Table of Contents

Introduction............................................................................................................. 2
Meaning and definitions of statistics..................................................................3
Types of data and data sources............................................................................5
Types of statistics................................................................................................... 7
Scope of statistics.................................................................................................. 9
Importance of statistics in business..................................................................11
Limitations of statistics....................................................................................... 13
Conclusion.............................................................................................................. 16

Introduction
Statistics means numerical information expressed in quantitative terms.
This information may relate to objects, subjects, activities, phenomena, or
regions of space. As a matter of fact, data have no limits as to their
reference, coverage, and scope. At the macro level, these are data on gross
national product and shares of agriculture, manufacturing, and services in
GDP (Gross Domestic Product). At the micro level, individual firms,
howsoever small or large, produce extensive statistics on their operations.
The annual reports of companies contain variety of data on sales, production,
expenditure, inventories, capital employed, and other activities. These data
are often field data, collected by employing scientific survey techniques.
Unless regularly updated, such data are the product of a one-time effort and
have limited use beyond the situation that may have called for their
collection. A student knows statistics more intimately as a subject of study
like economics, mathematics, chemistry, physics, and others. It is a
discipline, which scientifically deals with data, and is often described as the
science of data. In dealing with statistics as data, statistics has developed
appropriate methods of collecting, presenting, summarizing, and analyzing
data, and thus consists of a body of these methods.

Meaning and definitions of statistics

In the beginning, it may be noted that the word statistics is used rather
curiously in two senses plural and singular. In the plural sense, it refers to a
set of figures or data. In the singular sense, statistics refers to the whole
body of tools that are used to collect data, organize and interpret them and,
finally, to draw conclusions from them. It should be noted that both the
aspects of statistics are important if the quantitative data are to serve their
purpose. If statistics, as a subject, is inadequate and consists of poor
methodology, we could not know the right procedure to extract from the data
the information they contain. Similarly, if our data are defective or that they
are inadequate or inaccurate, we could not reach the right conclusions even
though our subject is well developed.
A.L. Bowley has defined statistics as: (i) statistics is the science of counting,
(ii) Statistics may rightly be called the science of averages, and (iii) statistics
is the science of measurement of social organism regarded as a whole in all
its manifestations. Boddington defined as: Statistics is the science of
estimates and probabilities. Further, W.I. King has defined Statistics in a
wider context, the science of Statistics is the method of judging collective,
natural or social phenomena from the results obtained by the analysis or
enumeration or collection of estimates.
Seligman explored that statistics is a science that deals with the methods of
collecting, classifying, presenting, comparing and interpreting numerical data
collected to throw some light on any sphere of enquiry. Spiegal defines
statistics highlighting its role in decision-making particularly under
uncertainty, as follows: statistics is concerned with scientific method for
collecting, organizing, summa rising, presenting and analyzing data as well
as drawing valid conclusions and making reasonable decisions on the basis
of such analysis. According to Prof. Horace Secrist, Statistics is the aggregate
of facts, affected to a marked extent by multiplicity of causes, numerically
expressed, enumerated or estimated according to reasonable standards of
accuracy, collected in a systematic manner for a pre-determined purpose,
and placed in relation to each other.
From the above definitions, we can highlight the major characteristics of
statistics as follows:
(i)

Statistics are the aggregates of facts. It means a single figure is not

statistics.
For example, national income of a country for a single year is not
statistics but the same for two or more years is statistics.

(ii)

(iii)

(iv)

(v)
(vi)

Statistics are affected by a number of factors. For example, sale of a

product depends on a number of factors such as its price, quality,
competition, the income of the consumers, and so on.
Statistics must be reasonably accurate. Wrong figures, if analyzed,
will lead to erroneous conclusions. Hence, it is necessary that
conclusions must be based on accurate figures.
Statistics must be collected in a systematic manner. If data are
collected in a haphazard manner, they will not be reliable and will
lead to misleading conclusions.
Collected in a systematic manner for a pre-determined purpose
Lastly, Statistics should be placed in relation to each other. If one
collects data unrelated to each other, then such data will be
confusing and will not lead to any logical conclusions. Data should
be comparable over time and over space.

Types of data and data sources

Statistical data are the basic raw material of statistics. Data may relate to an
activity of our interest, a phenomenon, or a problem situation under study.
They derive as a result of the process of measuring, counting and/or
observing. Statistical data, therefore, refer to those aspects of a problem
situation that can be measured, quantified, counted, or classified. Any object
subject phenomenon, or activity that generates data through this process is
termed as a variable. In other words, a variable is one that shows a degree of
variability when successive measurements are recorded. In statistics, data
are classified into two broad categories: quantitative data and qualitative
data. This classification is based on the kind of characteristics that are
measured.
Quantitative data are those that can be quantified in definite units of
measurement.
These
refer
to
characteristics
whose
successive
measurements yield quantifiable observations. Depending on the nature of
the variable observed for measurement, quantitative data can be further
categorized as continuous and discrete data.
Obviously, a variable may be a continuous variable or a discrete variable.
(i)

(ii)

Continuous data represent the numerical values of a continuous

variable. A continuous variable is the one that can assume any
value between any two points on a line segment, thus representing
an interval of values. The values are quite precise and close to each
other, yet distinguishably different. All characteristics such as
weight, length, height, thickness, velocity, temperature, tensile
strength, etc., represent continuous variables. Thus, the data
recorded on these and similar other characteristics are called
continuous data. It may be noted that a continuous variable
assumes the finest unit of measurement. Finest in the sense that it
enables measurements to the maximum degree of precision.
Discrete data are the values assumed by a discrete variable. A
discrete variable is the one whose outcomes are measured in fixed
numbers. Such data are essentially count data. These are derived
from a process of counting, such as the number of items possessing
or not possessing a certain characteristic. The number of customers
visiting a departmental store every day, the incoming flights at an

airport, and the defective items in a consignment received for sale,

are all examples of discrete data.
Qualitative data refer to qualitative characteristics of a subject or an object.
A characteristic is qualitative in nature when its observations are defined and
noted in terms of the presence or absence of a certain attribute in discrete
numbers. These data are further classified as nominal and rank data.
(i)

(ii)

Nominal data are the outcome of classification into two or more

categories of items or units comprising a sample or a population
according to some quality characteristic. Classification of students
according to sex (as males and females), of workers according to
skill (as skilled, semi-skilled, and unskilled), and of employees
according
to
the
level
of
education
(as
matriculates,
undergraduates, and post-graduates), all result into nominal data.
Given any such basis of classification, it is always possible to assign
each item to a particular class and make a summation of items
belonging to each class. The count data so obtained are called
nominal data.
Rank data, on the other hand, are the result of assigning ranks to
specify order in terms of the integers 1,2,3, ..., n. Ranks may be
assigned according to the level of performance in a test. a contest,
a competition, an interview, or a show. The candidates appearing in
an interview, for example, may be assigned ranks in integers
ranging from 1 to n, depending on their performance in the
interview. Ranks so assigned can be viewed as the continuous
values of a variable involving performance as the quality
characteristic.

Data sources could be seen as of two types, secondary and primary. The two
can be defined as under:
(i)

(ii)

Secondary data: They already exist in some form: published or

unpublished - in an identifiable secondary source. They are,
generally, available from published source(s), though not
necessarily in the form actually required.
Primary data: Those data which do not already exist in any form,
and thus have to be collected for the first time from the primary
source(s). By their very nature, these data require fresh and firsttime collection covering the whole population or a sample drawn
from it.

Types of statistics
There are two major divisions of statistics such as descriptive statistics and
inferential statistics. The term descriptive statistics deals with collecting,
summarizing, and simplifying data, which are otherwise quite unwieldy and
voluminous. It seeks to achieve this in a manner that meaningful conclusions
can be readily drawn from the data. Descriptive statistics may thus be seen
as comprising methods of bringing out and highlighting the latent
characteristics present in a set of numerical data. It not only facilitates an
understanding of the data and systematic reporting thereof in a manner; and
also makes them amenable to further discussion, analysis, and
interpretations.
The first step in any scientific inquiry is to collect data relevant to the
problem in hand. When the inquiry relates to physical and/or biological
sciences, data collection is normally an integral part of the experiment itself.
In fact, the very manner in which an experiment is designed, determines the
kind of data it would require and/or generate. The problem of identifying the
nature and the kind of the relevant data is thus automatically resolved as
soon as the design of experiment is finalized. It is possible in the case of
physical sciences. In the case of social sciences, where the required data are
often collected through a questionnaire from a number of carefully selected
respondents, the problem is not that simply resolved. For one thing,
designing the questionnaire itself is a critical initial problem. For another, the
number of respondents to be accessed for data collection and the criteria for
selecting them has their own implications and importance for the quality of
results obtained. Further, the data have been collected, these are
assembled, organized, and presented in the form of appropriate tables to
make them readable. Wherever needed, figures, diagrams, charts, and

graphs are also used for better presentation of the data. A useful tabular and
graphic presentation of data will require that the raw data be properly
classified in accordance with the objectives of investigation and the
relational analysis to be carried out.
A well thought-out and sharp data classification facilitates easy description of
the hidden data characteristics by means of a variety of summary measures.
These include measures of central tendency, dispersion, skewness, and
kurtosis, which constitute the essential scope of descriptive statistics. These
form a large part of the subject matter of any basic textbook on the subject,
and thus they are being discussed in that order here as well.
Inferential statistics, also known as inductive statistics, goes beyond
describing a given problem situation by means of collecting, summarizing,
and meaningfully presenting the related data. Instead, it consists of methods
that are used for drawing inferences, or making broad generalizations, about
a totality of observations on the basis of knowledge about a part of that
totality. The totality of observations about which an inference may be drawn,
or a generalization made, is called a population or a universe. The part of
totality, which is observed for data collection and analysis to gain knowledge
about the population, is called a sample.
The desired information about a given population of our interest; may also be
collected even by observing all the units comprising the population. This
total coverage is called census. Getting the desired value for the population
through census is not always feasible and practical for various reasons. Apart
from time and money considerations making the census operations
prohibitive, observing each individual unit of the population with reference to
any data characteristic may at times involve even destructive testing. In
such cases, obviously, the only recourse available is to employ the partial or
incomplete information gathered through a sample for the purpose. This is
precisely what inferential statistics does. Thus, obtaining a particular value
from the sample information and using it for drawing an inference about the
entire population underlies the subject matter of inferential statistics.
Consider a situation in which one is required to know the average body
weight of all the college students in a given cosmopolitan city during a
certain year. A quick and easy way to do this is to record the weight of only
500 students, from out of a total strength of, say, 10000, or an unknown total
strength, take the average, and use this average based on incomplete
weight data to represent the average body weight of all the college students.
In a different situation, one may have to repeat this exercise for some future
year and use the quick estimate of average body weight for a comparison.
This may be needed, for example, to decide whether the weight of the

college students has undergone a significant change over the years

compared.
Inferential statistics helps to evaluate the risks involved in reaching
inferences or generalizations about an unknown population on the basis of
sample information. for example, an inspection of a sample of five battery
cells drawn from a given lot may reveal that all the five cells are in perfectly
good condition. This information may be used to conclude that the entire lot
is good enough to buy or not.
Since this inference is based on the examination of a sample of limited
number of cells, it is equally likely that all the cells in the lot are not in order.
It is also possible that all the items that may be included in the sample are
unsatisfactory. This may be used to conclude that the entire lot is of
unsatisfactory quality, whereas the fact may indeed be otherwise. It may,
thus, be noticed that there is always a risk of an inference about a population
being incorrect when based on the knowledge of a limited sample. The
rescue in such situations lies in evaluating such risks. For this, statistics
provides the necessary methods. These centers on quantifying in
probabilistic term the chances of decisions taken on the basis of sample
information being incorrect. This requires an understanding of the what, why,
and how of probability and probability distributions to equip ourselves with
methods of drawing statistical inferences and estimating the degree of
reliability of these inferences.

Scope of statistics
Apart from the methods comprising the scope of descriptive and inferential
branches of statistics, statistics also consists of methods of dealing with a
few other issues of specific nature. Since these methods are essentially
descriptive in nature, they have been discussed here as part of the
descriptive statistics. These are mainly concerned with the following:
(i)

It often becomes necessary to examine how two paired data sets

are related.
For example, we may have data on the sales of a product and the
expenditure incurred on its advertisement for a specified number of
years. Given that sales and advertisement expenditure are related
to each other, it is useful to examine the nature of relationship
between the two and quantify the degree of that relationship. As
this requires use of appropriate statistical methods, these falls

(ii)

(iii)

(iv)

under the purview of what we call regression and correlation

analysis.
Situations occur quite often when we require averaging (or totaling)
of data on prices and/or quantities expressed in different units of
measurement. For example, price of cloth may be quoted per meter
of length and that of wheat per kilogram of weight. Since ordinary
methods of totaling and averaging do not apply to such
price/quantity data, special techniques needed for the purpose are
developed under index numbers.
Many a time, it becomes necessary to examine the past
performance of an activity with a view to determining its future
behavior. For example, when engaged in the production of a
commodity, monthly product sales are an important measure of
evaluating performance. This requires compilation and analysis of
relevant sales data over time. The more complex the activity, the
more varied the data requirements. For profit maximizing and future
sales planning, forecast of likely sales growth rate is crucial. This
needs careful collection and analysis of past sales data. All such
concerns are taken care of under time series analysis.
Obtaining the most likely future estimates on any aspect(s) relating
to a business or economic activity has indeed been engaging the
minds of all concerned. This is particularly important when it relates
to product sales and demand, which serve the necessary basis of
production scheduling and planning. The regression, correlation, and
time series analyses together help develop the basic methodology
to do the needful. Thus, the study of methods and techniques of
obtaining the likely estimates on business/economic variables
comprises the scope of what we do under business forecasting.

Keeping in view the importance of inferential statistics, the scope of statistics

may finally be restated as consisting of statistical methods which facilitate
decision-- making under conditions of uncertainty. While the term statistical
methods are often used to cover the subject of statistics as a whole, in
particular it refers to methods by which statistical data are analyzed,
interpreted, and the inferences drawn for decision- making.
Though generic in nature and versatile in their applications, statistical
methods have come to be widely used, especially in all matters concerning
business and economics. These are also being increasingly used in biology,
medicine, agriculture, psychology, and education. The scope of application of
these methods has started opening and expanding in a number of social
science disciplines as well. Even a political scientist finds them of increasing
relevance for examining the political behavior and it is, of course, no surprise

to find even historians statistical data, for history is essentially past data
presented in certain actual format.

Importance of statistics in business

There are three major functions in any business enterprise in which the
statistical methods are useful. These are as follows:
(i)

The planning of operations: This may relate to either special

projects or to the recurring activities of a firm over a specified
period.

(ii)

(iii)

The setting up of standards: This may relate to the size of

employment, volume of sales, fixation of quality norms for the
manufactured product, norms for the daily output, and so forth.
The function of control: This involves comparison of actual
production achieved against the norm or target set earlier. In case
the production has fallen short of the target, it gives remedial
measures so that such a deficiency does not occur again.

A worth noting point is that although these three functions-planning of

operations, setting standards, and control-are separate, but in practice they
are very much interrelated.
Different authors have highlighted the importance of Statistics in business.
For instance, Croxton and Cowden give numerous uses of Statistics in
business such as project planning, budgetary planning and control, inventory
planning and control, quality control, marketing, production and personnel
administration. Within these also they have specified certain areas where
Statistics is very relevant. Another author, Irwing W. Burr, dealing with the
place of statistics in an industrial organization, specifies a number of areas
where statistics is extremely useful. These are: customer wants and market
research, development design and specification, purchasing, production,
inspection, packaging and shipping, sales and complaints, inventory and
maintenance, costs, management control, industrial engineering and
research. Statistical problems arising in the course of business operations are
multitudinous. As such, one may do no more than highlight some of the more
important ones to emphasis the relevance of statistics to the business world.
In the sphere of production, for example, statistics can be useful in various
ways.
Statistical quality control methods are used to ensure the production of
quality goods. Identifying and rejecting defective or substandard goods
achieve this. The sale targets can be fixed on the basis of sale forecasts,
which are done by using varying methods of forecasting. Analysis of sales
affected against the targets set earlier would indicate the deficiency in
achievement, which may be on account of several causes: (i) targets were
too high and unrealistic (ii) salesmen's performance has been poor (iii)
emergence of increase in competition (iv) poor quality of company's product,
and so on. These factors can be further investigated.
Another sphere in business where statistical methods can be used is
personnel management. Here, one is concerned with the fixation of wage
rates, incentive norms and performance appraisal of individual employee.
The concept of productivity is very relevant here. On the basis of
measurement of productivity, the productivity bonus is awarded to the

workers. Comparisons of wages and productivity are undertaken in order to

ensure increases in industrial productivity.
Statistical methods could also be used to ascertain the efficacy of a certain
product, say, medicine.
For example, a pharmaceutical company has
developed a new medicine in the treatment of bronchial asthma. Before
launching it on commercial basis, it wants to ascertain the effectiveness of
this medicine. It undertakes an experimentation involving the formation of
two comparable groups of asthma patients. One group is given this new
medicine for a specified period and the other one is treated with the usual
medicines. Records are maintained for the two groups for the specified
period. This record is then analyzed to ascertain if there is any significant
difference in the recovery of the two groups. If the difference is really
significant statistically, the new medicine is commercially launched.

Limitations of statistics
Statistics has a number of limitations, pertinent among them are as follows:
(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

There are certain phenomena or concepts where statistics cannot

be used. This is because these phenomena or concepts are not
amenable to measurement. For example, beauty, intelligence,
courage cannot be quantified. Statistics has no place in all such
cases where quantification is not possible.
Statistics reveal the average behavior, the normal or the general
trend. An application of the 'average' concept if applied to an
individual or a particular situation may lead to a wrong conclusion
and sometimes may be disastrous. For example, one may be
misguided when told that the average depth of a river from one
bank to the other is four feet, when there may be some points in
between where its depth is far more than four feet. On this
understanding, one may enter those points having greater depth,
which may be hazardous.
Since statistics are collected for a particular purpose, such data may
not be relevant or useful in other situations or cases. For example,
secondary data (i.e., data originally collected by someone else) may
not be useful for the other person.
Statistics are not 100 per cent precise as is Mathematics or
Accountancy. Those who use statistics should be aware of this
limitation.
In statistical surveys, sampling is generally used as it is not
physically possible to cover all the units or elements comprising the
universe. The results may not be appropriate as far as the universe
is concerned. Moreover, different surveys based on the same size of
sample but different sample units may yield different results.
At times, association or relationship between two or more variables
is studied in statistics, but such a relationship does not indicate
cause and effect' relationship. It simply shows the similarity or
dissimilarity in the movement of the two variables. In such cases, it
is the user who has to interpret the results carefully, pointing out
the type of relationship obtained.
A major limitation of statistics is that it does not reveal all pertaining
to a certain phenomenon. There is some background information
that statistics does not cover. Similarly, there are some other
aspects related to the problem on hand, which are also not covered.
The user of Statistics has to be well informed and should interpret

Statistics keeping in mind all other aspects having relevance on the

given problem.
Apart from the limitations of statistics mentioned above, there are misuses of
it. Many people, knowingly or unknowingly, use statistical data in wrong
manner. Let us see what the main misuses of statistics are so that the same
could be avoided when one has to use statistical data. The misuse of
Statistics may take several forms some of which are explained below.
(i)

(ii)

(iii)

(iv)

(v)

Sources of data not given: At times, the source of data is not given.
In the absence of the source, the reader does not know how far the
data are reliable. Further, if he wants to refer to the original source,
he is unable to do so.
Defective data: Another misuse is that sometimes one gives
defective data. This may be done knowingly in order to defend one's
position or to prove a particular point. This apart, the definition
used to denote a certain phenomenon may be defective. For
example, in case of data relating to unemployed persons, the
definition may include even those who are employed, though
partially. The question here is how far it is justified to include
partially employed persons amongst unemployed ones.
Unrepresentative sample: In statistics, several times one has to
conduct a survey, which necessitates to choose a sample from the
given population or universe. The sample may turn out to be
unrepresentative of the universe. One may choose a sample just on
the basis of convenience. He may collect the desired information
from either his friends or nearby respondents in his neighborhood
even though such respondents do not constitute a representative
sample.
Inadequate sample: Earlier, we have seen that a sample that is
unrepresentative of the universe is a major misuse of statistics. This
apart, at times one may conduct a survey based on an extremely
inadequate sample. For example, in a city we may find that there
are 1, 00,000 households. When we have to conduct a household
survey, we may take a sample of merely 100 households comprising
only 0.1 per cent of the universe. A survey based on such a small
sample may not yield right information.
Unfair Comparisons: An important misuse of statistics is making
unfair comparisons from the data collected. For instance, one may
construct an index of production choosing the base year where the
production was much less. Then he may compare the subsequent
year's production from this low base.
Such a comparison will undoubtedly give a rosy picture of the
production though in reality it is not so. Another source of unfair

(vi)

(vii)

comparisons could be when one makes absolute comparisons

instead of relative ones. An absolute comparison of two figures, say,
of production or export, may show a good increase, but in relative
terms it may turn out to be very negligible. Another example of
unfair comparison is when the population in two cities is different,
but a comparison of overall death rates and deaths by a particular
disease is attempted. Such a comparison is wrong. Likewise, when
data are not properly classified or when changes in the composition
of population in the two years are not taken into consideration,
comparisons of such data would be unfair as they would lead to
misleading conclusions.
Unwanted conclusions: Another misuse of statistics may be on
account of unwarranted conclusions. This may be as a result of
making false assumptions. For example, while making projections of
population in the next five years, one may assume a lower rate of
growth though the past two years indicate otherwise. Sometimes
one may not be sure about the changes in business environment in
the near future. In such a case, one may use an assumption that
may turn out to be wrong. Another source of unwarranted
conclusion may be the use of wrong average. Suppose in a series
there are extreme values, one is too high while the other is too low,
such as 800 and 50. The use of an arithmetic average in such a
case may give a wrong idea. Instead, harmonic mean would be
proper in such a case.
Confusion of correlation and causation: In statistics, several times
one has to examine the relationship between two variables. A close
relationship between the two variables may not establish a causeand-effect-relationship in the sense that one variable is the cause
and the other is the effect. It should be taken as something that
measures degree of association rather than try to find out causal
relationship.

Conclusion
Statistics plays a vital role in every fields of human activity. Statistics has
important role in determining the existing position of per capita income,
unemployment, population growth rate, housing, schooling medical facilities
etc. in a country. Now statistics holds a central position in almost every field
like Industry, Commerce, Trade, Physics, Chemistry, Economics,
Mathematics, Biology, Botany, Psychology, Astronomy etc., so application of
statistics is very wide.
Whether designing new products, streamlining a production process or
evaluating current vs. prospective customers, todays business managers
face greater complexities than ever before. Running a shop on instinct no
longer suffices. Statistics provide managers with more confidence in dealing
with uncertainty in spite of the flood of available data, enabling managers to
more quickly make smarter decisions and provide more stable leadership to
staff relying on them.