Statistics assumes as an essential part in each field of human activity. It plays an important role in determining the existing position of per capita income, population growth rate, unemployment, housing, schooling, medical facilities etc., in a particular country. Presently application of statistics is very wide and it holds a central position in almost every field like Industry, Trade, Commerce, Economics, Physics, Chemistry, Mathematics, Biology, Psychology, Botany, etc. Statistics is a branch of mathematics managing with the gathering, examination, translation, introduction, and association of information. There are many fields where statistics is utilised as a part of which business is one of the imperative field. Statistics play an important role in business. A successful businessman should be very quick and accurate in decision making and should know the need of his customers. Therefore, he should also have knowledge of what to produce and sell and in what quantities, which helps businessmen to plan the production of a particular item or product according to the taste of the customers. The quality of the products, making correct decision about the location of business, financial resources, marketing of the products, etc, can also be checked more efficiently by using statistical methods. In general, Business statistics are divided into two categories: descriptive and inferential.
1. Use of Descriptive Statistics
Descriptive statistics are used to summarise and describe total numbers. Looking at statistical numbers such as mean, mode, or median, helps managers monitor business activities and make decisions. Often numbers themselves do not show the big picture, so ratios, or numbers representing relationships are used.
For example, if you're a regional manager who oversees 15 different car dealerships. You will keep track of sales per month, number of vehicles sold, number of salesmen, sales/person, operational costs, deliveries, and other information. You can use this statistical information to look at trends, understand relationships between numbers, and make sound business decisions. Perhaps you need to shift a sales member to a different store, or realize that you need more available stock during certain months, all of which helps maximize the company's resources and profit.
2. Use of Inferential Statistics
Inferential statistics help managers to jump to a conclusion based on limited data. When predicting the future, we don't have a magic crystal ball, but we do have statistical strategies, such as sampling, probability, and models. Inferential statistics is often used in marketing. Statistical modelling is used in Finance to predict budgets and capital expenditures, when there are many unknown factors.
Let's say a company is taking loan for construction of a plant, expecting it to be operational in 3 years. They are relying on the income from the plant to repay the loan. The finance team will construct a statistical model that will conclude any possible delays, changes to building regulations, and catastrophic events. It's better to be prepared and to save company from any sudden bankruptcy.
“Facts are stubborn things, but statistics are pliable.”―Mark Twain