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Akhilesh Menon MMS Batch-2,Roll No.


Application of Statistical Techniques in Industry

1:Chi-Square Test: A chi-squared test, also referred to as chi-square test or test, is any statistical hypothesis test in which the sampling distribution of the test statistic is a chi-squared distribution when the null hypothesis is true, or any in which this is asymptotically true, meaning that the sampling distribution (if the null hypothesis is true) can be made to approximate a chi-squared distribution as closely as desired by making the sample size large enough. Its properties were first investigated by Karl Pearson in 1900. In contexts where it is important to make a distinction between the test statistic and its distribution, names similar to Pearson X-squared test or statistic are used. It tests a null hypothesis stating that the frequency distribution of certain events observed in a sample is consistent with a particular theoretical distribution. The events considered must be mutually exclusive and have total probability 1. A common case for this is where the events each cover an outcome of a categorical variable. A simple example is the hypothesis that an ordinary six-sided die is "fair", i.e., all six outcomes are equally likely to occur Pearson's chi-squared test is used to assess two types of comparison: tests of goodness of fit and tests of independence.

A test of goodness of fit establishes whether or not an observed frequency distribution differs from a theoretical distribution. A test of independence assesses whether paired observations on two variables, expressed in a contingency table, are independent of each other (e.g. polling responses from people of different nationalities to see if one's nationality affects the response).

Calculating the test-statistic: The value of the test-statistic is

where = Pearson's cumulative test statistic, which asymptotically approaches a distribution. = an observed frequency; = an expected (theoretical) frequency, asserted by the null hypothesis; n= the number of cells in the table.

Application of Chi-Square Test in Marketing:

A number of marketing problems involve decision situations in which it is important for a marketing manager to know whether the pattern of frequencies that are observed fit well with the expected ones. The

appropriate test is the c test of goodness of fit. The illustration given below will clarify the role of c in which only one categorical variable is involved. Example: In consumer marketing, a common problem that any marketing manager faces is the selection of appropriate colors for package design. Assume that a marketing manager wishes to compare five different colors of package design. He is interested in knowing which of the five is the most preferred one so that it can be introduced in the market. A random sample of 400 consumers reveals the following:
Preference by Package Color Consumers Red Blue Green Pink Orange Total 70 106 80 70 74 400

Do the consumer preferences for package colors show any significant difference? Solution: If you look at the data, you may be tempted to infer that Blue is the most preferred color. Statistically, you have to find out whether this preference could have arisen due to chance. The appropriate test statistic is the test of goodness of fit. Null Hypothesis: All colors are equally preferred. Alternative Hypothesis: They are not equally preferred

Please note that under the null hypothesis of equal preference for all colors being true, the expected frequencies for all the colors will be equal to 80. Applying the formula

we get the computed value of chi-square () = 11.400

The critical value of at 5% level of significance for 4 degrees of freedom is 9.488. So, the null hypothesis is rejected. The inference is that all colors are not equally preferred by the consumers. In particular, Blue is the most preferred one. The marketing manager can introduce blue color package in the market.

2 : Normal Distribution
In many natural processes, random variation conforms to a particular probability distribution known as the normal distribution, which is the most commonly observed probability distribution. The shape of the normal distribution resembles that of a bell, so it sometimes is referred to as the "bell curve". We can quickly estimate the spread of the data given the mean and standard deviation of a data set that follows the normal distribution. For a normal distribution:

68% of the data will fall within 1 standard deviation of the mean 95% of the data will fall within 2 standard deviations of the mean Almost all (99.7%) of the data will fall within 3 standard deviations of the mean

Characteristics The bells curve has the following characteristics:

Symmetric Unimodal Extends to +/- infinity Area under the curve = 1

Applications of Normal Distribution Operations Management In the field of operations management, results of many processes fall along the Normal Distribution Curve.

Human Resources The Normal Probability Distribution governs many aspects of human performance. Human resource professionals often use the Normal Distribution to describe employee performance. Investment Portfolio Modern portfolio theory commonly assumes that the returns of a diversified asset portfolio follow a normal distribution. Physics Certain quantities in physics are distributed normally. Examples of such quantities are:

Velocities of the molecules in the ideal gas. More generally, velocities of the particles in any system in thermodynamic equilibrium will have normal distribution, due to the maximum entropy principle. Probability density function of a ground state in a quantum harmonic oscillator.

Marketing Research Normal distribution is used in marketing research when conducting a sample survey. The results obtained are supposed to be normally distributed. This can be used to determine the success of new product launch.

The normal distribution helps financial analysts and investors make

better financial decisions based on the statistical information provided by the normal distribution.