Chapter 1 Flashcards
What is Business 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, fact-based decisions.
What are some applications of Business Analytics?
- Pricing
- Customer segmentation
- Merchandising
- Location
- Supply Chain Design
- Staffing
- Health care
What are the benefits of Business Analytics?
- Reduced costs
- Better risk management
- Faster decisions
- Better productivity
- Enhanced bottom-line performance
What challenges are associated with Business Analytics?
- Lack of understanding of how to use analytics
- Insufficient analytical skills
- Difficulty in getting good data
- Sharing information
- Not understanding the benefits versus perceived costs
What is the role of Business Intelligence (BI) in Business Analytics?
The facility of the collection, management, analysis, and reporting of data.
What is the definition of Descriptive analytics?
The use of data to understand past and current business performance and make informed decisions.
What does Predictive analytics do?
Predicts the future by examining historical data, detecting patterns or relationships, and extrapolating these relationships forward in time.
What is Prescriptive analytics?
Identifies the best alternatives to minimize or maximize some objective.
Fill in the blank: Big data refers to massive amounts of business data characterized by ______, ______, and ______.
[volume], [variety], [velocity]
What are the two main attributes of data quality?
- Reliability
- Validity
What is a model in Business Analytics?
An abstraction or representation of a real system, idea, or object that captures the most important features.
What are the three forms of a model?
- Verbal description
- Visual model
- Mathematical model
True or False: The effective use of big data has the potential to transform economies.
True
What is the primary purpose of Decision Support Systems (DSS)?
Combining business intelligence concepts with OR/MS models to create analytical-based computer systems to support decision making.
What is the significance of data reliability?
Data should be accurate and consistent.
What does data validity ensure?
Data correctly measures what it is supposed to measure.
What is the main focus of data mining?
Better understanding characteristics and patterns among variables in large databases using various statistical and analytical tools.
What are some examples of data sources used in Business Analytics?
- Annual reports
- Financial profitability analysis
- Economic trends
- Marketing research
- Operations management performance
- Human resource measurements
- Web behavior
Fill in the blank: Business analytics is a process of transforming data into ______ through analysis and insights.
[actions]
What are the impacts of analytics on business performance?
Enhanced profitability and customer satisfaction.
What does the term ‘visualization’ refer to in Business Analytics?
Data and results of analyses that provide a way of easily communicating data at all levels of a business.
What is a 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.
What are the inputs in a Decision Model?
- Data – assumed to be constant
- Uncontrollable inputs – quantities that can change but cannot be controlled
- Decision options – controllable and selected at the discretion of the decision maker.
What do Descriptive Models do?
Explain behavior and allow users to evaluate potential decisions by asking ‘what-if?’ questions.
What is the focus of Predictive Models?
Focus on what will happen in the future, often developed by analyzing historical data.
What are Prescriptive Models designed to do?
Help decision makers identify the best solution to a decision problem.
What is Optimization in the context of Prescriptive Models?
Finding values of decision variables that minimize (or maximize) something such as cost (or profit).
What is an Objective Function?
The equation that minimizes (or maximizes) the quantity of interest.
What is an Optimal Solution?
Values of the decision variables at the minimum (or maximum) point.
What is a Linear Demand Prediction Model?
A model where demand decreases as price increases, represented by D = a - bP.
In a Nonlinear Demand Prediction Model, what does the equation D = cP^-d represent?
It assumes price elasticity is constant, where c is demand when price is 0 and d > 0 is price elasticity.
What is the difference between Uncertainty and Risk?
- Uncertainty – imperfect knowledge of what will happen in the future.
- Risk – associated with the consequences of what actually happens.
What are the steps in Problem Solving with Analytics?
- Recognizing a problem
- Defining the problem
- Structuring the problem
- Analyzing the problem
- Interpreting results and making a decision
- Implementing the solution.
What constitutes recognizing a problem?
Problems exist when there is a gap between what is happening and what we think should be happening.
What factors increase complexity in defining a problem?
- Large number of courses of action
- Problem belongs to a group, not an individual
- Competing objectives
- External groups affected
- Problem owner and solver are not the same person
- Time limitations.
What does structuring the problem involve?
- Stating goals and objectives
- Characterizing the possible decisions
- Identifying any constraints or restrictions.
What role does analytics play in analyzing a problem?
Analytics involves experimentation or solution processes such as evaluating different scenarios and analyzing risks.
What is crucial when interpreting results and making a decision?
Managers must understand the limitations of models and their underlying assumptions.
What is necessary for implementing the solution?
Translating model results back to the real world, requiring adequate resources, motivation, and organizational support.
What is the formula for total gallons consumed per month if G is gallons, m is miles driven, d is days driven, and f is fuel economy?
Gallons consumed per month = (m x d + a) / f.
What is the breakeven point in an Outsourcing Decision Model?
Breakeven Point: TC(manufacturing) = TC(outsourcing), calculated as Q = 1,000.
What is the equation for Total Sales in a Sales-Promotion Decision Model?
Total Sales = 1105.55 + 56.18 x Price + 123.88 x Coupon + 5.25 x Advertising.
What are the assumptions made in developing a model?
Assumptions simplify a model to make it tractable and better characterize historical data.
What is the key assumption regarding demand and price in economic theory?
Demand for a product is negatively related to its price; as price increases, demand falls.
True or False: Predictive Models are used to forecast future outcomes based on historical data.
True
Fill in the blank: A _______ Model helps identify the best solution to a decision problem.
[Prescriptive]
What type of analytics is used to predict the failure rate of equipment in the next half year?
Predictive
This helps to reduce maintenance costs and improve power availability.
What is the purpose of prescriptive analytics in a travel agency?
To set the price of travel packages to attract more customers
It may also analyze past data regarding trends of hot travel destinations.
What is the formula for yearly government tax revenue in millions?
tax = -2.556 + 3.799 * income + 1.583 * profit + 0.739 * capital
This formula incorporates customer income, business profits, and capital gains.
What is the impact on government tax revenue if customer income is $1 million?
Increases by approximately $3.799 million
This represents the average yearly government tax revenue increase.
What is the impact on government tax revenue if business profits increase by $1 million?
Increases by approximately $1.583 million
This indicates the sensitivity of tax revenue to business profit changes.
What is the impact on government tax revenue if capital gains increase by $1 million?
Increases by approximately $0.739 million
This shows how capital gains affect tax revenue.
Calculate the government tax revenue given customer income of $1.2 million, business profits of $8.63 million, and capital gains of $5.76 million.
$19.92 million
This is the result of applying the provided formula with the given values.
True or False: Without customer income, business profits, and capital gains, the yearly government tax revenue is at a loss of $2.556 million.
True
This denotes the baseline revenue without any contributing factors.
