Quantitative Methods for

Management
Term II
4 credits
MGT 408
Business Statistics
A first course
7e
David M.Levine
Kathryn A.Szabat
David F.Stephan
P.K.Viswanathan
PEARSON
 Additional Readings
Business statistics- Ken Black

Business statistics J.K. Sharma

Statistics for Business and Economics-

Anderson, Sweeney , Williams
 Assessment
Assignments TWO 15x2 = 30 marks

End term Objective questions 50/52

each carries 2 marks ( concepts and simple

problems)
 TOPICS TO BE COVERED
INTRODUCTION
PRESENTATION OF DATA
NUMERICAL MEASURES MCT, MD,
SIMPLE REGRESSION
BASIC PROBABILITY & RV
DISCRETE PROBABILITY DISTRIBUTION
THE NORMAL DISTRIBUTION
SAMPLING DISTRIBUTION
CONFIDENCE INTERVAL ESTIMATION
FUNDAMENTALS OF TOH- CHI SQUARE
DECISION ANALYSIS
CHAPTER 1-8,11,12, 15
 Quantitative Methods for
Management
Introduction
Definition
Importance and limitations
Applications
Terminologies
Scale of measurement
Type of variables
Qualitative, quantitative
Time series and cross sectional
Types of statistics
Sources of data
Classification of data
Statistical software
 Why Learn Statistics?
to make better sense of the ubiquitous use of
numbers:
Business memos
Business research
Technical reports
Technical journals
Newspaper articles
Magazine articles

Chap 1-7
 Introduction
Statistics A way of thinking
Methods that allow to work with data effectively
Method which help to make better decisions
DCOVA framework ( Define, collect, organize,
visualize, analyze)
4 broad categories of business activities
Summarize and visualize business data
Reach conclusions from those data
Make reliable predictions about business activities
Improve business processes
Changing face of statistics
 DATA
Data- facts about the world ( a value associated
with something, or collective, a list of values
associated with something.
Decision
making
Knowledge
Information
DATA
 Variable : A characteristics of an item or
individual

DATA : The set of individual values associated

with a variable.
Statistics : the methods that help transform
data into useful information for decision
makers.
 What is Statistics?
Statistics is a way to get information from data
Statistics

Data Information

The word Statistics derived from the Latin word

status meaning a state

Statistics is a tool for creating new understanding from a set of

numbers.
 DEFINITION
STATISTICS
COLLECTION
COMPILATION
CLASSIFICATION
PRESENTATION
ANALYSIS &
INTERPRETATION OF DATA
 IMPORTANCE OF STATISTICS LIMITATIONS OF STATISTICS

It simplifies complexity Only quantitative data

It measures periodic changes Does not study individual
Facts are properly presented events
Formulation of policies Results are true only on
Enlarge human experience averages
and knowledge Does not give importance to
Helps in comparison all items
Forecasting Can be misused
Testing a hypothesis Single purpose only
 Changing face of statistics
Business analytics
Use SM to analyze and explore data to uncover
unforeseen relationships.
Use MS methods to develop optimization models

Big data
Collections of data that cannot be easily browsed or
analyzed using traditional methods.

Integral role of software in statistics

Application of statistics in
business
 Accounting : Public accounting firms use statistical
procedures when conducting audits for their clients.
Economics : uses statistical information in making
forecasts about the future of the economy or some
aspect of it. Regional, National, and international
economic performance
Finance : Financial advisors use price-earnings ratios
and dividend yields to guide their investment advice.
Investments and portfolio management.
Banking Economic , Market conditions
 Entrepreneurship Market study, trends,
competition, consumer preferences
Production forecasting demand, feedback
surveys. A variety of statistical quality control
charts are used to monitor the output of a
production process.
Purchasing vendor rating
International Business market and
demographic analysis
 Investment stock, securities, real estate-prices
Management human resources, compensation,
and quality management
Management Information systems Performance
of systems which gather, summarize, and
disseminate information to various managerial
levels.
Marketing market analysis and consumer
research. Electronic point of sale scanners at
retail checkout counters are used to collect data
for a variety of marketing research applications.
 QC SQC, sampling inferences

HR Wage rate, cost of living indices, Job stress

Retail footfalls, consumer preferences

Medical Sciences tests of significance

Technology Predicting trends, Structuring data

 Data Warehousing
Organizations obtain large amounts of data on a
daily basis by means of magnetic card readers, bar
code scanners, point of sale terminals, and touch
screen monitors.

Capturing, storing, and maintaining the data, referred

to as data warehousing, is a significant undertaking.
 Data Mining
Analysis of the data in the warehouse might aid in
decisions that will lead to new strategies and higher
profits for the organization.
Using a combination of procedures from statistics,
mathematics, and computer science, analysts mine
the data to convert it into useful information.

The most effective data mining systems use automated

procedures to discover relationships in the data and
predict future outcomes, prompted by only general,
even vague, queries by the user.
Terms and terminologies
 Basic Vocabulary of Statistics

VARIABLE
A variable is a characteristic of an item or individual.

DATA
Data are the different values associated with a variable.

OPERATIONAL DEFINITIONS
Data values are meaningless unless their variables have operational
definitions, universally accepted meanings that are clear to all associated
with an analysis.

Chap 1-23
Basic Vocabulary of Statistics

POPULATION
A population consists of all the items or individuals about which
you want to draw a conclusion.

SAMPLE
A sample is the portion of a population selected for analysis.

PARAMETER
A parameter is a numerical measure that describes a characteristic
of a population.

STATISTIC
A statistic is a numerical measure that describes a characteristic of
a sample.

Chap 1-24
 Population vs. Sample

Population Sample

Measures used to describe the Measures computed from

population are called parameters sample data are called statistics

Chap 1-25
 Data are the facts and figures collected, analyzed,
and summarized for presentation and interpretation.
All the data collected in a particular study are referred
to as the data set for the study
Elements are the entities on which data are collected
A variable is a characteristic of interest for the
elements.
The set of measurements obtained for a particular
element is called an observation
A data set with n elements contains n observations
Data, Data Sets,
Elements, Variables, and Observations
Variables

Element
Names Stock Annual Earn/
Company Exchange Sales($M) Share($)

Dataram NQ 73.10 0.86

EnergySouth N 74.00 1.67
Keystone N 365.70 0.86
LandCare NQ 111.40 0.33
Psychemedics N 17.60 0.13

Data Set
 Population Sample

Subset

Parameter Statistic
Populations have Parameters Samples have Statistics.
Descriptive measures of population descriptive measures of sample

A census is a complete enumeration of every item in a population.

 Symbols for
Population Parameters

denotes population parameter

2
denotes population variance
denotes population standard deviation
 Symbols for
Sample Statistics

x denotes sample mean

S
2
denotes sample variance
S denotes sample standard deviation
Types of statistics

Descriptive
inferential
 Types of Statistics

Statistics
The branch of mathematics that transforms data into
useful information for decision makers.

Descriptive Statistics Inferential Statistics

Collecting, summarizing, and Drawing conclusions and/or

describing data making decisions concerning a
population based only on sample
data

Chap 1-32
 Descriptive Statistics

Collect data
e.g., Survey

Present data
e.g., Tables and graphs

Characterize data
e.g., Sample mean = X i

Chap 1-33
 Inferential Statistics
Estimation
e.g., Estimate the population
mean weight using the sample
mean weight
Hypothesis testing
e.g., Test the claim that the
population mean weight is 120
pounds
Drawing conclusions about a large group of individuals based on a subset of the
large group.

Chap 1-34
 Descriptive Statistics
Most of the statistical information in newspapers,
magazines, company reports, and other
publications consists of data that are summarized
and presented in a form that is easy to understand.

Such summaries of data, which may be tabular,

graphical, or numerical, are referred to as descriptive
statistics.
 Statistical Inference
Statistical inference is the process of making an estimate, prediction, or
decision about a population based on a sample.

Population

Sample

Inference

Statistic
Parameter

What can we infer about a Populations Parameters

based on a Samples Statistics?
 Descriptive vs.
Inferential Statistics

Descriptive Statistics using data

gathered on a group to describe or reach
conclusions about that same group only

Inferential Statistics using sample data

to reach conclusions about the population
from which the sample was taken
Process of Inferential Statistics

Calculate x
to estimate
Population Sample
x
(parameter ) (statistic )

Select a
random sample
 Types of Variables
Categorical (qualitative) variables have values
that can only be placed into categories, such as
yes and no.

Numerical (quantitative) variables have values

that represent quantities.

Chap 1-39
 Types of Data

Data

Categorical Numerical

Examples:
Marital Status
Political Party Discrete Continuous
Eye Color
(Defined categories) Examples: Examples:
Number of Children Weight
Defects per hour Voltage
(Counted items) (Measured characteristics)
Chap 1-40
 Levels of Data Measurement

Nominal Lowest level of measurement

Ordinal
Interval
Ratio Highest level of measurement
 Nominal Level Data
Numbers are used to classify or categorize
Example: Employment Classification
1 for Educator
2 for Construction Worker
3 for Manufacturing Worker
Example: Ethnicity
1 for African-American
2 for Anglo-American
3 for Hispanic-American
 Ordinal Level Data
Numbers are used to indicate rank or order
Relative magnitude of numbers is meaningful
Differences between numbers are not comparable

Example: Ranking productivity of employees

Example: Taste test ranking of three brands of soft drink
Example: Position within an organization
1 for President
2 for Vice President
3 for Plant Manager
4 for Department Supervisor
5 for Employee
Example of Ordinal Measurement

1 f
6 i
2 n
4 i
3 s
h
5
 Ordinal Data

Faculty and staff should receive preferential

treatment for parking space.

Strongly Agree Neutral Disagree Strongly

Agree Disagree

1 2 3 4 5
 Interval Level Data
Distances between consecutive integers are equal
Relative magnitude of numbers is meaningful
Differences between numbers are comparable
Location of origin, zero, is arbitrary
Vertical intercept of unit of measure transform
function is not zero
Example: Fahrenheit Temperature
Example: Calendar Time
Example: Monetary Utility
 Ratio Level Data
Highest level of measurement
Relative magnitude of numbers is meaningful
Differences between numbers are comparable
Location of origin, zero, is absolute (natural)
Vertical intercept of unit of measure transform function is
zero
Examples: Height, Weight, and Volume
Example: Monetary Variables, such as Profit and Loss,
Revenues, and Expenses
Example: Financial ratios, such as P/E Ratio, Inventory
Turnover, and Quick Ratio.
Usage Potential of Various
Levels of Data
Ratio
Interval
Ordinal

Nominal
 Data Level, Operations,
and Statistical Methods

Statistical
Data Level Meaningful Operations
Methods

Nominal Classifying and Counting Nonparametric

Ordinal All of the above plus Ranking Nonparametric

Interval All of the above plus Addition, Parametric

Subtraction, Multiplication, and
Division

Ratio All of the above Parametric

 Scales of Measurement

Data

Categorical Quantitative

Numeric Non-numeric Numeric

Nominal Ordinal Nominal Ordinal Interval Ratio

Cross-Sectional Data

Cross-sectional data are collected at the same or

approximately the same point in time.

Example: data detailing the number of building

permits issued in February 2010 in each of the
counties of Ohio
Time Series Data

Time series data are collected over several time

periods.

Example: data detailing the number of building

permits issued in Lucas County, Ohio in each of
the last 36 months
Time Series Data

U.S. Average Price Per Gallon

For Conventional Regular Gasoline

Source: Energy Information Administration, U.S. Department of Energy, May 2009.

Sources of data collection
 Why Collect Data?
A marketing research analyst needs to assess the
effectiveness of a new television advertisement.

A pharmaceutical manufacturer needs to determine

whether a new drug is more effective than those currently
in use.

An operations manager wants to monitor a manufacturing

process to find out whether the quality of the product
being manufactured is conforming to company standards.

An auditor wants to review the financial transactions of a

company in order to determine whether the company is in
compliance with generally accepted accounting
principles.

Chap 1-55
 Sources of Data
Primary Sources: The data collector is the one using the data
for analysis
Data from a political survey
Data collected from an experiment
Observed data
Secondary Sources: The person performing data analysis is not
the data collector
Analyzing census data
Examining data from print journals or data published on the internet.

Chap 1-56
 Sources of data fall into four categories

Data distributed by an organization or an

individual

A designed experiment

A survey

An observational study

Chap 1-57
 Data Sources
Statistical Studies - Experimental
In experimental studies the variable of interest is
first identified. Then one or more other variables
are identified and controlled so that data can be
obtained about how they influence the variable of
interest.

The largest experimental study ever conducted is

believed to be the 1954 Public Health Service
experiment for the Salk polio vaccine. Nearly two
million U.S. children (grades 1- 3) were selected.
Data Sources

Statistical Studies - Observational

In observational (nonexperimental) studies no
attempt is made to control or influence the
variables of interest. a survey is a good example

Studies of smokers and nonsmokers are

observational studies because researchers
do not determine or control
who will smoke and who will not smoke.
 Primary
Secondary

Organizing the data Editing/ Coding/

Personal Computer Programs Used For Statistics

Minitab
A statistical package to perform statistical analysis
Designed to perform analysis as accurately as possible

Microsoft Excel
A multi-functional data analysis tool
Can perform many functions but none as well as programs that are
dedicated to a single function.

Both Minitab and Excel use worksheets to store data

Chap 1-61
 Minitab & Microsoft Excel Terms
When you use Minitab or Microsoft Excel, you place the data you
have collected in worksheets.

The intersections of the columns and rows of worksheets form

boxes called cells.

If you want to refer to a group of cells that forms a contiguous

rectangular area, you can use a cell range.

Worksheets exist inside a workbook in Excel and inside a

Project in Minitab.

Both worksheets and projects can contain both data, summaries,

and charts.

Chap 1-62
 Statistical software
MS- EXCEL
Minitab
SAS
SPSS
StatTools