Growing a business without the use of statistics is virtually impossible. Many business enterprises are on the verge of collapse due to the absence of statistical analysis in measuring business performances. This detailed article explains, in detail, the relevance, role, and importance of statistics in Business. Just relax and keep scrolling.
What is Statistics in Business?
Statistics in business can be likened to the third eye through which any business enterprise can see the future. It is also the navigation compass that guides a company on the road path to take, in other to avoid shipwreck.
Business statistics play a vital role in areas such as tax preparation, budgeting, proposals, and data mining. Definitely, Business statistics involve aspects of mathematics, management, and market research.
However, statistics in business involves the application of statistical tools in the area of marketing, production, finance, research development, manpower planning, which is used to extract relevant information for the purpose of decision making.
It may interest you to knot that no subjects, other than statistics, demonstrate and explain, so clearly, that there are several kinds of intelligence. Hence, statistics, if clearly understood, is a fascinating subject that has tremendous importance in computer, philosophy, medical sciences, psychology, and most especially, in business.
Statistics is used every now and then even outside the field of core Education such as Diagnosis and Programming. Statistics works hand-in-hand with Mathematics. Running away from Statistics is like running away from mathematics, you will be tired.
Statistics could be as a science of Average, a numerical statement of facts in any department of inquiry placed in relation to each other. The relevance or importance of statistics in business, cannot be overemphasized.
A business enterprise that is void of statistical analysis in its mode of operation is like a blind man leading a group of fellow blind men. Business statistics is the science of good decision making in the face of uncertainty and is used commonly in many disciplines which involve Economics, auditing, etc. These and more are the relevance of business statistics.
Business companies use statistics in market research, evaluation, and product development. Managers would want to monitor the demands of a product. Some questions are vital in market research that is if there is enough demand to justify spending money to develop a product? Companies, from a statistical analysis, use a break-even model, which is constructed to determine the volume of sales necessary for the product to succeed.
The Importance of Statistics in Business
- Rational Decision Making
- Management Performance/Forecasting
- Organization and Presentation of Data
- Historical Research of a Business
For any business to be successful, there must be uniformity in the rendering of services. There is always the existence of business ethics, laws, and even method of operation. All these are encapsulated and stored as a reference purpose through the help of Statistics. An important role of statistics in business is that it is expressed as a percentage ratio, average, medium, and even a raw number. What is vital is that the method used to calculate the statistics is uniform at every time.
2. Rational Decision Making
Statistical analysis enables an enterprise to measure the performances of a business and identify trends. This enables the enterprise to make a sound or rational decision, knowing that their judgment is based on data and facts and not on mere assumptions. Better planning and predictions are made through statistical analysis of data and figures.
In order to make a rational decision about any aspect of a business, it is of utmost importance to refer to the statistics of the business, which enables the enterprise to study the the presentation of data and other information in as statistical manner. Gathering all the data and information needed for the decision-making always seems impossible without the existence of a well defined statistics of operation over time.
3. Management Performance/Forecasting
The Usage of Statistics in business and management is limitless, with the proper skill to implement statistical methods. Managers can increase the production capacity of any plant or find out the optimum production capacity, efficient management of work and employee performance, limit the wastage of resources, etc.
However, by using historical data, managers can analyze past successes and failures. This is known as “cause and effect analysis“. Furthermore, managers using predictive analysis of statistical techniques (such as data mining and modeling) can predict future possibilities and trends based on historical data.
This goes beyond reporting what has happened to create the best estimates for what will happen. Nevertheless, some common applications of predictive analytics include fraud detection and security, risk assessment, marketing, and operations.
Notably, there are limitations in business statistics. This is because statistics focus only on quantitative characteristics, this is to say that statistics are numerical propositions or statements of facts. Therefore, data that cannot be expressed numerically are incapable of statistical analysis. Furthermore, statistics focuses on aggregates and not with individuals.
Also, statistical laws are not perfectly accurate. This is to say that since statistics deals with such characteristics that are affected by a multiplicity of causes, so it is not possible to study the effect of these factors.
Results following these limitations are not accurate but approximate. It can also be established that statistics can be misused by data placed on an inexperienced person which may lead to wrong results. Note that only persons having a fundamental knowledge of statistical methodology can handle the data properly.
4. Organization and Presentation of Data
Every business deals with data from sales, advertisement, marketing, and other forms of activity regarding the running and operation of the business. These data are, most times, bulky and sensitive, and therefore, demands a careful organization and presentation when needed.
However, statistics in business provides great tools to handle these data and information about the business in a systematic and well-arranged manner for an effective presentation. In fact, statistical data are 100% reliable even for future purposes.
5. Historical Research of a Business
The best method to apply when researching about a business or its history is by getting the statistical data, including activities from the company/business. With a statistical approach, even a layman can participate, contribute and be a part of the historical research. This is because Statistics presents the surest information and data regarding a business.