the research purpose with
economy in procedure. Moreover, we have discussed the characteristics, advantages and types
of research design also. The term research problem refers to a problem as any situation where
a gap exists between the actual and the desirable ideal states. We have discussed on research
problem types sources, formulation and evaluation of research problem.
66

Hypothesis means a mere assumption or supposition to be proved or disproved.

The term hypothesis is defined as when propositions are formulated and empirically tested,
they are called hypothesis. Propositions are contributions of concepts designed by statements
that may be judged true or false, it they refer to observable phenomena. Besides, we had a
discussion on sources, formulation, types and testing of hypothesis. It will give an in-depth
knowledge to the readers. This lesson also gives depth knowledge to the readers on research
problem formulation and testing a hypothesis.

5.17 Key Words

 Analytical Problem.
 Empirical Problem
 Normative Problem
 Research Hypothesis
 Research Design

5.18 Review Questions

1. State the importance of research design.
2. List out the essential of a good research design.
3. Discuss the types of research design.
4. Define hypothesis. State its characteristics.
5. Enlist and explain the types of hypothesis.
6. Discuss the procedure of testing hypothesis.
7. Discuss the concept of research problem.
8. State the types of research problem.

5.19 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.
2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.
3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A
first course, Pearson Education Asia
4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 67

LESSON 6
TYPES OF DATA
Learning objectives

After studying this lesson, you should be able to,

 Distinguish both primary and secondary data

 Describe the documentation services in India.

 Discuss the characteristics of schedule.

 Explain the forms of questionnaire

 Outline the types of interview.

Structure
6.1 Introduction

6.2 Sources of Data

6.3 Primary Data

6.4 Secondary Data

6.5 Distinction between Primary and Secondary Data

6.6 Documentary Sources

6.7 Schedule

6.8 Organizing of Schedule

6.9 Questionnaire

6.10 Distinction between Schedule and Questionnaire

6.11 Advantages and Limitations of Questionnaire

6.12 Interview

6.13 Qualities of an Interviewer

6.14 Steps in Conducting the Interview

6.15 Types of Interview

68

6.16 Surveys

6.17 Summary

6.18 Key Words

6.19 Review Questions

6.20 Suggested Readings

6.1 Introduction
The first step in the statistical approach to a problem is collection of statistical data or
facts. These data are the basic information for the statistical inferences and it depends on the
data sources used by the researcher. Thus the researcher must be given utmost importance
gathering the data or facts. This lesson will provide various types of data and necessary steps
to be followed for the collection of data. When information is to be collected by asking questions
of people who may have the desired data, standardized form called questionnaire or schedule
is prepared. The questionnaire is a list of questions to be asked to respondents and space in
which to record the answers. Each question is worded exactly as it is to be asked.

Interview is one of the important and powerful tools for the data collection in business
research. The main purpose of interview is to gather data extensively and intensively. The
interview techniques are usually administered in person, by telephone, by audio visual by mail,
or by e-mail. However, from a practical point, the subjective techniques are administered in
person.

6.2 Sources of Data

The sources of data are broadly classified into both primary data and secondary data.
According to Pauline V. Young, “the sources of information can be classified into documentary
source and field source. The books, manuscripts, diaries, letters, etc form the secondary (or)
documentary source and the information collected from individuals and groups constitute primary
or field data”. So, the above grouping is a useful classification for discussion.

6.3 Primary Data

Primary data is one which is collected by the researcher himself for the purpose of a
specific inquiry or study. Such data is original in character and is generated by surveys conducted
 69

by individuals or researcher, or research institutions. The primary data is collected through

observation, interview, mail questionnaire, audio-visual aids, etc.

The advantages of primary data include:

i) Degree of accuracy is quite high.

ii) It does not require extra caution

iii) It depicts the data in great details.

iv) Data collection frequently includes definition of various terms and units used.

v) For some investigations, the secondary data are not available.

The disadvantages of primary data include:

i) Collection of data requires a length of time.

ii) It requires more labour efforts.

iii) It also requires more time.

iv) It requires more expenses also

v) For some investigations, the primary data in not possible to collect.

6.4 Secondary Data

Secondary data refers to when a researcher uses the data which has already been collected
by others. The data is primary data for the agency that collected it and becomes secondary
data for someone else who uses this data for his own purposes. The secondary data can be
obtained from newspapers, journals, reports, research public actions, research organization,
government publications, etc.

The advantages of secondary data involve:

i. Wider range of availability of data.

ii. Less expensive one

iii. It saves time.

iv. Speedy collection of data.

v. Serves as a source comparative data, etc.

70

The disadvantages of secondary data involve:

i. Lack of consistency of perspective.

ii. Biases and inaccuracies cannot be checked.

iii. Published information often raises more questions than they answer.

iv. The data can be totally separated from the context of its collection, etc.

6.5 Distinction between Primary and Secondary Data

Primary Data Secondary Data

1. Original / primary source. 1. Secondary source

2. Raw / observed data. 2. Published data

3. Not done the statistical process. 3. Done the statistical process

4. Used for specific purpose. 4. Use for different purpose

5. Terms and definitions of the units are 5. Terms and definitions of the units are
included. not included.

6. Copy of questionnaire is included. 6. Copy of questionnaire is not included.

7. Description of sample is given. 7. Description of sample is not given.

8. Requires more time to collect. 8. Requires less time to collect.

9. More expensive. 9. Less expensive.

10. More accurate. 10. Less accurate.

6.6 Documentary Sources

A document is anything in writing that contains matter of both sociological and business
importance. A document is published or unpublished one. Most of the documents are written in
the past when the phenomena took place and are not specially prepared for the study of the
present problem. The documents have been classified into two heads: Personal documents
and Public documents.
 71

(i) Personal documents – are recorded by the individuals by their thoughts and views
about various problems, finally it also turned to a source of study. It includes life
history, diaries, letters, memoirs of their travels, etc. the personal documents have
provided us with useful information regarding, the language social customs, religious
faith, culture, career, professional life, and so on.

(ii) Public documents – deals with the matter of different interest. The public documents
are classified into two types. They are (a) unpublished documents and (b) published
documents.

(iii) (a) Unpublished documents – Such documents are also called as unpublished
records. They deal with the matters of public interest are not available to people in
published one. It means that everybody cannot have access to them. Example,
resolutions passed in meetings, articles, memorandum, etc.

(b) Published documents – It is also called as published records. They are available
for personal and investigation. Example, survey reports, committee report,
commission report, news papers, journals, etc.

The information explosion in the present decade has highlighted the role of documentation
services. At present more than 500 social sciences research information centers are working
and providing information for various research purposes. The documentation services are
provided by libraries, documentation centers, commercial institution professional organization,
and so on. They are,

i. Current Awareness Services (CAS)

ii. Bibliography of Doctoral Dissertations.

iii. Non-Doctoral Research – ICSSR News letter.

iv. Small Enterprises National Documentation Centre.

v. Centre for Development Instructional Technology.

vi. National Council of Applied Economic Research.

vii. India Index – Rajasthan University Library.

viii. Current Management Literature, Administrative College of India.

ix. RBI Reports.

x. Ministry of Industry and Commerce Publications, etc

72

6.7 Schedule
The term schedule may be defined as a Performa that contains a set of questions which
are asked and filled by an interviewer in a face to face situation with another. It is a standardized
device to collect the data in an objective manner. In this method of data collection through
schedule the interviewer puts certain questions and the respondent furnished certain answers
and the interviewer records them as the answers are given.

The main objectives of the schedule are:

i) The schedule delimits and specifies the subject of enquire.

ii) The schedule acts as an aide memory.

iii) It helps an aid to classification and analysis.

The following are the characteristics of a good schedule

i) The question given in the schedule should be easily read and understand by the
respondents.

ii) The size of schedule should be attractive.

iii) The questions of the schedule should be unambiguous.

iv) The questions should be free from subject evaluation.

v) The questions should be inter-linked.

vi) The information sought should be capable of being tabulated.

vii) The question should be planned to get the required information based on the
variables labeled.

The schedules are classified into

i) Observation schedule – the observer records the activities and response of an

individual or a group under specific conditions.

ii) Rating schedule – the rating schedules are used to access the attitudes, opinions,
prefers inhibitions and other similar elements.

iii) A document schedule is used to obtain data regarding written evidence and case
historical form, autobiography, diary, case histories, records of Governments, etc.

iv) Institution survey schedule – is used for studying the different problems of the
institutions.
 73

v) Interview schedule – is an interviewer present the question of the schedule to

interviewer and records their responses on the blank spaces.

The external aspect of the schedule is known as form or structure of the schedule. The
chance of success of the schedule is adequate attention. The attention is spread over on the
layout of the schedule. It considers the following things:

i) Quality of the paper.

ii) Size of the schedule (ie 8 ½” x 11")
iii) Printing / writing is done on only one side of the paper.
iv) The schedule comprises title, sub-title and columns.
v) The margin space left 2"or 1" and right 1" or 1/2"
vi) These should be enough space for nothing of responses.
vii) The schedule may be printed or may be cyclostyled.
viii) Use of pictures.

The schedule method has the following advantages: It given higher response from the
respondents.

i) It helps in saving of time in data collection.

ii) It given personal contract between the respondent and field investigator.

iii) It assists to enquire deeper in the personality, living conditions, value system, etc of
the respondents.

iv) It helps to detect the defects in sampling and rectified by the investigator.

v) It also helps to remove the doubts of the respondents

vi) It assists to the human elements make the study reliable and dependable.

The schedule method is suffering from the following limitations

i) It is more expensive one.

ii) It is a time consuming process.

iii) It needs well trained field worker / investigator.

iv) It becomes difficult to organize research.

v) It leads to adverse effect of personal presence, etc.

74

6.8 Organizing of schedule

The organizing of schedule involves the following

i) The selection of required sample respondents.

ii) The selection and training of the field investigators.

iii) The filed investigator should approach the respondent.

iv) For the proper response, the investigators should be able to convince the
respondents.

v) The proper and correct reply the respondent should not be hurt, etc.

6. 9 Questionnaire
A questionnaire consists of a number of questions written or printed in a definite order
on a form or set of forms. It is sent to respondents who are expected to read and understand the
questions and write down the reply in the space meant for the purpose in the questionnaire
itself. The respondents have to answer the question on their own.

The method of collecting data by mailing the questionnaire to respondents is most

extensively purpose of questionnaire is two fold:

i) To collect information from the respondents who are scattered in a vast area.

ii) To achieve success in collecting reliable and dependable data.

The types of questionnaire are

i) Structured questionnaire – contains definite, concrete, and direct questions.

i) Un-structured questionnaire – consists of partially computed questions or statements.

ii) Close-ended questionnaire – it is also turned as restricted questionnaire. Here, the

respondents selected the response in the questionnaire and they have not able to
frame their own response.

iii) Open-ended questionnaire – it is also named as un-restricted questionnaire. Here,

the respondents are having the freedom to frame and supply their own views.

iv) Mixed questionnaire – consists of both close ended and open ended questionnaire.

v) Facts questionnaire – the questionnaire of fact, which requires certain information

of facts respondent without any reference to their opinion.
 75

vi) Opinion questionnaire – the questionnaire of opinion in which the informants opinion,
attitude or preference regarding the phenomena is sought.

vii) Pictorial questionnaire – involves pictures are used to promote interest in answering
questions.

The study of questionnaire is divided into designing, issuing and returning. When the
questionnaire designing attention should be paid on three important aspects; physical
appearance, contents and subject matter of questionnaire, moreover, the process including the
following steps:

i) Consult colleagues, experts, etc associated with the problem.

ii) Formulate a list of question associated with the problem.

iii) Submit the list to experts both in the field of problem and related fields.

iv) Drafting the questionnaire at the first stage.

v) Pre-testing the questionnaire.

vi) Revising the questionnaire at the second stage.

vii) Employ the field for large scale study.

viii) Editing and coding the questionnaire responses.

6.10 Distinction between Schedule and Questionnaire

Schedule Questionnaire

1. Direct method of primary data 1. Indirect method of primary data

collection. collection.

2. Direct contact between respondent 2. Direct contact does not exist and the
and researcher. response through respondents only.

3. Covers a limited geographical area. 3. Covers a very large geographical

area.

4. Highly reliable data. 4. Less reliable data.

5. Short and pointed answers to the questions. 5. Lengthy and elaborate answers to the
questions.
76

6. Very high response. 6. Low response.

7. Full or part of the question can be 7. Full text of question has to be

distributed to the respondent. distributed.

8. Feasible to motivate respondents. 8. Not feasible to motivate respondents.

9. Expensive one. 9. Less expensive.

10. Require more time. 10.Required less time.

11. Difficult to organize. 11. Simple to organize.

12. Requires trained and qualified field worker. 12.Requires less trained and
qualified field workers.

6.11 Advantages and Limitations of Questionnaire

The advantages of questionnaire method are:
1. It is more economical comparing with schedule.

2. It also reduces the time in collection of data.

3. It is more suitable in special types of response.

4. It helps to ensure anonymity to express opinion.

5. It gives less pressure on the respondents.

6. It gives uniformity in measurement.

7. Mail questionnaire is popularly used, when the field of research in wider.

The questionnaire method is suffering from the following limitations.

1. Less educated and illiterate are involved.

2. Questionnaire not able to answer in detailed manner.

3. Percentage of returning the questionnaire is very low.

4. Misinterpretation is also possible.

5. It requires more experience and common sense also.

 77

6.12 Interview
An interview is a specialized type of communication, usually verbal, between two or
more people and is carried out for a specific purpose. It is different from other conversation in
that it forms and purpose is structured, interviews can be telephone, face to face or over the
internet

Interviewing is one of the major methods of data collection. The term interview is defined
as a two-way systematic conversation between an investigator and an informant, initiated for
obtaining information relevant to a specific study. It involves not only conversation, but also
learning from the respondent’s gestures, facial expression, and pauses and his environment.

The objective of an interview is discussed as under:

i) Collecting information about unknown facts through face to face contract.

ii) Opportunity to formulate hypothesis.

iii) Collecting information about qualitative facts.

iv) Aim to collect additional information.

v) Provides an opportunity to observe things and people.

vi) It also aims to finding the views of others, etc.

The characteristics of an interview involve:

i) It is a close interaction between two or more persons.

ii) The definite object of interview is to know the views and ideas of others.
iii) The face to face contact leads to a primary relationship between the individuals.
iv) The data collected for the study of business and social problems.

6.13 Qualities of an Interviewer

The qualities of an interviewer are:
i) Attractive personality.
ii) Pleasing manners.
iii) Amicable temperament.
iv) Tact and initiatives.

v) Active participant without confronting the informant or injuring his feelings,, etc.
78

6.14 Steps in Conducting the Interview

The following steps are useful in the process of conducting interview:

i) Use of narrative method instead of question answer method.

ii) Least interference and encouragement as and when required.

iii) Suggestive questions should be avoided.

iv) Gain the confidence of the interviewee.

v) Too much inquisitiveness should be avoided.

vi) The interview should be unbiased and free from prejudices.

6.15 Types of Interview

The types of interview are:
i. Structured interview – it is also known as directive interview. This interview is made
with a detailed standardized schedule. The same questions are put to all the
respondents and in the same order.

ii. Un-structured interview – it is also called as non-directive interview. It is least

structured one. The interviewer encourages the respondent to talk freely about a
given topic with a minimum of prompting or guidance.

iii. Telephone interview – interview through telephones. It is more ideal for collecting
data from a geographically dispersed sample population. It is cheaper to conduct
than face to face interviews. This method is very common is developed countries.

iv. Face to face interview – which is conducted with one person or a group of people at
one time. It can be large and more detailed other types of study.

v. In-depth interview – is a dialogue between a skilled interviewer and an interviewee.

Such interviews are best conducted face to face, although in some situations
telephone interviewing can be successful.

vi. Focus groups – are made up from a number of selected respondents based together
in the same room. The highly experienced researchers work with the focus group
together in depth qualitative feedback. The group tends to be made up from 10 to
18 participants. The discussion, opinion and beliefs are encouraged, and the research
will probe into specific areas that are the interest of the company.
 79

vii. Projective interview – the technique of inferring a subject’s attitudes or values based
on the researchers description of vague objects requiring interpretation. The
projective techniques are more popular in the field of psychology. They will generate
highly subjective qualitative data. Examples of projective techniques are inkblot
test, word association test, story completion test, etc.

viii. Omnibus studies – is where an organization purchases a single or a few questions

on a hybrid interview (i.e. either face to face interview or by telephone interview).
The organization will be one many that simply want to straight forward answer to a
simple question. This technique are for cheaper, less time consuming and effort
than conducting own research.

ix. Clinical interview – is concerned with broad underlying feeling or motivations or with
the course of the individual’s life experiences.

6.16 Surveys
A survey is a research technique in which data are systematically collected directly from
the people being studied by the questionnaire. Surveys are a form of questioning that more
rigid than interviews and that involve large group of people.

Usually the following steps are followed in conducting a survey:

i) Establish the goals of the survey.

ii) Determine the sample size.

iii) Choose the interview methodology.

iv) Develop your questionnaire.

v) Pre-test the questionnaire.

vi) Conduct interviews and enter-data.

vii) Analyze the data.

viii) Produce the report.

The types of survey are classified into:

i. Mail survey – is a method of collecting information by sending surveys via postal

mail. The participants return completed forms to the researcher. The respondents
are answering the questions at their leisure time.
80

ii. Telephone survey – when the time is short and distance is far away the researcher
will ask the research questions through phone. It is the most popular interview
method in advanced countries.

iii. Email survey – e-mail surveys are both very speedy and economical one. The e-
mail surveys are limited to simple questionnaires where as web page surveys can
include complex.

iv. Web page survey – it is also termed as internet or intranet surveys. In webpage
survey the questionnaire is posted on a popular website and can gather large number
of respondents, response within a few hours. It is extremely more speed, less
expensive and flexible.

v. Panel data – A panel is a group of study units that exist over time and form which
data is collected on a regular interval of time. The study units may be households,
institutions, organizations, etc. Usually the panels are sponsored by some commercial
houses and maintained by some marketing research agencies. Example ITC
operates a consumer panel on cigarettes; ORG maintains a retail store panel, etc.

6.17 Summary
The data is the basic formation for the statistical inference. It purely depends data used
for the purpose. The sources of data can be primary or secondary one. The primary data is
collected by the researcher from the study areas for the specific purpose. The secondary data
is also collected by the researcher from the published sources. Moreover we had very good
discussion on difference between primary and secondary data.

This lesson give an in depth discussion on schedule and questionnaire. The schedule is
a pro forma which contain a set of questions which are asked and filled by an interviewer in face
to face situation with another, while questionnaire is a list of questions to be asked respondents
and space discussed characteristics of schedule, types, layout, questions to be avoided in
schedule, etc. moreover the questionnaire, the process of preparing questionnaire, types, the
factors affecting responses, the main difference between schedule and questionnaire, sources
of bias in questionnaire, the ways to reduce bias in questionnaire, etc are discussed.

Let us sum up, an interview is a specialized type of communication, usually between two
or more people and is carried out for a specific purpose. It can be organized through face to
face, telephone or over the internet, moreover, we also discussed qualities of an interviewer,
 81

steps in conducting interview, types of interview, surveys, types of surveys, difference between
interview and questionnaire, etc. this lesson will give a very good insight to the readers.

6.18 Key Words:

 Primary data

 Secondary data

 Interview survey

 Questionnaire

 Schedule

6.19 Review Questions

1. Distinguish between primary data and secondary data.
2. Explain documentary sources of data.
3. State the merits and demerits of primary data.
4. Enlist and explain the types of schedule.
5. State the types of questions included in schedule.
6. State advantages of schedule.
7. What are the factors affecting the responses in questionnaire.
8. List out the advantages of questionnaire.
9. Define interview. State its objectives.
10. State the characteristics of interview.
11. Mention the qualities of an interviewer.
12. Explain the different types of interview.

6.20 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.
2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.
3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A
first course, Pearson Education Asia
4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
82

LESSON 7
SAMPLING TECHNIQUES
Learning objectives

After studying this lesson, you should be able to,

 List out the importance sampling

 Explain the different types of sampling

 Discuss the criteria for selection of sampling

Structure
7.1 Introduction

7.2 Sample and Sampling

7.3 Sampling Process

7.4 Essentials of a Good Sampling

7.5 Criteria for Selection of Sampling Technique

7.6 Methods of sampling

7.6.1 Probability / Random Sampling

7.6.2 Non-Probability / Non-Random Sampling

7.7 Sampling Error

7.8 Causes of Sampling Error

7.9 Methods of Reducing Sampling Error

7.10 Non-Sampling Errors

7.11 Causes of Non-Sampling Error

7.12 Limitations of Sampling Techniques

7.13 Sample Size

7.14 Factors Deciding Sample Size

7.15 Summary
 83

7.16 Key Words

7.17 Review questions

7.18 Suggested Readings

7.1 Introduction
Sampling is an important concept that we practice in our everyday life. We submit to
blood test as a part of physical examination since few drops we surrender can give a lot of
information about our health. Likewise a teacher asks a few students some questions to test
whether the students are well informed in a particular subject or not. In the morning we test the
warmth of our coffee by taking a sip. Sampling involves selecting a relatively small number of
elements from a larger defined group of elements and expecting that the information gathered
from the small group will allow judgments to be made about the larger group. In this lesson we
will discuss sampling methods and sampling design as well.

7.2 Sample and Sampling

Sample refers to smaller representation of a large whole. In other words, sample is the
part of the universe which we select for the purpose of investigation. A sample should exhibit
the characteristics of the universe. It should be a micro some a word which literally means small
universe. Sampling method is the process of learning about the population on the basis of
sample. Sampling may be defined as, “the section of part of an aggregate or totality on the
basis of which a judgment or inference about the aggregate or totality is made”.

7.3 Sampling Process

The sample process consists of seven sequential steps. These steps are:
i. Define the population – in terms of elements, units, extent or time.

ii. Identify sampling frame – representing the elements of population.

iii. Specify the sampling unit – contain one or more population elements.

iv. Specific the sampling method – sampling units are to be selected is described.

v. Determine the sample size – the number of elements of population is to be sampled

in chosen.
84

vi. Specify the sampling frame – the operational procedures for selection of the sampling
units are selected.

vii. Select the sample – the office and field work necessary for the selection of sample
are carried out.

7.4 Essentials of a Good Sampling

The important features of a good sampling involve:
i. The sample must possess all the characteristics of the universe or population.

ii. There should remain no bias in selecting a sample.

iii. All the items should be independent of each other.

iv. Time and quality of the sample should be the same.

v. The regulating conditions should be the same for all the individual items.

vi. The sampling needs to be adequate.

vii. It should be possible to measure or estimate the sampling error.

viii. A good sample should also consist of homogenous items.

7.5 Criteria for Selection of Sampling Technique

The guidelines for selection of sampling technique involves,

i. The sample should be true representative of the universe from where it has been
taken.

ii. These should remain no bias in selecting a sample.

iii. All the items should be independent of each other.

iv. Time and quality of the sample should be same.

v. The conditions should be the same for all the individual items.

vi. Sampling needs to be adequate.

vii. It result of the sample study, in general, should be applicable to all items of the
universe.
 85

7.6 Methods of sampling

The various methods of sampling techniques can be grouped into two broad heads.
They are

i. Probability Sampling / Random Sampling Method

ii. Non-Probability Sampling / Non-Random Sampling Method

7.6.1 Probability / Random Sampling

Probability sampling is based on the theory of probability. It is also known as random

sampling. It provides a known non-zero chance of selection for each population element.
Probability sampling should be used when generalization is the objective of the study, and a
greater degree of accuracy of estimation of population parameters in required. The cost and
time required for probability sampling may be large.

The importance of randomness in sampling needs no emphasis. It is meant for securing

a representative sample. To ensure randomness the method of selection must be independent
of human judgment. There are three basic procedures;

a) The lottery method

b) The use of table of random numbers and

c) Use of computers

The types of probability sampling are:

i. Simple Random Sampling – the sampling technique gives each element an equal
and independent chance of being selected. An independent chance means that the
draw of one element will not affect the chances of other elements being selected. It
more suitable for a small homogeneous population.

ii. Stratified Random Sampling – it is an improved type of probability sampling. Under

this method, the population is sub-divided into homogeneous groups or strata and
from each stratum, random sample in drawn. This method more suitable for a large
heterogeneous population.

iii. Systematic Random Sampling – this method is also called as fixed interval method.
It is an alternative to random selection. It consists of taking every n th item in the
86

population after a random start with an item of 1 to k. As the interval between

sample unit is fixed.

iv. Cluster Sampling – refers to random selection of sampling units consisting of

population elements. Each such sampling unit is a cluster of population elements,
then from each selected sampling unit, a sample population elements is drawn by
either simple random selection or stratified random selection.

v. Area Sampling – it is an important form of cluster sampling. In larger field surveys,

cluster consisting of specific geographical areas like districts, taluks, blocks or villages
in a city are randomly drawn. As the geographical areas are elected as sampling
units in such their sampling is called area sampling. In other words, divide each of
the selected area into smaller areas of almost equal size called segments and
select randomly a proportionate number of segments in each sample area and
survey all households in each of the selected segments.

vi. Multi-Stage and Sub-Sampling - In a country like India where a nation is divided
into states, states divided into districts, districts divided into taluks, taluks into towns,
towns into villages, area sampling is done on the basis of the administrative units in
multi-stages.

(i) In this method, sampling is carried out in two or more stages. The population is
regarded as being composed of a number of first stage sampling units. Each of
them is made up of number second stage units and so forth. This is at each stage;
a sampling unit is a cluster of the sampling units of the subsequent stage. First a
sample of the first stage of sampling units is drawn, then from each of the selected
first stage sampling unit, a sample of the second stage sampling units is drawn.
The procedure continues down to the final sampling units or population elements.
This method is appropriate where the population is scattered over a wider
geographical area or frame or list is available for sampling.

(ii) Sub-sampling is part of a multi-stage sampling process. In a multistage sampling,

the sampling is second and subsequent stage frame is called sub-sampling.

vii. Random Sampling with probability proportionate size. The procedure of selecting
cluster with proportionate to size is widely used. If one primary cluster has twice as
large a population as another, it is given twice the chance of being selected. If the
same number of persons is then selected from each of the selected clusters, the
 87

overall probability of any person will be the same. Thus, this method is a better
method for securing a representative sample of population elements in multistage
cluster sampling.

viii. Double Sampling and Multi-phase Sampling – refers to the sub-section of the
final sample from a pre-selected large sample that provided information for improving
the final selection. When this procedure is extended to more than two phases of
selection, it is then, called multi-phase sampling. It is also known as sequential
sampling.

ix. Replicated or Inter Penetrating Sampling – involves selection of a certain number

of sub-samples rather than one full sample from a population. All the sub-samples
should be drawn using the same sampling technique and each is a self-contained
and adequate sample of the population.

7.6.2 Non Probability / Non-Random Sampling

Non-probability sampling is also known as non-random sampling. It is not based on the

theory of probability. This sampling does not provide a chance of selection to each population
element. The only merits of this method of sampling are simplicity, convenience and low cost.

The non-probability sampling methods are classified into:

i. Convenience Sampling – It is also known as accidental sampling. It means selecting

sample units in a just interviewing people whom we happen to meet. In other words
selecting the sample whatever sampling units are conveniently available. It may be
used for simple purposes such as testing ideas or gaining ideas or rough impression
about a subject of interest.

ii. Purposive Sampling – This method of sampling is also termed as judgment

sampling. It means deliberate selection of sample units that confirm to some
predetermined criteria. It involves selection of cases which we judge as the most
appropriate one for the given study. This method is also based on the judgment of
the researcher or some expert. It is appropriate when what is important is the typically
and specific relevance of the sampling units to the study and not their overall
representativeness to the population.
88

iii. Quota Sampling – This method of sampling is a form of convenient sampling

involving selection of quota groups of accessible sampling units by traits such as
gender, age, social class, religion, etc, in a specific proportion, each investigator
may be given an assignment of quota groups specified by the predetermined traits
in specific proportions. Then the investigator select accessible persons, belonging
to these quota groups in the area assigned to him. This method is used in studies
like marketing surveys, opinion polls, and readership surveys which do not aim at
precision but to get quickly some crude results.

iv. Snow ball Sampling – This method of sampling is also termed as referral sampling.
Under this method of sampling involves the practice of identifying and qualifying a
set of initial prospective respondents who can, in turn, help the researcher identify
additional samples to be included. In this method of sampling on respondent refers
other potential respondents. In other words, snowball sampling refers to the initial
respondents are selected and subsequent respondents are selected by referrals or
information from the earlier respondents. In this sampling method, first building up
a list or a sample of a special population by using an initial set of its member as
informants, then the special population by using an initial set of its member as
informants. Then the investigator ask each one of them to supply the name of
others to known to them and continue this procedure until he gets an exhaustive list
from which he can draw a sample or make a census survey. Snowball sampling is
typically used in research situations like the defined target population is very small
and unique, and compiling a complete list of sampling units is a nearly impossible
task.

7.7 Sampling Error

Sampling survey denotes the study of small proportion of the total universe and drawing
inference about the population, there would naturally be a certain amount of inaccuracies or
errors. Such errors are known as known as sampling fluctuations or sampling errors. In other
words, the errors which arise due to the use of sampling surveys are known as the sampling
errors. The sampling errors are classified into two types. They are biased errors and unbiased
errors.

i. Biased Sampling Errors – are those which arise as a result of any bias or prejudice
of the person in selecting a particular sampling method. As a result of such a selection,
 89

some errors are bound to arise and they are known as bias sampling errors or
cumulative errors or non-compensating errors. Such errors are likely to increase
with an increase in the size of the sample.

ii. Un-biased Sampling Errors – are arising due to chance differences between the
members of the population included in the sample and those not included. This
error decreases on an average size of the sample increases. Therefore, such error
is known as non-cumulative error or compensating error. This may arise due to,
faulty process selecting of sample, faculty work during the collection of information,
faculty method of analysis, etc.

7.8 Causes of Sampling Error

The causes of sampling error arise due to the following reasons:
i) Selection of faculty process for sample.

ii) Faculty work during the collection of data

iii) Faculty method of data analysis.

iv) Faculty selection of sample.

v) Selection of sample in a haphazard way.

vi) Substitution of selected items in the sample by another.

vii) Incomplete investigation or information, etc.

7.9 Methods of Reducing Sampling Error

The following suggestions could help in reducing bias and improving sampling designs are:

i) Selection of specific research problem.

ii) Made an intensive study, verification and reporting of methodological biases.

iii) Systematic documentation of related research work.

iv) Greater investment in enumeration.

v) Effective pre-testing.

vi) Use of complementary research methods and

vii) Replication.
90

7.10 Non-Sampling Errors

The non-sampling error can occur in any survey, whether it is a complete enumeration
or sampling. Non-sampling errors includes bias and mistakes. Some of the factors responsible
for non-sampling errors are enumerated here. Vague definition of population, vague
questionnaire, vague conception regarding the information desired, inappropriate statistical
unit, inappropriate methods of interview, interview or measurement, error in data processing
operations such as coding, punching, verification, tabulation, etc errors committed during
presentation and printing of tabulated results. It trends to increase with the sample size and
require be controlled and reduced to a minimum.

7.11 Causes of Non-Sampling Error

The non-sampling errors are caused due to the following reasons:

i. Errors in sample selection or a portion of relevant population may be omitted.

ii. The responses obtained the study not related with objects interviewed.

iii. Selection of adequate respondents.

iv. Misunderstanding the concepts.

v. Lack of knowledge.

vi. Concealment of truth.

vii. Poor structuring of the questions.

viii. Errors in observation and recording.

7.12 Limitations of Sampling Techniques

The limitations of sampling techniques are:
i. Sampling requires a thorough knowledge of sampling methods and procedures.

ii. A complicated sampling plan may require more labour than a complete coverage.

iii. It may not be possible to ensure the representativeness of the sample respondents.

iv. Lack of specialized knowledge in selection of sample and respondents.

v. When the sampling is not possible to collect.

 91

vi. When census is incomplete.

vii. Misleading conclusions.

7.13 Sample Size

The most important problem confronts a researcher outset of the sample. If a large
sample then what is required is chosen, it involves more cost and time. If a small sample is
chosen the results obtained will be relatively less accurate. So the size of sample must be
optimum in nature.

An optimum sample may be defined as that size of sample which fulfils the requirements
of efficiency, flexibility, representativeness, reliability.

7.14 Factors Deciding Sample Size

However, the actual sample size depends on the following factors:

i) The nature of population.

ii) Complexity of tabulation.

iii) Problems relating to collection of data.

iv) Types of sampling.

v) The statistics for sample size estimation.

vi) The tolerable limit of error in the estimate of the sample compared to be true value.

7.15 Summary
Sample is the part of the universe which we select for the purpose of investigation.
Sampling may be defined as, the selection of part of an aggregate or totality on the basis of
which a judgment or inference about the aggregate or totality is made. Sampling method is the
process of learning about the population on the basis of sample. Sampling errors which arise
due to the use of sampling surveys are known as sampling errors. The non-sampling errors can
occur in any survey whether it is a complete enumeration or sampling. Non-sampling errors
includes bias and mistakes. Optimum sample may be defined as that size of sample which
fulfils the requirements of efficiency, flexibility, representativeness and reliability. Moreover, we
92

have discussed the types of sampling such as probability sampling and non-probability, criteria
for selection of sample, methods of reducing sampling error, etc. This will give a very good
insight to the learners.

7.16 Key Words

 Area Sampling

 Convenience Sampling

 Double Sampling

 Quota Sampling

 Purposive Sampling

 Simple Random Sampling

 Snow ball Sampling

 Stratified Random Sampling

 Systematic Random Sampling

7.17 Review questions

1. Discuss the concept of sampling.

2. Describe the steps in sampling.

3. State the essentials of a sample.

4. Mention the criteria of selection of a good sampling technique.

5. Explain the different types of sampling.

6. What is meant by sampling error.

7. Trace out causes of sampling error.

8. Discuss the methods of reducing sampling error.

9. What do you understand by non-sampling error.

10. State the causes of non-sampling error.

11. Point out the limitations of sampling techniques.

 93

12. What do you understand by snowball sampling? State its uses in social sciences
research.

7.18 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
94

LESSON 8
ATTITUDE MEASUREMENT AND SCALING
TECHNIQUES
Learning objectives:

After studying this lesson, you should be able to

 List out the level of measurement

 Discuss the scaling techniques

 Explain the Test of Validity and Reliability

Structure:
8.1 Introduction

8.2 Measurement

8.3 Levels of Measurement

8.4 Characteristics of Measurement

8.5 Techniques of Developing Measurement Tool

8.6 Test of Sound Measurement

8.6.1 Test of Validity

8.6.2 Test of Reliability

8.6.3 Test of Practicability

8.6.4 Test of Accuracy

8.7 Scaling

8.8 Scale Classification Bases

8.9 Scaling Techniques

8.10 Summary

8.11 Key Words

8.12 Review Questions

8.13 Suggested Readings

 95

8.1 Introduction
Measurement is mid-point to the process of obtaining data. The measurement in a
research project is very difficult in determining whether the project will be success. In this
lesson deals with measurement, levels and techniques of developing measurement, tests of a
sound measurement including validity and reliability, scaling, scaling techniques and classification,
etc.

8.2 Measurement
Measurement refers to the process of associating numbers or symbols to observations
obtained in a research study. These observations could be qualitative or quantitative. In other
words, measurement is the assignment of numerals to characteristics of objects, persons,
states, events, etc as per rules.

8.3 Levels of Measurement

These are four levels of measurement. They are Nominal, Ordinal, Interval and Ratio;

i. Nominal Measurement – is the most elementary method of measurement which

classifies persons, objects, or events into a member of mutually exclusive categories, on the
basis of the simple presence or absence, applicability or inapplicability, possession or non-
possession of certain property. In other words, nominal scale is simply a system of assigning
number symbols to events in order to label them. This is have and have not measurement
which assigns mutually exclusive labels to identity objects. Thus, the population of a town may
be classified, according to sex, male and females (i.e., 1,2 (or) A,B and according religion, into
Hindus, Muslims, Sikhs and Christians and each category or persons given certain labels either
in the form of numerals (0,1,2,3) or in the form of letter (A,B,C,D).

ii. Ordinal measurement – numerals, letters or other symbols are used to rank objects.
This is essentially an advanced form of categorization. The ordinal scale places events in order,
but there is no attempt to make the intervals of the scale equal in-terms of some rule. In marketing
research particularly consumer oriented research relies on this type of data. Their most common
use is in obtaining preference measurements. For example, a consumer or a sample of experts
may be asked to rank preferences for several brands, flavors or package design. Attitude
measures are also often ordinal in nature.
96

iii. Interval Measurement – represents numerals used to rank objects in such a way that
numerically equal distances on the scale represent equal distance in the property being
measured. For example, if we are measuring the achievements of three students A,B, and C on
an interval scale and obtain the values 1,4,5 respectively as shown below;

iv. Ratio Measurement – have an obsolete or true zero of measurement. A true zero
means that the object measuring zero proposes none of the property in question. Height and
weight are obvious examples, with a ratio measurement; the comparison between ratios of the
absolute magnitude of the numbers becomes possible. So, all descriptive measures and
inferential techniques are applicable to ratio-measured data.

8.4 Characteristics of Measurement

The characteristics of measurement involves,

i) The stable characteristics of an object or event. For example, the respondents

tendency to give only favorable responses independent of his true feelings.

ii) The short-term characteristics of the object, for example health, hunger, fatigue,
etc.

iii) Situational characteristics – for example the present or absent of some person
where the measurement is taken.

iv) Characteristics of the measurement process – for example sex, age, dress code,
etc.

v) Characteristics of response process for example mistakes caused by checking to

wrong response.

vi) Characteristics of the analysis – for example, mistakes caused by wrong coding,
tabulating etc.
 97

8.5 Techniques of Developing Measurement Tool

The technique of developing measurement tools involves a four stage process, consisting of

i) Concept development

ii) Specification of concept dimensions

iii) Selection of indicators and

iv) Formation of index

8.6 Test of Sound Measurement

The test of a good measurement must meet the test of validity, reliability, practicality
and accuracy. They are discussed one by one:

8.6.1 Test of Validity

Validity refers to the extent to which a test measures what we actually measures what we
actually wish to measure. Two forms of validity are usually mentioned in research literature,
namely external validity and internal validity.

a. External validity of research findings is their generalisability to populations, settings,

treatment variables and measurement variables.

b. Internal validity of a research design is its ability to measure what it aims to measure.
We shall deal with this validity only in the present lesson. Validity is the extent to which
differences found with a measuring instrument reflect true difference among these being
tested. But one can certainly consider three types of validity in this connection, they are

1) Content Validity – is the extent to which a measuring instrument provides adequate

coverage of the topic understudy. If the instrument contains a representative sample of the
universe, the content validity is good. Its determination is primarily judgment and intuitive. It can
also be determined by using a panel of persons who shall judge how well the measuring
instrument meets the standards.

2) Criterion – related validity – relates to our ability to predict some outcome or estimate
the existence of some current condition. This form of validity reflects the success of measures
98

used for some empirical estimating purpose it must poses the qualities such as relevance,
freedom from bias, reliability and availability.

3) Construct Validity – is the most complex and abstract. A measure is said to possess
construct validity to the degree that it conforms to predicted correlations with other the critical
propositions. Construct validity is the degree to which scores of a test can be amounted for by
the explanatory constructs of a sound theory. For determining construct validity, we associate a
set of other propositions with the results received from using our measurement instrument. If
the measurement of our devised scale correlates in a predicated way with these other
propositions, we can conclude that there is some construct validity. If the above – said criteria
and tests are met with, we may finalize that our measuring instrument is valid and will result in
correct measurement.

8.6.2 Test of Reliability

Test of Reliability is another important test of sound measurement. A measuring instrument

is reliable if it provides consistent results. Reliable measuring instrument does contribute to
validity but a reliable instrument need not be a valid instrument. According to reliability is not as
valuable as validity, but it is easier to assess reliability in comparison to validity. If the quality of
reliability is satisfied by an instrument, then while using it we can be confident that the transient
and situational factors are not inferring. There are two aspects of reliability namely stability and
equivalence.

The stability aspect is concerned with securing consistent results with repeated
measurements of the same person and in the same measurement. We usually determine the
degree of stability by comparing the results of repeated measurements.

The equivalence aspect considers how much error may get introduced by different
investigators or different samples of the items being studied. A good way to test for the
equivalence of measurements by two investigators is to compare their observations of the
same events. The equivalence aspect can be improved in the following two ways. They are:

a) By standardizing the conditions under which the measurement takes place.

b) By carefully designed directors for measurement with no variation from group to

group, by using trained and motivated persons to conduct the research.
 99

8.6.3 Test of Practicability

Test to Practicability refers to judging the characteristics of a measuring instrument can

be judged in terms of economy, convenience and interpretability. According to the operational
point of view the measuring instrument ought to be practical. The economic consideration
suggests that some trade-off is needed between the ideal research project and that which
budget can affordable. The convenience consideration suggests that the measuring instrument
should be easy to administer. So, it requires proper layout of the measuring instrument.
Interpretability consideration is especially important when persons other than the designers of
the test are to interpret the results.

8.6.4 Test of Accuracy

The characteristics of a accuracy of a measurement scale means it should be a true

representative of the observation of underlying characteristics for example, measuring with an
‘inch’ scale will provide accurate value only up to one-eighth of an inch, while measuring with
‘cm’ scale will provide more accurate value.

8.7 Scaling
Scaling describes the procedure of assigning numbers to various degrees of opinion,
attitude and other concepts. This can be done by into two ways namely,

i. Making judgment about some characteristics of an individual and placing him directly
on a scale that has been defined in-terms of that characteristics and

ii. Considering questionnaires in such a way that the score of individual’s responses
assigns him a place on a scale.

It may be stated that scale is a continuum, consisting of the highest point and the lowest
point along with several intermediate points between these two extreme points. These scale-
point positions are so related to each other that when the first point happens to be the highest
point, the second point indicates a higher degree in terms of a given characteristics as compared
to third point and the third point indicates a higher degree as compared to the fourth point and
so on.
100

8.8 Scale Classification Bases

The number assigning procedure or the scaling procedures may be broadly classified
on the following base:

i. Subject Orientation – this scale maybe designed to measure characteristics of the

respondent who completes it or to judge the stimulus object which is presented to the
respondent.

ii. Response Form – this type of scale is classified into categorical and comparative.
Categorical scales are also known as rating scales. Comparative scales which has also
known as rating scales, the respondent is asked to compare two or more objects.

iii. Degree of Subjectivity – under this base the scale data may be based on whether we
measure subjective personal preferences or simply makes non-preference judgments.

iv. Scale Properties – considering the scale properties, one may classify the scales as
nominal, ordinal interval and ratio scales. (Refer the previous pages)

v. Number of Dimensions – under this basis, the scales can be classified as uni-dimensional
and multi-dimensional scales. The uni-dimensional scale, we measure only one attribute
to the respondent or object. But the multi-dimensional scaling recognizes that an object
might be described better by using the concept of an attribute space of number of
dimensions.

vi. Scale Construction Techniques – the following five techniques are used to develop the
scales:

a. Arbitrary approach – is an approach where scale is developed on ad hoc basis.

b. Consensus approach – consists of a panel of judges evaluate the items chosen for
inclusion.

c. Item Analysis Approach – consists of a number of individual items are developed

into test which is given to a group of respondents. After administering the test, the
total scores are calculated for everyone.

d. Cumulative Scales – are chosen on the basis of their confirming to some ranking of
items with ascending and descending discriminating power.
 101

e. Factor Scales – are constructed on the basis of inter correlations of items which
indicate that a common factor accounts for the relationship between items. This
relationship is typically measured through factor analysis test.

8.9 Scaling Techniques

The important scaling techniques often used in the context of research especially in
context of social and business research methods. The attitude can be defined as the mental
state of a consumer. In marketing this can be perceived as a consumer’s predisposition to
respond a product or service. There are various ways to represent a respondent with a continuum
of numbered categories that represent the range of possible attitude judgment. The types of
scales in research are:

Single Item Scale – under this single itemized category scale is most widely used by
researchers. This category is also sub-divided into the following types:

i. Itemized Category Scales – are also known as Satisfaction Scales (or) Discrete
Scales. These are four categories from which respondent can choose to indicate
their overall level of satisfaction with their present facilities provides by the service
provider. They are:

A. Very satisfied

B. Quite satisfied

C. Somewhat satisfied

D. Not at all satisfied

ii. Numerical Scale – under this scaling of the response categories from +2 to -2, as
presented in the following chart

Very Satisfied Very Dissatisfied

+2 +1 0 -1 -2

iii. Comparative Scale – is another form of the itemized scale would be label the
categories into excellent to poor and thereby eliminating the implicit comparison
102

iv. Ordinal scale / rank order scale – represent member, letter or other symbols
used to rank items. The ranking of certain attributes to as deemed important by the
respondent is obtained through this scale. For example rank the following attributes
on a scale of 1 to 5 according to importance of a laptop.

A. Brand in age

B. Features

C. Comfort

D. Design

v. Q-Sort scaling or order category sorting in Q-sort scaling the respondents are
asked to sort the various characteristics or objects that are being categorized into
various groups, such that the distribution of the numbers of objects or characteristics
in each group follows a normal distribution.

vi. Pictorial scales – are used different measurements are expressed with pictures,
line drawings, etc.

vii. Staple scales – are unipolar, 10 point interval, rating from +5 to -5. And are balanced
without neutral point.

viii. Semantic differential scales – are usually 7 point scales. They are bi-polar with a
neutral point like rating +3 to -3.

ix. Constant-sum scales – require respondents to allocate a fixed number of rating

points among several objects, to reflect the relative preference of each object. Usually
10 or 100 points are distributed among the object to reflect the difference and gap.

x. Interval scale – represents numbers used to rank items such that numerically equal
distances on the scale represent equal distance in the property being measured. It
involves qualitative description of aspects of a product or trait of a person. For
example rate your present mobile phone on the following qualities.
 103

A Product Design Poor 1 2 3 4 5 Good

B Brand Name Lesser Known 1 2 3 4 5 Well Known

C Price Low 1 2 3 4 5 High

D After Sales Service Very Dissatisfied 1 2 3 4 5 Very Satisfied

xi. Ratio Scale – Represents consist of numbers that rank items such that numerically
equal distances on the scale represent equal distances in the property being
measured and have a meaning full zero. All descriptive measures and inferential
techniques are application 0 ratio scaled data.

xii. Paired Comparison method – when two or more stimuli to judge, the number of
judgments are required in paired comparison is given as N = n (n-1) /2 Where, N
= Number of Judgments n = number of objects stimuli to be judged.

xiii. Specialized scales – are the judgments against other similar objects. The
respondents directly compare two or more objects and may choose among them.

· Nominal Scale – for example roll numbers, categories, etc

· Ordinal Scale – Example grading in Exams, Temperature

· Ratio Scales – Example, length, Distance, Salaries, etc.

xiv. Comparative judgment by L.L. Thurstone. It involves converting the frequencies

o preferences into a table of proportions. This is then transformed to Z matrix by
referring to the table area under the curve.

xv. Arbitrary Scales – they are developed on an ad-hoc basis and are designed largely
through the researchers own subjective selection of items. The researcher first
collect a few statements or items which he believes are unambiguous and appropriate
to a given topic, then a few of them are selected or inclusion in the statement on
which they agree.

xvi. Differential scales / Thurstone types scales – are developed using consensus
scale approach, when a panel of judges who evaluate the items of whether they are
relevant to that topic area are unambiguous in implication makes the selection of
items.
104

xvii. Summated Scales / Likert Type scales – are developed by utilizing the items
analysis approach wherein a particular items is evaluated on the basis of how well
it discriminate between those persons whose total score is high and those where
score is low. The summated scale consists of a number of statements, which express
either a favorable or unfavorable attitude towards a given object to which the
respondent is asked to react. The respondent indicates his agreement or
disagreement with each statement in instrument. Each response is given a numerical
scale or score and these scores are totaled to measure the respondent’s opinion.
The most frequently used summated scales in the study of social attitudes follow
the patterns devised by Likert

xviii. Cumulative Scales – these scales consists, of a series of statements to which a

respondent express his agreement or disagreement. These statements from a series.
They are related to one another in such a way that an individual who replies favorably
to say item no.2, and also replies favorable item 2 and 1 and so on. Then individuals
score is worked out by counting the number of statements he answers favourably.
If one know the total score can estimate as to how a respondent has answered
individual statements counting cumulative scales.

xix. Special Scale – it is the modification of the differential scale. It refers from the
semantic differential scale in that the adjectives or descriptive phrases are tested
separately instead of simultaneously as bipolar pairs. Also the points on the scale
are identified by member as these are ten scale positions rather than five or seven
as in the required manner. It is formulated -5 to +5 without a neutral point.

xx. Fractional Rating Scale – It requires the rates to rate an object by comparing it
with reference point. The goal is ratio-scale representation of attitudes toward the
complete set of objects. For example please divide 100points among the following
two TV brands

Sony —— Points

Samsung —— Points
 105

xxi. Fishbein’s Scale – This scale uses a combination of constant sum and semantic
different scale. To assess how consumers perceive a set of alternative offerings,
this type of scale is used. Here, the respondent is first asked to assign weight age
to a set of given attributes. Afterwards the respondent is given some specific choice
alternative. It is used in problems such as comparing brand image and adverting
designs.

xxii. Multi-Dimensional Scaling – can be characterized as a set of procedures for

portraying perceptual or effective dimensions of substantive interest. It is used when
all the variables in the study are to be analyzed simultaneously and all such variables
happen to be independent.

xxiii. Semantic differential Scaling – was developed by Charles E. OS good, G.J. Suci
and PH. Tennenbnum in 1975. It is an attempt to measure the psychological meaning
of an object to an individual. For example the items of analyzing candidate for
leadership position may be as under:
106

xxiv. Disguised, Structured Scaling Techniques.

For the disguised, structured sealing method of data collection, certain projective
techniques are used. The popular projective tests are:

a) Word Association – A series of situations or words is given to the respondents and

they are asked o fill up the first word or brand which comes to the mind. It is interesting
for the respondent to fill up the various word associations. It is quick and easily
understood. For example,

Dove = Love

b) Sentence completion – the respondent is given a number of sentences and asked

to complete them. The respondents profit as well as his attitude towards certain
felling can be approximated. The respondents require more time to fill up the
sentences. For example, a person listening to 93.5 FM radio regularly is _________

c) Thematic Apperception Test – pictures instead of words are used in this technique.
A series of pictures are shown to the respondent who may he asked to compare
them or answer questions. The attitudes of the respondents can get reflected if the
technique is properly administered. It is difficult to interpret the responses at times.

d) Story-telling – A situation is described to the respondent who is asked to complete

the story based on his opinion and attitude. This technique to test of the respondent,
but it results may be difficult to interpret as the responses would be varied. However
it is extensively used tap any creative responses which can be put to use.

e) Home building / Body building – the important values such that they can be used
to construct a house or build a body. The core values of the brand might from the
foundation of the house or the heart of the body. The packaging or after sales
service might be viewed as the arms or feet or windows as the case may be. The
respondent may not be able to complete the house or body in can the brand has
few values. A strong brand, on the other hand results in a strong body or house.

f) Multi-item scaling – are widely used is social sciences research to measure abstract
constructs. The characteristics that are to be measured is generally inferred to us
the construct. It starts with developing theory and ends in the final scale.
 107

8.10 Summary
The term measurement refers to the process of associating numbers or symbols to
observations obtained in a research study. The observation could be qualitative or quantitative.
Moreover, we have discussed the techniques of developing measurement tools, testing of
measurement tools like validity, reliability, testing of measurement tools like validity, reliability,
practicability, etc. The scaling describes the procedure of assigning numbers to various degrees
of opinion, attitude and other concepts. The scaling classification bases, various types of scaling
techniques are discussed. This will give an in-depth understanding on measurement and scaling
techniques to the learners.

8.11 Key Words

 Arbitrary Scales

 Ordinal Scale

 Nominal Scale

 Interval Scale

 Ratio Scale

 Liker Scale

 Reliability Test

 Validity Test

8.12 Review Questions

1. Explain the concept of measurement.

2. Discuss the four levels of measurement.

3. State the characteristics of measurement.

4. What is meant by test of validity? Discuss the procedure for conducting validity test.

5. State the need for test of reliability in management research.

6. Explain the various tests used in sound measurement.

7. Discuss the scaling techniques used in social sciences research.

108

8. State the importance of Likert scale in business research methods.

9. Describe the scale classification business in research.

8.13 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 109

LESSON 9
CORELATION & REGRESSION
Learning objectives:

After completing this lesson, you may be able to,

 Compute correlation coefficient using Karl Pearson method and Spearmen’s Rank
correlation coefficient.

 Find the lines of regression

Structure:
9.1 Introduction

9.2 Correlation

9.2.1 Karl Pearson Coefficient of Correlation

9.2.2 Rank Correlation Coefficient

9.3 Regression

9.4 Worked Examples

9.5 Summary

9.6 Key Words

9.7 Review Questions

9.8 Suggested Readings

9.1 Introduction
Correlation and regression are called as measures of relationship. Correlation is used
to measure the degree of relationship between the variables under consideration. Regression
is used to estimate the value of one variable given the value of another variable. Let us discuss
the methods used to find correlation coefficient and estimate the values of variable using
regression.
110

9.2 Correlation
It is a statistical device which helps us in analyzing the co variation of two or more variables.
In business, it enables the executive to estimate costs, sales, prices and other variables on the
basis of some other series with which these costs, sales or prices may be functionally related.
The correlation can be measured with the help of correlation coefficient. Its value varies from (-
1) to 1 including zero. If the value of correlation coefficient is (-1), then we have negative
correlation. If the value of correlation co-efficient is 1, we have positive correlation. If the value
is zero, then there is no correlation between the variables. Karl’s Pearsons coefficient of
correlation and rank correlation are used to measure correlation.

9.2.1 Karl’s Pearson Coefficient of Correlation

The coefficient of correlation can be found out by using the direct method or when
durations are taken from an assumed mean method.

The formula to find the correlation coefficient using direct method is

Nxy  xy
r
2 2
Nx 2  x  Ny 2  Y 

Where r = Karl pearson’s coefficient of correlation

N = Number of pairs of observation

The formula to find the correlation coefficient using assumed mean is given by

Ndxdy  dx dy

r
2 2
Ndx 2  dx  Ndy 2  dy 

Where dx = Deviations of x series from assumed mean

dy = Deviations of y series from assumed mean

 dx = Sum of deviations of x series from an assumed mean

 dx dy = Sum of the product of the deviations of x and y series from their

assumed mean
 111

 dx2 = Sum of the squares of the deviations of x series from an assumed mean

  dy 2 = Sum of the squares of the deviations of y series from an assumed mean

9.2.2 Rank Correlation coefficient

It is used when the population is not normally distributed and the shape of the distribution
is not known. Spearman’s rank correlation coefficient can be found out using the formula.

R = 1 – 6  D2 / N (N2 -1)

Where R denotes rank correlation coefficient and D denotes the difference of rank between
paired items in two series.

9.3 Regression
Regression is a statistical tool used to predict (estimate) the unknown values of one
variable from known values of another variable. The variable which is used to predict the
variable of interest is called the independent, variable or explanatory variable and the variables
we are trying to predict is called the dependent variable or explained variable. The independent
variable is denoted by x and the dependent variable by y.

The regression equation of x on y is given by

(X – Mean of X) = r  x (Y- Mean of Y) /  y

Where, r  x /  y is the regression coefficient of X or Y and is denoted by bxy..

Similarly the regression equation of Y on X is given by

(Y-Mean of Y) = r  y (X-mean of X) /  x

Where r  y /  x is the regression coefficient of Y or X and is denoted by byx.

112

9.4 Worked Examples

1. Calculate the coefficient of correlation using Karl pearson’s method.

X: 6 2 10 4 8

Y: 9 11 5 8 7

Solution

X (X-6) (X-6)2 Y (Y-8) (Y-8)2 (X-6) (Y-8)

6 0 0 9 1 1 0

2 (-4) 16 11 3 9 (-12)

10 4 16 5 (-3) 9 (-12)

4 (-2) 4 8 0 0 0

8 2 4 7 (-1) 1 (-2)

TOTAL 30 0 40 40 0 20 (-26)

Correlation coefficient = r = (-26) / Sqrt. (40 x 20) = -0.919

2. Calculate the coefficient of correlation using Karl parson’s method assuming mean of X
and Y as 66 & 63 respectively.

X 60 62 64 66 68 70 72

Y 61 63 63 63 64 65 67
 113

X (X-66) (X-66)2 Y (Y-63) (Y-63)2 (X-66) (Y-63)

60 (-6) 36 61 (-2) 4 12

62 (-4) 16 63 0 0 0

64 (-2) 4 63 0 0 0

66 0 0 63 0 0 0

68 2 4 64 1 1 2

70 4 16 65 2 4 8

72 6 36 67 4 16 24

TOTAL 0 112 5 25 46

Correlation coefficient = (7x46) - (0x5) / Sqrt. (7 x 112 – 0) Sqrt. ( 7 x25 – 25) = 0.939

3. Calculate Spearman’s coefficient of correlation between the marks assigned to ten students
by judges X and Y in a certain competition as shown below.

Marks by judge X : 52 53 42 60 45 41 37 38 25 27

Marks by judge Y : 65 68 43 38 77 48 35 30 25 50

Solution:

First assign the ranks and then calculate rank correlation coefficient.

Judge X Rank X Judge Y Rank Y D = (Rank X - Rank Y) D2

52 8 65 8 0 0

53 9 68 9 0 0

42 6 43 5 1 1

60 10 38 4 6 36

45 7 77 10 (-3) 9

41 5 48 6 (-1) 1
114

37 3 35 3 0 0

38 4 30 2 2 4

25 1 25 1 0 0

27 2 50 7 (-5) 25

TOTAL 76

R = 1 – 6  D2 / (N3-N) = 1 – 6 x 76 / (103 – 10) = 1–0461 = 0.539

4. Obtain the rank correlation coefficient between the variables X and Y from the
following parts from the observed values.

X 50 55 65 50 55 60 50 65 70 75

Y 110 110 115 125 140 115 130 120 115 160
Solution

For finding ranks correlation coefficient first rank two various values. Taking lowest as 1
and next higher as 2, etc.

X Rank X (R1) Y Rank Y (R2) R1-R2=D D2

50 2 110 1.5 0.5 0.25

55 4.5 110 1.5 3 9.00

65 7.5 115 4 3.5 12.25

50 2 125 7 (-5) 25.00

55 4.5 140 9 (-4.5) 20.25

60 6 115 4 2 4.00

50 2 130 8 (-6) 36.00

65 7.5 120 6 1.5 2.25

70 9 115 4 5 25.00
75 10 160 10 0 0.00

 D2 = 134
 115

It may be noted that an series X, 50 has repeated thrice (m=3), 55 has repeated twice
(m=2), 65 has been repeated twice (m=2). In series Y, 110 has been repeated twice (m=2) and
115 thrice (m=3).

R=1–6 (  D2 +
1/12 (m3-m) ) / N3 – N

R = 1-0.845 = 0.155

5. Obtain the lines of regression from the following data.

X 4 5 6 8 11

Y 12 10 8 7 5

Solution

X dx = (X-6) dx2 Y dy=(Y-8) dy2 dx dy

4 -2 4 12 4 16 (-8)

5 -1 1 10 2 4 (-2)

6 0 0 8 0 0 0

8 2 4 7 (-1) 1 (-2)

11 5 25 5 (-3) 9 (-15)

34 4 34 42 2 30 (-27)

Regression equation of x on y is X – mean of X) = r  x (Y-mean of Y) /  y

r  x
/  y
= 5 (-27) – 4 (2) / 5(30) – 2(2) = (-0.979)

X – 6.8 = – (-0.979) (y-8.4)

X = 15.024-0.979 y

Regression equation of y on x is (Y-Mean of Y) = r  y

(X-mean of X) /  x

ry /  x
= 5 (–27) – 4(2) / 5(34) – 4(4) = –0.929
116

Y – 8.4 = (–0.929) (x–6.8)

Y = –0.929x + 14.717

6. Obtain the regression equation of y on x and estimate y when x = 55 from the following
data.

X 40 50 38 60 65 50 35

Y 38 60 55 70 60 48 30

Solution

X (x-48)=dx dx2 Y (y-50)=dy dy2 dx dy

40 (-8) 64 38 -12 144 96

50 2 4 60 10 100 20

38 (-10) 100 55 5 25 (-50)

60 12 144 70 20 400 240

65 17 289 60 10 100 170

50 2 4 48 (-2) 4 (-4)

35 (-13) 169 30 (-20) 400 260

338 2 774 361 11 1173 732

regression equation of y on x is (Y-Mean of Y) = ry (X-mean of X) / x

ry / x = 0.942

Y - 51.57 = 0.942 (x-48.29)

Y = 0.942x + 6.08

When x = 55, y = 0.942(55) +6.08

= 51.81 + 6.08

Y = 57.89
 117

7. The following data, based on 450 students are given for marks in Statistics and Economics
at a certain examination.

Mean marks in Statistics = 40

Mean marks in Economics = 48

Standard deviation of marks in Statistics = 12

Variance of marks in Economics = 256

Sum of the products of deviation of marks from their respective mean = 42075

Give the equation of the two lines of regression and estimate the average marks in

Economics of candidates who obtained 50 marks in Statistics.

Solution

Let the marks in Statistics be denoted as x and marks in Economics as y

Regression equation of x on y is (X – Mean of X) = r x (Y- Mean of Y) /y

(X-40) = 0.487 x 12 (y-48) / 16

= 0.365 (y-48)

X -40 = 0.365 y -17.52

X = 22.48 + 0.365 Y

Regression equation of y on x is (Y - Mean of Y) = ry (X-mean of X) / x

(Y-48) = 0.487 x 16 (x-40) / 12

= 0.649 (x-40)

Y- 48 = 0.649 X - 25.96

Y = 22.04 + 0.649 X
118

If X = 50, Y = 22.04 + 0.649 x 50

Y= 22.04 +32.45

Y = 54.49

8. Two random variables have the regression equations.

3 x + 2y = 26

6 x + y = 31

Find the mean values and co-efficient of correlation between X and Y. If the variance of
X is 25, find the standard deviation of Y.

Solution:

3 X + 2 Y = 26 1*

6 X + Y = 31 2*

Multiply equation 1* by 2 on both sides

6 X + 4 Y = 52 3*

Subtract Equation 2* from equation 3*. We get 3Y = 21

Y=7

Mean of Y = 7

Put Y = 7 in Equation 2*

6 X +7 = 31

6 Y = 31 – 7 = 24

6 X = 24

X=4

Mean of X = 4
 119

From equation 1* 2 Y = 26 – 3 X

Y = 13 – 3/2 X

byx = -3/2 = (-1.5)

From equation 2* 6 X = 31 – Y

X = 31/6 – (1/6) Y

bxy = (-1/6)

R = Sqrt. (bxy * byx)

= Sqrt. (-1.5) x (-1/6) = 0.5

To find standard deviation of Y

byx = r  y /  x

 y = 15

Standard deviation of Y = 15

9.5 Summary
Correlation is a statistical device which helps us in analyzing the co variation of two or
more variables. In business, it enables the executive to estimate costs, sales, prices and other
variables on the basis of some other series with which these costs, sales or prices may be
functionally related. Regression is a statistical tool used to predict (estimate) the unknown
values of one variable from known values of another variable. The variable which is used to
predict the variable of interest is called the independent variable or explanatory variable and the
variables we are trying to predict is called the dependent variable or explained variable. The
methods of computing regression and correlation are also explained in this lesson.
120

9.6 Key Words

 Correlation

 Regression

 Correlation co-efficient

 Rank Correlation

9.7 Review Questions

1. Two regression lines of a sample are x + 6Y = 6 and 3 x+ 24 = 0. Find the correlation co-
efficient.

2. A Corporation owns several companies. The strategic planner for the corporation believes
money spent on advertising can to some extent be a predictor of total sales. As a aid in
long term planning, he gathers the following sales and advertising information from several
of the companies for 2005 (Rs. in lakhs). Calculate the lines of regression.

Advertising 12.5 3.7 21.6 60.00 37.6 6.1 16.8 41.2

Sales 148 55 338 994 541 89 126 379

3. The following data are from Doshi & Modi shows the number of business failures from
2004 to 2014 and the number of business starts for each of the previous years. Use
these data to develop the equation of a regression line to predict the number of business
failures from the number of business starts the previous year. Discuss the scope and y
intercept the model.

Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Number of
business
starts
from
previous year 253710 199091 181645 158930 155672 164086 166154 168387 168158 170475 166740

Number of
business
failures 57094 56361 60747 88140 97059 86133 71558 71128 71931 83364 71857
 121

4. A firm administers a test to sales trainees before they go into the field. The management
of the firm is interested in determining the relationship between the test scores and the
sales made by the trainees at the end of one year in the field. The following data were
collected for 10 sales personnel who have been in the field for one year.

Sales Person
on Number 1 2 3 4 5 6 7 8 9 10

Test Score(T) 2.6 3.7 2.4 4.5 2.6 5.0 2.8 3.0 4.0 3.4

Number of
Unit Sold (S) 95 140 85 180 100 195 115 136 175 150

(a) Find the regression line that could be used to predict sales from trainee test scores?

(b) How much the expected number of units sold increase for each 1 point increase in
a trainee’s test score?

5. Apple Juice is studying the effect of its latest advertising campaign. People chosen at
random were called and asked how many paper cups of Apple Juice they had bought with
the past week

X(Number of Advertisements) 3 7 4 2 0 4 1

Y(Number of paper cups purchased) 11 18 9 4 7 6 3

(a) Calculate the sample correlation coefficient?

(b) Develop regression line of Y on X?

6. Two sales managers have ranked 12 sales assistants in the order the sales as under:

Sales
Assistants A B C D E F G H I J K L

Rank by 1st
Sales Manager 5 2 4 1 8 9 10 6 3 11 7 2

Rank by 2nd
Sales Manager 6 9 7 10 1 2 4 12 3 5 11 8
122

Calculate rank correlation coefficient to find out whether the sales managers are in
agreement with each other or not.

9.8 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 123

LESSON 10
CHISQUARE TEST AND ANOVA
Learning objectives

After completing this lesson, you must be able to,

 Compute Chi-square value

 Outline the procedure for one way & two way Analysis of variance.

Structure
10.1 Introduction

10.2 Chi-square Test

10.3 One-Way ANOVA

10.4 Two Way ANOVA

10.5 Worked Examples

10.6 Summary

10.7 Key Words

10.8 Review Questions

10.9 Suggested Readings

10.1 Introduction
In the previous lesson, the measures of relationship was discussed. The measures of
relationship are correlation and regression. In this lesson, let us discuss chi-square test and
Analysis of variance. Both one way ANOVA (Analysis of variance) and two way ANOVA will be
discussed in this lesson.

10.2 Chi-square Test

It is one of the non-parametric tests used in statistical work. The reasons for using non-
parametric test in business research are
124

(i) These statistical tests are distribution free.

(ii) They are computationally easier to handle.

(iii) They can be used with types of measurements that prohibit the use of parametric
tests.

The steps for computing chi-square value involve three steps.

(i) Calculate the expected frequencies (E)

E = Row Total x Column Total / Total Number of observations

(ii) Obtain the difference between observed (O) and expected frequencies and obtain
the values of (O-E)2

(iii) Divide the values of (O-E)2 by Expected Frequency (i.e.)  (0-E)2 / E

The degrees of freedom for chi square test can be computed from (Rows – 1)
(Columns-1)

10.3 One Way ANOVA

Analysis of variance frequently referred to by the contraction ANOVA is a statistical
technique specially designed to test whether the means of more than two quantitative populations
are equal. It consists of classifying and cross-classifying statistical results and testing whether
the means of a specified classification differ significantly. In one way classification, the data are
classified according to only one criterion. The null hypothesis is that all means are not equal.
The steps for calculating one-way ANOVA is given below.

1. Calculate the variance between the samples.

a) Calculate the means of each sample.

b) Calculate the grand average.

c) Take the difference between the means of various samples and grand average.

d) Square these deviations and obtain the total which will give sum of squares between
the samples.

e) Divide the total obtained in step d) by the degrees of freedom.

 125

2. Calculate the variance within the samples.

a) Calculate the mean values of each sample

b) Take the deviations of the various items in a sample from the mean values of the
respective samples.

c) Square these deviations and obtain the total which gives the sum of square within
the samples.

d) Divide the total obtained in step (c) by the degrees of freedom.

3. Calculate the ratio of F as follows:

F = Between – Column Variance / Within – Column Variance

Source of SS = Sum of Degrees of MS = Mean F Ratio

Variation Squares freedom Square

Between SSC C-1 MSC = SSC/(C-1)

Samples

Within SSE n-C MSE = SSE / (n-C) MSC/MSE

Samples

TOTAL SST n-1

SST = Total Sum of Squares of variations

SSC= Sum of Squares between samples (Columns)

SSE= Sum of Squares within samples (Rows)

MSE=Mean sum of squares within samples

MSC=Mean sum of squares between samples

10.4 Two Way ANOVA

In a two way classification, the data are classified according to two different criteria or
factors.
126

Source of Sum of Degrees of Mean Sum Ratio of F

Variation Squares freedom of Square

Between SSC (C-1) MSC = SSC /(C-1) MSC/MSE

Samples

Between rows SSR (R-1) MSR = SSR / (R-1) MSR/MSE

Residual SSE (C-1)(R-1) MSE= SSE/(C-1) (R-1)

or Error

TOTAL SST (N-1)

SSC = Sum of Squares between Columns

SSR = Sum of Squares between Rows

SSE = Sum of Squares due to error

SST = Total Sum of Squares

Sum of squares for the source residual is obtained by subtracting from total sum of squares
the sum of squares between Columns and Rows.

SSE = SST – (SSC + SSR)

Total number of degrees of freedom = (N-1)

Number of Columns = C

Number of Rows =R

Number of Degrees of Freedom between Columns = (C-1)

Number of degrees of freedom between rows = (R-1)

Number of degrees of freedom for residual = (C-1) (R-1).

Residual or error sum of square = Total Sum of squares – Sum of square between
Columns – Sum of squares between rows.
 127

10.5 Worked Examples

1. From the data given below about the treatment of 250 patients suffering from a disease,
state whether the new treatment is superior to the conventional treatment.

Treatment No. of Patients Total

Favourable Not Favourable

New 140 30 170

Conventional 60 20 80

TOTAL 200 50 250

Given for one degree of freedom, Chi-square value at 5 percent = 3.84.

Solution

Null Hypothesis: There is no significant difference between new and conventional treatment.

Expected frequency = Row Total x Column Total / Grand Total

Observed Freq O Expected Freq E (O-E)2 (O-E)2/E

140 136 16 0.118

60 64 16 0.250

30 34 16 0.471

20 16 16 1.000

TOTAL 1.839

Calculated Chi-square value = 1.839

Table Chi-square value = 3.84

Since the calculated value is less than the table value, the null hypothesis is accepted.
Hence there is no significant difference between the new and conventional treatment.
128

2. Based on information on 1000 randomly selected fields about the tenancy status of
cultivation of these fields and use of Fertilizers, collected in an agro-economic survey.
The following classification was noted.

Fertilizers Owned Rented Total

Used 416 184 600

Not Used 64 336 400

Total 480 520 1000

Would you conclude that owner cultivators are more inclined towards the use of fertilizers?

Solution

Null Hypothesis: Ownership of fields and use of fertilizers are independent.

O E (O-E)2 (O-E)2/E

416 288 16384 56.889

64 192 16384 85.333

184 312 16384 52.513

336 208 16384 78.769

TOTAL 273.504

Calculated chi-square value = 273.504

Table Value = 3.84

Null hypothesis is rejected. Hence Owners cultivators are more inclined towards use of
fertilizers.
 129

3. Three samples below have been obtained from normal population with equal variances.
Test the hypothesis that the sample means are equal.

8 7 12

10 5 9

7 10 13

14 9 12

11 9 14

Table Value of F at 5% level of significance is 3.88.

Solution

Null Hypothesis: There is no significant difference in the means of three samples.

Mean of first sample = 8+10+7+14+11 / 5 = 10

Mean of second sample = 7+5+10+9+9 /5 =8

Mean of third sample = 12+9+13+12+14 /5 = 12

Grand Average = (Sum of all samples) / N = (10+8+12) /3 = 10

Variance between samples

(I Sample Mean- (II Sample Mean- (III Sample Mean-

Grand Average)2 Grand Average)2 Grand Average)2

0 4 4

0 4 4

0 4 4

0 4 4

0 4 4

0 20 20
130

Sum of squares between samples = 0+20+20 = 40

Variance within Samples

(I Sample- (I Sample- (II Sample- (II Sample- (III Sample – (III Sample –
I Sample I Sample II Sample II Sample III Sample III Sample
Mean) Mean)2 Mean) Mean)2 Mean) Mean)2

(-2) 4 (-1) 1 0 0

0 0 (-3) 9 (-3) 9

(-3) 9 2 4 1 1

4 16 1 1 0 0

1 1 1 1 2 4

30 16 14

Sum of Squares within Samples = 30-+16+14 = 60

Source of Variation Sum of Squares Degrees of Freedom Mean Square

Between 40 2 20
Within 60 12 5

Total 100 14

F = 20/5 = 4

Calculated F Value = 4

Table F Value = 3.88

Since the Calculated F value as is greater than table value, null hypothesis is rejected.

4. The following table gives the number of refrigerators sold by 4 salesmen in three months
May, June and July 2018.
 131

Salesmen
Month
A B C D

May 50 40 48 39

June 46 48 50 45

July 39 44 40 39

Is there a significant difference in the sales made by the four salesmen?

Is there a significant difference in the sales made during different months?

Solution

Null hypothesis 1: There is no significant difference in the sales made by four salesmen.

Null hypothesis 2: There is no significant difference in the sales made during different months.

Month Salesmen Total

A B C D

May 10 0 8 (-1) 17

June 6 8 10 5 29

July (-1) 4 0 (-1) 2

Total 15 12 18 3 48

To facilitate computations, let us deduct 40 from each given value.

Correction Factor = CF = (Total) 2 /N = (48)2/12 = 192

Sum of squares between the salesmen = (15)2/3 + (12)2/3 + (18)2/3 + (3)2/3 - 192

= 75 +48 + 108 + 3 + 192

= 42

Sum of squares between the months= (17)2/4 + (29)2/4 + (2)2/4 - 192

= 72.25 + 210.25 + 1 – 192 = 91.5

132

Total Sum of squares = (102 + 62 + (-1)2 + 02 +82 + 42 + 82 + 102 + 02 + (-1)2 +

(5)2 + (-1)2 ) - 192 = 100 + 36 + 1 + 64 + 16 + 64 + 100 + 1 + 25 + 1 – 192 = 216

ANOVA TABLE

Source of Sum of Degrees Mean

Variation Squares of Freedom Sum of Square

Between Salesmen 42.5 3 14

Between Months 91.5 2 45.75

Residual 82.5 6 13.75

Total 216 11

F (Salesmen) = 14 /13.75 = 1.018

The table value of F at 5% for (3, 6) degrees of freedom is 4.76

Since the calculated value is less than the table value, the null hypothesis is accepted.

F (months) = 45.75 / 13.75 = 3.33

The table value of F at 5% for (2, 6) degrees of freedom is 5.14.

Since the calculated value is less the table value, the null hypothesis is accepted.

5. To test the significance of variations of the retail prices of a commodity in three cities
Mumbai, Calcutta and Delhi, four shops are chosen at random in each city and prices
observed in rupees were as follows:

Cities Shop A Shop B Shop C Shop D

Mumbai 16 8 12 14

Calcutta 14 10 10 6

Delhi 4 10 8 8

Do the data indicate that the prices in three cities are significantly different?
 133

Solution:

Null Hypothesis: There is no significant difference in the prices in three cities.

I Sample mean = 12.5

II Sample mean = 10

III Sample mean = 7.5

Grand Average = 10

Variance between samples

(I Sample Mean- (II Sample Mean- (III Sample Mean-

Grand Average)2 Grand Average)2 Grand Average)2

6.25 0 6.25

6.25 0 6.25

6.25 0 6.25

6.25 0 6.25

Total 25 0 25

Sum of Squares between Samples = 25+0+25 = 50

Variance within samples

(I Sample - (II Sample - (III Sample -

2 2
I Sample Mean) II Sample Mean) III Sample Mean)2

12.25 16 12.25

20.25 0 6.25

0.25 0 0.25

2.25 16 0.25

Total 35 32 19

Sum of Squares within Samples = 35-+32+19 = 86

134

ANOVA TABLE

Source of Variation Sum of Squares Degrees of Freedom Mean Square

Between 50 2 25.0

Within 86 9 9.56

Total 136 11

F = 25/9.56 = 2.62

Table F values for (2,9) degrees of freedom is 4.26

Since the calculated value is less than the table value, null hypothesis is accepted.

10.6 Summary
Chi square distribution is the family of curves with each distribution defined by the degree
of freedom associated to it. Chi-square test is very popular as a goodness of fit test. It enables
us to ascertain whether the known probability distributions fit with an actual sample distribution.
It is also used as a test of independence and test of homogeneity.

ANOVA is a technique of testing a hypothesis about the significant difference in several

population means. In one way classification, the total variation in the sample data can be
divided into two components, namely variance between the samples and variance within the
Samples. In the two way classification of ANOVA, we have one more variation called residual
variation.

10.7 Key Words

 Chi Square Test

 One Way ANOVA

 Two Way ANOVA

10.8 Review Questions

1. A Company has three manufacturing plants and the company officials went to
determine whether there is a difference in the average age of workers at the three locations.
 135

The following data are the ages of five randomly selected workers at each plant. Perform a
one-way analysis of variance to determine whether there is a significant difference in the mean
ages of the workers at the three plants. Use a = 0.01 and note that the sample sizes are equal.

Plant (Employee ages)

1 2 3

29 32 25

27 33 24

30 31 24

27 34 25

28 30 26

2. A Milk Company has four machines that fill gallon jugs with milk. The quality control
manager is interested in determining whether the average fill for these machines is the
same. The following data represent random samples of fill measures (in quarts) for 19
jugs of milk filled by the different machines. Use a = 0.05 to test the hypotheses. Discuss
the business implications of your findings.

Machines

1 2 3 4

4.05 3.99 3.97 4.00

4.01 4.02 3.98 4.02

4.02 4.01 3.97 3.99

4.01 3.99 3.95 4.01

4.00 4.00

4.00
136

10.9 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 137

LESSON-11
FACTOR ANALYSIS AND
DISCRIMINANT ANALYSIS
Learning Objectives

After reading this lesson, you should be able to

 Describe the uses of factor analysis
 State conditions under which a factor analysis could be carried out.
 Outline the steps involved in a factor analysis exercise.
 Explain the concepts and statistics associated with factor analysis with the help of
an example.
 List out the purpose of discriminant analysis
 Discuss the concepts and statistics associated with discriminant analysis using a
illustration
 Explain the methods of assessing the classification accuracy of the method
 Judge the out-of-sample performance of the discriminant model.

Structure
11.1 Introduction
11.2 Factor Analysis
11.3 Uses of Factor Analysis
11.4 Conditions for Factor Analysis
11.5 Discriminant Analysis
11.6 Objectives of Discriminant Analysis
11.7 Uses of Discriminant Analysis
11.8 Steps for Discriminant Analysis
11.9 Summary
11.10 Key Words
11.11 Review Questions
11.12 Suggested Readings
138

11.1 Introduction
Multivariate statistical techniques include Factor Analysis, Discriminant Analysis, Cluster
Analysis, Conjoint Analysis, Multiple Regression and Multidimensional Scaling. In this lesson
let us explain both factor analysis and Discriminant Analysis

11.2 Factor Analysis

Factor analysis is a multivariate statistical technique in which there is no distinction between
dependent and independent variables. It is used to uncover the latent structure or dimensions
of a set of variables; it reduces attribute space from a larger number of variables to smaller
number of factors of variables to smaller number of factors. Factor analysis is developed by
Charles Spearman. He made an attempt to show that a wide variety of mental test could be
explained by a single intelligence factor. It is part of the general linear model family of procedure
and makes many of the same assumptions as multiple regressions, but it uses multiple outcomes.
It involves several dimensions. They are:

 Factor and component

 Exploratory and confirmatory factor analysis

 Extraction

 Factory loading

 Eigen value and scree plot

 Scale reliability

 Sample size considerations

11.3 Uses of Factor Analysis

 Scale Construction

Factor analysis could be used to develop concise multiple item scales for measuring
various constructs. It can reduce the set of statements to a concise instrument and at the same
time, ensure that the retained statements adequately represent the critical aspects of the
constructs being measured. Suppose we want to prepare a multiple item scale for measuring
the job satisfaction of skilled workers in a organization. As the first step, we would generate a
large number of statements, numbering say 100 or so as part of exploratory research. These
 139

statements could be subjected to factor analysis and let us assume that we get three factors
out of it. Now, if we want to construct a 15-item scale to measure job satisfaction, what could be
done is to separate five items in each of the factors having the highest factor loading. This way,
a 15-item scale to measure job satisfaction could be developed.

 Establish Antecedents

This method reduces multiple input variables into grouped factors. Thus, the independent
variables can be grouped into broad factors. For example, all the variables that measure the
safety clauses in a mutual fund could be reduced to a factor called safety clause. Thus, the
company could know about the broad benefit that a investor seeks in a fund.

 Psychograpic Profiling

Different independent variables are grouped to measure independent factors. These are
then used for identifying personality types. One of the most well known inventories based on
this technique is called the 16 PF inventory.

 Segmentation Analysis

Factor analysis could also be used for segmentation. For example, there could be different
sets of two-wheelers-customers owning two wheelers because of different importance they
give to factors like prestige, economy consideration and functional features.

 Marketing Studies

The technique has extensive use in the field of marketing and can be successfully used
of new product development; product acceptance research, developing of advertising copy,
pricing studies and for branding studies. For example we can use it to:

 identify the attributes of brands that influence consumer’s choice;

 get a insight into the media habits of various consumers;

 identify the characteristics of price-sensitive customers.

11.4 Conditions for Factor Analysis

140

The following conditions must be met for proper execution of factor analysis

 Availability of Metric Data (Only Interval or ratio scale)

 Responses should be standardized.

 Initial set of variables should be highly correlated.

Factor analysis is a “search” technique. The researcher-decision maker does not typically
have a clear a priori structure of the number of factors to be identified. Cut off points with
respect to stopping rules for the analysis is often ad hoc as the output becomes available. Even
where the procedures and rules are stipulated in advance, the results are more descriptive than
inferential.

The term “factor analysis” embraces a variety of techniques. Our discussion focuses on
one procedure: principal component analysis and the factors derived from the analysis are
expressed as linear equations. These linear equations are of the form

Fi = a1ix1+ a2ix2+ a3ix3 +…………………………………+amixn

The “i” factors are derived, and each variable appears in each equation. The a- coefficients
indicate the importance of each variable with respect to a particular factor coefficient of zero
indicating the variable is of no significance for that factor. In principal component analysis; the
factors are derived sequentially, using criteria of maximum reduction in variance and non-
correlation among factors

Example

A manufacturer of fabricating parts is interested in identifying the determinants of a

successful salesperson. The manufacturer has on file the information shown in the following
table. He is wondering whether he could reduce these seven variables to two or three factors,
for a meaningful appreciation of the problem.

Data Matrix for Factor Analysis of seven variables (14 sales people)
 141

Sales (x1) (x2) Education Age No. of Size of IQ

Person Children household
(x3) (x4) (x5) (x6) (x7)

1 67 155 12 27 0 2 102

2 69 175 11 35 3 6 92

3 71 170 14 32 1 3 111

4 70 160 16 25 0 1 115

5 72 180 12 36 2 4 108

6 69 170 11 41 3 5 90

7 74 195 13 30 1 2 114

8 68 160 16 32 1 3 118

9 70 175 12 45 4 6 121

10 71 180 13 24 0 2 92

11 66 145 10 39 2 4 100

12 75 210 16 26 0 1 109

13 70 160 12 31 0 3 102

14 71 175 13 43 3 5 112

Can we now collapse the seven variables into three factors? Intuition might suggest the
presence of three primary factors : A maturity factor revealed in age/children/size of household,
physical size as shown by height and weight, and intelligence or training as revealed by education
and IQ,

The sales people data have been analysed by the SAS or SPSS program. This program
accepts data in the- original units, automatically transforming them into standard scores. The
142

three factors derived from the sales people data by a principal component analysis (SAS or
SPSS program) are presented below

Three factor results with seven variables.

Sales people characteristics Factor

Variable I II III Communality

Height 0.59038 0.72170 - 0.30331 0.96140

Weight 0.45256 0.75932 -0.44273 0.97738

Education 0'.80252 0.18513 0.42631 0.86006

Age -0.86689 0.41116 0.18733 0.95564

No. of children -0.84930 0.49247 0.05883 0.96730

Size of household -0.92582 0.30007 - 0.01953 0.94756

IQ 0.28761 0.46696 0.80524 0.94918

Sum of squares 3.61007 1.85136 1.15709

Variance summarised 0.51572 0.26448 0.16530 0.94550

Factor Loadings: The coefficients in the factor equations are called “factor loadings”
They appear above in each factor column, corresponding to each variable. The equations are

F1 = 0.59038x1 + 0.45256x2 + 0.80252x3 - 0.86689x4 - 0.84930x5 - 0.92582x6 + 0.28761x7

F2 = 0.72170x1 + 0.75932x2 + 0.18513x3 + 0.41116x4+ 0.49247x5 + 0.30007x6 + 0.46696x7

F3 = - 0.30331x1- 0.44273x2 + 0.42631x3 + 0.18733x4 + 0.5883x5 - 0.01953x6 + 0.80524x7

The factor loadings depict the relative importance of each variable with respect to a
particular factor. In all the three equations, education (x3) and IQ (x7) have got positive loading
factor indicating that they are variables of importance in determining the success of sales person.
 143

Variance Summarised: Factor analysis employs the criterion of maximum reduction of

variance -variance found in the initial set of variables. Each factor contributes to reduction. In
our example Factor I accounts for 51.6 per cent of the total variance. Factor II for 26.4 per cent
and Factor III, for 16.5 per cent. Together the three factors “explain” almost 95 per cent of the
variance.

Communality: In the ideal solution the factors derived will explain 100 per cent of the
variance in each of the original variables; “Communality” measures the percentage of the variance
in the original variables that is captured by the combination of factors in the solution. Thus
communality is computed for each of the original variables, each variable communality might
be thought of as showing the extent to which it is revealed by the system of factors. In our
example the communality is over 85 per cent for every variable. Thus the three factors seem to
capture the underlying dimensions involved in these variables.

There is yet another analysis called varimax rotation, after we get the initial results. This
could be employed if needed by the analyst.

In the concluding remarks, it should be mentioned that there are two important subjective
issues which should be properly resolved before employing factor analysis model. They are

1. How many factors should be employed in attempting to reduce the data? What
criteria should be used in establishing that number?

2. The labelling of the factors is purely intuitive and subjective.

11.5 Discriminant Analysis

Discriminant analysis is used to predict group membership. This technique is used to
classify the sample into two or more categories. Discriminant function analysis is used to
determine which variables discriminate between two or more naturally occurring groups. The
objectives of two group discriminant analysis is to find a linear composite of the predictor variable
to help the analyst to separate the groups, establishing, procedures for assigning new individuals,
testing for significant differences between the means predictor variables and determining the
variables which accounts for the most inter-group differences. Discriminant analysis is a
classification problem, where two or more groups or clusters or populations are known a priori and
one or more new observations are classified into one of the known populations based on the
measured characteristics.
144

11.6 Objectives of Discriminant Analysis

 To estimate the percentage of respondents that the discriminant model is able to
classify correctly

 To determine the statistical significance of the discriminant function.

 To find out which of the predictor variables are relatively better in discriminating
between the groups

 To classify a new respondent into one of the two groups by building a decision rule
and a cut-off score.

11.7 Uses of Discriminant Analysis

 Scale Construction

 Segment Discriminantion

 Perpetual Mapping

Example : Swiss Bank Notes

Let us consider a bank note with the following measurements:

Variable Measurement

Length 214.9

Left Width 130.1

Right Width 129.9

Bottom Margin 9.0

Top Margin 10.6

Diagonal 140.5

Any number of lines of measurements may be considered. Here we are just interested in
one set of measurements. It is requested that this bank note be classified as real or genuine.
The posterior probability that it is fake or counterfeit is only 0.000002526. So, the posterior
probability that it is genuine is very close to one (actually, this posterior probability is 1 -
 145

0.000002526 = 0.999997474). We are nearly 100% confident that this is a real note and not
counterfeit.

Next consider the results of cross validation. Note that cross validation yields estimates of
the probability that a randomly selected note is correctly classified. The resulting confusion
table is as follows:

Classified As

Truth Counterfeit Genuine Total

Counterfeit 98 2 100

Genuine 1 99 100

Total 99 101 200

Here, we can see that 98 out of 100 counterfeit notes are expected to be correctly classified,
while 99 out of 100 genuine notes are expected to be correctly classified. Thus, the estimated
misclassification probabilities are estimated to be:

^p (real | fake) =0.02p^ (real | fake) =0.02 and ^p (fake | real) =0.01p^ (fake | real)=0.01

The question remains: Are these acceptable misclassification rates?

A decision should be made in advance as to what would be the acceptable levels of error.
Here again, you need to think about the consequences of making a mistake. In terms of classifying
a genuine note as a counterfeit, one might put an innocent person in jail. If you make the
opposite error you might let a criminal go free. What are the costs of these types of errors? And,
are the above error rates acceptable? This decision should be made in advance. You should
have some prior notion of what you would consider reasonable.

11.8 Steps for Discriminant Analysis

Discriminant analysis is a 7 step procedure:

Step 1: Collect training data.

146

Training data are data with known group memberships. Here, we actually know which
population contains each subject. For example, in the Swiss Bank Notes, we actually know
which of these genuine notes are and which others are counterfeit examples.

Step 2: Prior Probabilities:

The prior probability pi represents the expected portion of the community that belongs to

population ði. There are three common choices:

1
1) Equal priors: p̂i  This is useful if we believe that all of the population sizes are
g
equal.

2) Arbitrary priors selected according to the investigators beliefs regarding the relative
population sizes. Note that we require:

p̂1  p̂ 2  .....  p̂ g  1

i
3) Estimated priors: p̂i 
N

where n i is  the  number  observations  from  population  ð i in  the  training  data,
and N = n1 + n2 + ... + ng    

Step 3: Use Bartlett’s test to determine if the variance-covariance matrices are

homogeneous for all populations involved. The result of this test will determine whether to use
Linear or Quadratic Discriminant Analysis.

Case 1: Linear discriminant analysis is for homogeneous variance-covariance matrices:

1   2  .....   g  

In this case the variance-covariance matrix does not depend on the population.

Case 2: Quadratic discriminant analysis is used for heterogeneous variance-covariance
matrices:

i  j  for some  i  j

This allows the variance-covariance matrices to depend on the population.

 147

(We do not discuss testing whether the means of the populations are different. If they are
not, there is no case for DA)

Step 4: Estimate the parameters of the conditional probability density functions

f ( X |  i ). Here, we shall make the following standard assumptions:

1. The data from group i has common mean vector   i

2. The data from group i has common variance-covariance matrix   .

3. Independence: The subjects are independently sampled.

4. Normality: The data are multivariate normally distributed.

Step 5: Compute discriminant functions. This is the rule to classify the new object into
one of the known populations.

Step 6: Use cross validation to estimate misclassification probabilities.

As in all statistical procedures it is helpful to use diagnostic procedures to asses the

efficacy of the discriminant analysis. We use cross-validation to assess the classification
probability. Typically  you  are  going  to  have  some  prior  rule  as  to  what  is  an acceptable
misclassification rate. Those rules might involve things like, “what is the cost of misclassification?”
This could come up in a medical study where you might be able to diagnose cancer. There are
really two alternative costs. The cost of misclassifying someone as having cancer when they
don’t. This could cause a certain amount of emotional grief! There is also the alternative cost of
misclassifying someone as not having cancer when in fact they do have it. The cost here is
obviously greater if early diagnosis improves cure rates.

Step 7: Classify observations with unknown group memberships.

The procedure described above assumes that the unit or subject being classified actually
belongs to one of the considered populations. If you have a study where you look at two species
of insects, A and B, and the insect to classify actually belongs to species C, then it will obviously
be misclassified as to belonging to either A or B.

11.9 Summary
Factor analysis is a multivariate statistical technique in which there is no distinction between
dependent and independent variables. It is used to uncover the latent structure or dimensions
148

of a set of variables, it reduces attribute space from a larger number of variables to smaller
number of factors, of variables to smaller number of factors. Factor analysis is developed by
Charles Spearman. The uses of fact analysis and conditions are also explained in this lesson.
Discriminant analysis is used to predict group membership. This technique is used to classify
the sample into two or more categories. Discriminant function analysis is used to determine
which variables discriminate between two or more naturally occurring groups. The steps for
Discriminant analysis is also explained in this lesson.

11.10 Key Words

 Factor Analysis

 Discriminant Analysis

11.11 Review Questions

1. What is factor analysis?

2. What are the applications of factor analysis?

3. Explain the steps in Discriminant analysis?

11.12 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 149

LESSON 12
CLUSTER AND CONJOINT ANALYSIS
Learning objectives

After reading this lesson, you should be able to,

 Importance of Cluster Analysis in today’s market conditions

 Inputs for cluster analysis

 Different approaches to cluster analysis

 Understand the concept and need of conjoint analysis

 Explain the steps involved in conjoint analysis

 Application of Conjoint Analysis

Structure
12.1 Introduction

12.2 Cluster analysis

12.3 Steps in Cluster Analysis

12.4 What is our objective with this data?

12.5 Random assignment

12.6 Leader Algorithm

12.7 Conjoint Analysis- Introduction

12.8 Steps in the application of conjoint analysis

12.9 Conjoint Analysis applications

12.10 Summary

12.11 Key Words

12.12 Review Questions

12.13 Suggested Readings

150

12.1 Introduction
In the previous lesson, the topics such as factor analysis and discriminant analysis were
explained. In this lesson, let us explain the procedure to follow Cluster analysis and Conjoint
Analysis.

12.2 Cluster analysis

Cluster analysis is a data exploration (mining) tool for dividing a multivariate dataset into
“natural” clusters (groups). We use the methods to explore whether previously undefined clusters
(groups) exist in the dataset. For instance, a marketing department may wish to use survey
results to sort its customers into categories (perhaps those likely to be most receptive to buying
a product, those most likely to be against buying a product, and so forth).

Cluster Analysis is used when we believe that the sample units come from an unknown
number of distinct populations or sub-populations. We also assume that the sample units come
from a number of distinct populations, but there is no apriori definition of those populations. Our
objective is to describe those populations with the observed data.

Cluster Analysis, until relatively recently, has had very little interest. This has changed
because of the interest in bioinformatics and genome research. We will use an ecological
example in our lesson.

12.3 Steps in Cluster Analysis

The cluster analysis program that is run on the computer identifies the different groups
(clusters) or respondent groups such that the members. of any one • group(cluster) are similar
to each other, but different from the respondents in the other groups. The computer program for
cluster analysis searches through the answers that the respondents give to the various questions
in the questionnaire, and groups together those respondents who have given identical ox almost
similar answers of ascertain combination of the questions. These respondents whose answers
are similar are formed into one cluster. The procedure is then continued till more’ cluster are
formed.

Example: Woodyard Hammock Data

We illustrate the various methods of cluster analysis using ecological data from Woodyard
Hammock, a beech-magnolia forest in northern Florida. The data involve counts of the numbers
 151

of trees of each species in n = 72 sites. A total of 31 species were identified and counted,
however, only p = 13 of the most common species were retained and are listed below. They
are:

carcar Carpinuscaroliniana Ironwood

corflo Cornusflorida Dogwood

faggra Fagusgrandifolia Beech

ileopa Ilex opaca Holly

liqsty Liquidambar styraciflua Sweetgum

maggra Magnolia grandiflora Magnolia

nyssyl Nyssa sylvatica Blackgum

ostvir Ostryavirginiana Blue Beech

oxyarb Oxydendrumarboreum Sourwood

pingla Pinusglabra Spruce Pine

quenig Quercusnigra Water Oak

quemic Quercusmichauxii Swamp Chestnut Oak

symtin Symplocustinctoria Horse Sugar

The first column gives the 6-letter code identifying the species, the second column
gives its scientific name (Latin binomial), and the third column gives the common name for
each species. The most commonly found of these species were the beech and magnolia.

12.4 What is our objective with this data?

We hope to group sample sites together into clusters that share similar species
compositions as determined by some measure of association. There are several options to
measure association. Two common measures are listed below:
152

1. Measure of Association between Sample Units:  We need some way to measure how

similar two subjects or objects are to one another. This could be just about any type of measure
of association. There is a lot of room for creativity here. However, SAS only allows Euclidean
distance (defined later).

2. Measure of Association between Clusters: How similar are two clusters? There are
dozens of techniques that can be used here.

Many different approaches to the cluster analysis problem have been proposed. The
approaches generally fall into three broad categories:

 1. Hierarchical methods:
 In agglomerative hierarchical algorithms, we start by defining each data point
as a cluster. Then, the two closest clusters are combined into a new cluster. In each
subsequent step, two existing clusters are merged into a single cluster.

 In divisive hierarchical algorithms, we start by putting all data points into a single
cluster. Then we divide this cluster into two clusters. At each subsequent step, we
divide an existing cluster into two clusters.

Note 1: Agglomerative methods are used much more often than divisive methods.

Note 2: Hierarchical methods can be adapted to cluster variables rather than observations.
This is a common use for hierarchical methods.

2. Non-hierarchical methods:
 In a non-hierarchical method, the data are initially partitioned into a set of K clusters.
This may be a random partition or a partition based on a first “good” guess at seed
points which form the initial centers of the clusters. Then data points are iteratively
moved into different clusters until there is no sensible reassignment possible. The
initial number of clusters (K) may be specified by the user or by the software algorithm.

 The most commonly used non-hierarchical method is MacQueen’s K-means

method.

3. Model based methods:

 A model based method uses a mixture model to specify the density function of
the x-variables. In a mixture model, a population is modeled as a mixture of different
 153

subpopulations, each with the same general form for its probability density function
and possibly different values for parameters, such as the mean vector. For instance,
the model may be a mixture of multivariate normal distributions. In cluster analysis,
the algorithm provides a partition of the dataset that maximizes the likelihood function
as defined by the mixture model. We won’t cover this method any further in this
course unit.

Defining Initial Clusters

12.5 Random assignment

The first approach is to assign the clusters randomly. This does not seem like it would be
a very efficient approach. The main reason to take this approach would be to avoid any bias in
this process.

12.6 Leader Algorithm

The second approach is to use a Leader Algorithm. (Hartigan, J.A., 1975, Clustering
Algorithms). This involves the following procedure:

Step 1. Select the first item from the list. This item forms the centroid of the initial cluster.

Step 2. Search through the subsequent items until an item is found that is at least distance
ä away from any previously defined cluster centroid. This item will form the centroid of the next
cluster.

Step 3: Step 2 is repeated until all K cluster centroids are obtained or no further items can

be assigned.

Step 4: The initial clusters are obtained by assigning items to the nearest cluster centroids.

The following view let illustrates this procedure for k =  4 clusters  and p = 2  variables
plotted in a scatter plot:
154

12.7 Conjoint Analysis- Introduction

Conjoint Analysis is basically a data decomposition technique which tries to plot the output
data on the joint space of the importance of each attribute are the attribute. It seeks data from
the consumers in the form of their overall response to the totality of products (or their descriptions)
while the output is in terms of the scores that the consumer has implicitly assigned to each of
the attribute and its levels.

The important thing to note is that the consumer is not asked to assign scores to different
attributes separately. In fact, the consumer is presented the stimulus in the form of totality of the
product like in the case of MD S. However, there is one difference between and Conjoint Analysis.
In Conjoint Analysis, the stimuli are created by the researcher himself while in the case of
PODS already existing products or brands are used.

Conjoint Analysis derives the importance weights (called “part worth utilities”) assigned
by each consumer to respective levels of attributes in such a way that they are directly
comparable. This feature of the technique allows to determine the trade- offs that the consumers
make in their minds. The relative importance of the attributes can also be derived from the
output of “part worth utilities”. Thus, starting with a very simple input data (just the ranking of
 155

some predesigned product alternatives) Conjoint Analysis provides the part worth utilities for
each of the product attributes levels for every consumer individually

12.8 Steps in the Application of Conjoint Analysis

The main steps involved in the application of Conjoint Analysis are following:

1. Determination of the salient attributes for the given product from the points of view
of the consumers

2. Assigning a set of discrete levels or a range of continuous values to each of the

attributes.

3. Utilising Fractional Factorial Design of Experiment for designing the stimuli for
experiment.

4. Physically designing the stimuli

5. Ranking or Rating data collection

6. Conjoint analysis and determination of part worth utilities.

7. Applying conjoint analysis output for different marketing decisions

8. Identification of Salient Attributes

Unlike MDS or Factor Analysis, Conjoint Analysis requires the salient attributes to be
given. These attributes can be selected based on the marketer’s experience, depth interviewing
or focussed group discussions. In some cases Factor Analysis or MDS may also be used for
labelling the salient factors. Only those attributes should be selected here around which
differences do exist among brands or through which future differentiations can be achieved.
For, if it is not possible to differentiate products along any particular attribute, the managerial
value of that attribute becomes very low.

1. Assignment of levels to selected attributes

The real products can be described as specific combinations of the attributes where each
attribute can take different values. Sometimes the attribute can take only discrete values.
Examples of such attributes may be brand name, colour of the product or the nature of technology
used. Out of the entire range of values that may be theoretically possible, the marketer may
choose only a few for his active consideration. For example, soap can technically be produced
in all colors. But, some colors, like dark black, may be ruled out.
156

Some attributes, like price or life of the product, may take continuous values. Conjoint
Analysis can treat them or like that also. Some range of values may be specified for them or the
range may be kept open ended.

2. Fractional Factorial Design of experiment

In Conjoint Analysis the profile of different products are presented to the consumers for
their responses. These profiles are generated by varying the levels of its attributes. For example,
suppose we are conducting a Conjoint Analysis based study of dish washers. Let us assume
that the most important attributes considered by its customers are Brand, Price, Washing
Capacity, Colour and Shape. Let us further assume that the following levels of attributes are
considered relevant and interesting by the marketer for the study:

Sl. No Attribute Levels

1. Brand Kitchen Master Elegant Torrent Evermaid

2. Price Rs. 15,000/- Rs. 20,000/- Rs. 25,000/-

3. Washing Capacity High Medium Low

4. Color Steel grey White Light Blue Pink

5. Shape Cylindrical Box Type

Since the 5 attributes can take 4, 3, 3, 4 and 2 levels, the total number of possible product
concepts that can be generated by configuring these attributes is 4x3x3x4x2= 288. In order to
determine the part worth utilities of each of the levels, of all these attributes, we shall have to
take 288 different product concepts for getting his responses. This number is certainly too large
for any consumer. Therefore, we resort to the method of Fractional Factorial Design of Experiment
to make it manageable.

The statistical technique of Fractional Factorial Design of Experiment finds out the minimum
number of product designs which are necessary to use in the study and yet provide us all the
information that we originally sought. These designs are also mutually independent (orthogonal)
to avoid any redundancy in the data and allow the representation of each of the attributes and
their respective levels in an unbiased manner.

In the example of dish washer considered here, this technique has given us only 16
designs out of the 288 possible dish washers. However, it should be noted that such reduction
in number of product designs is possible only after making certain assumptions. For example,
 157

we had assumed that none of the attributes interact among themselves. Or in other words, the
attributes are considered to be independent of each other. Only under this assumption we got
the number of product concepts as 16. At the other end, if we would have allowed all the
attributes to interact with each other the required number of product concepts would have
remained as 288. With different types of assumptions the number of concepts required would
be in between these extremes.

The 16 product concepts found through this method are not unique. Many other sets of
16 cards would have also been, equally good. However, all of these sets would have to be
independent and represent all the attributes and their respective levels in an unbiased manner.
We are illustrating below one such set of 16 cards representing the product concepts of dish
washers using Fractional Factorial Design of Experiment.

Card # Brand Price Cap. Colour Shape

Card 1 Kit Master Rs. 15,000 High St. Grey Cylinder

Card 2 Elegant Rs.25,000 Medium St. Grey Box Type

Card 3 Torrent Rs.20,000 Medium St. Grey Box Type

Card 4 Ever Maid Rs.20,000 Low St. Grey Cylinder

Card 5 Kit Master Rs.20,000 Medium St. Grey Box Type

Card 6 Elegant Rs.20,000 Low White Cylinder

Card 7 Torrent Rs.25,000 High White Cylinder

Card 8 Ever Maid Rs.15,000 Medium White Box Type

Card 9 Kit Master Rs.25,000 Low Light B1 Box Type

Card 10 Elegant Rs.15,000 Medium Light B1 Cylinder.

Card 11 Torrent Rs.20,000 Medium Light B1 Cylinder.

Card 12 Ever Maid Rs.20,000 High Light B1 Box Type

Card 13 Kit Master Rs.20,000 Medium Pink Cylinder

Card 14 Elegant Rs.20,000 High Pink Box Type

Card 15 Torrent Rs.15,000 Low Pink Box Type

Card 16 Ever Maid Rs.25,000 Medium Pink Cylinder

158

4. Physical design of stimuli

After selecting the product concepts required for the Conjoint Analysis study, they need to
be exposed to the consumers as stimuli. This may be done in a variety of ways mainly depending
on the demands of the situation and the convenience of the researcher. Of course, it would be
most desirable to present real life prototypes of the products according to the product concepts
specified. These, may be given to the consumers for their usage or trials. But, such extreme
ways of presenting the products may not always be possible or even necessary. In such cases,
product models, diagrams or even verbal descriptions may be adopted. In our example of dish
washers, it may not be possible to produce the 16 prototypes and take them to the consumers.
Just their models or pictures may be sufficient.

5. Data Collection

Ease of data collection is a key feature of Conjoint Analysis. The consumers are asked
only to assign rating scores to each of the product stimuli or even rank the different concepts
presented to them. This is quite, a realistic task and is close to the shopping experiences where
the customer merely makes choices. This feature of conjoint analysis is possible due to the use
of Fractional Factorial Design of Experiment before collection of data and the use of Conjoint
Analysis after collecting the data. In other words, the use of the technique eases the burden of
the respondents

6. Determination of part worth utilities

The rating or ranking data obtained from the consumers are analyzed next. Two methods
are more popular for this purpose. In one method, the part worth utilities for each of the levels
of each attributes are arbitrarily assigned. Based on these assumed values, consumers overall
rating or ranking (as the case may be) are estimated. These estimated responses may,
understandably, be quite different from the actual data.

After a few iterations convergence is achieved so that the part worth utilities found
approximate the estimate responses to the actual data best.

In the alternative method, the part worth utilities are derived in one step. Here, an error
function describing the difference between the estimated and actual data is defined. This function
is then minimized.
 159

After using any of the available method, the output is obtained for each of the respondent
separately. This is quite significant as the disaggregate data can be combined in any of the
desired way. But, if the output was only at the aggregate level then disaggregation might not
have been possible.

In our example of dish washer, the part worth utilities may be found for each of the attributes
and their levels as following:

Sl. No. Attribute Levels Part Worth Utility

1. Brand(25.4%) Kitchen Master 2.2

Elegant -2.3

Torrent -0.8

Evermaid 0.9

2. Price(66.2%) Rs. 15,000/- 5.9

Rs. 20;000/- -0.1

Rs. 25,000/- -5.8

3. Washing Capacity (4.9%) High 0.0

Medium 0.1

Low -0.1

4. Color(2:8%) Steel Grey -0.3

White -0.1

Light Blue 0.1

Pink 0.2

5 Shape(0.7%) Cylindrical -0.1

Box Type 0.1

From the above table, we find that price plays most important role (66.2%) in the minds of
customers. This is followed by Brand (25.4%), Washing Capacity (4.9%), Color (2.8%) and
Shape (0.7%). These relative importance values for the attributes have been found by finding
160

the difference between the maximum and minimum values of the part worth utilities of the
respective. attributes.

The relative importance of different attributes has been shown in figure 1 below.

Figure 1: Relative importance assigned by the customers by the

customers to attributes of dish washer

Customers respond quite predictably towards different price levels. They prefer lesser
price to the higher ones. Among brands, we find that Kitchen Master is the most liked brand and
Elegant is the least liked one. However, they do not prefer the “High” capacity most. They prefer
“Medium” size most. In terms of the color, they prefer “pink color” most. Between the two shapes,
box type dish washers are preferred more. But, the importance scores for the wash capacity,
color and shape themselves are quite low.

The part worth utilities of conjoint analysis can be represented graphically as shown in
the figure 2.

Figure 2: Part worth utilities assignment by the customers to different

attributes levels of dish washer
 161

Part Worm utility

Washing capacity

In the above figure, the part worth utilities for different attributes and their respective
levels have been shown along the common Y-axis. As a result, the part worth utilities become
comparable within as well as across different attributes: This way we can understand the trade-
offs that the consumers make.

The part worth utilities can now be added to determine the total utility for each of the
possible product concepts. This allows us to scan the consumer preference pattern for all of the
162

288 product concepts although he has been exposed to only 16 of them. We can now also rank
all of these 288 product concepts.

12.9 Conjoint Analysis applications

Calculation of the part worth utilities becomes just the starting point for many interesting
applications of conjoint analysis: The important ones among them are described next:

i. Optimum Product Design: Since all possible product concepts can be compared after
adding their respective attribute levels part worth utilities, it is possible to determine the demand
for different products out of any given set of available products in the marketplace. The demand
levels can be converted into profit figures as cost of producing and marketing can also be
calculated. These cost calculations are possible as the volume of operations and the features
of the products are now known. Thus, the optimum product can be chosen from the profits point
of view (or any of the other given management’s objective). Customer’s differential rates of
purchase of products are also duly considered at this stage.

Quite often, a manager may like to know the effects of slight change in any of the attribute
by his own company or the competitor’s. Conjoint Analysis allows this kind of “What if’ analysis
very easily with the data base of part worth utilities. In fact, different kinds of scenarios can be
simulated and the manager can optimize not only the product but other aspects of his marketing
strategy. Similarly, whenever there is any change in competitor’s actions or in the environment
a fresh scenario can be-drawn for simulation. Of course, the simulation shall be limited to the
attributes considered in the analysis. This feature does also help in increasing the shelf life of
the conjoint analysis output:

ii. Market segmentation: Since the Conjoint Analysis is done at the individual customer
level, the individual customer’s identity can be retained throughout the analysis. Thus, consumers
can be segmented according to their sensitivities to different product attributes.

It is also possible to identify the customers segments which would be attracted most
for the proposed product position. This helps in having a focussed matching between the chosen
product position and the target customer segment. It can also help in identifying that part of
competitor’s market which needs to be. poached for snatching market share from them. Similarly,
the same type of analysis can be done to identify the most vulnerable section of one’s own
market segment.
 163

Sometimes, an additional product offer appears to be quite attractive. But, this may be
at the cost of cannibalisation. Conjoint Analysis can help in estimating the effects of cannibalisation
as well. Thus, it helps in maximizing net profits of the organization.

iii. SWOT Analysis: First of all, the part worth utility of the brand itself can tell about the
relative brand strength. Similarly by looking at the other features of one’s own and competitor’s
offers Conjoint Analysis enables the marketers to conduct his detailed SWOT analysis.

iv. Estimating Customer Level Brand Equity: Conjoint Analysis is a good Conjoint
Analysis bridge between the consumer level perceptions and the financial worth of the offers.
This can be used for estimating the important parameter of brand equity at the consumer’s
level. There is scope of differentiating the “Loyal”, “Acceptors” and “Switchers” for more accurate
calculations of brand equity.

12.10 Summary
In this unit we have discussed about Conjoint Analysis, which is a multivariate analysis
technique introduced to the marketers in 1970’s. Conjoint Analysis is basically a data
decompositional technique which tries to plot the output data on the joint space of the importance
of each attribute. The important point to note is that the consumer is not asked to assign scores
to different attribute separately. The main steps involved in using conjoint analysis include
determination of the salient attributes for the given product from the points of view of the
consumer, assigning a set of discrete levels or a range of continuous values to each of the
attributes, utilizing traction factorial design of experiment for designing the stimuli for experiment,
physically designing the stimuli, data collection, conjoint analysis and determination of part
worth utilities. The possible application of conjoint analysis includes product design, market
segmentation, SWOT analysis etc.

12.11 Key Words

 Cluster Analysis

 Conjoint Analysis

12.12 Review Questions

1. Explain the steps in performing Cluster Analysis.

2. Explain the steps in performing Conjoint Analysis.

3. What are the applications of Conjoint Analysis?

164

12.13 Suggested Readings

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
 165

LESSON 13
MULTIPLE REGRESSION AND
MULTI-DIMENSIONAL SCALING
Learning objectives:

After reading this lesson, you should be able to,

 Explain Multiple Linear Regression

 List out the Points to consider for Multiple Regression

 Discuss Mulit-Dimensional Scaling Procedures

 Applications of Multi-Dimensional Scaling

Structure
13.1 Introduction

13.2 Multiple Linear Regression

13.3 Assumptions of the Model

13.4 Points to ponder on Multiple Regression Analysis

13.5 Multi-dimensional Scaling

13.6 Attribute Space - Objective Space and Perceived Space.

13.7 Applications of Multi-Dimensional Scaling in Marketing

13.8 Introduction to Statistical Software

13.9 Summary

13.10 Key Words

13.11 Review Questions

13.12 Suggested Readings

166

13.1 Introduction
Multiple Linear Regression and Multi Dimensional Scaling are covered in this lesson. An
introduction to Statistical software is also given in this lesson.

13.2 Multiple Linear Regression

Regression analysis is probably the most widely applied technique amongst the
analytical models of association used in marketing research. Regression analysis attempts to
study the relationship between a dependent variable and a set of independent variables (one or
more). For example, in demand analysis, demand is inversely related to price, for normal
commodities. We may write D = A - BP where D is the demand which is the dependent variable,
P is the unit price of the commodity, an independent variable. This is an example of a simple
linear regression equation. The multiple linear regressions model is the prototype of single
criterion/multiple predictor association model where we would like to study the combined influence
of several independent variables upon one dependent variable. In the above example if P is the
consumer price index, and q is the index of industrial production, we may be able to study
demand as a function of two independent variables P and Q and write D = A - BP + CQ as a
multiple linear regression model.

The objectives of the market researchers in using Regression Analysis are

1) To study a general underlying pattern connecting the dependent variable and

independent variables by establishing a functional relationship between the two. In
this equation the degree of relationship is derived which is a matter of interest to the
researcher in his study.

2) To use the well established regression equation for problems involving prediction
and forecasting.

3) To study how much of the variation in the dependent variable is explained by the set
of independent variables. This would enable him to remove certain unwanted
variables from the system. For example if 95% of variation in demand in a study
could be explained by price and consumer rating index, the researcher may drop
other factors like industrial production, extent of imports, substitution effect etc.
which may contribute only 5% of variation in demand provided all the causal variables
are linearly independent,
 167

We proceed by first discussing bi-variate (simple) regression involving the dependent

variables as a function of one independent variable and then on to multiple regression.

Simple linear regression model is given by

Y = 0 + 1X1 +€

where Y is the dependent variable,

X1 is independent variable

€ is a random error term

0 and 1 are the regression coefficients to be estimated.

13.3 Assumptions of the Model

1) The relationship between Y and Xi is linear.

2) Y is a random variable which follows a normal distribution from which sample values
are drawn independently.

3) X1 is fixed and is non-stochastic (non-random).

4) The means of all these normal distribution of Y as conditioned by X1 lie on a straight

line with slope pi.

5) ª is the error term HIND(0,á2) and independent of X1.

Multiple linear regression (MLR) is an extension of simple linear regression.

y = b0 + b1x1 + b2x2 + b3x3 + ...... + bkxk

The assumptions are exactly same as simple linear regression except that you add X 1,
X2, ………… Xk in the place of X1 because Y is linearly related to X1…………. Xk and our aim is
to understand the combined influence of the K factors X1, X2……………. Xk on Y. To understand
the concept clearly, let us study a case of 2 independent variables and write the model as

y = b 0 + b 1x 1 + b 2x 2

So that Y = a + bX1+ cX2 being the estimated regression equation where we add one
more independent variable X2 in the model. Suppose we extend the previous example of bivariate
168

regression on preference rating Vs protein (XI) by adding X2: the percentage of minimum daily
requirements of vitamin D per standard serving. Let us see how the multiple regression model
emerges to explain the variation in the dependent variable Y caused by X, and X2. Let us look
at the following table giving the data on Y, XI, and X2.

Rater Preference Protein Vitamin D

Rating Y X1 X2

1 3 4 2

2 7 9 7 “Y = 43

3 2 3 1 “X1=43

4 1 1 2 “X2=40

5 6 3 3

6 2 4 4 “YX1 = 247

7 8 9 “YX2 = 232

8 3 3 2 “X21=255

9 9 8 7 “X22=226

10 2 1 3 “X1X2 = 229

The normal equations are:

 Y = Na +  X1+ c  X2
 YX1=a  X1+b  X21+c  X1X2
 YX2 = a  X2 +b  X1X2 + c  X22
10a +43b+40c = 43

43a + 255b+229c = 247

40a + 229b+226c = 232

 169

Solving for a, b and c we have a=0.247, b=0.493, c = 0.484

Y= 0.247 + 0.493 X1 + 0.484 X2

Here b and c are called partial regression coefficients b = 0.493 denotes the change-in Y
per unit change in XI when X2 is held constant. Similarly c = 0.484 denotes the change in Y per
unit change in X2 when XI is held constant.

13.4 Points to Ponder on Multiple Regression Analysis

1) Equation should be validated statistically.

2) For forecasting the dependent variable, the independent variables should forecast
first.

For example if demand is a function of price index and production index Established by a
multiple regression model, then to forecast demand for the period, it is imperative first to
forecast the price index and production index and :then substitute them in the model to get the
forecast for demand. This is one of the limitations of regression forecasting.

3) When the variables become too many the analysis is complex and very often the
market researcher does not know which variables to retain. This problem could be
overcome by doing ‘stepwise regression’ on computer. For example if demand is a
function of 20 variables, we first fit demand equation with 3 important variables
which we think affect demand. Suppose R2 = 0.85 that is 85% of the variation in
demand is explained by these variables, we add another two more variables of
importance to make five independent variables. Now if R2= 0.95 we can as well
stop adding further variables as the contribution may not appreciably improve the
situation. We can thus visualise demand as a function of just 5 variables. The various
permutations of changing and adding variables is possible only with the help of a
computer. The important point to remember is that the cat off point for the number
of variables to be added should be based on the increase every time you get on R2.
The moment the increase is marginal, stop adding variables.

4) If the independent variables among themselves are highly correlated, then we are
facing the problem of ‘multi-co linearity’. Normally we say that the partial regression
coefficient-with respect to XI implies change in Y per unit change in XI provided X2,
X3…………..are held constant. This poses% serious problem if there is multi-co
170

linearity. One way to overcome multi-co linearity is to drop certain variables, from
the model if the corresponding standard error of regression coefficient is unduly
large. Another method is to see whether the original set could be transformed into
another linear composite so that the new variables are uncorrelated.

13.5 Multi-dimensional Scaling

Multi –dimensional scaling (MDS) technique or perceptual map or positioning map is a
multi- variate analysis technique that is particularly suitable for measuring human perceptions
and preference for products/brands. MDS is concerned with spatial representation of relationships
among behavioural data i.e., buyer perceptions and preferences.

MDS Fundamentals

a) Metric MDS

b) Non-Metric MDS

Consider the following geographic location of various cities in our country:

 171

The distance between various cities could be calculated and put in a tabular form as
follow

Figure 2 Distances in Kms.

Cities Bombay Pune Nasik Ahmedabad Delhi

Bombay

Pune

Nasik

Ahmedabad

Delhi

In short, it is a relatively simple matter to go from the map in figure I to the set of numerical
distances in figure 2.However, the converse or going form figure 2 to figure I is very difficult.
Given different objects and their attributes, every consumer perceives the objects in a different
manner. So, one has to first understand the perceptions (distance,-,) in the mind of the consumer
regarding products, brands, and plot a graphical representation for the same. The task is to
work backwards. That is, we would have to find out simultaneously; the number of dimensions
(can be more than two-dimension perceptual mapping)

Configuration (or patter4) of points in that perceptual space, so that their computed inter-
point distances most closely match the input data of figure 2. This is the problem of metric MDS.
Whenever input data is interval-scaled or ratio-scaled, it is called as Metric MDS.

The same input data in the format of figure 2 could be transformed into a rank- order.
Suppose we take the smallest distance between two cities- and give in the Rank 1.

Then we could arrange the remaining distances between cities in ascending order and
give it ranks from 2 onwards up to Rank 13 (e.g., largest distance could be between cities
Calcutta and Bombay on the map. We therefore find with this method.

Number of dimensions

Configuration (pattern) of points in that dimensionality, so that the ranks on their computed
inter-point distances most closely matched the ranks of the input data. This is the problem of
172

non-metric MDS. Whenever input data is in the form of nominal or ordinal form, it is called as
non-metric MDS.

Whichever method for MDS one select (metric; and non-metric MDS), it does not change
the relative distances of the points.

13.6 Attribute Space - Objective Space and Perceived Space

Any product or service can be visualized as composed of both objective and perceived
attributes and dimensions’. A company has an objective description of its product in physical or
chemical terms. Such an objective attribute ‘space’ in which various brands are viewed as
points positioned in space, will usually not agree with the buyers perception of the products.
The buyers perception about a product, service, company is a sum total of not only the company
which is selling the product, but also other factors in the market like competition, competitor’s
products Advertising, after- sales service etc.

Also note that the dimensions of perceived space need not be the same as, the objective
space. As an example, for many consumer goods that are highly individualistic items like tea,
coffee, toothpastes, perfumes, shampoos, -where strong individual preferences play a key role
in buying decisions, the objective space of the company and perceived space of the consumer
may be widely different. But in the case or industrial product, the perceived configuration of
brands may agree rather closely with an objectively constructed configuration in which
measurements of such characteristics as speed, reliability, and efficiency can be made rather
straightforwardly.

Ultimately, the view of the consumer is the most relevant one, as this is what would make
the consumer go out and buy a particular product/brand.

Example of Multi-Dimensional Scaling

A study was conducted in a leading business school (A) among the first year MBA students
to find out how other, business schools were ‘similar’ or ‘different from the ‘A’ business school.
Various attributes are used to evaluate a business school - faculty, faculty/student ratio, starting
salaries of the MBA students, physical facilities like library, computers, and so on. But which of
the attributes do students ‘actually’ use in making a competitive comparison between the business
schools?
 173

Let us consider six leading business schools in a place as A, B, C, D, E, F. Around hundred

students were given a questionnaire in which the students were asked to respond to the questions
which indicated various attributes of a management school, and students had to mark schools
that were similar/dissimilar on the different counts.

From the information that was gathered from the questionnaire and subjected to NOS
software program, what emerged was that course content and starting salary are the most
important criteria by which, students judge a business school.

The multi-dimensional scaling technique is therefore very useful in plotting the perceived
perception of the consumer about different brands/products/services. And this analysis could
be used by the marketing manager of a company for developing further marketing strategies.

13.7 Applications of Multi-Dimensional Scaling in Marketing

Some of the typical marketing applications that emerge from the MDS technique are

Market Segmentation

Market segmentation is the technique of trying to identify groups of consumers who exhibit
commonality of perception of products and preferences, One can use MDS techniques to identify
present perceptions of products by consumers, and use it modify the company’s product,
package, advertising, additional features, so that the product offering of the company moves
more and more closer to the ‘ideal’ requirement of the consumer.
174

Advertisement Evaluation

The MDS technique could be used at the stage of advertisement pre-testing. Once an
advertisement has been developed, it could ‘be tested for similarity/dissimilarity with other
advertisements in the same product category. As the ultimate objective of an advertisement is
to communicate, with the target consumer effectively, and this is possible only if the advertisement
is distinct in its message from the other competing advertisements,

Product Re-positioning Studies

If &-company is interested in re-positioning its product/service (in the mind of the consumer),
the first and foremost activity to be done is to assess the current perception of the product in the
mind of the consumer. The classic re-positioning case is that of Cadbury chocolates, which
kept on assessing its positioning platform, and successfully moved Chocolates from a product
perceived. as one for children, to a product which could be consumed by a person of any age,,
at any time, of the day, and for varied occasions.

New Product Development

MDS technique shows us the various perceived perceptions of the different brands. Spaces/
Gaps in the product perceptions could be used’ to, develop new offerings for the target consumer
test marketing MDS technique can be used to identify cities that have similar demographic
characteristics, and one could then identify a city which could represent a national character,
and use that city for test marketing. One can thus ‘observe that MDS is a very useful technique
to help understand the market place and develop strategies for the future.

Advantage of MDS

The advantage of NOS methods is not in the measurement of physical distances, but
rather “psychological distances”, also called as `dissimilarities’. In MDS, we assume that every
individual pawn has a ‘metal map’ of products, people, places, events, companies, and individuals
keep on evaluating their external environment on a continuous basis. We also assume that the
respondent is able to provide either numerical measure of his or her perceived degree of similarity/
dissimilarity between pairs of objects, or can rank pairs of objects (ordinal scale of measurement)
in terms of similarity/dissimilarity to each other.
 175

Now-a-days a number of software programmes are available for conducting MDS analysis.
These programmes provide for a variety of input data. Some of the widely used software’s
include MDPREF, MDSCAL SM, INDSCAL, PREFMAM, PROFIT, KUST.

13.8 Introduction to Statistical Software

Background

For many students, the thought of having to undertake statistical analyses is uncomfortable.
This is because mathematics and statistics are often poorly taught at school, and barely covered
during undergraduate training. Further – let’s face it, mathematics and statistics are conceptually
difficult. However, there really is no need to panic. There is lots of support available to make you
more comfortable with undertaking statistical analyses, including this online course, biostatistician
consultants, websites, YouTube tutorials, and even MOOC courses.

There are also many websites where you can undertake online statistical analyses. A
good starting place is:

There are also many specialized software programs for things like graphs, sample size
calculations, and genetic analyses. Again, some are commercial, but others can be freely
downloaded.

However, there are some software packages that are readily available and often used
including Microsoft Excel, SPSS, SAS, Stata and R, which will briefly overview here.

Microsoft Excel
History

This is part of the Microsoft Office suite of programs. Excel version 1.0 was first released
in 1985, with the latest version Excel 2016.

Good points

 Extremely easy to use and interchanges nicely with other Microsoft products

 Excel spreadsheets can be read by many other statistical packages

 Add on module which is part of Excel for undertaking basic statistical analyses

 Can produce very nice graphs

176

Bad points
 Excel is designed for financial calculations, although it is possible to use it for many
other things

 Cannot undertake more sophisticated statistical analyses without purchase of

expensive commercial add on’s.

Availability

Most computers come with Microsoft software already installed. For blue-plated (UniSA)
computers, contact the IT Help Desk to install the latest Microsoft office software. For your own
computer, you can always purchase Microsoft Office from a retail store.

SPSS

SPSS stands for Statistical Package for the Social Sciences. It was one of the earliest
statistical packages with Version 1 being released in 1968, well before the advent of desktop
computers.  It is now on Version 23.

Good points

 Very easy to learn and use

 Can use either with menus or syntax files
 Quite good graphics
 Excels at descriptive statistics, basic regression analysis, analysis of variance, and
some newer techniques such as Classification and Regression Trees (CART)
 Has its own structural equation modeling software AMOS, that dovetails with SPSS

Bad points
 Focus is on statistical methods mainly used in the social sciences, market research
and psychology

 Has advanced regression modeling procedures such as LMM and GEE, but they
are awful to use with very obscure syntax

 Has few of the more powerful techniques required in epidemiological analysis, such
as competing risk analysis or standardized rates
 177

 Availability

SPSS is available on blue-plated (UniSA) computers. If it is not on the one that you use,
then contact the IT Help Desk to install it. Staffs are allowed to use SPSS at home for a cost of
$10. Unfortunately, students have no home use rights, but can purchase a pretty much full
version called a Premium Grad-pack with a 2-year license for approximately $250 from Hearne
software.

SAS

SAS stands for Statistical Analysis System. It was developed at the North Carolina State
University in 1966, so is contemporary with SPSS.

Good points
 Can use either with menus or syntax files

 Much more powerful than SPSS

 Commonly used for data management in clinical trials

Bad points
 Harder to learn and use than SPSS

Availability

Health Sciences has a Division license for SAS 9.4M3 which is available for the Division’s
staff and students. To organize installation contacts the IT Help Desk. SAS also has a free
version SAS University. 

Stata

Stata is a more recent statistical package with Version 1 being released in 1985. Since
then, it has become increasingly popular in the areas of epidemiology and economics, and
probably now rivals SPSS and SAS in it user base. We are now on Version 14.

Good points
 Can use either with menus or syntax files

 Much more powerful than SPSS – probably equivalent to SAS

 Excels at advanced regression modeling

 Has its own in-built structural equation modeling

178

 Has a good suite of epidemiological procedures

 Researchers around the world write their own procedures in Stata, which are then
available to all users

Bad points
 Harder to learn and u se than SPSS

 Does not yet have some specialized techniques such as CART or Partial Least
squares regression

 Availability

Stata can be downloaded onto blue-plated computers by contacting the IT Help Desk.
Students can purchase a full copy with a perpetual license from the Australian distributors
(Survey Design and Analysis) for about $200. The Division is currently examining licensing
arrangements.

S-plus is a statistical programming language developed in Seattle in 1988. R is a free

version of S-plus developed in 1996. Since then the original team has expanded to include
dozens of individuals from all over the globe. Because it is a programming language and
environment, it is used by giving the software a series of commands, often saved in text
documents  called  syntax  files  or scripts, rather  than having  a  menu-based  system.  Because
of this, it is probably best used by people already reasonably expert at statistical analysis, or
who have an affinity for computers.

Good points

 Very powerful – easily matches or even surpasses many of the models found in
SAS or Statas

 Researchers around the world write their own procedures in R, which are then
available to all users

 Free!

 Bad points

 Much harder to learn and use than SAS or Stata

 179

Availability

R can be downloaded from here:

http://cran.csiro.au/

13.9 Summary
Regression analysis is probably the most widely applied technique amongst the analytical
models of association used in marketing research. Regression analysis attempts to study the
relationship between a dependent variable and a set of independent variables (one or more).
Multi –dimensional scaling (MDS) technique or perceptual map or positioning map is a multi-
variate analysis technique that is particularly suitable for measuring human perceptions and
preference for products/brands. MDS is concerned with spetial representation of relationships
among behavioural data i.e., buyer perceptions and preferences. The various statistical software’s
are also explained in this lesson.

13.10 Key Words

 Multiple Linear Regressions

 Multi-Dimensional Scaling

13.11 Review Questions

1. What is Multiple Linear Regression?

2. What is Multi-Dimensional Scaling?

3. What are the applications of Multi-Dimensional Scaling?

13.12 Suggested Reading

1. S.P.Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
180

LESSON 14
RESEARCH REPORTS
Learning Objectives:

After reading this lesson, you should be able to:

• Discuss the subject matter of various types of reports

• Prepare a proposal for any type of report

• Review and edit the draft of a report.

Structure
14.1 Introduction

14.2 Types of Report

14.3 Proposal

14.4 Reviewing the Draft

14.5 Summary

14.6 Key Words

14.7 Review Questions

14.8 Suggested Readings

14.1 Introduction
Report writing is common to both academic and managerial situations.

In academics, reports are used for comprehensive and application oriented learning.
Student reports are called term papers, project reports, theses, and dissertations depending on
the nature of the report, the time and effort expected of the student, and the curriculum design.
Further, researchers put out their initial findings in a research report, paper, or monograph,
which is later condensed into an article or expanded into a series of articles or a book.

In organizations, reports form the basis for decision making. These reports are expected
to be brief but comprehensive and reflect the thinking of the manager, the management
committee, or the consulting group that has been given the terms of reference for fact finding or
decision making.
 181

14.2 Types of Report

Reports fall into three major categories:
1) Information oriented
2) Decision oriented
3) Research oriented

The substance and focus of the content determines the category. However, a report may
contain characteristics of more than one category.

Information Reports

In describing any person, object, situation, or concept, the following seven questions (6
Ws+ 1 H) help to convey a comprehensive picture:

Subject/Object Action Reason

Who ? What ? Why ?

Whom ? When ?

Where ?

How ?

Therefore, the comprehensiveness of an information or descriptive report can be checked

by iteratively asking:

Who does What to Whom ?

When, Where, How and Why?

Information reports are the first step to understand the existing situation (for instance,
business, economic, technological, labour, market, or research scenario reports) or what has
been discussed or decided (for instance, the minutes of a meeting) form the foundation for
subsequent decision reports and research reports.
182

Decision Reports

Decision reports adopt the following steps of the problem solving approach:

1) Identifying the problem

2) Constructing the criteria

3) Generating and evaluating the options

4) Making a decision

5) Drawing up an action plan

6) Working out a contingency plan

7) Conclusion

The problem solving approach helps only when one can question oneself again and
again at every stage and bring to bear various’ thought processes to do a comprehensive
analysis and synthesis. Then only will the administrator, executive, or manager be able to
genuinely share his/her thoughts with the reader.

If the problem solving approach and steps are used merely as a form filling exercise, a
superficial analysis and report will result. An attractive package does not necessarily mean a
good product.

An executive report is not a summary of the view and information that a decision maker
has elicited but an analysis and synthesis of an integrated decision or recommendation. Thinking
through a decision making situation is an iterative act.

A good decision report is structured sequentially but reflects comprehensively the iterative
thinking process of the decision maker(s).

Research Reports

Research reports contribute to the growth of subject literature. They pave the way for
new information, significant hypotheses, and innovative and rigorous methods of research and
measurement. They broadly have the following organization

1) Literature survey to find gaps in knowledge.

2) Nature and scope of the study, hypothesis to be tested, and significance and utility
of the study
 183

3) Methodology for collecting data, conducting the experiment, and analyzing the data.

4) Description and analysis of the experiment and data.

5) Findings.

6) Conclusions.

7) Recommendations.

8) Suggestions for further research.

9) Backup evidence and data.

14.3 Proposal
Preparation of reports is time consuming and expensive. Therefore, reports have to be
very sharply focused in purpose, content, and readership. And to control the final outcome of
the product-whether it is a research report, committee/ consulting administrative report, or student
report-it is often preceded by a proposal and its acceptance or modification and periodic interim
reports and their acceptance or modification by the sponsor.

A proposal gives information on the following items:

1) Descriptive title of the study

2) Names of authors and their background

3) Nature of the study

 Problem to be examined Significance and need for the study Background

information available
 Scope of the study-extent and limitations to whom will it be useful

4) Hypothesis, if any, to be tested

5) Data

 Sources
 Collection procedure
 Methodology for analysis

6) Equipment and facilities required

7) Schedule-target dates for completing

184

a) Library research
b) Primary research
c) Data organization and analysis
d) Outlining the report
e) First draft
f) Final draft

8) Likely product or tentative outline

9) Cost estimates

10) Bibliography

14.4 Reviewing the Draft

The report should be thoroughly reviewed and edited before the final report is submitted.
The following questions MH help to review the draft:

1) Author’s purpose?

2) Reader’s profile?

3) Content?

4) Language and tone?

5) Length?

6) Appearance?

Author’s Purpose

The lack of clarity and explicitness in the communication purpose leads to two major
problems: 0) confusion in determining the mix of content, language and tone, length, and looks
and (2) misinterpretation of the message.

Reader’s Profile

The readership may consist of one or more persons or one or more groups. If more than
one person or segment is involved, check whether all of them are on the same wavelength. If
not, segregate the common interest areas from the special interest ones. Then decide on the
types and parts of the report which can satisfy various reader groups.
 185

Think of the organization and social membership and hierarchical level of the reader.
An executive writing a report, for instance, should know whether the reader is an insider or an
outsider to the organization or the cultural system, an immediate boss or a boss who is two or
three rungs removed, a colleague or a subordinate. An understanding of the reader on these
lines helps the author to modulate the content, language, and tone to suit the reader.

The major discriminating features of the reader’s profile are the cultural, social, religious,
ideological, educational, economic, and age.

Also pay attention to the reader’s interest and familiarity of the subject and the language.
Otherwise, you may be pitching the communication either too high or too low.

Content

The content is the crucial communication axle between the author and the reader. Attention
should be given to the content’s focus, its organization, accuracy of facts, and logic of arguments.
These are discussed below:

Focus

Failure to prune and polish the content’s focus makes the report as diffused as an amateur’s
photograph. All the wisdom of an author cannot be wrapped up in a few pages. Only the essentials
required for the purpose can be covered.

The focus should be clarified right in first few paragraphs to attract the reader’s attention
and hold it. This is the first and last chance to catch the reader’s attention. The main theme,
presentation scheme, author’s purpose, and intended readership should be indicated right in
the beginning. The appropriate style and tone of the language should be set into motion right
from the first sentence and be kept up till the end.

Organization

The focus is the foundation for the rest of the content. If any material is added or deleted
in the text, check the focus delineated in the beginning to see whether any, changes are required
in the foundation. If needed, change either the focus or the text to get the consistency. Otherwise,
different messages may emerge from the communication and confuse the reader.
186

Then ensure that:

1) The discussion is organized step-by-step into parts, sub-parts, and paragraphs,

2) The arguments of each section and paragraph flow smoothly into the next one, and

3) Too many ideas are not crammed into one section.

To check that the various parts of the report and ideas are sequenced effectively, constantly
ask whether a different sequence would be easier for the reader’s comprehension.

Examine the structure of paragraphs. The most recommended structure for paragraphs
in recent years has been the “inverted pyramid” style.

First, this style calls for putting forward the most important point first and then going down
in priority. The idea is to put forward as much essential information as possible to the readers
before their attention wavers or is lost.

Second, the style calls for putting forward the conclusion first or the main topic or theme
in the very first sentence of the paragraph and then substantiating or supporting it with information
and evidence in the order of priority beginning with the most essential or important at the top.
The idea is that even if the reader skims through the first sentences of paragraphs, he/she
should be able to get the gist of the content.

Accuracy of Facts: Authors can lose their credibility if they fail to check the accuracy of
facts, figures, quotations, and references. A discerning reader can easily check the internal
consistency of the report by comparing information across pages and sections.

Evaluation of Information: Decision makers often lack data or information. Not all that
they want is available. Therefore, they have to constantly ask: What is the minimum data required
for the decision, what is available, what can be got within the available time and money, and
what cannot be obtained? Sometimes they have to make assumptions to fill up the gaps.

Facts, figures, and opinions have to be interpreted to become evidence for throwing light
on an issue. Facts and figures do not speak for themselves. Only their interpretation makes an
argument.

For effective communication, logic is a dependable tool in convincing. the reader of the
reasonableness of the points of view. But how can we make sense out of confusing and constantly
 187

changing situations? How can we recognize unreasonableness of the seemingly reasonable

arguments? We can do it by

• Analyzing the situation.

• X-raying the facts through their smoke screens-words, opinions, and assumptions.

• Examining the inference process.

• Capsulizing and concretizing the ideas.

Situational Analysis: What is good in one situation may not necessarily be so in another
and that one situation may appear to be similar and yet be different. We have to list and arrange
(either mentally or on paper) the elements and the actors of a situation to understand the
dynamics of the situation. We can map out the territory on the basis of who did and said what to
whom.

Elements, which shape a situation, could be of various kinds. Decision to buy or not to
buy a new machine; decision to postpone the decision on the new machine; installing or not
installing the new machine; decision to buy from one and not the other; X, Y, Z companies
quoting different prices for the same product; the government’s decision to make a statutory
requirement of giving X amount of bonus; the company’s offer of Y amount of bonus to its
employees; workers threatening to go on strike; the boss having a poor opinion about the
subordinate; X having certain image in the company; X being granted leave while Y has been
refused leave; X telling Y that Z is a fine fellow-all such elements shape a situation.

Actors in a situation also matter. The managing director’s request often gets treated as
an order. A colleague’s request remains a request. And a subordinate’s request remains in the
basket for consideration in due course of time. If two or three workers ask for a change in
timings, the manager may not consider the event as serious. If 80 per cent of the workers ask
for it, the significance drastically changes; the manager will hasten to find a solution.

In arranging the elements and actors, we can try to understand-the rules of the game-
opportunities and threats inherent in the situation. If a strike is on, for example, we can identify
the areas of agreement and disagreement, items on which the management ‘will bend its back
to avoid a strike, items on which the management’s tail will be up, and power that the management
can and cannot draw from the government and the situation within the country or the timing of
the happening. It is such opportunities and threats which help the management to form the
strategy for solution.
188

In arranging the, elements of a situation, we must check whether the element is relevant
to the situation. If it is, we consider it in ordering the elements. If not, we ignore it. For example,
at the year end when the financial statements are being prepared, the death of the chief
accountant may contribute to a serious situation; but the death of a worker will be inconsequential.
However; if a company has launched a family planning programme for its workers, the death of
even a worker due to an operation can jeopardize the whole programme; but the death of even
the managing director in such a situation will be inconsequential.

The elements of a situation can be structured along the following dimensions depending
on the situation: a) time, b) space, c) quantity, d) quality, e) cost, and f) hierarchy.

Each dimension offers a two-pronged fork-a) the relationship of the element to others
and b) the magnitude of the element itself.

The time sequence among elements helps in understanding the situation. If the production
has been going down, for instance, it is possible to attribute its cause to a new procedure that
has been introduced. But if production drop was noticed even before the procedure was
introduced, the latter cannot be the cause for the former-at the most it could have aggravated
the problem. Moreover, finding out the events at the starting point of the production may help in
focusing the attention on causes of the problem.

An understanding of the spatial arrangement of element adds to the understanding of the

situation. For example, if three plants-A, B, and C in that order-are in straight line at different
distances, we know that plant B is between plant A and plant C. If they are located in a triangle,
plant A could be at equidistance from plant B and plant C. If we are planning for a common
processing facility at a central plant, we know that we can locate the facility in plant B in the first
case and in plant A in the second case. Moreover, the information about the space available in
each plant helps us to check whether it matches with the space required for the new facility.

Similarly, each element can be ranked according to quantity and quality, and each element’s
available quantity and quality can be checked against the requirement.

The cost dimension help, like the earlier four dimensions, in ranking elements and
comparing each element against the requirement. But it has third fork. It can also provide an all-
inclusive comparative picture of various elements. The cost dimension can include within it the
time, space, quantity, and quality dimensions when they are quantified in money terms.
 189

Finally, the hierarchical dimension is the most difficult one to understand and pinpoint.
The elements and actors in this dimension are constantly changing. Today’s colleague may be
tomorrow’s boss. Hierarchical positions within the company will broadly indicate the authority,
power, influence, and responsibility each actor wields. Moreover, the secretary to the boss
sometimes commands power which is not reflected by his/ her position in the organizational
chart.

The structuring of elements and actors across different dimensions helps in examining
various elements and their relationships and in focusing on the decision making area or the
problem.

X-Raying of Facts: Facts often get shaded by three smoke screens-words, opinions, and
assumptions.

The hazy picture of facts that we get at first sight gives us the feeling that we have
understood the facts. Yet the real shape of the facts eludes us unless we x-ray the facts through
the smoke screens. Unless we understand the facts in their real form, our conclusions may be
way off the reality.

The Meaning of the same word for the writer and the reader may be different. If a company
says that its staff is “disciplined”, what does it mean? Does it mean that they have “a high
commitment to work, a task, or a cause”? Does it mean that they are “obedient yes-men”?
Does it mean that they are “punctual”? Does it mean that they are “faithful and loyal”? Does it
mean that they are “polite”? It could mean some of these, all of these, or something else what
the company considers as discipline. Can we break through this smoke screen of “discipline” to
find out what the reality is?

Opinion is another smoke screen which envelops facts. When a personnel manager, for
example, says-that Mr. X is 58 years old and he will be retiring in another two years, the statements
can be checked. One can cross check from Mr. X’s personnel file whether he is 58 and from the
company policy whether the retirement age for the employee is 60. But when the personnel
manager writes about Ms. Y, who is being considered for a training programme, that she is “too
old to learn”, the age of Ms. Y can be anywhere say between 21 and 60. In fact, the opinion of
the personnel manager may have been based on observations other than age. Therefore, facts
and observations on which this opinion has been based need to be ascertained before agreeing
or disagreeing with the personnel manager’s recommendation.
190

The third smoke screen is made up of assumptions. When there is a gap in the information
or an uncertainty about the future events, we make assumptions, which if they are not recognised
as assumptions, escape the scrutiny and pass off as facts.

Assumptions can be of two kinds: illustrative and critical: An illustrative assumption

helps to describe a process or a result concretely so that further arguments can be built. For
example, if the price of product X is Rs. 10 per piece and an excise levy of 10 percent ad
valorem is assumed, the effective price to the customer is Rs. 11. If the tax is 20 percent, the
effective price is Rs. 12. Here, the assumptions about the percentage of excise duty are made
to explain how the effective price to the customer will vary depending on the percentage of tax.

However, if a company feels that the demand of its product will remain unchanged at a
price of Rs. 11 but will fall drastically at Rs. 12, it will seriously think before the budget session
of Parliament about the impact of change in the tax structure. If it assumes the rate at 10 per
cent, it has no cause for worry. If it assumes that the rate will be 20 per cent or between 10 per
cent and 20 per cent, it has to examine the impact of tax on the demand for the product.
Therefore, the assumption in this situation about the likely tax rate is critical because it affects
the decision.

Then how can we penetrate the smoke screens to see the facts as they are? A three-
pronged attack may be useful. First concretize all general statements. Second, check against
the actual. Third, examine contradictions in evidence.

Statement qualified by general words like “all”, “almost all”, “most”, “the majority”, “the
minority”, “few”, and “some” can distort the picture of the actual situation. When a company
says that the majority of its employees are satisfied workers, it may mean that 251 workers out
of 500 are happy. The arithmetic is correct, but the representation of the gravity of the situation
is doubtful. When a company says that only a few of its employees are disgruntled and does not
reveal that these few are the opinion leaders, it may not be projecting the true picture.

General adjectives or qualifying words hide facts. When a manager says that X is a good
employee or an average employee, it is not clear what X is capable of doing or not doing. We
can arrive at the actual profile of X only when the manager spells out concretely what is meant
by good and whether X has been actually rated against those criteria. However, labels like
“good”, “average”, and “bad” keep floating unchallenged.
 191

Having concretized the generic words to understand what is actually meant, check whether
the so called facts are really facts. When someone, for example, claims that he/she belong to
X, Y, Z category and hence eligible to a certain privilege, ascertain first whether he/she really
belongs to the privileged category or not. Often rules and procedures are quoted by memory to
help or hinder someone. Check whether such a rule or procedure really exists, or had existed
and changed over time, or is being anticipated to be introduced, or never existed except in the
mind of the person quoting it.

Often we come across contradictory observations about an item when only one of them
can be true. For example, X may report that machine Y has broken down. But Z may report that
machine Y is in working condition. The contradiction needs to be examined. Maybe X and Z are
talking about two different machines. Or X and Z are talking of two jobs of which the machine at
present can do one and cannot do the other. Or X and Z are picking on each other. Unless such
contradictions of facts are recognized and challenged, facts will continue to elude and delude
us.

Inference Process: The first step in examining the inference process is to understand
the cause-and-effect relationship.

When a company, for example, begins to lose its market share, the marketing manager
investigates with the assumption that there is a cause or a set of causes underlying the loss of
market share. Unless the cause(s) is clearly understood, the attempt to change the effect is
likely to be a shot in the dark.

The next step is to draw conclusions from facts and observations through deductive
(general to specific) and/or inductive (specific to general) reasoning processes.

Deductive Inference: If a universal or general principle is known or has been proved to

be true, conclusions can-be drawn from it about individuals falling in that universe. Let us take
an example:

1) No leave was granted to the employees of company X on a certain date.

2) Y is an employee of company X.

3) Therefore, Y was not granted leave on that date.

192

In using this kind of reasoning, we should make sure that the universal principle is true
and the linkage between the universal principle and the individual is relevant; otherwise the
conclusion drawn in a particular situation may or may not be valid. If some employees were
granted leave and some-were not, we cannot be sure into which category Y falls. Much worse
will be the situation if Y is not an employee of the company; the universal principle stated will
then have no relevance to Y, and, therefore, it cannot be concluded definitely whether Y was
granted leave or not.

Inductive Inference: When universal or general principles are not available, conclusions
are drawn on the basis of observations of individual units in a universe. The basic assumption
in inductive reasoning is that the particular units partake of the universal character.

If a company, for example, wants to find out the customer reaction to a new product or
service, one method is to ask all the customers about it. But the number of customers may be
so large that the company has to resort to sampling. From the sample reaction, it can then
generalize or interpret likely response to the new product or service.

When inductive inference is being drawn from sampling, we must guard against some
loopholes:

First, is the sample relevant? Second, is the method right?

Third, the existence of causes other than the ones identified cannot be ruled out without
careful scrutiny. For example, a manager may generalize that the employees want job security
because some of them had left the company for lower wages. Another manager may conclude
from talking to the same workers that they left because they lived at far-off places from the
plant.

Fourth, opinions may change. Therefore, feedback collected today may not necessarily
hold good tomorrow when the action is taken.

Capsulization and Concretization: Capsulization involves both a) miniaturization of the

main theme and identification of the high points of evidence and arguments and b) chewing
ideas bit-by-bit. It dispels the fog or impression that long-winded arguments or lengthy reports
create. By understanding the main ideas and the main points in a nutshell or a skeleton form,
we can map out the territory and identify the traps.
 193

Concretization involves use of a) specific words and b) visualization. The statement that
plant A is “10 km away” from plant B is more specific than plant A is “very far” or “quite close” to
plant B. Instead of saying that the new policy of the government is “generally favorable” or
“generally unfavorable” to the organization, we can specify the implications-say in rupees and
paise. We can translate the favorableness or un-favorableness through the balance sheet and
the income statement. We can specify in implementation terms the new opportunities and
threats to our business.

Traps of Logic: In playing the trap detection game, we should recognize the following
common traps:

1) Avoidance

2) Diversion

3) Stacking the deck

4) Either-or

The avoidance trap can be recognized when one begins by saying, “I am not concerned
with...” or “How am I concerned with...” Another form of avoidance is what is commonly known
as “pass the buck”. The buck could be passed upwards, downwards, or sideways. All of us play
it to avoid taking the decision or applying ourselves to the problem on hand. The more
sophisticated form of avoidance is much-can-be-said-on-both-sides technique used when one
has to make a choice.

The diversion trap operates mainly on diverting the attention from the main theme or
argument.

One diversionary technique is to side-track the main issue. If the general manager is
discussing a strike on hand with the plant manager, the latter may fritter away the time by
talking about the general climate or history of unionism in the country, or general absenteeism
of the workers or the promotion of a person in another plant, or for that matter he may talk about
the weather.

Another kind of diversion can be provided by emotional appeal. Both the management
and the union use the technique by appealing to fairness, prestige and prejudice. Appeals and
insinuations on both sides divert the attention from the real issue. If a case of {reinstatement of
an employee who has been fired for malpractice is discussed, the real issue of whether the
employee has been guilty or not is wrapped up in emotional terms of victimization.
194

Another diversionary tag is to project self-confidence-a tool often used by salesmen. The
way the salesman-talks or carries himself may numb the purchase manager from examining
whether the selling company can provide after-sales service or some critical issues before
making the purchase.

One more diversionary technique is to cite an authority. The chairman or the managing
director wants it done this way, or all the world over it is done that way, or the Bible-whatever
book you swear by-says so are common indicators of this technique.

Stacking-the-deck trap is sprung by citing only facts that support an argument and ignoring
unfavourable ones. A manager who is interested in promoting subordinate X may quote facts
which help to build X’s case and suppress the weak points. Moreover, the weak points of other
contenders may be highlighted and their plus points blanked out. Similarly, a purchase manager,
who is interested in helping a supplier, may stack up all the plus points of the favored supplier
and all the minus points of other suppliers. Moreover, the manager may gloss over contradictions
in the recommendation. Supplier X may be rejected for inability to provide after-sales service.
But in the same breath, supplier Y may be recommended without telling his inability also to
provide the expected after-sales service.

The either-or trap (i.e., either this or that only) is aimed at limiting the thinking to only two
choices without proving that only two choices are feasible in a given situation. The attention is
fixed only to black or white and is not allowed to examine the possibilities of grey areas or any
other color. Either one is a friend or an enemy. All other possibilities are ruled out. When a
manager argues that product A is to be bought from supplier X or supplier Y, the mind is closed
to the choice of a mix or a supplier Z. Of course, such an argument becomes valid if it is proven
that neither grey nor any other color exists in the given situation.

Language and Tone

Since the purpose of communication is to make the reader understand the message, use
the vocabulary and sentence structures which the reader understands. The terminology and
language structures of a subject specialist are not familiar to non- specialist. Even among the
specialists, sometimes there are differences in the usage of terminology and language
structures. For effective communication, the author has to climb down or climb up to the reader’s
level-a difficult adjustment for many of us to make.
 195

Abstract phrases are difficult to comprehend. Concrete phrases are easy to understand.
For example, a word like “freedom” is abstract unless it is followed by a definition or an example.
“This is better” or “that is good or bad” are oft-made judgments. But the reader finds it difficult to
understand “better than what” or “good or bad by what criteria”. Generic adjectives and adverbs
sabotage the effectiveness of communication. For example,, instead of merely stating that XYZ
company is a large company, the author can also indicate the various dimensions (e.g., sales,
profits, and employees) which lead to the conclusion that the company is large.

Finally, the tone of the language also matters. It can make the reader receive, ignore, or
reject the message. Executives have to differentiate and modulate the tone of writing to superiors,
peers, and subordinates.

Length

How long should the report be? This is a matter to be judged by the author keeping in
mind the purpose, the subject, and the reader’s interest. Shorter the content, the more attractive
it is to the reader. But it cannot be so brief as to miss the essential points and the linkages in the
flow of arguments and force the reader to ask for more information. If the length does not match
with the reader’s interest and patience, the author has to rework and scale down the purpose,
the focus, or the content.

Check the readability of paragraphs. As a thumb rule, paragraphs should not exceed
eight typed lines, sentences should not exceed more than three typed lines, and punctuated
pauses should not go over two typed lines.

In short, the communication should be like a capsule. It should be small enough to swallow
but powerful enough to act.

Here are a few suggestions to save words:

1) Cut out repetitions, unless they are meant for sharpening the message.

2) Take out redundancies. (Instead of “takes 10 minutes of time”, write “takes 10

minutes”. Instead of “The profit increased to the tune of Rs. 50 lakh”, write “The
profit increased to Rs. 50 lakhs”.)

3) Use active voice. (Instead of “The balance sheet is given in Exhibit 1 “, write “Exhibit
1 gives the balance sheet”.)
196

4) Use shorter and direct verbs. (Instead of “They had done investigations in the matter”,
write “They had investigated the matter”. Instead of “To make a comparison of
these two divisions”, write “To compare these two divisions”.)

5) Eliminate weighty expressions. (Instead of “The demand will fall in the event of
price going up”, write “The demand will fall if the price goes up”.)

6) Make concrete adjectives. (Instead of “The company incurred a loss of Rs. 20,000”,
write “The company incurred Rs. 20,000 loss” or even better “The company lost Rs.
20,000”.)

7) Strike out it and there. (Instead of “There was no machine available”, write “No
machine was available”.)

8) Use abbreviations which are more familiar than their expanded forms. (Instead of
“United Nations Educational, Scientific, and Cultural Organization” write “UNESCO”.)
(See 7.5)

9) Use pronouns wherever possible. If confusion arises, clarify the pronoun by name
or by words like “former” or “latter”. (Note the difference between “former” and
“farmer” and between “latter” and “later”.) Note the modern trend of avoiding the
use of “he” alone as a generic pronoun unless if suits the context. If a generic
pronoun is needed, use “he/she”, or rephrase the sentence to drop it, or use plural
nouns and pronouns.

10) Use the full name of a person at the first reference. Then use only the short name,
preferably the last name in a formal report.

Appearance

The novelty or presentation is as important as the originality of ideas. Both are products
of creativity and criticalness. Presentation attracts the readers, and the content holds their
attention. Both the product and the package are equally important.

14.5 Summary
In this lesson, we have discussed the steps involved in preparation of a proposal for a
report. Three categories of reports namely Information reports, Decision reports and Research
reports have been explained. The steps involved in writing various types of reports are also
 197

discussed. Before a final report is submitted, the report should be thoroughly reviewed and
edited. The lesson concludes by answering certain questions for reviewing the draft of a report.

14.6 Key Words

Substance of Reports

14.7 Review Questions

1. What is Substance of Reports?

2. Explain the steps in Substance of Reports?

14.8 Suggested Readings

1. S.P. Gupta, Statistical methods Sultan Chand & Sons, New Delhi.

2. Richard I Levin and David S. Rubin, Statistics for Management, Pearson Education
Asia.

3. David M Levin, Simothy C Krehbiel and Mark L.Berenson, Business Statistics – A

first course, Pearson Education Asia

4. Levin and Rubin, Statistics for Management – Prentice Hall of India 7th edition.
198

LESSON 15
REPORT FORMATS AND REFERENCING
Learning Objectives

After going through this lesson, you should be able to:

• Distinguish between various parts of a report

• Explain the different parts of a report

• Instruct the typist as to how he/she should go about typing the report

• Edit any report by using the copy reading and proof reading symbols.

Structure
15.1. Introduction

15.2 Parts of a Report

15.3 Cover and Title Page

15.4 Introductory Pages

15.5 Text

15.6 Reference Section

15.7 Typing Instructions

15.8 Copy Reading

15.9 Proof Reading

15.10 Summary

15.11 Key Words

15.12 Review Questions

15.13 Suggested Readings

15.1 Introduction
In the last lesson, we have explained the steps one should follow while writing a proposal
for any type of report. The subject matter of various types of reports was also discussed. It was
 199

also explained as to how one should go about editing the draft of a report. The next stage
understands the Formats of Reports which is the subject matter of this unit. It explains the
contents of Cover and the Title Page. We should also understand as to what goes into introductory
pages, Text and Reference Section of a report. Once this is known there is a standard format in
which the report should be typed. Therefore, a few pages are devoted in this unit on typing
instructions. Once the report is typed, it should be edited by using the copy reading and proof
reading symbols. This forms the concluding section of this unit.

15.2 Parts of a Report

The different parts of a report are:

1) Cover and the title page

2) Introductory pages

a) Foreword
b) Preface
c) Acknowledgement
d) Table of contents
e) Lists of tables and illustrations
f) Summary

3) Text

a) Headings
b) Quotations
c) Footnotes
d) Exhibits

4) Reference section

a) Appendices
b) Bibliography
c) Glossary (if required)
200

15.3 Cover and the Title Page

The cover and the title page of a report contain the following information:

1) Title of the subject or project

2) Presented to whom

3) On what date

4) For what purpose

5) Written by whom

If there is any restriction on the circulation of the report, it is indicated (e.g., “For Official
Use Only”) in the top right corner of the cover and the title page.

15.4 Introductory Pages

The introductory pages are given lower case Roman numerals (e.g., i, ii, iii). Arabic numerals
(e.g., 1, 2, 3) are used from the first page of the introduction. The introductory pages
contain the following:

1) Foreword

2) Preface

3) Acknowledgement

4) Table of contents

5) Lists of Tables and Illustrations

6) Summary

1. Foreword

The first page of the foreword is not numbered, but it is counted among the introductory
pages. Usually a foreword is one page or even shorter. If a foreword is more than a page,
subsequent pages of the foreword are numbered in lower case Roman numerals.

The foreword is written by someone other than the author. It is written by an authority on
the subject or the sponsor of the research or the book and introduces the author and the work
to the reader.
 201

At the end of the foreword, the writer’s name appears on the right side. On the left side,
address and place of writing the foreword, and date appear. Name, address, place and date are
put in italics.

2. Preface

The first page of the preface is not numbered, but it is counted among the introductory
pages. Subsequent pages of the preface are numbered in lower case Roman numerals.

The preface is written by the author to indicate how the subject was chosen, its importance
and need, and the focus of the book’s content, purpose, and audience.

At the end of the preface, the author’s name is given on the right side. On the left side,
address and place of writing the preface, and date appear. Name, address, place and date are
put in italics.

3. Acknowledgement

If the acknowledgement section is short, it is treated as a part of the preface. If it is long,

it is put in a separate section.

The first page of the acknowledgement is not numbered, but it is counted among the
introductory pages. Subsequent pages of the acknowledgement are numbered in lower case
Roman numerals.

At the end of the acknowledgement, only the author’s name appears in italics in the right-
hand corner.

4. Table of Contents

In writing the table of contents, great care should be taken. The contents sheet is both a
summary and a guide to the various segments of the book. The table of contents should cover
all the essential parts of the book and yet be brief enough to be clear and attractive. The first
page is not numbered, but the subsequent pages are numbered in lower case Roman numerals.

The heading Table of Contents or Contents in all capital letters appears at the top. On the
left side, foreword, preface, acknowledgement, and numbers and titles of sections, chapters,
centre heads, centre subheads, and side heads are listed. On the right side, the corresponding
page numbers are given. The page numbers are aligned on the right.
202

The section and chapter titles are put in all capital letters. The centre head is put in capital
and lower case letters. The centre subheads and side heads are put in lower case letters,
except the first letter of the first word and proper nouns.

The classification of the headings can be done in the traditional or decimal system in the
declining order as follows:

The headings of the text can be indented in a step form to visually highlight the classification.

At the end of the headings of the text, references to appendices, bibliography, glossary,
and index appear. These references are put in all capital letters from the margin.

Samples of contents sheet in traditional and decimal classification follow.

5. Lists of Tables and Illustrations

Lists of tables and illustrations follow the table of contents. Each list starts on a separate
page. If the items in each list are few, both the lists are put on the same page but under different
headings.

The headings for these lists may be in all capital letters List of tables, List of Illustrations,
Tables, or Illustrations, and they follow the format of the heading that is used on the contents
page-Table of Contents or Contents.

Only the first letter of the main words are capitalized in writing the titles of tables and
illustrations.

The second and .subsequent lines of an item are indented. The page number appears
against the first, second, or third line where the item’s description ends.

Tables and illustrations are numbered continuously in serial order throughout the book in
Arabic numerals (e.g., 1, 2, 3,) or in the decimal form (e.g., 1.1, 2.1, 2.2., 3.1). In the latter
classification, the first number refers to the chapter number and the second one to the serial
order of the table or illustration within the chapter.
 203

Example

TABLES

1) Growth of Consumer Goods Production 10

2) Index Number of Excise Duties Rates on Capital and Consumer Goods 30

6. Summary

A report invariably carries an abstract or an executive summary in the initial pages as a

help to the busy researcher or executive. The summary is positioned immediately before or
after the contents sheet. The summary and the contents together provide an overview to the
reader. The length of the summary may vary from 100 words to 1,000 words.

In a short report, the preface itself becomes the summary. In a long report, the summary
is given in the first chapter of the text.

The summary should highlight the following essential information:

1) What is the study about?

2) What is the extent and limitation of the coverage?

3) What is the significance and need for the study?

4) What kind of data has been used?

5) What research methodology has been used?

6) What are the findings and conclusions?

7) What are the incidental findings, if any?

8) Flow can the conclusions be used and by whom?

9) What are the recommendations and the suggested action Plan?

15.5 Text
The subject matter of Text is divided into the following:
1) Headings

2) Quotations
204

3) Footnotes

4) Exhibits

The following types of headings are common:

1) Centre Read (All caps, without underlining)

2) Centre Subhead (Caps and lower case, underlined)

3) Side Head (All caps, without underlining)

4) Side Head (Caps and lower case underlined)

5) Paragraph Head followed by a colon (caps and lower case, underlined)

Which combination of headings to use depends on the number of classifications or divisions

that a chapter has.

Centre Head: A centre head is typed in all capital letters. If the title is long, the inverted
pyramid style (i.e., the second line shorter than the first, the third line shorter than the second)
is used. All caps headings are not underlined; underlining is unnecessary because capital letters
are enough to attract the reader’s attention.

Example

Chalking out a programme for

Import Substitution and

Export Promotion

Centre Subhead: The first letter of the first and the last word and all nouns, adjectives,
verbs and adverbs in the title are capitalized. Articles, prepositions, and conjunctions are not
capitalized.

Example

Chalking out a Programme for

Import Substitution and

Export Promotion
 205

Side Heads: Words in the side head are either written in all capitals or capitalized as in
the centre subhead and underlined.

Example

Import Substitution and Export Promotion

Paragraph Head: Words in a paragraph head are capitalized as in the centre subhead
and underlined. At the end, a colon appears, and then the paragraph starts.

Example

Import Substitution and Export Promotion: The Seventh Five-Year Plan of India has
attempted.

2) Quotation

Quotations Marks: Double quotation marks (“ “) are used. A quotation within a quotation
is put in single quotation marks (‘ ‘). Example: He said, “To the selfish, ‘freedom’ is synonymous
with license.”

Punctuation and Quotation Marks: The quotation mark is put after the comma and the
full stop. (Example: ‘To the selfish,” he said, “freedom is synonymous with license.”) But the
quotation mark is put before the semi-colon and colon. (Example: The following are methods
of “realistic learning”: case method, tutorial method, group discussions and business games.)
The quotation mark is put before or after the question mark or the exclamation mark depending
on the sense. Examples: 1) He asked, “Did you write to Ramesh?” 2) What do you mean by
“freedom”?

When to Use Quotation Marks: Quotation marks are used for 1) a directly quoted passage
or word, 2) a word or phrase to the emphasized, and 3) titles of articles, chapters, sections of a
book, reports, and unpublished works.

How to Quote: a) All quotations should correspond exactly to the original in wording,
spelling, and punctuation. b) Quotations up to three typewritten lines are run into the text. c)
Direct quotations over three typewritten lines are set in indented paragraphs. Quotation marks
are not used for indented paragraphs.
206

Five Ways of Introducing a Quotation:

a) Introduction: He said, “The primary test of success in a negotiation is the presence
of goodwill on both sides.”

b) Interpolation: “The primary test of success in a negotiation,” he said, “is the presence
of goodwill on both sides.”

c) End Reference: “The primary test of success in a negotiation is the presence of

goodwill on both sides,” he said.

d) Indented Paragraph: He said:

For the workers no real advance in their standard of living possible without steady increase
in productivity because any increase in wages generally, beyond certain narrow units, would
otherwise be nullified by a rise in prices.

e) Running into a Sentence: He recommended that “joint management councils be

set up in all establishments in the public as well as private sector in which conditions
favorable to the success of the scheme exist”.

Omission in a Quotation

a) Omission of a word or words from the quotation is indicated by ellipsis, i.e., three
dots).

b) Omission, of a whole paragraph is indicated by a line of dots.

Author’s Comments in a Quotation

a) Comments of the author in a quotation are separated by brackets [ ].

b) If there is an obvious error in the original source, it is quoted as in the original

source. The author can indicate that he is doing so by [sic].

3) Footnotes
Types of Footnotes: A footnote either indicates the source of the reference or provides
an explanation which is not important enough to include in the text.
In the traditional system, both kinds of footnotes are treated in the same form and are
included either at the bottom of the page or at the end of the chapter or book.
In the modern system, explanatory footnotes are put at the bottom of the page and are
linked with the text with a footnote number. But source references are incorporated within the
text and are supplemented by a bibliographical note at the end of the chapter or book.
 207

Rationale of Footnotes: Footnotes help the readers to check the accuracy of the
interpretation of the source by going to the source if they want to. They are also an
acknowledgement of the author’s indebtedness to the sources. They lend authority to the work
and help the readers to distinguish between the author’s own contribution and that of others.

Where to Put the Footnote: Footnotes appear at the bottom of the page or at the end of
the chapter or report (before the appendices section).

Numbering of Footnotes

a) For any editorial comment on the chapter or title, an asterisk is used.

b) In the text Arabic numerals are used for footnoting. Each new chapter begins with
number 1.

c) The number is typed half a space above the line or within parentheses. No space is
given between the number and the word. No punctuation mark is used after the
number.

d) The number is placed at the end of a sentence or, if necessary to clarify the meaning,
at the end of the relevant word or phrase. Commonly the number appears after the
last quotation mark. In an indented paragraph, the number appears at the end of
the last sentence in the quotation.

Footnotes at the Bottom of the Page

a) After the last line of the text, three spaces are given and a 15-space line is drawn to
separate the footnotes from the text. Then three spaces are given and the first
footnote is typed.

b) Each footnote is typed in single space. Between two footnotes, two spaces are
given.

c) The first lane of each footnote is indented five spaces, and the rest of the lines are
started from the regular margin.

d) Footnotes should not overflow from one page to another. If the last footnote of a
page has to be carried over to the next page, the carry-over portion is typed at the
bottom of the next page before the footnote references of that page begin. The
footnote of the first page is broken in the middle of a sentence so that the reader is
made to turn to the next page to read the rest of the footnote.
208

Separated Reference Notes and Explanatory Notes

Within the text, immediately after a quotation or a paraphrased statement, the last name
of the author, year of publication, and page number (Rao, 1981, p. 101) are indicated within
parentheses. If more than one publication of the author in the same year is referred to, a letter
is added after the year of publication (Rao, 1981 (a), p. 101).

If the author’s name is mentioned in the text in introducing the quotation or the paraphrased
statement, the reference to the name in the parentheses is dropped. If the year is also mentioned
in the text, the reference to the year in the parentheses is also dropped.

The source references are elaborated in notes at the end of the article, chapter, or book.
The reference notes are presented in a bibliographical form.

The explanatory notes are presented as in the traditional footnote form with a number at
the appropriate place in the text and the explanatory footnote at the bottom of the page.

Examples of Footnote Entries

Comparative examples of footnote and bibliographical entries are given under the
bibliography section. Comparative examples of traditional and modern footnoting forms follow.

Example of Traditional Footnoting

History of Coronet

The first issue of Coronet put out by Esquire, Inc., was dated November 1936. It appeared
“with a five-color cover, [carrying] drawings, etchings, and color reproductions of Raphael and
Rembrandt in addition to fiction, articles, and photographs.” (1) Esquire described the contents
of Coronet in an advertisement as follows:

The book-size magazine of popular culture is a “believe-it-or-not” of money’s worth, for

the many-sided Coronet is truly four magazine in one : It’s a magnificently illustrated journal of
the fine arts; it’s a breath taking beautiful “picture magazine” of unforgettable photographs; it’s
a full-strength satire and humor magazine; and a distinguished general magazine. Each issue
is an entertaining education in “things you never knew till now”-a liberal culture course in capsule
form -a little college in your coat pocket. (2) Within 48 hours, according to its first publisher,
David A. Smart, the 250,000 copies of the first issue were sold out. (3)
 209

1) Theodore Peterson, Magazines in the Twentieth Century (Urbana: University of

Illinois Press, 1964), pp. 342-3.

2) Esquire, December 1936, p. 322. For complete discussion on format and contents
of the magazine, see Chap. IV.

3) Peterson, op, cit., p. 343. For the names of all the editors and publishers of the
magazine, see Chap. III.

Example of Modern Footnoting

History of Coronet

The first issue of Coronet put out by Esquire, Inc., was dated November 1936. It appeared
with a five-color cover, [carrying] drawings, etchings, and color reproductions of Raphael and
Rembrandt in addition to fiction, articles, and photographs (Peterson, 1964, pp. 342-3). Esquire
(December 1936, p. 322) described the contents of Coronet in an advertisement as follows:
The book-size magazine of popular culture is a “believe-it-or-not” or money’s worth, for the
many-sided CORONET is truly four magazines in one: It’s a magnificently illustrated journal of
the fine arts; it’s a breath- taking beautiful “picture magazine” of unforgettable photographs; it’s
a full-strength satire and humor magazine; and a distinguished general magazine. Each issue
is an entertaining education in “things you never knew till now”-a liberal culture course in capsule
form-a little college in your coat pocket: (1) Within 48 hours, according to its first publisher,
David A. Smart, the 250,000 copies of the first issue were sold out (Peterson, 1964, p. 343.

(2)

a. For complete discussion on format and contents of the magazine, see Chap. IV.

b. For the names of all editors are publishers of the magazine, see Chap. III.

Notes

[At the end of the Chapter]

Peterson, Theodore, Magazines in the Twentieth Century. Urbana: University of Illinois

Press, 1964.
210

4) Exhibits

Tables

Reference and Interpretation

Before a table is introduced, it is referred in the text (e.g., see Table 1.1; refer to Table 1.1;
as in Table 1.1; Table 1.1 indicates). A table is meant only to expand, clarify, or give visual
explanation rather than stand by itself. The text should highlight the table’s focus and conclusions.

An example of a good match between the text and the table is quoted below from Anne
Anastasi’s Fields of Applied Psychology (New York: McGraw-Hill Book Company, 1964); page
146:

The Communication Process: Industrial psychologists have investigated the communication

process from many angles. Some have been concerned with the relative effectiveness of different
media. In one such study (11) information was transmitted by five different methods in various
departments of an industrial plant. Later, tests were administered to determine how much the
individual employees had actually received and retained. The results are shown in Table 10. It
will be noted that the combination of oral and written communication gave the best results but
that oral only was more effective than written only. Bulletin board and grapevine yielded the
poorest results.

Identification
a) Each table is given a number, title, and, if needed, a subtitle. All identifications are
centered.

b) Arabic numerals, instead of Roman numerals or capital letters, are recommended

for numbering the tables. Usually technical monographs and books contain many
tables. As the number increases, Roman numerals become unfamiliar to the reader.
Roman numerals also occupy more space than Arabic numerals. If there are more
than 26 tables, capital letters will not be sufficient to identify them.

Tables can be numbered consecutively throughout the chapter as 1.1, 1.2,

1.3. Wherein the first number refers to the chapter and the second number to the table.

c) For the title and subtitle, all capital letters are used.

d) Abbreviations and symbols are not used in the title or subtitle.

 211

Body
a) Column headings are typed vertically, and abbreviations are used as space-
savers. If uncommon abbreviations are used, they are explained in footnotes. The
main words of column headings are capitalized and underlined if column rules are
not used.

b) Identifications of measurement units (e.g., Rs. S) are put in column headings.

c) Column numbers are usually avoided. But they are used if references are made to
columns (e.g., Col. 1, or the total of Cols. 1 and 4) either in the text or in the table.

d) The row captions are aligned on the left. But the numbers are aligned on the right.
If there is a sub-caption, it is indented three spaces inside. Single space is used
throughout. Between the caption and the sub-caption double space is given. If the
captions run into two or more lines, the serial numbers corresponding to the captions
are aligned.

Column Rules

a) Column rules are used only if they increase legibility. The white space between columns
is sufficient to act as a divider.

b) If rules are used, the following box format may be followed:

References
a) Immediately after the table, the source of the table is indicated.

b) After the source, abbreviations and symbols are explained.

c) Then the footnotes to the table are given.

d) For footnote sequencing, the order from top to bottom (column) and from left to
right (row) is followed.

e) No text matter appears between the table’s body and its references.

Paper
a) If the table occupies more than one-half space of a page, it is typed on a separate
sheet.

b) If the table is typed in continuation with the text on one page, three spaces are given
between the text matter and the table both at the top and the bottom of the table to
visually separate the table from the text.
212

c) Tables are usually typed lengthwise. If the number of columns cannot be

accommodated, the table is typed widthwise on a separate sheet.

d) If the table is typed widthwise; the top of the table will be on the binding side.

e) If the table cannot be accommodated within the size of the paper used for the text
matter, a bigger paper is used. The sheet is then folded in from the right-hand side
and up from the bottom. The fold, on either side, should be one inch inside the right
and bottom edge of the text paper. Otherwise, trimming the report after binding will
be very difficult.

f) The page numbers are typed consecutively with the text page. Even if the table is
typed widthwise, the page number is typed vertically on the top where it would have
been if the page was typed lengthwise. Otherwise the page number will disappear
in the binding edge.

Continuation Page
a) If the table is continued on the second page, only the identification mark TABLE 1.1
Continued is enough. There is no need to repeat the title and subtitle.

b) On the continuation page, column and row captions are repeated to facilitate quick
reference.

c) The totals of the previous page are repeated at the top within the columns of the
second page. In the row captions, indications such as Carried forward and Brought
forward are given.

Checklist

Relevance, accuracy, and clarity are of utmost importance in tables. When entering the
table, check the following:

1) Have the explanation and reference to the table been given in the text?

2) It is essential to have the table for clarity and extra information?

3) Is the representation of the data comprehensive and understandable?

4) Is the table number correct?

5) Are the title and subtitle clear and concise?

6) Are the column headings clearly classified?

 213

7) Are the row captions clearly classified?

8) Are the data accurately entered and represented?

9) Are the totals and other computations correct?

10) Has the source been given?

11) Have all the uncommon abbreviations been spelt out?

12) Have all footnote entries been made?

13) If column rules are used, have all rules been properly drawn?

Illustrations

Illustrations cover charts, graphs, diagrams, and maps. Most of the instructions given for
tables hold good for illustrations.

Identification

Illustrations are identified as FIGURE, CHART, MAP, or DIAGRAM. The identification

marks (i.e., number title, and, if any, subtitle) are put at the bottom, because an illustration,
unlike a table, is studied from bottom upwards.

15.6 Reference Section

This section follows the text. First the appendices section, then the bibliography and
glossary. Each section is separated by a divider page on which only the words Appendices,
Bibliography, or Glossary in all capital letters appear.

All reference section pages are numbered in Arabic numerals in continuation with the
page numbers of the text.

1) Appendices

What Goes into an Appendix

a) Supplementary or secondary references are put in the appendices section. But all
primary reference material of immediate importance to the reader is incorporated in
the text. The appendices help the author to authenticate the thesis and help the
reader to check the data.
214

b) The material that is usually put in the appendices is indicated below:

1) Original data

2) Long tables

3) Long quotations

4) Supportive legal decisions, laws, and documents

5) Illustrative material

6) Extensive computations

7) Questionnaires and letters

8) Schedules or forms used in collecting data

9) Case studies/histories

10) Transcripts of interviews

Numbering of Appendices

The appendices can be serialized with capital letters (Appendix A, Appendix B) to

differentiate from the chapter or table numbers.

References to Appendices

a) In the text, reader’s attention is drawn to the appendices as in the case of tables.

b) All appendices are listed in the table of contents.

2) Bibliographies

Positioning of the Bibliography

The bibliography comes after the appendices section and is separated from it by a division
sheet written Bibliography. It is listed as a major section in all capital letters in the table of
content.

A bibliography contains the source of every reference cited in the footnote and any other
relevant works that the author has consulted. It gives the reader an idea of the literature available
on the subject and that has influenced or aided the author.
 215

Bibliographical Information

The following information is given for each bibliographical reference:

Books Magazines and Newspapers

1) Author(s) 1) Author(s)

2) Title (underlined) 2) Title of the article (within quotation marks)

3) Place of publication 3) Title of the magazine (underlined)

4) Publisher 4) Volume number (Roman numerals)

5) Date of publication 5) Serial number (Arabic numerals)

6) Number of pages 6) Date of issue

7) Page numbers of the article

Types of Bibliographies

The title of a bibliography should indicate what type of items is listed. Some common
varieties of bibliographies are given below:

a) Bibliography of Works cited lists only those items which have been referred to in the
text.

b) Selected Bibliography contains only those items which the author thinks are of primary
interest to the reader and indicates the criteria used for selecting the items.

c) Annotated Bibliography gives a brief description of each item to help the reader to
find out the usefulness of the book.

Difference between Bibliographical and Footnote Entries

The formats of bibliography and footnote differ in the following respects:

a) In a bibliography, the first line of an item begins at the left margin and the subsequent
lines are indented. But in a footnote, the first line is indented and the subsequent
lines of the item begin at the left margin.

b) In a bibliography, the last name of the author is given first (Kumar, Arvind), but in a
footnote the first name is given first (Arvind Kumar).
216

c) A bibliography is arranged within a section in the alphabetical order of the last name
of the author or in the alphabetical order of the title of the work, or in the chronological
order of publication. But footnotes are arranged in the sequence in which they have
been referred to in the text.

d) Punctuation, marks in a bibliography and in a footnote are different.

e) In a bibliography the total number of pages of a book (205 pp.) or page numbers
32of the article (1-21) are given, while in a footnote only the specific page (p. 21) or
pages cited (pp. 3-5) are given.

How to Make a Bibliography

Solutions to some of the difficulties commonly faced in writing a bibliography are given
below:

a) When the bibliography is long, items are classified for easy reference according to
1) format like books, periodicals, and newspapers, 2) subject or theme, or 3)
chronological order.

b) If the name of the author is not given, the title of the book or the article appears first.
“A”, “An”, and “The” in the beginning of the title are ignored for determining the
alphabetical order; however, the article appears in the listing if it is a part of the title.

c) An author’s works written in collaboration with others are listed after the works
which he has written alone.

d) If there are more than three authors, the symbol et al. is used after, the first author’s
name and other names are omitted.

e) If two or more works of an author are listed, the author’s name is written for the first
time, and for subsequent items a 10-space line is drawn where the author’s name
should appear.

f) Within the works of an author, the order is determined by the alphabetical order of
the title of the work or the date of publication.

g) If two or more persons have written the book, the names are listed in the order
mentioned in the book or article. Examples of Bibliographical and Footnote Entries
 217

Conference Paper

Bibliography

Bhattacharya, S.K. “Control ‘techniques and Their Applicability.” Paper read at the
Ahmedabad Management Association, Ahmedabad, 22 Nov 1967. 12 pp.
(Mimeographed) Footnote 1, S.K. Bhattacharya, “Control Techniques and Their
Applicability.” Paper read at the Ahmedabad Management Association, Ahmedabad,
22 Nov 1967. p.l l (Mimeographed)

More than one item of an Author

Bibliography

Shah, B.G. “Farm Finance: A Few important Issues”, Artha Kkas, IV, 1, (Jan 1968), 38-45.
“Manpower Development for Banks”, The Economic Times, VIII, 3, (26 June 1968), 5.3

Glossary

What is a Glossary : A glossary is a short dictionary giving definitions and examples of

terms and phrases which are technical, used in a special connotation by the author, unfamiliar
to the reader, or foreign to the language in which the book is written. It is listed as a major
section in all capital letters in the table of contents.

Positioning of a Glossary: The glossary appears after the bibliography and it may also
appear in the introductory pages of a book after the lists of tables and illustrations.

Order of Listing: Items are listed in alphabetical and normal order. Example: Centre
Heading is lasted under C and not under H.

15.7 Typing Instructions

For typing of a report, the following should be kept in mind.

Paper

a) Quarto-size, white, thick, un ruled paper is used for manuscripts.

b) Typing is done on only one side of the paper.

218

Margins

The following margins may be followed: Left = 1.5 in. Right = 1 in. 35

Report Writing and Presentation

Top and bottom = 1 in. (But on the first page of every major division, e.g., beginning of a
chapter give 3 in. space at the top. give 3 in. space at the top.

Uniform margins make the typescript look neat.

Indention
a) The first line of a regular paragraph is indented five spaces from the margin.

b) All lines in an indented paragraph are indented five spaces from the margin. But

the first line of an indented paragraph, if it has a paragraph beginning, is indented 10

spaces from the margin. Example : The increase in taxation on commodities through excise
duties and custom duties has increased the tax and therefore the prices.

Spacing between Lines

a) The whole manuscript is typed in double space, except indented paragraphs, tables,
and footnotes, which are usually in single space. Wherever single space is used,
double space is given between paragraphs or sets of items.

b) Triple space is given 1) before a paragraph head and 2) before and after a centre
head, centre subhead, side head, indented paragraph, or table.

Spacing within a Sentence

Between words 1 space

After a semi-colon 2 spaces

After a colon 2 spaces

After a comma 1 space

After a full stop 2 spaces before the first parenthesis or bracket 1 space

After the last parenthesis 1 space No space is given in the following cases:

a) Between the last letter and the comma, semi-colon, colon, exclamation mark,
question mark, last parenthesis, and last bracket.
 219

b) Between the first quotation mark and the following word.

c) Between the last quotation mark and the last quoted word or punctuation.

d) Between the dash and the words preceding or following it.

e) Between hyphenated words.

f) Between the bar (/) and the words preceding or following it.

15.8 Copy Reading

The copy reader’s symbols are used for instructing the typist or secretary. But the proof
reading symbols are used for instructing the printer. Some symbols are common. But the symbols-
for proof reading are more than for copy reading. (Copy reading symbols with explanations are
given at the end of this unit in Appendix A.)

15.9 Proof Reading

Types of Proofs

a) Usually the printer sends galley proofs (also known as first proofs), page proofs,
and engraver’s proofs (wherever photographs or other illustrations are involved). If
required, revised proofs at any stage are sent. For a high quality work, the printer
provides a dummy, which is also called machine proof or press proof.

b) The galley proof is the one which is not divided into pages. Galleys, the short name
for galley proofs, are in single column set in the line width of the text and sometimes
as long as 24 inches. The second stage is that of page proofs, which give Formats
of Reports an idea what each page will contain and look fake. Dummy is the final
stage which represents the printed version before copies are run off.

How to Proof Read

a) A good proof reader has accuracy to pin-point all the mistakes, clarity in giving
instructions to the printer, and speed for meeting the printer’s deadlines.

b) Correction marks are indicated at two places 1) within the line where the correction
is to be carried out and 2) in the margin against the corresponding line giving the
instruction. If there are two or more corrections in a line, both the right and left
margins are used for instructions. The sequence of instructions corresponds to the
220

sequence of marks within the line in order from left to right. Each instruction is
separated by a bar (/).

c) Instructions are never given at the place of correction. The printer only goes through
the margins and never reads through the proofs. If the instruction is not in the
margin, the printer will miss it.

d) The proof may be marked preferably with a red ballpoint pen. The red color shows
up better in the background of black ink and darkness of the composing room.
Avoid red ink or pencil. Ink spreads on the cheap paper used for proofs and pencil
marks are not sharp.

e) To catch as many errors as possible, proof may be read four times as follows:

1) Ask another person to read the copy aloud while you go through the proofs.

2) Read the proof alone without somebody reading from the copy.

3) Check all the headings and subheadings.

4) Check all the cross references.

Above all, remember proofs have to be read letter by letter rather than word by word.

f) Proofs are meant to be corrected but not edited. Additions and deletions at the
proof stage, commonly known as author’s alterations (AA), are time consuming
and very expensive. The cost of making these alterations is passed on to the author.
Large-scale editing will upset the layout of the pages also. But if the mistake is very
glaring, edit it at the proof stage rather than let it go into the final print.

Returning the Proofs

a) Proofs must be returned to the printer according to the agreed schedule. The delay
on author’s part upset scheduling of the machines and other operations of the printer
and the publisher.

b) The manuscript is also returned with the proofs. The printer uses the manuscript
for his checking and record in case any suit for damages is filed. The manuscript
becomes the property of the printer. The author can use the duplicate of the
manuscript for correcting. Then the printer need not send the original copy back
and forth.

c) Sometimes printers send two proof copies-6ne for the author’s record and the other
for returning to the printer.

d) For security, either hand deliver the proofs or send in a registered cover.
 221

15.10 Summary
In this lesson, we have discussed the various parts of a report. They are divided into
cover and Title Page, Introductory Pages, Text and Reference Section. Cover and Title Page
have these components (a) Title of the subject or Project (b) Presented to whom (c) on what
date (d) for what purpose (e) written by whom. The Introductory pages contain (a) Foreword (b)
Preface (c) Acknowledgement (d) Table of contents (e) Listing of Tables and Illustrations and
(f) Summary. The subject matter of Text is divided into (a) Headings (b) Quotations (c) Footnotes
(d) Exhibits. Reference section follows the Text. It contains (a) Appendices (b) Bibliography and
(c) Glossary. Each of these heads and subheads are explained with the help of examples.

The lesson also explains the typing instructions which should be followed while typing the
report. The lesson concludes by explaining how one goes about proof reading the report.

15.11. Key Words

 Table of Contents

 Report Formats and Referencing

 Referencing

 Glossary

15.12 Review Questions

1. What is Report Formats?

2. What is Referencing?

3. Explain the steps in Report Formats and Referencing?

15.13 Suggested Readings

1. Gallagher, J. William, “Report Writing for Management”, Addison-Wesley

2. Golen, P. Stevan, “Report W riting for Business and Industry”, Business

Communication Service

3. Sharma R.C. and Krishan Mohan, “Business Correspondence and Report Writing”,
Tata McGraw-Hill

4. Wright, C., “Report Writing”, Witherby & Co England

222

LESSON 16
RESEARCH ETHICS
Learning Objectives

After studying this lesson, you should be able to,

 Describe the uses of Research Ethics

 State conditions under which a Research Ethics could be carried out.

 Understand the steps involved in a Research Ethics.

Structure
16.1 Introduction

16.2 Research Ethics

16.3 Ethical Codes

16.4 What does this mean for my research project?

16.5 Guidelines for relatively standard research proposals

16.6 Summary

16.7 Key Words

16.8 Review Questions

16.9 Suggested Readings

16.1 Introduction
As you carry out your research and begin to write your dissertation, you will be conscious
of the assessment requirements, rules and regulations set down by your institution (see section
on Plagiarism). However, there are other rules which all researchers, whatever their subject,
must follow, rules of ethics and morality. In this section, you will learn the distinction between
these two categories in an academic context, and find guidelines for conducting a variety of
types of research.
 223

16.2 Research Ethics

The terms ethics and morals are often used interchangeably. Francis (1999) makes a
useful distinction between the two:

 Morals generally refer to an unwritten set of values that provide a frame of reference
that we use to help our decision-making and regulate our behavior.

 Ethics generally refer to a written code of value principles that we use in a particular
context.

Research ethics are therefore the principles that we use to make decisions about what is
acceptable practice in any research project. You will probably find that your institution has a
research ethics policy and procedures to guide researchers about what is permissible in their
research.

16.3 Ethical Codes

Research participants have moral and legal rights and it is important that as researchers
we do not violate these rights. Sometimes enthusiasm for the research topic can lead researchers
to pay less attention to the experience of the research participant as they are so focused on
answering their research question. A code of research ethics is required to ensure that there
are agreed standards of acceptable behavior for researchers, which protect participants’ moral
and legal rights.

Research ethics codes also ensure that there is good scientific practice in research. It is
essential that the public should be able to trust the results of research programmes as these
findings may impact significantly on their lives. Having researchers conform to codes of research
ethics protects against scientific dishonesty and fraudulent results.

What are the basic principles for ethical research?

1. Research studies have to comply with all legal requirements. This includes the
data protection legislation and appropriate screening of researchers working with
vulnerable groups of people. Different licensing requirements apply to research
involving animals or biomedical research.

2. Research is required to comply with the commonly agreed international

standards for good practice in research. These are laid down in the Declaration
of Helsinki and can be categorized as:
224

 Beneficence (Do positive good)

 Non-malfeasance (Do no harm)

 Informed consent

 Confidentiality/Anonymity

Many professional bodies such as the British Sociological Association and the British
Psychological Society have produced their own ethical codes. 

16.4 What does this mean for my research project?

At the outset you have to bear in mind that your overarching responsibility is to protect the
rights and dignity of all your research participants.

Research participants

One of the first questions needs to be about the participants you wish to recruit. Do you
wish to undertake research with what are termed ‘vulnerable’ participants? Vulnerable participants
are defined as the following:

 Infants and children under the age of eighteen or sixteen if they are employed
(Criminal Justice and Court Services Act, 2000).

 Vulnerable adults, defined as:

a) People with learning or communication difficulties

b) Patients in hospital or under the care of social services

c) People with mental illness including those with addictions to drugs and alcohol

If you wish to recruit vulnerable participants as defined above then you need to consider
where you will be interacting with them. If you wish to undertake research with vulnerable
populations that require you to be on your own with the individual in a private interview room or
the like then you will need to undergo Criminal Records Bureau Screening. This will take some
time, and may engender some cost, so you need to plan for this if it is necessary for your
research. The school or institution where you are undertaking your research is also likely to
insist on this if you are having private unsupervised access to vulnerable research participants.
 
 225

This does not mean that you cannot do research with these populations. It may be that
you can arrange supervised access to your research participants. For example you may interact
with children in a public place, such as the corner of a classroom, or in the presence of a
teaching assistant, or in some other public venue within the institution provided you are not
alone with the participant for significant amounts of time. These are issues you will have to
discuss when arranging access to your research participants.

There are several other factors related to research ethics that you have to consider when
designing your research project.

 Consent

 Protection of participants

 Debriefing

 Confidentiality

 Observational research

 Deception

 Withdrawal from the research

 Data storage.

Consent

Where possible, participants should be informed about the nature of the study. All of the
aspects of the research that are likely to affect their willingness to become participants should
be disclosed. This might include the time it is likely to take, particularly if you require significant
amounts of their time. You are seeking to get informed consent from your participants so they
need to be adequately briefed. For research involving vulnerable participants getting informed
consent may involve briefing parents, teachers or careers about the study.

Many studies now use a Participant Information Sheet in order to brief potential participants
about the study. An example of the typical layout of a Participant Information Sheet is provided
at the end of this section. After reading the Participant Information Sheet, participants should be
given the opportunity to ask any questions. After this they can be asked to complete a consent
form confirming that they have read and understood the information about the study and that
they agree to participate. An example of a Consent Form is also provided at the end of the
section.
226

For standard questionnaire studies, where the topic of the research is not a particularly
sensitive issue, it may be sufficient to include a description of your study at the start of your
questionnaire, completion of the questionnaire implying consent. Again, your supervisor will be
able to advise you if you are uncertain.  

Observational research

Unless the participants give their consent to being observed, observational research must
only take place where those observed could normally expect to be observed by strangers.

Observational studies must not violate the individual’s privacy and psychological well-
being. You should also be sensitive to any cultural differences in definitions of public and private
space.

Protection of participants

The Declaration of Helsinki, discussed earlier, provides the guiding principles here. As a
researcher you must take care at all times to protect your participants from physical and mental
harm. If potentially distressing questions may be asked, participants must have the right not to
answer these questions and this must be made clear to them at the start. If negative
consequences might ensue then the researcher has to detect and remove these effects. This
might for example involve having telephone numbers of help lines that participants could contact
if they wanted to discuss the issues further. In research with children, you must not discuss the
results you obtain from individual children with teachers and parents. In all cases you can only
report back your anonymous results.

Deception

In most social science research, deception should not be necessary. Sometimes, however,
participants may modify their behavior if they know what the researcher is looking for, so that by
giving the full explanation to participants you cannot collect reliable data. Deception should only
be used when no other method can be found for collecting reliable data and when the seriousness
of the question justifies it. A distinction is made between deliberately deceiving participants and
withholding of some information.

Deliberate deception is rarely justifiable. Withholding of information does occur more

frequently. This might mean, for example, giving your questionnaire a general title such as An
Exploration of Social Attitudes rather than saying which attitudes in particular you are interested
 227

in. The guiding principle is taken to be the likely reaction of participants when the deception is
revealed. If participants are likely to be angry or upset in some way then deception should not
occur. If deception is involved then you need to seek ethical approval for your study.

Debriefing

When deception has occurred, debriefing is particularly emphasized, but it should be a

part of all research to monitor the experience of the participants for any unanticipated negative
effects. This may involve providing participants with written information describing the study
and/or the contact details of help lines or counseling services or health care agencies that
participants can contact if they wanted to discuss the issues further. Participants should also
know how to contact you after the study. Generally the inclusion of your university e-mail address
is the best option.

Withdrawal from the research

Sometimes individuals may get distressed during an interview for example, and you must
make it clear that they can withdraw from the study at any time without giving any reason. It
may be that a participant decides after an interview that they have said things that they now
regret. Participants should be able to withdraw their interview data in cases such as this. It is
good practice in your participant information sheet to give a cut-off date up to which participant
data can be withdrawn. This will normally be up to the time when you intend to start your data
analysis. 

Confidentiality

Here you must conform to data protection legislation, which means that information
obtained from a research participant is confidential (unless you have agreed in advance that
this is not to be the case). This means that you must take care to anonymous data that you
obtain from participants, say in interview studies. To do this, you must not only change names
but also change any details that might make the person easily identifiable. This should be done
at the transcription stage. You are required to assure your participants that this will occur.

Data storage

If you are collecting data from participants who are not anonymous, then you must take
special precautions to ensure that the data is stored appropriately to ensure the participants’
anonymity. This means that tapes should be kept securely and they should not be labeled with
228

participants’ real names. You will have to keep your data sets until after you have passed your
degree in case you are required to produce them by your university. Interview tapes and other
confidential material should be disposed of carefully when no longer required.

16.5 Guidelines for relatively standard research proposals

While it is not possible to provide definitive guidelines, scrutiny of these questions will
help you decide whether your research proposal has special ethical issues that result in it
requiring ethical review by your departmental/University Research Ethics Committee or
equivalent. Your supervisor will also provide you with further advice on this.

1. Does it involve human participants and/or data from human participants? (Yes/No)

2. Does it involve vulnerable participants as defined below? (Yes/No)

 Infants and children under the age of eighteen.

 People with learning or communication difficulties.

 Patients in hospital or under the care of social services.

 People in custody or on probation.

 People engaged in illegal activities such as drug abuse. (British Psychological

Society, 2004).

3. Does it involve sensitive topics? (I.e. topics likely to cause significant embarrassment
or discomfort to participants or topics related to illegal activity.) (Yes/No)

4. Does it involve collection of data that is not anonymous? (Yes/No)

If you have answered YES to questions 2 and 3, you will normally be required to
submit an ethics proforma for ethical approval by your departmental/University
Research Ethics Committee or equivalent.

16.6 Summary
Morals are unwritten values used to distinguish the right from the wrong. Ethics are
usually a written set of values which apply to a specific context. Codes of behavior are used to
protect the interests of research participants, since these interests are different and may even
be at odds with those of the researcher. As a researcher, you must comply with the legal
requirements binding your actions and the privacy of the research participants.
 229

16.7 Key Words

 Morals

 Research Ethics

16.8 Review Questions

1. What is Research Ethics?

2. Explain the steps in Research Ethics?

16.9 Suggested Readings

1. Francis, R.D. (1999). A Code of Ethics for Psychologists. Leicester, BPS Books.

2. Lee-Trewick, G. and Linkogle, S. (2000). Danger in the Field: Risk and ethics in
social research. London, Routledge

3. Maunthner, M. and Birch, M. (2002). Ethics in Qualitative Research. London, Sage

4. Walliman, N. (2005).Your Research Project. 2nd ed. London, Sage, chapter 8 –

honesty and research ethics
230

Model Question Paper

MBA Degree Examination, DECEMBER 2018
First Year – First Semester
Paper - II
QUANTITATIVE AND RESEARCH METHODS IN BUSINESS
Time : 3 Hours Maximum : 80 Marks

SECTION - A

Answer any TEN of the following in 50 words each (10 x 2 = 20 Marks)

1. What are mutually exclusive events?

2. What is Baye's theorem?
3. What is correlation ?
4. What is regression ?
5. What is type I error ?
6. What is random sampling?
7. What is binomial distribution?
8. What is research ?
9. What is parametric test ?
10. What is an interview schedule?
11. What is ANOVA ?
12. What is Likert Scale ?

SECTION - B

Answer any FIVE of the following in 250 words each ( 5 x 6 = 30 Marks)

13. What are the uses of factor analysis ?

14. What are the characteristics of measurement ?

15. List out the characteristics of a questionnaire.

16. Distinguish Fundamental research and applied research.

17. The sick leave time of employees in a firm in a month is normally distributed with a mean
of 100 hours and a standard deviation of 20 hours.
 231

i) What is the probability that the sick leave time for next month will be between 50 to
80 hours?

ii) How much time should be budgeted for sick leave of the budgeted amount should
be exceeded with a probability of only 10%

18. Discuss the applications of snow ball sampling.

19. Discuss the merits of Probability Sampling.

SECTION - C

Answer any THREE questions in about 500 words each (3 x 10 = 30 Marks)

20. Two sales managers have ranked 12 sales assistants in the order the sales as under:

Sales
Assistants A B C D E F G H I J K L

Rank by 1st
Sales Manager 5 2 4 1 8 9 10 6 3 11 7 2

Rank by 2nd
Sales Manager 6 9 7 10 1 2 4 12 3 5 11 8

Calculate rank correlation coefficient to find out whether the sales managers are in
agreement with each other or not.

21. Explain the scaling techniques used in social science

22. The average number of annual trips per family to amusement parks in Chennai is Poisson
distributed, with mean of 0.6 trips per year. What is the probability of randomly selecting
an Chennai family and find the following:
i) The family does not make a trip to an amusement park last year?
ii) The family took exactly one trip to an amusement park last year?
iii) The family took two or more trips to an amusement park last year?
iv) The family took there or fewer trips to amusement parks over a three year period?
v) The family took exactly four trips to amusement parks during a six year period?

23. Explain the steps in discriminant analysis.

24. Discuss the format of a research report.

Copy protected with Online-PDF-No-Copy.com