MGT 205- Introduction to

Statistics

Lecture 1
Statistics, Data, & Statistical Thinking

İstanbul Şehir University

Gökçen Arkalı Olcay
Fall 2016-2017
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What does Statistics mean to you?

FT Business Education (Global

MBA Ranking 2012):
Average total cost is
approximately $70,000 in Asia-
Pacific, $67,000 in the UK, and
$74,500 in the rest of the
Europe.
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 Statistics is everywhere..

sigortam.net (September 15, 2011):

According to the statistical data, the odds that you will be
involved in an accident is 57 %.
Get your insurance before it is too late!

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 Statistics is everywhere..

Sep. 23, 2012

Election Results
48.3% Obama
51.1 % Obama
44.6 % Romney
msn.com (September 23, 2012): 47.2 % Romney

Data: Decision 2012 polls. The charts above show the latest poll
numbers for selected races in the 2012 election.
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 Statistics is everywhere..

http://www.realclearpolitics.com/epolls/2016/president/us/ (September 29, 2016)

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 The Science of Statistics
• Survey (Trans-Atlantic Trends 2011) shows Americans now
considering Asia more important than Europe: A majority of
U.S. respondents (51 percent) felt that Asian countries like
China, Japan and South Korea were more important to
national interests than the countries of the European Union
(38 percent). (by Judy Dempsey, September 15, 2011, The
New York Times).
• Employees in management and finance had a median annual
salary of $49,712 for 2003 (The World Almanac, 2004).
• The average cost of a 30-second television commercial during
the 2006 Super Bowl game was $2.5 million. (USA Today,
January 2006).

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 Learning Objectives
1. Introduce the field of statistics
2. Demonstrate how statistics applies to business
3. Introduce the key elements of any statistical
problem
4. Differentiate between population and sample data
5. Introduce the key elements of a process
6. Identify the different types of data and data-
collection methods
7. Differentiate between descriptive and inferential
statistics
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 What is Statistics?

Statistics is the science of data. It involves

collecting, classifying, summarizing, organizing,
analyzing, and interpreting numerical
information.
•Monthly unemployment figures, the failure rate of
startup companies, the proportion of female executives
in a particular industry, …

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 Applications in Business and
Economics
• Accounting
– Public accounting firms use statistical sampling procedures for
conducting audits for their clients.
• Finance
– Financial analysts use statistical information to guide their
investment recommendations.
• Marketing
– Brand managers use the scanner and the promotional activity
statistics to understand the relationship between promotional
activities and sales.
• Production
– A variety of statistical quality control charts are used to monitor
the output of a production process.
• Economics
– Economists use statistical information to make forecasts about the
future or some aspects of the economy.

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 Statistics: Two Processes

• Describing sets of data

and
• Drawing conclusions (making estimates,
decisions, predictions, etc.) about sets of data
based on sampling

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 Statistical Methods
Statistical
Methods

Descriptive Inferential
Statistics Statistics

Utilizes numerical and graphical methods to look for

Utilizes sample data to make estimates,
patterns in a data set, to summarize the information
decisions, predictions, or other
revealed in a data set, and to present the information
generalizations about a larger set of data.
in a convenient form.

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 Descriptive Statistics
1. Involves
• Collecting Data $
50
• Presenting Data
• Characterizing Data 25

2. Purpose 0
• Describe Data Q1 Q2 Q3 Q4

μX = 30.5 s2 = 113

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 Inferential Statistics
1. Involves
• Estimation Population?
• Hypothesis
Testing

2. Purpose
• Make decisions about
population characteristics

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 Examples of Descriptive and
Inferential Statistics
• U.S. Market Share
U.S. Credit Card Market Shares
for Credit Cards 6%
(Nilson Report, May Visa
MasterCard
2008) 12% American Express

• Describes the type of 46%

card used in all

36%
credit card
purchases in 2007.
Descriptive Statistics
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 Examples of Descriptive and
Inferential Statistics
“The Executive Compensation Scoreboard” based on a survey of executives
at the 500 largest U.S. companies (Average Pay-for-Performance Efficiency
Ratings of CEOs by Industry, Forbes, April 2011)
Industry Average Efficiency Rating
Aerospace and Defense 85
Banking 59
Business Services 4.5
Food, Drink and Tobacco 140
Telecommunications 163

How much are the top corporate executives in the United States are being paid,
and are they worth it?
• Forbes might infer that typical CEOs in telecommunications are overpaid
relative to CEOs in business services.
Inferential Statistics
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 Fundamental Elements
of Statistics

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 Fundamental Elements
1. Experimental unit
• An object (e.g., person, thing, transaction, or
event) upon which we collect data
2. Population
• All items of interest
3. Variable
• Characteristic (e.g., age, gender, income)
of an individual experimental unit

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 Fundamental Elements
• Obtaining a numerical representation for a particular
variable:
– Through measurement: the process used to assign
numbers to variables of individual population units.
– When a variable is measured for every experimental unit
of a population, the result is called a census of the
population.
• Time-consuming, costly! Alternative: a subset!

4. Sample
• A subset of the units of a population
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 A Sample
Suppose a company is being audited for invoice errors. Instead of examining
15,472 invoices, an auditor selects and examines a sample of just 100 invoices.
Population
Sample
1st invoice selected

2nd invoice selected

100th invoice selected

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 A Sample- cont’d
Statistical Inference: Estimate or prediction or
generalization about a population based on
information contained in a sample

The auditor may estimate the total number of invoices

containing errors in the population (15,472 invoices) from the
sample of 100 invoices.

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 Fundamental Elements
5. Parameter
• A summary measure (e.g. • P in Population
mean) that is computed to & Parameter
describe a characteristic of • S in Sample
the population & Statistic

6. Statistic
• A summary measure (e.g.
mean) that is computed to
describe a characteristic of
the sample
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Example 1- Key Elements of a Statistical
Problem
According to Variety (June 29, 2008), the average age of viewers
of television programs broadcast on ABC is 50 years. Suppose a
rival network (e.g., FOX) executive hypothesizes that the average
age of FOX viewers is less than 50. To test her hypothesis, she
samples 200 FOX viewers and determines the age of each.
a) Describe the population
b) Describe the variable of interest
c) Describe the sample
d) Describe the inference

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 Example 2- Key Elements of a
Statistical Problem
Cola wars is the popular term for intense competition between Coca-
Cola and Pepsi displayed in their marketing campaigns. Their
campaigns have featured movie and television stars, rock videos,
athletic endorsements, and claims of consumer preference based on
taste tests. Suppose, as part of a Pepsi marketing campaign, 1,000 cola
consumers are given a blind taste test (i.e., a taste test in which the
two brand names are disguised). Each consumer is asked to state a
preference for brand A or brand B.

a)Describe the population

b)Describe the variable of interest
c)Describe the sample
d)Describe the inference

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 Fundamental Elements
Statistical Inference – OK, but how good the inference
is?
– Is it possible to include the entire population in the
sample?

Measure of Reliability
• Statement (usually quantified) about the
degree of uncertainty associated with a
??
statistical inference
• An inference is incomplete without a
measure of its reliability.
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 Four Elements of Descriptive
Statistical Problems
1. The population or sample of interest
2. One or more variables (characteristics of the
population or sample units) that are to be
investigated
3. Tables, graphs, or numerical summary tools
4. Identification of patterns in the data

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 Five Elements of Inferential
Statistical Problems
1. The population of interest
2. One or more variables (characteristics of the
population units) that are to be investigated
3. The sample of population units
4. The inference about the population based on
information contained in the sample
5. A measure of reliability for the inference

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 Processes

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 Processes
A process is a series of actions or operations that
transforms inputs to outputs. A process produces or
generates output over time.

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 Processes

Any set of output (object or numbers) produced by a

process is called a sample.
• Next 100 cars turned out by the assembly line
• Every fifth car produced today

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Example 4- Key Elements of a Process
A particular fast-food restaurant offers 50% discount to customers
who wait more than a specified number of minutes to receive their
orders. What should be the time-limit? Decided to estimate the
avg. waiting time at a particular drive-through window in Dallas, TX.
For 7 consecutive days, the worker taking customers’ orders
recorded the time that every order was placed. The worker who
handed the order to the customer recorded the time of delivery. At
the end of the 7-day period, 2,109 orders had been timed. Describe
a) the process of interest at this restaurant
b) the variable of interest
c) the sample
d) the inference of interest
e) how the reliability of the inference could be measured

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 Types of Data

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 Types of Data
Quantitative data are measurements that are recorded
on a naturally occurring numerical scale.
• Interval Data- can be ranked, differences are meaningful
• Ratio Data- the origin (zero value) has a clear definition, ratio of
two values is meaningful

Qualitative data are measurements that cannot be

measured on a natural numerical scale; they can only be
classified into one of a group of categories.
• Nominal data: cannot be ordered
• Ordinal data: can be meaningfully ranked

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 Quantitative Data
Measured on a numeric 4
scale.
• Current unemployment
943
rate 21 52
• Scores of a sample of MBA
applicants on the GMAT 120 12
• Number of female 8
executives employed in a 71
sample of manufacturing 3
companies
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 Qualitative Data
Classified into categories:

• College major of each

student in a class.
• Gender of each employee
at a company.
• Method of payment $ Credit
(cash, check, credit card).
• The size of a car (subcompact,
compact, midsize, or full-size) rented
by a sample of travelers

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 Example 5- Types of Data
Chemical and manufacturing plants sometimes discharge toxic-
waste materials into nearby rivers and streams which can adversely
affect the plants and animals inhabiting the river and riverbank.
The US Army Corps conducted a study of fish in the Tennessee
River (in Alabama) and its three tributary creeks: Flint Creek,
Limestone Creek, and Spring Creek. A total of 144 fish were
captured and the following variables are measured for each.
Classify the variables as quantitative or qualitative.
1) River/creek where each fish was captured
2) Species (channel catfish, largemouth bass or smallmouth buffalo fish)
3) Length (centimeters)
4) Weight (grams)
5) DDT concentration (parts per million)
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 Collecting Data

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 Obtaining Data
1. Data from a published source
1. book, journal, newspaper, web site
2. Data from a designed experiment
1. researcher exerts strict control over units (people,
objects, or events)
3. Data from an observational study (e.g., a survey)
1. a group of people are surveyed and their responses are
recorded

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 Samples
A representative sample exhibits characteristics
typical of those possessed by the population of
interest.

A simple random sample of n experimental

units is a sample selected from the population in
such a way that every different sample of size n
has an equal chance of selection.

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 Random Sample
Every sample of size n has an equal chance of
selection.

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 Random Number Generators
• Most researchers rely on random number
generators to automatically generate the random
sample.
• Random number generators are built into most
statistical software packages.
• Importance of selection: The sample will be used to
infer the characteristics of the sampled population;
therefore, how a sample is selected from a
population is of vital importance in statistical
inference.
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 Example 6- Generating a Simple
Random Sample
Suppose you wish to assess the feasibility of building a
new high school. As part of you study, you would like
to gauge the opinions of people living close to the
proposed building site. The neighborhood adjacent to
the site has 711 homes. Use a random number
generator to select a simple random sample of 20
households from the neighborhood to participate in
the study.

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 Example 7- Data Collection
How do consumers feel about using the Internet for online
shopping? To find out, a customer-experience software
company commissioned a nationwide survey of 1,859 US adults
who had conducted at least one online transaction in the past
year. The findings reported on BusinessWeek.com revealed that
1,655 respondents, or 89% experienced technical problems with
an online transaction.
a) Identify the data collection method
b) Identify the target population
c) Are the sample data representative of the population?

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 Example 8- Data Collection
Marketers use wordings such as “was $100, now $80”to indicate a price
promotion- compared to the retailer’s previous price or to a competitor’s price.
A study in the Journal of Consumer Research investigated whether between-
store comparisons result in greater perceptions of value by consumers than
within-store comparisons. Suppose 50 consumers were randomly selected
from all consumers in a designated market area to participate in this study.
The researchers randomly assigned 25 consumers to read a within-store price
promotion ad and 25 read a between-store ad. The consumers then gave their
opinion on the value of the discount offer on a 10-point scale (1=lowest and
10=highest value). The value opinions of the two groups of consumers were
compared.
a)Identify the data collection method
b)Are the sample data representative of the target population?

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 The Role of Statistics in
Managerial Decision Making

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 Statistical Thinking

How to evaluate data intelligently?

Statistical thinking involves applying rational

thought and the science of statistics to critically
assess data and inferences. Fundamental to the
thought process is that variation exists in
populations and process data.

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 Example 9- Biased Sample
An article in the New York Times considered the question of
whether motorcyclists should be required by law to wear
helmets. In supporting his argument for no helmets, the editor
of a magazine for Harley-Davidson bikers presented the results
of one study that claimed “nine states without helmet laws had
a lower fatality rate (3.05 deaths per 10,000 motorcycles) than
those that mandated helmets (3.38) and a survey that found of
2,500 bikers at a rally, 98 % of the respondents opposed such
laws.
– Based on this information do you think it is safer to ride a motorcycle
without a helmet?
– What further statistical information would you like?

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 Nonrandom Sample Errors
Selection bias results when a subset of the experimental
units in the population is excluded so that these units
have no chance of being selected for the sample.

Nonresponse bias results when the researchers

conducting a survey or study are unable to obtain data
on all experimental units selected for the sample.

Measurement error refers to inaccuracies in the values

of the data recorded. In surveys, the error may be due to
ambiguous or leading questions and the interviewer’s
effect on the respondent.
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 Real-World Problem

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 Key Ideas
Types of Statistical Applications

Descriptive
1. Identify population and sample (collection
of experimental units)
2. Identify variable(s)
3. Collect data
4. Describe data

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 Key Ideas
Types of Statistical Applications

Inferential
1. Identify population (collection of all
experimental units)
2. Identify variable(s)
3. Collect sample data (subset of population)
4. Inference about population based on
sample
5. Measure of reliability for inference
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 Key Ideas

Types of Data

1. Quantitative (numerical in nature)

2. Qualitative (categorical in nature)

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 Key Ideas

Data-Collection Methods

1. Observational (e.g., survey)

2. Published source
3. Designed experiment

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 Key Ideas

Problems with Nonrandom Samples

1. Selection bias
2. Nonresponse bias
3. Measurement error

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