BA CH1

Benefits of Business analytics

Business Analytics can help companies reduce cost, have better risk management, perform faster decision making, have better productivity, and enhance bottom-line performance in profitability and customer satisfaction.

Difference between Deterministic Model and Stochastic Model

Certainty

Validity

Data correctly measures what it is supposed to mean

Softwares used

IBM Cognos Express SAS Analytics Tableau Software

Uncertainty

Imperfect knowledge of what will happen

Big Data

Massive amounts of business data from a wide variety of sources, much of which is available in real time and much of which is uncertain or unpredictable. Mostly from customer behavior and customer experience.

Data

Numerical or textual facts and figures that are collected through some type of measurement process. Based on raw material

Ordinal Data

Ordered or ranked according to some relationships to one another. ( College football rankings).Its more useful because the data can be compared to one another, Surveys are often used, used in ranking. No fixed units of measurements. Overall satisfaction and quality of schools

SAS Analytics

Predictive modeling and a mining, visualization, forecasting, optimization and model management, statistical analysis, and more

Predictive Analytics

Predicts the future by examining historical data, detecting patterns or relationships in these data and then extrapolating these relationships. Wishes to predict the response of of different customer segments to an advertising campaign, a the commodities short term for traders, or demand cycles. Can predict risk and find the relationship in data not readily apparent with traditional analysis.

Contribution Margin

Price-variable Cost

Applications of Business Analytics

Pricing, customer segmentation(target market), merchandising, location, and social media

Prescriptive Analytics Example

Profit, revenue , how to reduce costs Uses areas in operations, marketing, and finance. The best price of advertising to maximize revenue.

Information

Result of analyzing data; that is, extracting meaning for data to support evaluation and decision making. It says what is most important.

Tableau Software

Simple drag and drop tools for visualization data from spreadsheets and other databases.

Objective Function

The quantity that is to be minimized or maximized; minimizing some quality of interest profit, revenue, cost , time, and so on by optimization

Price Elasticity

The ratio of the percentage change in demand

Analytics

The use of data, information technology, statistical analysis, quantitative methods, and mathematical or computer based models to help managers gain improved insight about their business operations and make better decisons

Mathematical models

Total Costs, Variable costs, quantity produced

Total cost Outsourcing

Variable cost unit * Quantity

Influence Diagram

Various elements of the model influence, or relate to, others. How various elements influence or relate to one another. Are characterized into key relationships

Ratio Data

Which is continuous and have a natural zero. The most meaningful for business, Quality item cost, cost per order, a/p terms of contacts

Database

a collection of related files containing records on people, places, or things. Important for business analytics of accessing data, making queries, and other data information management activities.

Prescriptive Analytics

identifies the best alternatives to minimize or maximize some objective.

Discrete Metric

is the one that is derived from counting something. Number of incomplete orders, number on time deliveries, number of errors

Categorical Data

(Nominal) are stored into categories based on specific characteristics.No quantitative relationship to one another. Expressed in counted or as proportions or percentages. Gender Ethnicity

How Data is Used in Businessed Examples

1 ) Annual Reports summarized data about the company in profitability and market to communicate numerically to stockholder by charts 2) Accountant Audits 3) Predicting economically market trends, interest rates, industry performance, consumer spending, international trade, unemployment rates, 4)Collecting customer data for marketing research in demographics, performance , opinions, transaction history, shopping behavior 5) Operations use data on production performance, manufacturing quality ,supplier performance, productivity, cost, delivery time, environmental compliance 6) Human resource managers measure employee satisfaction, training costs, turnover, market innovation, training effectiveness, and skill development 7) Financial analyst collect data for profitability, revenue growth, return on investment, asset ultization, operating margins, earnings per share, economic value, earnings per share, margins, economic value added, shareholders value,

Data Classification Groups

1) Categorical 2) Ordinal Data 3) Interval Data 4) Ratio data

Three Manger Components of Business Analytics

1) Descriptive analytics 2)Predictive analytics 3) Prescriptive Analytics

Problem Solving Steps

1) Recognizing the Problem 2) Defining the problem 3) Structuring the problem 4) Analyzing the Problem 5)Interpreting results and making a decision 6) implementing the solution

Three forms of Models

1) Verbal Description 2) Visual Model 3) Mathematical model

Total Cost Manufacturing

= Fixed costs + Variable Costs Fixed cost + ( Variable cost unit * quantity produced)

Decision Model

A logical or mathematical representation of a problem or business situation that can be used to understand, analyze, or facilitate making a decision. The relationship among the data ,incontrollable variables, and decision variables and the output interest of the variables

Business Analytics

A process of transforming data into actions through analysis and insights in the context of organizations decision making ad problem solving

Deterministic Model

All model input information is either known or assumed to be known or assumed to be known with certainty variables.

Models

An abstraction or representation of a real system, idea , or object . They capture the most important features of a problem and present them in a form that is easy to interpret. Can be a graph, flowchart, spreadsheet, verbal description, figures.

IMB Cognos Express

An integrated business intelligence and planning solution designed to meet the needs of midsize companies, provides reporting, analysis, dashboard, scorecard, planning, budgeting, and forecasting capabilities.

Optimal Solution

Any set of decision variables that optimize the objective function.

Continuous Metrics

Are based on a continuous scale of measurements. Any metrics involving dollars, length, time, volume, or weight.

Measures

Are numerical values associated with a metric

Interval Data

Are ordinal dates and time , but have constant differences between observations and have arbitrary zero points. Time in a certain place, Only when their is a numerical scale without descriptive labels. Age and residency

Reliability

Data that is accurate and consistent

Margin of Safety

Difference of Break Even and Expected to Sell BE-expected to Sell

Predictive Analytics Example

Example: Forecasting, regression,

Break Even in Quantity

Fix cost+( Variable cost * quantity)= Variable cost * Quantity

Break Even in Price

Fixed cost/ (Price -Variable cost)

Data Set

Is a collection of data. (Marketing surveys, table of stock changes, collection of measurements)

Metric

Is a unit of measurement that provides a way to objectively quantify performance

Risk

Is associated with the the consequences and likelihood of what will happen

Measurement

Is the act of obtaining data associate with a metric

Problem Solving

Is the activity associated with defining, analyzing, and solving a problem and selecting an appropriate solution that solves a problem.

Optimization

Is the process of finding a set of values for decision variables that minimizes or maximize some quality of interest and the most important tool for prescriptive anyatics

Business Applications that Analysis Benefits

Statistics, Data Mining, Business Intelligence, Information Systems, Modeling and Optimization, Operation Research/ Management Science, Decision Support Systems

Descriptive Analytics Example

Summarized data into meaningful charts about budgets, sales, revenue, or cost.

Descriptive Analytics

The data use of data to understand past and current business performances and make informed decisions. Tells what the data means and what is happening.

Challenges of Business Analytics

The lack of understanding of how to use analytics, computing business priorities, insufficient analytical skills, difficulty in getting good data and sharing information, and not understanding the benefits verses the cost.

Stochastic Model

The model input information is uncertain variables.(Most Common in models)