StatisticsForManagement

Unit1

Unit1
Structure
1.1 Introduction Objectives 1.2 1.3 1.4 1.5 1.6 1.7 ScopeandApplicationsofStatistics DefinitionsofStatistics FunctionsofStatistics LimitationsofStatistics ComputersandStatistics Summary TerminalQuestions AnswertoSAQsandTQs

Introduction

1.1.

Introduction

ImportanceofStatisticsinModernBusinessEnvironment With fast moving technologies, advanced communication network, rapid changes in consumer behaviour, varied expectations of variety of consumers and new market openings, modern managershavedifficulttaskofmakingquickandappropriatedecisions.Thereforethereisneed for them to depend more upon quantitative techniques like mathematical models statistics, operationresearchandeconometrics.Thesetechniquespushbackthedomainofignoranceand ruleofthumbandenlightensthemwithnewhorizonofthoughtprocess.

Ourdaytodayactivitiesinteractwithpersonnel,public,social,political,economic,businessand other environments. Decision making encompasses all these activities. Suppose we wish to purchase a television we would like to know the price, quality, durability, maintainability etc. Thereforethereisaneedforcollectingdataandmakinganoptimumdecision.Againsupposea companywishestointroduceanewproduct,ithastocollectdataonmarketpotential,consumer likings,availabilityofrawmaterials,feasibilityofproducingtheproductetc.Inotherwordsdata collectionisthebackboneofanydecisionmakingprocess.Manyorganizationsfindthemselves datarichbutpoorindrawinginformationfromit.Thereforeitisimportanttodeveloptheabilityto extract meaningful information from raw data to make better decisions. Statistics play an importantroleinthisaspect.
SikkimManipalUniversity

StatisticsForManagement

Unit1

LearningObjectives
Aftergoingthroughthisunitsyouwillbeabletolearnthe

1. Meaning&ScopeofStatistics 2. Characteristics&functionsofStatistics 3. LimitationsofStatistics

SelfAssessmentQuestions1
Inwhichofthefollowingsituationswouldyouliketousestatistics. a) Buyingahouse b) PurchasingmedicineprescribedbyDoctor c) Investingfundsinseveraloptions. d) Attendingrelativesmarriages

1.2

ScopeandApplicationofStatistics

StatisticalmethodsareappliedtospecificproblemsinBiology,Medicine,Agriculture,Commerce, Business,Economics,Industry,Insurance,Sociology,Psychologyetc. In Biology, Medicine and Agriculture, Statistical methods are applied in the study of growth of plant, movement of fish population in the ocean, migration of birds, effect of newly invented medicines,theoriesofheredity,estimationofyieldofcrop,effectoffertilizeronyield,birthrate, deathrate,populationgrowth,growthofbacteriaetc.Theinsurancepremiumsarebasedonthe age composition of the population and the mortality rates. Actuarial science deals with the calculation ofinsurancepremiumsanddividends. Statisticsis a partand parcelofEconomics, CommerceandBusiness.Statisticalanalysisofvariationsofprice,demandand productionare helpfultobusinessmenandeconomists.Costoflivingindexnumbershelpineconomicplanning andfixationofwages.Theyareusedtoestimatethevalueofmoney.Analysisofdemand,price, productioncost,inventorycostsetc.,helpindecisionmakinginbusinessactivities.Management of limited resources and labour needs statistical methods to maximize profit. Planned recruitmentsanddistributionofstaff,properqualitycontrolmethods,carefulstudyofdemandfor goodsinthemarket,balanceinvestment,etc.helptheproducertoextractmaximumprofitoutof minimum capital. In industries, statistical quality control techniques help in increasing and controlling the quality ofproductsata minimumcost. Agovernments administrative systemis fully dependenton production statistics,incomestatistics, labour statistics, economicindicesof cost,price,etc.Economicplanningofanynationisentirelybasedonstatisticalfacts.Statistics

SikkimManipalUniversity

StatisticsForManagement

Unit1

hasbecomesoimportanttodaythathardlyanyscienceexistsindependentofthis,andhencethe statementScienceswithoutStatisticsbearnofruitStatisticswithoutScienceshasnoroot.

SelfAssessmentQuestions2
Mentionsomeotherareaswherethereisscopeofapplyingstatistics.

1.3

DefinitionsofStatistics

A.L.BoddingtondefinedStatisticsasThescienceofestimatesandprobabilities. AccordingtoCroxtonand Cowden,Statisticsisthescienceofcollection,presentation,analysis andinterpretationofnumericaldata.Thus,Statisticscontainsthetoolsandtechniquesrequired forthecollection,presentation,analysisandinterpretationofdata.Thisdefinitionispreciseand comprehensive. AccordingtoProf.HoraceSecritStatisticsdealswithaggregateoffacts,affectedtomarkedextent by multiplicity of causes, numerically expressed, enumerated or estimated according to a reasonablestandardofaccuracy,collectedinasystematicmannerforapredeterminedpurpose andplacedinrelationtoeachother.

1.3.1. CharacteristicofStatistics
1. StatisticsDealswithaggregateoffacts:Singlefigurecannotbeanalyzed.Thus,thefact MrLeeis170cms.tallcannotbestatisticallyanalyzed.Ontheotherhad,ifweknowtheheights of60studentsofaclass,wecancommentupontheaverageheight,variation,etc. 2. Statisticsareaffectedtoamarkedextentbymultiplicityofcauses:Thestatisticsofyield ofpaddyis the resultoffactors such asfertilityof soil,amountof rainfall,quality of seed used, qualityandquantityoffertilizerused,etc. 3. Statistics are numerically expressed: Only numerical facts can be statistically analyzed. Therefore,factsaspricedecreaseswithincreasingproductioncannotbecalledstatistics. 4. Statisticsareenumeratedorestimatedaccordingtoreasonablestandardsofaccuracy: Thefactsshouldbeenumerated(collectedfromthefield)orestimated(computed)withrequired degreeofaccuracy.Thedegreeofaccuracydiffersfrompurposetopurpose.Inmeasuringthe lengthofscrews,anaccuracyuptoamillimetermayberequired,whereas,whilemeasuringthe heightsofstudentsinaclass,accuracyuptoacentimeterisenough. 5. Statisticsarecollectedinasystematicmanner:Thefactsshouldbecollectedaccordingto plannedandscientificmethods.Otherwise,theyarelikelytobewrongandmisleading. 6. Statisticsarecollectedforapredeterminedpurpose: Theremustbeadefinitepurpose forcollectingfacts.Eg.Movementofwholesalepriceofacommodity.
SikkimManipalUniversity

StatisticsForManagement

Unit1

7. Statisticsareplacedinrelationtoeachother:Thefactsmustbeplacedinsuchawaythat a comparative and analytical study becomes possible. Thus, only related facts which are arrangedinlogicalordercanbecalledstatistics.

SelfAssessmentQuestions2
1.Canweconsiderthepointsmentionedintheabovedefinitionas characteristicsofStatistics? 2.Doesstatisticdealwithqualitativedata?

1.4

FunctionsofStatistics

1. Itsimplifiesmassdata 2. Itmakescomparisoneasier 3. Itbringsouttrendsandtendenciesinthedata 4. Itbringsouthiddenrelationsbetweenvariables. 5. Decisionmakingprocessbecomeseasier.

SelfAssessmentQuestions3
1. TotalsalesofaproductinAreaAis840for30workingdays.TotalSalesof sameproductin Area B is 784 for 28 working days. Do you think that statistics need to be applied to get appropriatepictureregardingcomparisonofsales.

1.5

LimitationofStatistics

MajorlimitationsofStatisticsare: 1. Statisticsdoesnotdealwithqualitativedata.Itdealsonlywithquantitativedata. 2. Statistics does not deal with individual fact: Statistical methods can be applied only to aggregatetofacts. 3. Statistical inferences (conclusions) are not exact: Statistical inferences are trueonly on an average.Theyareprobabilisticstatements. 4. Statistics can be misused and misinterpreted: Increasing misuse of Statistics has led to increasingdistrustinstatistics. 5. Common men cannot handle Statistics properly: Only statisticians can handle statistics properly.

SikkimManipalUniversity

StatisticsForManagement

Unit1

1.6

ComputersandStatistics

WiththeadventofcomputerslotofStatisticalprogrammesareavailableinthemarket.Theyhelp us in summarizing, presenting and analyzing the mass data in short time. Some of them are Minitab,SPSS,Texto&Contexto,Excel,EViewetc.

1.7.

Summary

Decision making process become more efficient with the help of Statistics. It deals with aggregate of facts. It is applied in all fields of our activities more efficiently. Its interpretation requiresskilledandexperiencedstatistician.

TerminalQuestions

1. MentiontheCharacteristicsofStatistics? 2. GivepluralmeaningofthewordStatistics? 3. WhatarethelimitationsofStatistics?

AnswersToSelfAssessmentQuestions SelfAssessmentQuestions1 a)Yesb)No C)Yes d)No

SelfAssessmentQuestions2 IndustrialQualitycontrol,Investmentpolicies,tofindMarketpotentialfora product. SelfAssessmentQuestions3 1)Yes2)No 3)Yes

AnswerToTerminalQuestions
i)Ref.1.3.1 ii)TheScienceofestimatesandprobabilities. iii)Ref.1.5

SikkimManipalUniversity