It will help business people greatly if they can correctly predict what will happen in the future. It will help them greatly to know what sales volumes they can expect in the coming few months. They can plan their production accordingly and avoid short or excess stocks. But it is not so easy without the right techniques. One way to predict the future is by analysing the company’s data. They can get a lot of insights from the available information. Business statistics is a technique that helps experts apply statistical principles in business to predict various events.
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What Is Business Statistics?
Business statistics is a method of using statistics to gain valuable information from the data available to a company. Various techniques and principles of statistics are applied to gain insights that help to make better decisions. It is a method of using numerical data that they collect from various sources. The information can come from surveys, experiments or other information systems in the company. It helps organisations understand the reasons for various events in the present and predict the future. It can be used in marketing, production planning, human resource planning, finance, etc.
Why Is Business Statistics Important?
Companies benefit from seeing patterns in their activity. It can be done with business statistics. Looking at past sales patterns, an organisation can predict sales volumes in various situations. Using this technique, one can determine if the company’s business proposition is viable. It is something that affects the performance of the whole company. Businesses can also find out if a particular marketing campaign has helped to attract more customers. It will help them in planning future campaigns in a better way. Business statistics is the foundation for business analytics.
To understand ways to optimise a team’s performance, the company must first know their present productivity levels and weak areas. It can be gathered from data they have already generated from previous projects. But simply collecting data will not give the management any idea about improving the performance. It is where business statistics help. They must analyse and interpret the data using statistical methods. Though software programmes can do this, a human mind is needed to understand the significance of the analysis and take necessary action.
Decision Making – This is one area where statistics helps businesses. Instead of using hypotheses, managers can use solid data to support their decisions. The exercise also enables companies to make the right forecast.
Performance Management – Analysing the performance of employees is another way companies use business statistics. It helps the management know if employees are fulfilling their productivity requirements. They can take action to support those who are below the expected levels.
Market Research – Companies use statistics to check whether the market will react positively to a product. They need to know this to invest money in creating a new item. Customer surveys help the firm know whether there will be a good response to the new product.
How To Collect Data For Your Business Statistics?
There are many methods to collect data to create business statistics. Your method will depend on your objective for this exercise. It is not fair to assume that you can use only quantitative data for analysis. It is possible to use complex qualitative data for analysis using statistics. You must start by preparing a set of questions that you would like answers to. One must know what data will provide the answers to the questions.
The list must also include the possible ways of collecting the data. You can use surveys, focus groups or customer interviews to get the information you need. The required details can also come from data you get from purchase data, lead details and information from your marketing channels. A/B testing is another method to gather the required information. External data for analysis using business statistics can come from competitor information you collect from the market. Some agencies sell information that companies need.
Avoid Common Mistakes
It is not just enough to collect data. That is just the first step. You need to ensure that the information you are collecting for business statistics does not contain any statistical biases. It is best to ensure this before you collect the data. Firstly you must collect a large sample size for accurate analysis. It must have all the appropriate variables, or you risk having an omitted variable bias. Make sure that you include all the important data points so that your collection doesn’t result in survivorship bias.
Surveys and interviews are the most probable areas where you run into biases. Choosing only those close to you for a survey is selection bias. The ideal way to avoid this is to get a random sample of people to get the responses. Even if you select a random sample, there are risks of only those close to you responding to the survey. This, again, can result in bias. An observer bias results when you ask only questions that can give you the preferred answer. This happens when you collect data for business statistics through interviews or focus groups.
Types Of Business Statistics
Descriptive statistics is the summarisation of information in a way that is meaningful and useful for businesses. It is business statistics that provide you with valuable insights you can use for making better decisions. This statistical information contains numerical data, graphs or tables. This type of statistical analysis helps to see what has occurred and the reasons for the same. It helps the company understand the consequences of certain actions. Officials can see the mistakes or the good work they have done in the past.
In this type of business statistics, companies draw samples from a population to find out the properties of the population. It helps experts have a good understanding of the population under research. This type of analysis enables companies to find out the characteristics of a population using the sample data. They can make generalisations using a small sample. The experts use various tools to ensure that the samples collected are the right representative of the population. Data specialists use cluster sampling, random sampling, stratified sampling and systematic sampling to ensure the accuracy of data.
One can learn full details of the different types of statistics in the Executive Post Graduate Programme In HRM offered by reputed institutions. You can find all the details about this programme on our website.
How Do Companies Use Business Statistics?
Financial Data Management
Every business needs to be financially healthy for its survival. Good finances are also required for expanding the business. The main financial activities in a company are bookkeeping and accounting. These help the company remain organised and use resources efficiently. But these are not enough to ensure long-term financial security and growth. All firms generate a huge amount of data as part of their daily operations. A wise use of this data can give a lot of insights into how to manage their finances well. It is here that business statistics play a major role.
Financial data management is an important statistical technique in business. The technique uses various tools to record, track and use the firm’s financial information. Specialised software, algorithms, analytics, data visualisation tools and reporting are commonly used for this purpose. It is important to apply financial information to develop healthy budgets. It also enables the organisation to make accurate financial projections. Business statistics also helps the company maintain correct records for legal and compliance purposes. This is one of the main uses of statistics for businesses.
Measuring Performance And Efficiency
All organisations must ensure that they are performing as desired and with optimum efficiency. Top management will be able to assess the company’s performance by looking at the bottom lines. But various other indicators are of interest to the management, and these can be examined only by using business statistics. Companies must ensure that their products maintain good quality. In an automated assembly line, it is not practically possible to check every item. This is where experts use statistical analysis to assess the quality of products. They use sampling methods to evaluate the total production.
Companies must also ensure that they are using their workforce and other resources in the best manner to get the optimum output. Business statistics is an excellent way to evaluate the overall efficiency of staff members. It helps them evaluate if all employees are performing to the expected level. Apart from employee output, statistics are also used to know time utilisation by various departments. Data analysis also helps to prepare models that will help improve performance and efficiency.
Improving Business Operations And Decision-Making
Further to using business statistics to measure performance and efficiency, companies can also use this method to improve business operations and make better decisions. They can use statistics to analyse the below sections of the business.
- Sales analysis and growth
- Perfecting marketing strategies
- Employee training and management
- Leadership development for executives
- Staffing and scheduling efficiency
- Better organisational goal-setting
If there is slow sales growth, the company can use this exercise to identify the problem and isolate it. If the problem lies in poor marketing strategies, these can be corrected with better messages and by using the right platforms. Statistics also help in market research and analysis. It helps improve advertising strategies.
Business statistics can also help understand problems that the staff members may be facing. A keen analysis and use of statistical tools can help to identify if any official practices are reducing employee performance. Solving such issues not only helps improve performance but also conveys the feeling that the company is concerned about employee problems. The solutions that helped the company in the initial stages may not help when it enters the next phase. Statistics can also help the senior management take the right decisions for the growth of the company.
Identifying Trends And Improving Forecasting
Understanding market trends is very important for companies to know what improvements or changes they must make in their products or marketing strategies. You can get this only by taking data from outside. Business statistics is a method of analysing trends and understanding the latest trend. Looking at market information also helps us know what will happen shortly. It helps in coming up with better business ideas and becoming a leader in the market. Organisations can also get earlier warnings about any dangers in the market.
The other important benefit of business statistics is the ability to forecast demand. Forecasting sales help the company maintain an optimum inventory and save money. It also helps the firm source raw materials needed to fulfil upcoming orders. Apart from sales forecasting, analysing data using statistical tools helps forecast expenses which are vital for the company. Knowing major expenses in the future helps to look for financial sources to meet them. Statistics also help predict profit margins which help the company plan growth and development activities.
Improving Market Research And Analytics
As businesses grow, the initial ideas that helped them grow may not be effective. It is at this time that they need better market research and analytics. Business statistics help to improve the market research capabilities of a firm. This exercise helps the company know the potential product demand and also how they can increase the returns on product investment. Knowing marketing ROI is a tough job, and this is where expert statisticians can help the organisation a lot. Knowing this will help them develop better and more profitable marketing campaigns.
Analytics is a subject that is being talked about everywhere for the benefits it offers companies. Business statistics is the foundation for analytics. Analytics can help the company understand the effectiveness of each campaign and help to improve them. It also helps companies find out consumer behaviour and understand what will attract them to the company’s products. Statistics enables companies to explore new markets and find out how well their products will be accepted there. It also can provide the necessary information for creating effective campaigns for these new markets.
Appraisal of values is very important for those companies that are looking to invest in a property or finance companies that are looking at providing a loan on buildings or vehicles. Both these need an accurate appraisal of the value of the property. This can also be done using business statistics. Banks must know the value of the property on which they propose to advance the money. If the customer doesn’t pay the loan, the bank must take the property and sell it. In such cases, the bank must know what they will get from selling the property.
Companies regularly invest their excess profits in land or buildings. They must know if the investment will give them the returns they expect. They can use business statistics to know the price of the property in the area and see how much they can earn from it. Construction companies can also find out if a new project is worth executing and whether they will earn good profits from it. The prices of various materials used for construction and the finished building can vary with time. Using statistics, they can find out what profit they will make from the project.
Statistics In Hiring
Hiring is a time-consuming and expensive activity for any company. This means that they must hire people who will stay for a long time. One of the ways to attract and retain people is to offer them good salaries. Organisations that are planning to recruit people can use business statistics to know the salary trend. They can find out the salary for different posts for which they are hiring people. This helps them offer the correct salary and get good candidates to choose from. They can also find the trend of benefits being offered to employees from the market.
Another critical aspect of any firm is employee retention. As hiring new hands is expensive, companies look at retaining their good employees. For this also, it is essential to know what salaries are normal for the position in other companies. They can use business statistics to analyse the salary data of various companies and see what they must offer to keep employees from leaving the firm. Statistics also help to understand the average tenure for each position. This helps companies know when they have to start the hiring process for each post.
The above are certain uses of business statistics that companies benefit from greatly. You can learn more about the use of this technique in the Executive Post Graduate Programme In HRM offered by reputed institutions. Our website contains more details about this course and what topics it deals with.
Businesses need to make decisions that are as accurate as possible. Wrong decisions can result in unpleasant consequences. Right decisions don’t come from guesswork or gut feeling. They must come from solid data. This is where statistics play a major role in businesses. Companies can use the available data to use statistical techniques to find valuable insights. They help make more informed decisions about the future. Experts in statistics have excellent career prospects as more companies use these techniques to make their operations more efficient and profitable.