Statistics for Management in Business and Economics
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This assignment explores the application of statistical methods in business and economic data analysis. It covers evaluating data from various sources, analyzing qualitative and quantitative data, applying statistical methods in business planning, and communicating findings using charts and tables.
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Statistics for management 1
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Contents Introduction................................................................................................................................3 LO1 Evaluate business and economic data/ information obtained from published sources......4 P1 Evaluate the nature and process of business and economic data/ information from a range of different published sources......................................................................................4 P2 Evaluate data from a variety of sources using different methods of analysis...................5 M1: Critically evaluate the methods of analysis used to present business and economic data/ information from a range of different published sources..............................................6 LO2 Analyse and evaluate qualitative and quantitative raw business data from a range of examples using appropriate statistical methods.........................................................................8 P3 Analyse and evaluate qualitative and quantitative raw business data from a range of examples using appropriate statistical methods.....................................................................8 M2: evaluate the differences in application between descriptive statistics, inferential statistics and measuring association.....................................................................................11 D1 Critically evaluates the differences in application between methods of descriptive, exploratory and confirmatory analysis of business and economic data...............................12 LO3 Apply statistical methods in business planning...........................................................13 P4 Apply a range of statistical methods used in business planning for quality, inventory and capacity management....................................................................................................13 M3 evaluate and justify the use of appropriate statistical methods supported by specific organisational examples.......................................................................................................15 D2 Make valid recommendations and judgement for improving business planning through the application of statistical methods...................................................................................22 LO4 Communicate findings using appropriate charts/ table....................................................23 P5 using appropriate charts/ tables communicate findings for a number of given variables ..............................................................................................................................................23 M4 Justify the rationale for choosing the method of communication.................................25 D3 Critically evaluate the use of different types of charts and tables for communicating given variables.....................................................................................................................26 Conclusion................................................................................................................................27 References................................................................................................................................28 2
Introduction: This assignment is prepared to understand the usefulness of statistical methods in defining business and economic information. There are varied sources for collection of business informationsuchasbusinessstatisticsinformation,publicisedinformation.Overthis information,statisticalanalysistoolsareappliedforextractingsomeusefuldetailed information. The techniques mostly used are exploratory technique, descriptive analysis, and exploratory analysis. The assignment provides in-depth detail regarding statistical techniques for effective and proper analysis of information. There is also analysis of the communicating methods which are used by businesses to independently define their business figures. 3
LO1 Evaluate businessand economicdata/informationobtainedfrom published sources: P1 Evaluate the nature and process of business and economic data/ information from a range of different published sources Nature: Business and economic data are the numerical data of the economic process which is usedforfurthereconomicstatistics.Economicstatisticscontainsanumberofthe phenomenonfordevelopmentofconceptsandclassificationswhichareusefulfor understanding economic state. The business and economic data which are interpreted through economic statistics defines economic behavior, economic movements, economic policies and economic business decisions. The knowledge of business and economic data are extracted through a number of sources which are available economy facts and figures which are developed through in the ICT (Information and communication technologies) (George, et. al., 2014). Process: business or economic data process can be understood as a mechanism which consists of entire channels from extraction to production to the utilization of available resourcesforultimatehumanconsumption.Theprocessdefinesthetotalprocessof converting raw material into final product (George, et. al., 2014). 4
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P2 Evaluate data from a variety of sources using different methods of analysis The business/ economic data which can are used for making propositions and analysis are taken from mainly from two sources namely internal and external source. An organization can internally get information about its business trends and business financial information such as revenues, costs, and profitability and thus, the data is mainly quantitative. Also, the data can be extracted from external sources which mainly relates to the wider perspective and are associated with sectors like political, economic, social, technological and competitive information. For instance: if a Volkswagen needs to know the economic possibility of sales in near future, it would need to collect and interpret the social data (for knowing the trend). The data can be further classified into primary data and secondary data (Peirson, et. al., 2014). The different kinds of data are collected through a number of sources such as published statistics by a number of agencies, formal/ informal interviews conducted at a different interval of time, self/ team investigation regarding a subject, and through questionnaire technique (Peirson, et. al., 2014). Published statistics: various organizations such as an office for national statistics, Eurostat, newspaperauthoritieslikefinancialtimesetc.publishdata.Thedatacanbefurther implemented through statistical tools and techniques and interpretation can be made (Peirson, et. al., 2014). Formal/ informal interviews: Interviews are done for developing and extracting new data/ information. Self-investigation: Self-investigation can also be done through questionnaire technique which is to formulate and interpret the result (Peirson, et. al., 2014). 5
M1: Critically evaluate the methods of analysis used to present business and economic data/ information from a range of different published sources The varied methods of analysis are descriptive statistical analysis, confirmatory data analysis, and exploratory data analysis. Thedescriptivestatisticalanalysisisamethodwhichincludesseriesofactionslike collection, summarization, and interpretation of financial data/ information through charts and tables. This explanation is restricted to the sample part and might or might not apply to the entire population. Though, it quite useful as it presents the raw data into meaningful information. The main tools of descriptive analysis are measures of central tendency and measures of spread. The former is used for describing the central position for a data while the latter describes the spread of data (Collis, and Hussey, 2013). Confirmatorydataanalysistechniqueisusefulformakinginterpretationthroughthe establishmentoffacts,hypothesisandimplementingtraditionaltoolslikeinference, confidence, and inference, also through precision, variance, and regression. It is quite useful as this technique makes use of findings for trial test and use tools like regression analysis, variance analysis, hypothesis tests etc.It also has certain limitations such as it makes focus only on hypothesis and its analysis is also restricted to that point (Collis, and Hussey, 2013). Exploratory data analysis is a different segment. It makes use of presumptions, assumptions and another hypothesis. It applies tools like quantitative tools and visuals/ graphic tools for presentingthedata.Italsoestablishesusesconfidenceintervalandmarginoferror techniques (Collis, and Hussey, 2013). 6
LO2 Analyse and evaluate qualitative and quantitative raw business data from a range of examples using appropriate statistical methods. Introduction: This report presents usefulness of the business economic data and implementation of statistical methods for analyzing the data and inferring data. Being a business data analyst, the qualitative and quantitative raw data has been converted. The quantitative data includes sales and net income and the tools applied are measures of central tendency. P3 Analyse and evaluate qualitative and quantitative raw business data from a range of examples using appropriate statistical methods. There are mainly two types of data namely quantitative data and qualitative data. Qualitative data can be understood as the data which cannot be measured numerically but can be tested throughtheimplementationofhypothesisandassumptions.Quantitativedatacanbe presented as the data which can be measured numerically and also can be mathematically solved (Houghton, 2013). Analyse and interpretation of quantitative raw data: YearSalesNet income 200915,00020,000 201020,00025,000 201124,00030,000 201220,00040,000 201318,00035,000 201425,00050,000 7
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201520,00045,000 201630,00065,000 201724,00045,000 Mean21,77839,444 Median20,00040,000 Mode2000045000 The organization data of sales and net income between years 2009-2017 are provided; the applicationofdescriptivedata(mean,medianandmode)summarisesthebusiness information taken from its financial accounts. The mean or average presents that the organization average sales for the last 9 years have been £21,778 while the average income has been around £39,444. Median presents the middle value which is £20,000 for sales. This middle point represents average only an average net income in accordance with median is £40,000. Mode represents the value which arrives maximum time. The average sales are £20,000 which represents that it arrives maximum time and average net income is £45,000. The above averages show that the company must have above described sales and income (Houghton, 2013). Analyse and interpretation of qualitative raw data: The qualitative raw data defines varied information from varied published sources. The data includes feedback data of organization from a number of sources (Houghton, 2013). 8
The hypothesis from the data which is to be tested is “The Company is focusing more on increasing the number of customers rather than customer retention”. The hypothesis is tested through correlation method (Houghton, 2013). ParticularsNumberof customers arrives in one week Numberof customers retains in one week 1st week103 2nd week92 3rd week83 4th week52 Correlation coefficient0.53 Standard deviation2.160.58 The data above is 4 weeks describing two sections, namely, customer’s arrival in one week and customer’s retention number in one week. The correlation coefficient has arrived at 0.53. It is positive which shows that there is a positive relationship between both the data i.e. numberofcustomer’sarrivalandanumberofcustomerswhoretains.Thepositive correlation shows that with the decreasing number of customer’s arrival, number of retain customers also decreased (Houghton, 2013). 9
M2: evaluate the differences in application between descriptive statistics, inferential statistics and measuring association. Differences in the application of descriptive and inferential statistics: Descriptive statistics: This segment of statistics mainly uses the procedure of collecting, summarising and presenting the data. It describes characteristics of a data and it mainly deals with evaluating the frequency, distribution, and spread of a given sample. The main tools of descriptive statistics are mean, median, and mode. All these tools deal with a given sample and present a conclusion for the sample data only. Lastly, it can be analyzed that it deals with summarising and presenting the data (Wildemuth, 2016). Descriptive statistics describe the data through summarization and classification of data. It analyses the data through classification and further implementation of varied measures such as mean, median, and mode. These techniques are implemented over the data and frequency and spread are measured. This technique is very popular and quite useful in case of analyzing a sample from a given set of population’s data. It provides an average figure for analyzing the sample and making a conclusion for the entire population (Wildemuth, 2016). Inferential statistics: In this statistical tool, the sample data is analyzed for hypothesis testing, formulating predictionsand extracting inferencesfrom the existing data. This segment is used when a data has to be inferred and analyzed. Inferential statistics is mainly used for establishing a relationship between two or more variables. It sets out certain hypothesis and tests it accordingly. This statistics is quite useful in describing the relationship between variables (Wildemuth, 2016). Exploratory statistics: It is implemented to ascertain or development of relationship among different variables through setting varied variables. This statistics is useful in terms of stating relationship through different patterns (Wildemuth, 2016). Conclusion: From this report, it can be concluded that the different set of statistics such as descriptive, exploratoryandinferentialstatistics.Differentstatisticssegmentsareusedatthe implementation of statistical tools and define varied statistics patterns. 10
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D1 Critically evaluates the differences in application between methods of descriptive, exploratory and confirmatory analysis of business and economic data. The three statistical methods namely descriptive, exploratory and confirmatory are quite different from each other. Descriptive is the most common and simplest to apply to a range of data. This method mainly applies to a selected sample extracted from a sample. Its major tools are measures of central tendency and measures of spread. These tools provide central and deviation point from average and it provides the simplest interpretation of data which can shorten a large set of population and also advice for future decision making (Jackson, 2015). On the other hand, confirmatory data analysis is a tool in which researcher makes their findingsandputtheirargumentsfortesting.Ituseshypothesisforevaluationand interpretation. It uses tools like variance analysis, regression analysis etc. The difference lies that the descriptive is restricted to interpretation of sample (and the population) while the confirmatory restricts the research to its assumption and argument put over testing and trial. Exploratory analysis is on another hand, puts up few assumptions and further works for formation of hypothesis and assumptions and it uses tools like visual tools, quantitative methods such as of descriptive tools only. But since it is a statistical thinking, it might not provide accurate answers (Jackson, 2015). 11
LO3 Apply statistical methods in business planning P4 Apply a range of statistical methods used in business planning for quality, inventory and capacity management The different range of statistical methods which are to be applied to the business planning including inventory and capacity management, quality management are as follows: Measures of variability: the measures for variability assess the varying degree from the central position. The organization faces issues with respect to the difference in customer services, inventory management, capacity etc. the techniques which can be used are a range, inter-quartile range, variance and standard deviation for measuring changes (Weiss, and Weiss, 2012). Measures of probability: there are large probability measures which are applied to an organization for data distribution in business processes. There is applicability of measures like normal distribution curve, Poisson distribution curve, binomial distribution curve and also makes use of inferences through setting confidence limits and margin error (Weiss, and Weiss, 2012). 12 Range Inter-quartile range Variance Standard deviation
Figure: describing normal distribution curve (Source: howmed.net, 2012) 13
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M3 evaluate and justify the use of appropriate statistical methods supported by specific organizational examples: There is a number of statistical methods which are used by companies/ organizations to improve and evaluate their performances. The number of methods implemented by it is quality management, inventory management and for knowing the capacity utilization. The varied techniques are mean, mode, median, control chart, distribution curve, EOQ, capacity utilization technique etc. the implementation of the techniques over organization examples are provided as below through aid of tabular and graphical representation (Weiss, and Weiss, 2012). Quality management: S. No.Sample meanMean CL UCLLCL 115.9115.9516.367215.5272 215.9915.9516.367215.5272 315.9215.9516.367215.5272 415.9315.9516.367215.5272 515.9815.9516.367215.5272 616.0315.9516.367215.5272 715.9615.9516.367215.5272 14
b) Inventory management For inventory management, an organization makes use of techniques like economic order quantity. EOQ: X (number of units): 360 Holding cost: £0.8/ per unit/ year Ordering cost: £100 per order EOQ: = 2*360*100/0.8 =90,000 (it’s under root) = 300 units per order Number of orders: Annual consumption/ Quantity in one order =360 units /300 units =1.2 orders or 2 orders Time between orders: =Days per year/ number of order =250/2 125 days c) Capacity management: 18
Capacity utilisation of the team is as follows Actual output= 200 hours Design capacity = 10 persons*7 days *7hours = 490 hours Utilisation= 200 hours/ 490 hours = 40.81% Efficiency: it is calculated by dividing Efficiency measures through “Actual output/ effective capacity” Actual output= 200 hours Effective capacity= 10 persons*7 days* 5.6 =200 hours/ 392 hours = 51.02% 19
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D2 Make valid recommendations and judgment for improving business planning through the application of statistical methods; Business planning makes use of a number of statistical tools for maintaining its business data andeffectiveworkingoperations.Thefollowingarethemajorrecommendationsfor implementing statistical tools and operations: It is recommended to implement techniques like EOQ and capacity utilization for properinventorymanagement.Inventoryisthemostcrucialtechniquefor investigating. These provide data for proper implementation of statistical techniques and thus, provide a proper answer. Theservicesectoralsorequiresimplementationoftechniqueslikemodeling, permutation and combination and many other such techniques (Cramér, 2016). The proper reporting of business planning ensures the development of blueprints which predicts relevant and accurate answers and thus, ensures effective decision making. Theimplementationofstatisticaltoolsmustbefurthercommunicatedthrough communicationchannelslikeoralcommunication,writtencommunication,and graphical method (Plichta, et. al., 2013). 20
LO4 Communicate findings using appropriate charts/ table: P5 using appropriate charts/ tables communicate findings for a number of given variables: Communication is indeed important for sharing information with all the persons available in theorganization.Businesseshavetomakeuseofdifferenttypesofmethodsof communicationfor effectiveandrelevantdiscussions. Themostcommonmethodfor presentation of data is through the tabular presentation, graphical presentation. These are simple and also are understandable to a layman. The following are two examples of presentation for a different set of variables: For instance: The inventory data for an organization includes annual consumption is 360 units, inventory holding costs is £0.8 per unit per cost, and ordering cost is £100 per order. The implementation of statistical tools has provided answer such as EOQ is 300 units, a number of orders are 2 orders and the time between orders are 125 days. It is tabulated as below: Tabular presentation of data: Inventory management EOQ300 units Number of orders2 orders Time between orders125 days The following is the graphical presentation of control chart for an organization data. A control chart is formed with the purpose to analyze the business movements over a period of time. It consists of an average line, upper control line, and below control line. The upper limit and lower limits are formed by taking into consideration 3 times of standard deviation. The 21
warning comes in the graph when dots go beyond 2 times of the standard deviation. Considering an organizational example, a control chart is prepared. The chart clearly presents that the organization activities are well controlled in a span period of time. Graphical presentation of data: Control chart 22
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M4 Justify the rationale for choosing the method of communication Themethodforcommunicatinginformationisatabularpresentationandgraphical presentation. These are selected because of the following reasons: It simplifies the data is quite an appropriate manner to be clearly understandable by a layman. The graphical method is quite useful for analyzing the increasing or decreasing level of any data. Theseareimmenselyandwidelyusedforpresentingbusinessandeconomic information. Businesses are supposedly required to present their financial information through annual report/ annual statements and hence, it is their requisite to use these techniques and communicate with all the stakeholders. Both the methods are the most simple and useful technique for presenting data. The graphical presentation includes a number of presentation through pie-charts, line graphs, bar graphs etc. these are quite attractive which seeks attention and provide large information in small parts. 23
D3 Critically evaluates the use of different types of charts and tables for communicating given variables. For presenting the data in an attractive manner and for communicating information, different types of charts which can be used are tables, graphs, charts etc. The graph is a graphical presentation which describes the plotting of variables at different points. This can be made even more attractive by inserting colors and shading. There are different types of graphs like line, smooth curve; plotting of dots etc. these are formulated in accordance with data and simplification in presenting data. It takes time to prepare graphs over Microsoft excel and also need professional expertise for preparing such graphs. Tabular presentation of data is another format for simplifying the data and easier to understand. It can be well prepared in Microsoft Excel and makes the presentation simpler to understand. Though tabular presentation requires proper implementation of time and efforts and also require numerical figure which can be separated from the boxes and statistical tools can also be implemented. Overall, it can be ascertained that different communication methods are highly helpful and interactive, even simple for analyzing by a layman. But there must be relevant professional expertise in making such graphs and tabular presentation. 24
Conclusion: From this assignment, it can be concluded that statistical methods are quite useful tools for simplifying business information to a large extent. The different statistical analysis namely descriptive, exploratory and confirmatory analysis tool is quite interesting. The descriptive tool makes use of techniques like measures of central tendency and method for dispersion. The exploratory technique makes varied assumptions and hypothesis which provide analysis throughimplementationoftechniqueslikeregressionanalysis,varianceanalysisetc. Confirmatory analysis technique is useful as it makes ascertainment through assumptions and hypothesis technique. These techniques are highly useful and interactive for ascertaining business information. Further, there is also the implementation of communication tools like graphs, tabular presentation etc. 25
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References: Collis,J.andHussey,R.,2013.Businessresearch:Apracticalguidefor undergraduate and postgraduate students. Palgrave macmillan. Cramér, H., 2016.Mathematical methods of statistics (PMS-9)(Vol. 9). Princeton university press. George, G., Haas, M.R. and Pentland, A., 2014. Big data and management.Academy of management Journal,57(2), pp.321-326. Houghton, J.W., 2013. Economic implications of alternative scholarly publishing models. InA Handbook of Digital Library Economics(pp. 125-141). Howmed.net, 2012. Normal Distribution Curve. [Online] howmed.net. Available at: http://howmed.net/community-medicine/normal-distribution-curve/. Accessed as on: 23rdFebruary, 2018. Jackson, S.L., 2015.Research methods and statistics: A critical thinking approach. Cengage Learning. Peirson, G., Brown, R., Easton, S. and Howard, P., 2014.Business finance. McGraw- Hill Education Australia. Plichta, S.B., Kelvin, E.A. and Munro, B.H., 2013.Munro's statistical methods for health care research. Wolters Kluwer Health/Lippincott Williams & Wilkins,. Weiss,N.A.andWeiss,C.A.,2012.Introductorystatistics.London:Pearson Education. Wildemuth, B.M. ed., 2016.Applications of social research methods to questions in information and library science. ABC-CLIO. 26