BA-1203: Business Statistics

Lesson 1: Introduction to Statistics

Md. Mehedi Hasan

Assistant Professor, Dept. of Business Administration
North Western University, Khulna.
 Lecture Topics
• Why study statistics?
• Definition of Statistics and Business Statistics
• Stages of Statistics
• Characteristics of statistics
• Functions / Objectives/ Importance of Statistics
• Limitations of Statistics
• Application of Statistics in Business/ How Statistics use in Business
• Data and Information
• Sources of Data
• Methods of Collecting Primary Data
• Sources of Collecting Secondary Data
• Difference between Primary and Secondary data
• Some Important Concepts
 Population and Sample
 Difference between Population and Sample
 Variables and Types of variables
 Scales of Measurement
 Divisions of Statistics
 Why study statistics?

 Data are everywhere

 Statistical techniques are used to make many
decisions that affect our lives
No matter what your career, you will make
professional decisions that involve data. An
understanding of statistical methods will help
you make these decisions efectively
 Definition/ Meaning of Statistics
Statistics may be defined as the science of collection,
organization, classification, presentation, analysis and
interpretation of numerical data as well as deriving valid
conclusion and making reasonable decision on the basis of
this analysis.
Sir Ronald Aylmer Fisher(R.A. Fisher) is known as ‘Father
of Statistics’ and Kazi Motaher Hossain is known as
‘Father of Statistics in Bangladesh’.
According to professor R. A. Fisher, “ The science of
statistics is essentially a branch of applied mathematics and
may be regarded as mathematics applied to observational
data”.
According to professor W. I. king, “ Statistics is the science
of decision making in the field of uncertainty”.
 Definition/ Meaning of Business Statistics
Business Statistics is defined as the systematic practice of
collecting, analyzing, interpreting, and presenting data, relevant to
business operations and decision-making. It serves as a critical tool
for organizations to gain insights into their performance, market
dynamics, and customer behaviour. By applying various statistical
methods and techniques, businesses can uncover patterns, trends,
and relationships within their data, enabling them to make informed
decisions, set goals, and optimize processes.

Business statistics refers to a method that involves the application

of statistics to get valuable insights from the data or information
available to a company. It helps businesses understand their present
situation and make future projections. Thus, this method plays a
crucial role in helping companies make crucial decisions.
Stages/ Steps of Statistics
 Stages/ Steps of Statistics
Each stage of Statistics is explained as follows:
(i) Collection of Data - It is the first step in a statistical enquiry. There
are two ways of collecting data: primary and secondary. The data provide
the basis of statistical enquiry. If data is biased, the entire study will
become unreliable. Therefore, it has to be collected with great caution.
(ii) Organization of Data - The next step after collection of data is to
organize this data in a proper way. Organizing involves classification,
grouping and editing.
(iii) Presentation of Data - Once the collected data are organized these
are presented in a systematic manner to make statistical analysis clear and
easier. Data can be presented through tables, diagrams, graphs or pictures.
(iv) Analysis of Data - After presentation data are analyzed by using
averages, dispersion, correlation, regression, time series analysis etc. It
helps us to reach at some conclusions on the basis of data.
(v) Interpretation of Data - It is the final stage of statistical study. In
this stage data are used to derive some conclusions to take decisions.
 Functions / Objectives of Statistics
• It simplifies mass of data (condensation);
• Helps to get concrete information about any problem;
• Helps for reliable and objective decision making;
• It presents facts in a precise & definite form;
• It facilitates comparison(Measures of central tendency
and measures of dispersion);
• It facilitates Predictions (Time series and regression
analysis are the most commonly used methods towards
prediction.);
• It helps in formulation of suitable policies.
Importance of Business Statistics
 Importance of Business Statistics
1. Informed Decision Making: Business statistics provides the tools and techniques
necessary to analyze data and extract valuable insights. This enables organizations to make
informed decisions based on empirical evidence rather than relying on intuition or
guesswork.
2. Performance Evaluation: It allows businesses to assess the performance of various
aspects of their operations, such as sales, marketing, production, and finance. By measuring
performance against established benchmarks and objectives, companies can identify areas for
improvement.
3. Risk Assessment and Mitigation: Business statistics help in identifying and quantifying
risks. By understanding the likelihood and potential impact of various risks, organizations
can take proactive measures to mitigate them, enhancing their resilience and ability to adapt
to changing circumstances.
4. Market Understanding: Companies can use statistics to gather and analyze data on
market trends, consumer behaviour, and competition. This information is vital for developing
effective marketing strategies, launching new products, and staying competitive.
5. Resource Optimization: Statistics aids in optimizing resource allocation, including
budgeting, manpower, and inventory management.
6. Quality Improvement: Statistical quality control techniques help businesses monitor and
enhance the quality of their products or services. By reducing defects and variations,
companies can improve customer satisfaction and reduce waste.
7. Forecasting: Business statistics is essential for making accurate forecasts, whether it is
predicting sales, demand for products, or financial trends. These forecasts are instrumental in
planning and resource allocation.
 Limitations of Statistics
1. Data Quality Issues: Statistics heavily depend on the quality and accuracy of data. If data
is collected with biases or contains errors, it can introduce significant distortions into the
analysis, potentially leading to misleading results.
2. Sampling Errors: The size of the sample used in statistical analysis can impact the
accuracy of results. A small sample may not be representative of the entire population,
leading to skewed conclusions. The method used to select a sample can introduce biases. For
instance, if a non-random sampling method is used, it may not accurately represent the
population.
3. Assumptions and Simplifications: Statistical models often make simplifying
assumptions about the data. If these assumptions do not hold in reality, the results can be
misleading. For example, linear regression assumes a linear relationship between variables,
which may not always be the case.
4. Historical Data: Statistics often rely on historical data, which may not accurately predict
future events, especially in rapidly changing environments or markets.
5. Limited Scope: Statistics can only analyze data that has been collected. It may not
account for factors that were not measured or considered, potentially leading to incomplete
analyses.
6. Human Judgment: Interpreting statistical results involves human judgment. Different
analysts may interpret the same data differently, leading to subjectivity and potential bias.
7. Ethical and Privacy Concerns: Collecting and analyzing data may raise ethical and
privacy concerns, especially when dealing with sensitive information.
 Application of Statistics in Business/ How
Statistics use in Business
Marketing: Statistics is used in almost every aspect of creating and
growing customers, in forecasting sales, market share and demand
for various industrial products, in designing marketing companies,
in conducting marketing research, in studying customer response
etc.
Finance: Statistical tools and technique are used for analyzing
financial risk, measuring financial performance, comparing return
on investment, making break even analysis, making financial
planning and asset evaluation, cash flow analysis and prediction
etc.
Insurance: Probability and Statistics are used extensively in
designing new insurance policies and fixing of premiums for the
companies.
 Application of Statistics in Business/ How
Statistics use in Business
Purchasing and Inventory: Statistical techniques offer guideline
on how much raw material to purchase, levels of inventory to keep
and costs to ship and store finished products.
Operations: Operations means transforming various resources
into product and services in the place, quantity, cost, quality and
time as required by the customers. Statistics plays a very useful
role at the input, processing and output stage.
Human Recourse Management (HRM): All the functions of
HRM department need statistical tools for evaluating the
performance, developing rating systems and training systems,
studying labor turnover rates and collecting, storing, retrieval and
analysis of a mass of data.
 Application of Statistics in Business/ How
Statistics use in Business
Research and Development: Without statistical applications, it is
impossible for a firm to conduct research on particular topic and
reach valid conclusions.
Economics: Statistical data and methods give valuable assistance
in the proper understanding of the economic problem and in the
formulation of economic policies.
Controlling: Managers and decision makers need to use statistics
in every area of controlling costs, operations and in planning
budgets.

 In this way statistics play an important role in business.

 How do Companies use Business Statistics?
Companies use business statistics in various ways to improve decision-making, optimize
operations, and achieve their business objectives. The specific applications of business statistics
may vary depending on the industry and company objectives. Here are some common ways in
which companies use business statistics:
1. Market Research and Customer Analysis
• Conducting surveys and data analysis to understand customer preferences, needs, and
behaviour.
• Segmenting customers into distinct groups based on demographics, buying patterns, or other
characteristics.
• Analyzing market trends, competition, and potential opportunities.
2. Sales and Revenue Forecasting
• Predicting future sales and revenue based on historical data, market trends, and other relevant
factors.
• Adjusting pricing, marketing, and inventory strategies based on sales forecasts.
3. Inventory Management
• Determining optimal inventory levels to meet customer demand while minimizing carrying
costs.
• Using statistical models to forecast demand and reorder points.
4. Quality Control and Process Improvement
• Monitoring and analyzing production processes to ensure product quality and consistency.
• Identifying defects or issues and implementing corrective actions based on statistical analysis.
 How do Companies use Business Statistics?
5. Financial Analysis and Risk Management
• Analyzing financial data to assess the company’s financial health and performance.
• Managing financial risks through techniques like variance analysis and sensitivity analysis.
6. Human Resources and Workforce Management
• Making hiring decisions based on data-driven assessments of candidates.
• Evaluating employee performance and identifying areas for training and improvement.
• Managing workforce diversity and inclusion through data analysis.
7. Supply Chain and Operations Optimization
• Analyzing supply chain data to optimize procurement, logistics, and distribution processes.
• Reducing lead times, improving efficiency, and minimizing costs through statistical analysis.
10. Risk Assessment and Compliance
• Assessing and managing various types of risks, including financial, operational and compliance
risks.
• Ensuring regulatory compliance through data analysis and reporting.
11. Strategic Decision-Making
• Using statistical models and data analysis to support strategic decisions, such as market
expansion, product development, and acquisitions.
• Scenario analysis to evaluate potential outcomes and risks associated with different strategies.
13. Customer Feedback and Satisfaction
• Collecting and analyzing customer feedback and satisfaction surveys to make improvements in
products and services.
 Data
Data is a raw and unorganized fact that required to be processed to
make it meaningful. Data can be simple at the same time
unorganized unless it is organized. Generally, data comprises facts,
observations, perceptions numbers, characters, symbols, image,
etc.
Data is always interpreted, by a human or machine, to derive
meaning. So, data is meaningless. Data contains numbers,
statements and characters in a raw form.

A set of observations obtained from a particular enquiry is called data.

Data may be qualitative or quantitative.
 Information
Information is a set of data which is processed in a
meaningful way according to the given requirement.
Information is processed, structured or presented in a
given context to make it meaningful and useful.
Data + Meaning = Information
 Examples of Data and Information
1. Individual exam marks are raw data, but if you were to
process those to say that the average mark for the class was
53%, or that boys did better than girls, or that 76% of the
students in your University got a grade A or B, then that is
information!
2. The colour red is data as it has no meaning.
 What information we attach to the red colour is information.
For example:
 On the traffic light it means STOP.
 In a football match a red card means that the player has been
suspended.
 In a certain places the red colour may mean a danger zone.
 Sources of Data
Data can be obtain from two important sources namely:
1. Primary Data
2. Secondary Data
Primary data: The primary data are those which are
collected afresh and for the first time and thus happen to
be original in character.

Secondary Data: The secondary data are those which have

already been collected by someone else and which have
already been passed through the statistical process.
 Methods of Collecting Primary Data

There are some basic methods of obtaining primary data:

1. Direct personal interview
2. Indirect oral investigation
3. Information through local correspondents
4. Questionnaire method.
 Sources of Collecting Secondary Data
(A)Published sources
i. Government publications
ii. International publications
iii. Reports of commissions and committees
iv. Publications of research institutions
v. Magazine
vi. Reports of trade associations
vii. Publications of personal investigation

(B) Unpublished sources

Difference between Primary and Secondary data
Basis For Comparison Primary Data Secondary Data
Meaning Primary data refers to the first Secondary data means data
hand data gathered by the collected by someone else
researcher himself. earlier.
Data Real time data Past data
Process Very involved Quick and easy
Source Survey, observations, Government publications,
experiments, questionnaire, websites, books, journal
personal interview, etc. articles, internal records etc.
Cost effectiveness Expensive Economical
Collection time Long Short
Specific Always specific to the May or may not be specific to
researcher's needs. the researcher's need.

Accuracy and Reliability More Relatively less

 Some Important Concepts

Population: A complete set of observation (data)

of the entire group of individuals under
consideration. A population can be finite or
infinite.
Example: The population may be:
All workers of a factory;
 All employees of a firm;
All students of North Western University; etc.
 Some Important Concepts

Sample: A sample is a part of a population that

is taken and considered for study.
A representative part of a population is called
sample.
Example:
Some workers of a factory,
Some employees of a firm,
Some students of North Western University;
etc.
 Difference between Population and Sample
Basis For Comparison Population Sample
Meaning Population refers to the Sample means a subgroup
collection of all elements of the members of
possessing common population chosen for
characteristics, that participation in the study.
comprises universe.

Includes Each and every unit of Only a handful of units of

the group. population.
Characteristic Parameter Statistic
Data collection Complete enumeration or Sample survey or
census sampling
Focus on Identifying the Making inferences about
characteristics. population.
 Some Important Concepts
Variable: A variable is a factor or characteristic that can
take on different possible values or outcomes. A variable
can be qualitative (categorical) or quantitative (numerical).

Or, A changing entity is called variable.

Example:
 Age of workers,
 Religion of students,
 Income of employees,
 Gender of garment workers,
 Height/Weight of students; etc.
 Types of Variables

Variables

Qualitative Quantitative
(Categorical) (Numerical)
Examples:
 Marital Status
 Political Party Discrete Continuous
 Eye Color
(Defined categories) Examples: Examples:
 Number of Children  Weight
 Defects per hour  Height
(Counted items) (Measured characteristics)

.
 Some Important Concepts

Qualitative variable: A qualitative variable is a

characteristic that is not capable of being measured but
can be categorizes some characteristics.
A few example of qualitative variable are:
i. Religion of students;
ii. Gender of patients;
iii. Economic status of persons;
iii. Place of birth;
iv. Examination grade; etc.
 Some Important Concepts
Quantitative variable: A variable that can be measured
numerically is called a quantitative variable.

Examples of quantitative variable:

Year of teaching experience of professor,
Income of individuals,
Longevity of lives,
Day temperature,
Number of children per family,
Price of a shirt produced by a garment factory; etc.
 Some Important Concepts

Discrete variable: A variable, which can take, only

isolated or countable number of values is called a
discrete variable.

Examples of discrete variables are:

i. Number of children per family,

ii. Number of days absent from work of illness,

iii. Number of typing error in a document; etc.

 Some Important Concepts

Continuous variable: A variable that can take infinitely

many values over a certain interval or intervals is called a
continuous variable. That is continuous variable can be
measured only.

Examples:
Height or weight of individual,
Age of a worker,
Systolic blood pressure of a patient; etc.
 Scales of Measurement
Measurement: Measurement is a process of assigning
numbers to some characteristics or variables according
to scientific rules. A measurement is obtained when a
variable is measured on experimental unit. All variables
under statistical study can be measured.
According to Stevens there are four scales of
measurements.
 Nominal scale
The scale of measurement by which we can classify and identify
a qualitative variable according to different categories is called
nominal scale. The variables measured by nominal scale are also
called nominal variables and the data obtained by this scale of
measurement are called nominal data.
 Used to label/ categorize/ classify variables
 Mutually exclusive sub-classes
 No numerical significance
 It represents the lowest level in the hierarchy.
Some examples of nominal scale:
• Gender of a garment worker (Male, Female)
• Colour of eyes of a worker (Black, Green, Brown)
• Religion of a worker (Islam, Hindu, Buddhist Christian )
• Marital Status of a worker (Single, Married, Divorced)
 Ordinal Scale
The scale of measurement by which we can classify, identify and
rank a qualitative variable according to different categories is called
ordinal scale. The variables measured by ordinal scale are also called
ordinal variables and the data obtained by this scale of measurement
are called ordinal data.
 It also a qualitative scale.
 It is used to categorize and also used to arrange the data in order.
 It supplies more information than nominal scale.
 It does not indicate the amount by which participants differ and
thus the measurement carried out at ordinal scale does not reflect
the property of equal interval between the well classified and
ranked categories.
 Some examples of ordinal scale:
 Grading of a student (A, B, C, D)
 Size of a worker (Tall, Medium, Short)
 Economic status of a citizen (Higher class, Middle class, poor)
 Interval scale
The scale of measurement by which we can measure a quantitative
variable numerically on experimental unit with arbitrary zero as
origin is called interval scale. The variables measured by interval
scale are also called interval variables and the data obtained by this
scale of measurement are called interval data.
 It is a quantitative scale.
 It supplies more information than ordinal scale. It includes the
concept of equal intervals between the events that are ordered.
 It has ‘0’. But not absolute / true ‘0’.
 ‘+’, ‘-’ operation are possible.
 ‘×’, ‘÷’ operation not possible.
Some examples of interval scale:
 Body temperature of a patient.
 Marks obtained by students in an examination.
 Calendar time.
 Ratio Scale
The scale of measurement by which we can measure a quantitative
variable numerically on experimental unit with absolute zero as origin
is called ratio scale. The variables measured by ratio scale are also
called ratio variables and the data obtained by this scale of
measurement are called ratio data.
 It is a quantitative scale.
 It supplies more information than interval scale. It includes the
concept of absolute/true ‘0’.
 ‘+’, ‘-’ ,‘×’, ‘÷’ operation are possible.
Some examples of ratio scale:
 Age of a worker
 Weight of a worker
 Height of a worker
 Number of printing mistake per page of a book.
 Number of defects of a product.
 Divisions of Statistics
Statistics can be classified into two: Descriptive Statistics and Inferential
Statistics
Descriptive Statistics: Descriptive statistics consists of procedure used to
summarize (such as tabular, graphical) and describe the important characteristics
of a set of data.
For the purpose of describing properties, it uses measures of central tendency, i.e.
mean, median, mode and the measures of dispersion i.e. range, standard
deviation, quartile deviation and variance, etc.
The data is summarized by the researcher, in a useful way, with the help of
numerical and graphical tools such as charts, tables, and graphs, to represent data
in an accurate way.
Examples:
• The average age of the students in this class is 20 years.
• Of the students enrolled in BBA program this year,74% are male and 26% are
female.
• The percentage of students who passed the Business Statistics course in the
previous semester.
 Divisions of Statistics
Inferential Statistics: Inferential statistics consists of procedure used to draw
conclusions and inferences about population characteristics on the basis of
estimates derived from a sample.
Inferential Statistics is used to determine the probability of properties of the
population on the basis of the properties of the sample, by employing probability
theory. The major inferential statistics are based on the statistical models such as
Analysis of Variance, chi-square test, student’s t distribution, regression analysis,
etc.
Methods of inferential statistics:
 Estimation of parameters
 Testing of hypothesis
Examples:
• A manager would like to predict based on previous years’ sales, the sales
performance of a company for the next five years.
• There is a strong association between student study habits and academic
performance.
 Difference between Descriptive Statistics and Inferential Statistics

Basis For Comparison Descriptive Statistics Inferential Statistics

Meaning Descriptive Statistics is that Inferential Statistics is a type of
branch of statistics which is statistics, that focuses on drawing
concerned with describing the conclusions about the population,
population under study on the basis of sample analysis
and observation

What it does? Organize, analyze and present Compares, test and predicts data
data in a meaningful way

Form of final Result Charts, Graphs and Tables Probability

Usage To describe a situation To explain the chances of
occurrence of an event

Function It explains the data, which is It attempts to reach the conclusion

already known, to summarize to learn about the population, that
sample extends beyond the data available
Thank You All