Managers often use business statistics when making forecasts or decisions.
Business statistics is the science of using data to make good decisions when faced with uncertainty. Various departments typically make use of business statistics, such as finance, marketing, and customer service. Statistical techniques commonly found in business include the use of descriptive statistics, probability, binomial and normal distributions, hypothesis tests, confidence intervals, linear regression, and correlation.
Managers often use business statistics when forecasting or making decisions that involve a level of uncertainty. Some skill and training is needed to interpret and apply business statistics. In general, business graduates in the United States are required to complete a business statistics course before graduating. Understanding and applying business statistics can give managers and companies a competitive advantage.
Companies that use statistics have a competitive advantage when making decisions based on data. For example, if a manager believes that an item will become obsolete in the future and wants to cut its price in half to sell it, he might find, after running a linear regression, that the product will sell for full price in two months. If he were to cut prices now, the company would be cutting its profit margin for no reason. Also, managers often calculate the mean, or mean, when they must also consider the mode or median. Outliers may be present, making the average and decisions based on that number inaccurate.
The most common departments that use business statistics include finance, marketing, and customer service. The finance department benefits from using business statistics to perform financial statement analysis, forecasting, and correlation. The marketing department can use it to forecast sales and demand, as well as look for trends and find the probability of a given event occurring. Customer service can increase their performance by using business statistics to determine which offers or retention techniques are working best, as well as review staff performance.
The techniques used for business statistics vary by organization. Business schools teach students descriptive statistics, probability, binomial and normal distributions, hypothesis testing, confidence intervals, linear regression, and correlation. Descriptive statistics includes calculating and knowing when is the most appropriate time to use the mean, median, and mode. Probability and distributions are used to determine the probability of an event occurring. Hypothesis tests, confidence intervals, linear regression, and correlations are commonly used when making predictions or testing whether a theory is true.