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The document outlines the three major components of Business Analytics: Descriptive, Predictive, and Prescriptive Analytics. Descriptive Analytics focuses on understanding past performance through data summarization, Predictive Analytics aims to forecast future outcomes based on historical data, and Prescriptive Analytics provides optimization solutions for decision-making. Each type addresses specific business questions and utilizes different techniques to analyze data effectively.

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9 views3 pages

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The document outlines the three major components of Business Analytics: Descriptive, Predictive, and Prescriptive Analytics. Descriptive Analytics focuses on understanding past performance through data summarization, Predictive Analytics aims to forecast future outcomes based on historical data, and Prescriptive Analytics provides optimization solutions for decision-making. Each type addresses specific business questions and utilizes different techniques to analyze data effectively.

Uploaded by

Adepena Ibukunoluwa
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We take content rights seriously. If you suspect this is your content, claim it here.
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DIPLOMA IN APPLICATION OF BUSINESS ANALYTICS

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Dimensions of Business Analytics

DIMENSIONS OF BUSINESS ANALYTICS

Business Analytics begins with the collection, organization, and manipulation of data and is supported by
three major components:

Descriptive Analytics : Most businesses start with Descriptive Analytics—the use of data to understand
past and current business performance and make informed decisions. Descriptive analytics is the most
commonly used and most well-understood type of analytics. These techniques categorize, characterize,
consolidate, and classify data to convert it into useful information for the purposes of understanding
and analyzing business performance. Descriptive analytics summarizes data into meaningful charts and
reports, for example, about budgets, sales, revenues, or cost.

This process allows managers to obtain standard and customized reports and then drill down into the
data and make queries to understand the impact of an advertising campaign, for example, review
business performance to find problems or areas of opportunity, and identify patterns and trends in data.
Typical questions that Descriptive Analytics help answer are
“How much did we sell in each region?” “What were our revenue and profit last quarter?”

“How many and what types of complaints did we resolve?”

“Which factory has the lowest productivity?”

Descriptive Analytics also helps companies to classify customers into different segments, which enables
them to develop specific marketing campaigns and advertising strategies.

Predictive Analytics : Predictive Analytics seeks to predict the future by examining historical data,
detecting patterns or relationships in these data, and then extrapolating these relationships forward in
time. For example, a marketer might wish to predict the response of different customer segments to an
advertising campaign, a commodities trader might wish to predict short-term movements in
commodities prices, or a skiwear manufacturer might want to predict next season’s demand for skiwear
of a specific color and size. Predictive Analytics can predict risk and find relationships in data not readily
apparent with traditional analyses.

Using advanced techniques, predictive analytics can help to detect hidden patterns in large quantities of
data to segment and group data into coherent sets to predict behavior and detect trends. For instance, a
bank manager might want to identify the most profitable customers or predict the chances that a loan
applicant will default, or alert a credit-card customer to a potentially fraudulent charge. Predictive
Analytics helps to answer questions such as

“What will happen if demand falls by 10% or if supplier prices go up 5%?”

“What do we expect to pay for fuel over the next several months?”

“What is the risk of losing money in a new business venture?”

Prescriptive Analytics : Many problems, such as aircraft or employee scheduling and supply chain design,
for example, simply involve too many choices or alternatives for a human decision-maker to effectively
consider. Prescriptive Analytics uses optimization to identify the best alternatives to minimize or
maximize some objective. Prescriptive analytics is used in many areas of business, including operations,
marketing, and finance. For example, we may determine the best pricing and advertising strategy to
maximize revenue, the optimal amount of cash to store in ATMs, or the best mix of investments in a
retirement portfolio to manage risk. The mathematical and statistical techniques of predictive analytics
can also be combined with optimization to make decisions that take into account the uncertainty in the
data. Prescriptive Analytics addresses questions such as
“How much should we produce to maximize profit?”

“What is the best way of shipping goods from our factories to minimize costs?”

“Should we change our plans if a natural disaster closes a supplier’s factory: if so, by how much?”

Descriptive vs Predictive vs Prescriptive Analytics

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