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.