Adarsh Institute Of management

Margao goa

Topic:

Role of statistics and mathematics in

business decision making

Done by:

Prajot Morajkar

Introduction

Statistics is the formal science of making effective use of numerical data

relating to groups of individuals or experiments. It includes not only the

collection, analysis and interpretation of such data, but also the planning

of the collection of data, in terms of the design of surveys and

experiments. It plays important role in determining the existing position

of per capita income, unemployment, population growth rate, housing,

schooling, medical facilities, etc in a country. Now statistics holds a

central position in almost every field like Industry, Commerce, Trade,

Physics, Chemistry, Economics, Mathematics, Biology, Botany, Psychology,

etc. Mathematical thinking is a very significant factor in a modern society

as a habit of mind for its usage at the workplace, business and finance;

and for personal decision-making. Mathematics is essential for the

prosperity of a nation in providing devices for understanding science,

engineering, technology and other related subjects. It provides students

with great and powerful ways to describe analyze and transform the

world.

Role of statistics and mathematics in business decision

making

Mathematics is used in most aspects of daily life, it also plays important

role in business and most of the business decision is based on

mathematical calculations and records. Also businesses decisions rely

heavily on using percentages, important business decisions are taken on

calculating the percentage of risk involved and also the percentage of its

success; Mathematics typically used in business are elementary

arithmetic, such as fractions, decimals, statistics and probability.

Statistics also plays an important role in business as it is a vital tool in

Business decision-making. It introduces techniques for summarizing and

presenting data, estimation, confidence intervals and hypothesis testing.

Today’s good decisions are driven by data. In all aspects of our lives, and

importantly in business context, an amazing diversity of data is available

for inspection and analytical insight. A successful businessman must be

very quick and accurate in decision making. Business managers and

professionals are increasingly required to justify decisions on the basis of

data. Statistical skills enable them to intelligently collect, analyze and

interpret data relevant to their decision-making.

Statistical concepts and statistical thinking enable them to:

Solve problems in a diversity of contexts.

Add substance to decisions.

reduce guesswork

It helps to make sound statistical thinking understandable in

business term

An introductory course in statistics is designed to provide you with the

basic concepts and methods of statistical analysis for processes and

products. A basic objective is to embed statistical thinking into managers,

who must often decide with little information of what his customers wants,

he should therefore, know what to produce and sell and in what

quantities. Statistics helps businessman to plan production according to

the taste of the costumers, the quality of the products can also be

checked more efficiently by using statistical methods. So all the activities

of the businessman based on statistical information. He can make correct

decision about the location of business, marketing of the products,

financial resources etc…

Business Statistics is a science assisting you to make business decisions

under uncertainties based on some numerical and measurable scales.

Decision making processes must be based on data and not on personal

opinion or on belief. Decision based on statistical studies removes

hindrances to high quality and productivity at every stage of production.

This saves time and money. It is well recognized that quality must be

engineered into products as early as possible in the design process. One

must know how to use carefully planned, cost-effective statistical

experiments to improve, optimize and make tough products and

processes.

Statistical Decision-Making Process:

There may be various decision that a person has to take in the business

on the data that may be collected through different statistical methods,

hence the steps remains the same. They are:

1. Simplification

2. Building a decision model

3. Testing the model

4. Using the model to find the solution:

o It is a simplified representation of the actual situation

o It need not be complete or exact in all respects

o It concentrates on the most essential relationships and

ignores the less essential ones.

o It is more easily understood than the empirical (i.e., observed)

situation, and hence allows the problem to be solved more

voluntarily with minimum time and effort.

5. It can be used again and again for similar problems or can be

modified.

Fortunately statistical methods for analysis and decision making under

uncertainty are more numerous and powerful today than ever before. The

computer makes possible many practical functions. A few examples of

business functions are the following:

An auditor can use random sampling techniques to audit the

accounts receivable for clients.

A plant manager can use statistical quality control techniques to

assure the quality of his production with a minimum of testing or

inspection.

A market researcher may use test of significance to accept or reject

the hypotheses about a group of buyers to which the firm wishes to

sell a particular product.

A sales manager may use statistical techniques to forecast sales for

the coming year.

In today’s business world statistics and mathematics has played an

important role, every decision in the business whether it is related to

production, sales, expansion, management or termination is based on

these statistical data’s and mathematical calculations. Mathematics shows

many faces as it works through the business settings. Statistics measures

the quality of information. Optimization finds the best substitute.

Probability quantifies and directs uncertainty. Control automates decision

making. Modelling and computation build the mathematical idea’s of

reality upon which these and many other powerful mathematical tools

operates. Mathematics is indeed the foundation of business decision

making.