Business Statistic Chap 001

What is Statistics
V c Hong V
University of Economics HCMC
January 2016
V c Hong V (UEH) Applied Statistics January 2016 1 / 32

Overviews of Statistics - Chapter 1
Chapter Content
1 1.1 What is Statistics?

Chapter Content
2 1.2 Why study statistics?

Chapter Content
3 1.3 Use of Statistics

Chapter Content
4 1.4 Statistics Challenges

Chapter Content
4 1.4 Statistics Challenges
5 1.5 Critical Thinking

Chapter Learning Objective (LO)
1 LO1: Define statistics and explain some of its uses in business.

2 LO2:List of reasons for a business student to study statistics

3 LO3: State the common challenges facing business professionals
using statistics

3 LO3: State the common challenges facing business professionals
using statistics
4 LO4: List and explain common statistical pitfalls

What is Statistics?
Learning Objective
LO1: Define statistics and explain some of its uses in business.
Statistics is the science of collecting, organizing, analyzing,

interpreting, and presenting data.

What is Statistics?
Learning Objective
LO1: Define statistics and explain some of its uses in business.
Statistics is the science of collecting, organizing, analyzing,

interpreting, and presenting data.
A statistic is a single measure (number) used to summarize a
sample data set. For example, the average height of students in
a university

What is Statistics?
For the height of students, a gown manufacturer may need to know

the average height for the length of the gowns or an architect may
need to know the maximum height to design the height of the door
ways of the class rooms.

Why Study Statistics?
Learning Objective
LO2: List reasons for a business student to study statistics.
Knowing statistics will make you a better consumer of other

peoples data.

Learning Objective
LO2: List reasons for a business student to study statistics.
Knowing statistics will make you a better consumer of other

peoples data.
You should know enough to handle everyday data problems, to
feel confident that others cannot deceive you with spurious
arguments, and to know when youve reached the limits of your
expertise.

Statistical knowledge gives a company a competitive advantage

against organizations that cannot understand their internal or
external market data.


Mastery of basic statistics gives an individual manager, a
competitive advantage as one works ones way through the
promotion process, or when one moves to a new employer.


Mastery of basic statistics gives an individual manager, a
competitive advantage as one works ones way through the
promotion process, or when one moves to a new employer.
Here are some reasons to study statistics

Why Study Statistics (cont.)
Communication
Understanding the language of statistics facilitates
communication and improves problem solving.

Communication
Computer Skills
The use of spreadsheets for data analysis and word processors or
presentation software for reports improves upon your existing
skills

Communication
Computer Skills
The use of spreadsheets for data analysis and word processors or
presentation software for reports improves upon your existing
skills
Information Management
Statistics help summarize large amounts of data and reveal
underlying relationships.

Technical Literacy
Career opportunities are in growth industries propelled by
advanced technology. The use of statistical software increases
your technical literacy

Technical Literacy
Career Advancement
Statistical literacy can enhance your career mobility

Technical Literacy
Career Advancement
Statistical literacy can enhance your career mobility
Process Improvement
Statistics helps firms oversee their suppliers, monitor their
internal operations and identify problems

Uses of Statistics?
Two primary kinds of statistics:

Descriptive statistics - the collection, organization, presentation
and summary of data.

Uses of Statistics?
Two primary kinds of statistics:

Descriptive statistics - the collection, organization, presentation
and summary of data.
Inferential statistics - generalizing from a sample to a
population, estimating unknown parameters, drawing
conclusions, making decisions.

Uses of Statistics?

Uses of Statistics?
Auditing:
Sample from over 12,000 invoices to estimate the proportion of
incorrectly paid invoices. How large should the sample be for the
auditors to be confident that the estimate is close enough to the
true proportion?

Uses of Statistics?
Auditing:
true proportion?
Marketing:
Identify likely repeat customers for Amazon.com and suggests
co-marketing oppurtunities based on a database of 5 million
Internet purchases. How can this large database be mined to
reveal useful patterns that might guide the marketing strategy?

Uses of Statistics?
Auditing:
true proportion?
Marketing:
Health Care:
Evaluate 100 incoming patients using a 42-item physical and
mental assessment questionnaire.

Uses of Statistics?
Auditing:
true proportion?
Marketing:
Health Care:
Evaluate 100 incoming patients using a 42-item physical and
mental assessment questionnaire.
Each patient is evaluated independently by two experienced
therapists. Whether two therapists agree on the patients
Uses of Statistics?
Quality Improment:
Initiate a triple inspection program, setting penalties for workers
who produce poor-quality output.

Uses of Statistics?
Quality Improment:
Purchasing:
Determine the defect rate of a shipment and whether that rate
has changed significantly over time. A retailers shipment of 200
DVD players reveals 4 with defects. The suppliers historical
defect rate is 0.05. Has the defect rate really risen, or this simply
a "bad" batch?

Uses of Statistics?
Quality Improment:
Purchasing:
Determine the defect rate of a shipment and whether that rate
has changed significantly over time. A retailers shipment of 200
DVD players reveals 4 with defects. The suppliers historical
defect rate is 0.05. Has the defect rate really risen, or this simply
a "bad" batch?
Medicine:
Determine whether a new drug si really better than the placebo
or if the difference is due to chance.

Uses of Statistics?
Operations Management:
Manage inventory by forecasting consumer demand.

Uses of Statistics?
Operations Management:
Manage inventory by forecasting consumer demand.
Product Warranty:
Determine the average dollar cost of engine warranty claims on a
new hybrid engine.

Mini case: Vail Resorts
Board of management of the Vail Resorts would like to increase

revenue. Some solutions are
having more flexibility around vacation planning increase
chance that customers visit more than once per year.
issuing new season pass

Mini case (cont)
Vail Resorts needed answers to questions such as

Which resorts should be included on the pass?
How many ski days should the pass offer?
Should there be blackout dates or not?
What price would make the pass attractive?

Mini case (cont)
Four market surveys were sent to random samples of current and

potential guests, including out-of-state guests, in-state-guests, and
Vail Valley residents. Guests were most concerned about
Pass price;
wanting to be able to ski at all five ski areas;
unlimited days of skiing at Vail and Beaver Creek;
did not want any dates blacked out.

1.4 Statistical Challenges
Learning Objective
LO3: State the common challanges facing business
professionals using statistics.

Learning Objective
The Ideal Data Analyst

Learning Objective

is technically current (e.g., software-wise).

Learning Objective

communicates well.

Learning Objective

communicates well.
is proactive

1.4 Statistical Challanges


has a broad outlook.


is flexible.


is flexible.
focuses on the main problem.


is flexible.
meets deadlines.


is flexible.
meets deadlines.
knows his/her limitations and is willing to ask for help.


is flexible.
meets deadlines.
can deal with imperfect information.


is flexible.
meets deadlines.
can deal with imperfect information.
has professional integrity.

Imperfect Data and Practical Constraints


State any assumptions and limitations and use generally
accepted statistical tests to detect unusual data points or to deal
with missing data. You will face constraints on the type and
quality of data you can collect.



State any assumptions and limitations and use generally
accepted statistical tests to detect unusual data points or to deal
with missing data. You will face constraints on the type and
quality of data you can collect.

Business Ethics
Some broad ethical responsibilities of business are

Business Ethics

Treating customers in a fair and honest manner.

Business Ethics

Complying with laws that prohibit discrimination.

Business Ethics

Ensuring that products and services meet safety regulations.

Business Ethics

Standing behind warranties.

Business Ethics

Advertising in a factual and informative manner.

Business Ethics

Employees should be encouraged to ask questions and voice
concerns about the companys business practices.

Business Ethics

Employees should be encouraged to ask questions and voice
concerns about the companys business practices.
Responsible for accurately reporting information to management.

Upholding Ethical Standards
Ethical standards for the Data Analyst


Report procedures faithfully.


Protect confidential information.


Cite sources.


Cite sources.
Acknowledge sources of financial support.

Using Consultants
Hire consultants at the beginning of the project, when your team

lacks certain skills or when an unbiased or informed view is needed.

Communicating with Numbers


Numbers have meaning only when communicated in the context
of a certain situation.


Numbers have meaning only when communicated in the context
of a certain situation.
Presentation should be such that managers will quickly
understand the information they need to use in order to make
good decisions.

1.5 Critical Thinking
Statistics is an essential part of critical thinking because it allows

us to test an idea against empirical evidence.


Empirical data represent data collected through observation and
experiments.


Empirical data represent data collected through observation and
experiments.
Statistical tools are used to compare prior ideas with empirical
data but pitfalls do occur.

Learning Objective
LO4: List and explain common statistical pitfalls

Learning Objective
Pitfall
Making Conclusions about a Large Population from a Small Sample

Learning Objective
Pitfall
Making Conclusions about a Large Population from a Small Sample
Be careful about making generalizations from small samples (e.g., a

group of 10 patients from 1,000,000 patients.)

Pitfall
Pitfall 2: Making Conclusions from non-random samples
Be careful about making generalizations from small samples and from

retrospective studies of special groups (e.g., heart attack patients).

Pitfall
Pitfall 3: Conclusions from rare events
Be careful about drawing strong inferences from events that are not
surprising when looking at the entire population (e.g., winning the
lottery).

Pitfall
Pitfall 3: Conclusions from rare events
Be careful about drawing strong inferences from events that are not
surprising when looking at the entire population (e.g., winning the
lottery).
Pitfall
Using poor survey methods
Pitfall 4: Be careful about using poor sampling methods or vaguely

worded questions (e.g., anonymous survey or quiz).

Pitfall
Pitfall 5: Assuming a Causal Link Based on Observations
Be careful about drawing conclusions when no cause-and effect link

exists.

Pitfall
Pitfall 5: Assuming a Causal Link Based on Observations
Be careful about drawing conclusions when no cause-and effect link

exists. In your economics class, you may have learned about the post
hoc fallacy (the mistaken conclusion that if A precedes B then A is
the cause of B). For example, the divorce rate in Mississippi fell in
2005 after Hurricane Katrina. Did the hurricane cause couples to stay
together? A little research reveals that the divorce rate had been
falling for the previous two years, so Hurricane Katrina could hardly
be credited.

Pitfall
Pitfall 6: Generalization to individuals from observations about
groups.
Avoid reading too much into statistical generalizations (e.g., men are
taller than women).

Pitfall
Pitfall 6: Generalization to individuals from observations about
groups.
Avoid reading too much into statistical generalizations (e.g., men are
taller than women).
Pitfall
Pitfall 7: Unconscious Bias
Be careful about unconsciously or subtly allowing bias to color
handling of data (e.g., heart disease in men vs. women).

Pitfall
Pitfall 8: Significance versus Importance.
Statistically significant effects may lack practical importance (e.g.,

Austrian military recruits born in the spring average 0.6 cm taller
than those born in the fall).

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What is Statistics

University of Economics HCMC

V c Hong V (UEH) Applied Statistics January 2016 1 / 32

V c Hong V (UEH) Applied Statistics January 2016 2 / 32

V c Hong V (UEH) Applied Statistics January 2016 2 / 32

V c Hong V (UEH) Applied Statistics January 2016 2 / 32

V c Hong V (UEH) Applied Statistics January 2016 2 / 32

V c Hong V (UEH) Applied Statistics January 2016 2 / 32

V c Hong V (UEH) Applied Statistics January 2016 3 / 32

V c Hong V (UEH) Applied Statistics January 2016 3 / 32

V c Hong V (UEH) Applied Statistics January 2016 3 / 32

V c Hong V (UEH) Applied Statistics January 2016 3 / 32

Statistics is the science of collecting, organizing, analyzing,

V c Hong V (UEH) Applied Statistics January 2016 4 / 32

Statistics is the science of collecting, organizing, analyzing,

V c Hong V (UEH) Applied Statistics January 2016 4 / 32

For the height of students, a gown manufacturer may need to know

V c Hong V (UEH) Applied Statistics January 2016 5 / 32

Knowing statistics will make you a better consumer of other

V c Hong V (UEH) Applied Statistics January 2016 6 / 32

Knowing statistics will make you a better consumer of other

V c Hong V (UEH) Applied Statistics January 2016 6 / 32

Statistical knowledge gives a company a competitive advantage

V c Hong V (UEH) Applied Statistics January 2016 7 / 32

Statistical knowledge gives a company a competitive advantage

V c Hong V (UEH) Applied Statistics January 2016 7 / 32

Statistical knowledge gives a company a competitive advantage

V c Hong V (UEH) Applied Statistics January 2016 7 / 32

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Two primary kinds of statistics:

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Two primary kinds of statistics:

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Board of management of the Vail Resorts would like to increase

V c Hong V (UEH) Applied Statistics January 2016 15 / 32

Vail Resorts needed answers to questions such as

V c Hong V (UEH) Applied Statistics January 2016 16 / 32

Four market surveys were sent to random samples of current and

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The Ideal Data Analyst

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The Ideal Data Analyst

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The Ideal Data Analyst

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The Ideal Data Analyst

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The Ideal Data Analyst

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