Module I : Introduction to Business Analytics

• Scope of Business Analytics,

• Data for Business Analytics,
• Descriptive Decision Models,
• Predictive Decision Models,
• Prescriptive Decision Models,
• Problem Solving and Decision Making.
• Excel Functions, Spreadsheet Add-Ins for Business Analytics, & Modeling.
 Key words

• Business Intelligence(BI)- Collection, management,

analysis and reporting of data
• BI mainly focuses on description of historical and past
data.
• Business Analytics(BA)- Aims at exploring the data and
predicting outcome.
• Data
• Database
 Scope of Business Analytics
• Business Analytics tools have wide application such as-

Managing customer relationship

Predict and prevent credit frauds
Managing human capital and supply chain
Manufacturer use for production planning
Retailers use for recommending products to the customers and optimize
marketing promotion
Pharmaceutical firms use it market for life saving drugs
Airlines, hotel industries use for dynamic pricing and optimize revenue
 Scope of Business Analytics(Contd.)

Descriptive analytics (What Happened?)

- uses data to understand past and present
Predictive analytics (What might happen?)
- analyzes past performance
Prescriptive analytics( What should be done?)
- uses optimization techniques
 Test What have you learnt

Which type of analytics would be useful to answer the

following questions?
i. What was the total sale of Monday?
ii. Who has done the maximum transaction today?
iii. Which company is making maximum profit?
iv. What would be the expected temperature for next 7 days?
v. Whether one should invest in mutual fund
vi. Optimize pricing to boost maximum revenue
 Data for Business Analytics
• Understanding Data
Data we Data we
have need

– Data availability, quality, frequency, granularity etc

• Preparation of data
– Format mismatch, missing data etc.
 Example:

NAME GENDER CITY STATE DoB

Atul Male NOIDA UttarPradesh 12/02/86
Ritika Female UP 5th April,1972

NAME GENDER CITY STATE DoB

Atul Male NOIDA UP 12/02/86
Ritika Female NOIDA UP 05/04/72
 Data and DataBase
• Data is collected facts and figures.
• Example: survey responses, historical data of stock price,measurement
of descriptive features of proucts ,Annual report, economic trend,
experimental results.
• Data base- Systematic organization of data
• A collection of related files containing records on people, place, date etc
• Generally presented as a two dimensional table, columns representing
individual element(known as field or attribute) and rows represent
records of related data elements
• Facilitates data accessibility, making queries, comparing etc.
 Fields or
Sales Transaction data base attributes

Record

Ref.: Business Analytics by J. Evans, Pearson publication

 Metric and Measurement

• Metric- Unit of measurement

• A way to objectively quantify the performance
• Examples: to assess overall quality of a production plant, manager can
monitor proportion of defectives, durability of the product etc.

Metric

Discrete Continuous

• Measurement – the act of obtaining data associated with metric.

• These are numerical values associated with metric.
 Measurement Scale

Four Types of Measurement Scale:

Categorical (nominal)
Ordinal data
Interval data
Ratio data
 Four Types of Scales

• Nominal Scale: The

simplest type of scale.
• Assignment of numbers
or letters to objects
• Serve as labels for
identification or
classification

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Four Types of Scales (Continued)

• Ordinal Scale:
– This scale arranges
objects or alternatives
according to their
magnitude.

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Four Types of Scales (Continued)

• Interval Scale:
– Interval scales not only
indicate order, they
measure order (or
distance) in units of equal
intervals.
– The location of the zero
point is arbitrary.
• The classic example of an
interval scale is the Fahrenheit
temperature scale.
• If the temperature is 80 degrees,
it cannot be said that it is twice
as hot as a 40 degree
temperature.
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Four Types of Scales (Continued)

• Ratio Scale:
– Ratio scales have absolute
rather than relative scales.
– For example, both money and
weight are ratio scales
because they possess an
absolute zero and interval
Properties.
– The absolute zero represents
a point on the scale where
there is an absence of the
given attribute.
– However, for most behavioral
marketing research, interval
scales are typically the best
measurements.
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Appropriate Statistical Measures

Type of Descriptive
Scale Numerical Operation Statistics
Nominal Counting Frequency in each category
Percentage in each category
Ordinal Rank ordering Median
Range
Percentile ranking
Interval Arithmetic operations that preserve Mean
order and relative magnitudes Standard deviation
Variance
Ratio Arithmetic operations on actual quantities
Geometric mean
Coefficient of variation

All statistics appropriate for lower-order scales

(nominal being the lowest) are appropriate for higher-
order scales (ration being the highest).

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Classify the data as per scale