Application of Statistics in Business and Economics
Statistics has numerous applications in business and economics. Technological advancements have enabled companies and businesses to generate large amounts of data that help make critical decisions. The decisions enhance company and organizational growth, ensuring the smooth running of the various departments or the economy at large. Companies are increasingly employing a statistical tool to improve productivity and develop an organizational culture. It is only through statistics that managers can clearly distinguish between ordinary and distinctive variations that can improve processes (Sharma, 2017). Statistics is effectively used in firms where the employees have an adequate grasp of the concept of statistical thinking, therefore solving business problems and facilitating quick decision making.
Statistics in business seeks to find solutions to immediate problems that arise. Statistical business applications address a small group focused on a particular issue of an individual. Good decision making is dependent on the accuracy of the data collected (Black, 2019). There are various areas of business and economics where statistics is applied, such as marketing, economic policies, operations, human resource management, information systems, and data mining. This paper aims to investigate various statistics applications in business and economics and how these applications improve businesses and the economy.
Business managers and economists need to have adequate knowledge of data collection to manage both internal and external areas of the business and the economy. According to Anderson, business data is obtained through the use of areas such as production, finance, and sales. External data are factors outside the business, such as competitors, suppliers, and the government. Data collection on both the internal and external areas helps managers to effectively make decisions that benefit and improve the employees and production (Anderson, 2020). Statistics in economics establish relationships between variables such as money supply, demand, and supply, making it possible to develop favorable economic policies.
One of the applications of statistics in business is marketing. According to Philip Kotler, marketing establishes target markets and customer needs and make products to suit these markets. Marketing focuses on growing profits, and statistics is a significant component in determining profitability. According to Parihar Sapna, statistics help to make decisions on how to sell products and in designing marketing strategies and campaigns for targeted customers. It involves systematic collection, gathering, recording, and analyzing marketing data. Analysis of the data enables a company to know the location of its target market and customer preferences. Through this, it can tailor products to satisfy consumers, therefore increasing the company’s sales and profitability (Parihar, 2018). Web analytics collects data of online consumers and the behavior of potential clients. Statistics predict demand, market share, and sales of products in the market. Tools such as conjoint analysis and factor analysis help in designing products and services according to customer responses.
Finance is another application of statistics in business and economics. Every financial decision is based on the analysis of data. Therefore companies make an educated guess on where to invest money—probability theory and statistics aid in making premium policies and creating new insurance policies. Statistics help in the analysis (Lin, 2016)is of risk and compares the return on investment compared to capital investment. The selection of stock portfolios depends on equity, which is a statistical tool. Traders buy or sell their stock depending on the data analysis. Countries data analysis in world trade to know the price of goods expected to rise in the world market, therefore increasing the value of exports. Statistics also help determine interest rates and enable countries to borrow money from organizations or nations with low-interest rates.
The application of statistics in economics is significant. It helps in making economic policies through the understanding of fundamental economic problems and variables. Financial decisions are based on quantified data that is proven statistically. Econometrics deals with finding solutions for economic issues through the use of statistics. Economic theories are tested by using numbers to quantity variables and presents data as mass figures (Moore, 2016). Variables such as quantity demanded, and amount of supply, industrial and agricultural output, money supply, and prices are linked by statistical data. For a government to make sound and effective economic policies, it must consider the variables that affect trade and money circulation in the economy. The quantity of the variables usually presented in numbers enables it to make policies about agriculture, trade, transport, and industries (Abounoori, 2018). During an economic crisis, data collection helps to find solutions and reasons for a recession. Trade blocks within a region can collect and analyze data on the circulation, demand, and supply of goods to improve policies that increase regional trade.
Statistical information is vital in the improvement and profitability of a business. The applications of statistics in business, such as marketing and finance, are pivotal to companies’ growth and sustainability. The modern economics require concrete figures to improve on existing policies or make new ones. Companies rely on accurate and precise data analysis to determine marketing strategies, premiums, and insurance policies. With the rapid advancement in technology, statistics are embedded in business and economics, helping to improve different areas through numbers and figures to predict possible outcomes. Precision and accuracy of collecting, recording, and interpreting data are fundamental in the growth businesses, and it is a compass in economics to make sound economic policies that ensure the growth of the GDP.
References
Abounoori, E. (2018). Applied Mathematics/Statistics in Economics, Management & Finance. AIP Conference Proceedings (p. 200001). AIP Publishing LLC.
Anderson, D. R. (2020). Modern business statistics with Microsoft Excel. Cengage Learning.
Black, K. (2019). Business statistics: for contemporary decision making. John Wiley & Sons.
Lin, J. W. (2016). Statistical Applications from Clinical Trials and Personalized Medicine to Finance and Business Analytics: Selected Papers from the 2015 ICSA/Graybill Applied Statistics Symposium, Colorado State University, Fort Collins. Colorado: Springer.
Moore, D. S. (2016). The practice of statistics for business and economics. WH Freeman.
Parihar, S. (2018). Statistics for Management. south Asian Journal of Management, 25(2), 226-229.
Sharma, A. (2017). Role of Statistics in Different Fields. Research Journal of Science and Technology, 9(1), 118-122.