Exercises

1 Explain the value of business statistics in management.

2 What is the difference between descriptive statistics and inferential statistics?
3 Explain the role of statistical modelling in business practice.
4 Name three factors that influence data quality.
5 Why is it important to know whether the data type is categorical or numerical
in terms of the choice of statistical analysis?
6 When preparing data for statistical analysis, what three properties must be
considered in order to produce useful and usable information for managers from the
statistical findings?
7 A survey of a random sample of 68 human resource (HR) managers asked them to
identify the performance appraisal system their company used. The options were:
1 = a trait method
2 = a behavioural method
3 = a results method.
The survey found that only 15% used the trait method, 39% used the behavioural
method and 46% used the results method. The study aims to describe the profile
of performance appraisal systems used by all JSE companies.
(a) Define the random variable of interest.
(b) What is the population of interest?
(c) What is the sample?
(d) What is the sampling unit in this scenario?
(e) Is the ‘46% who use the results method’ a parameter or a statistic?
(f) Why is it important that the sample of 68 HR managers be randomly selected?
8 Fair Lady magazine believes that it has a 38% share of the national female
readership market of women’s magazines. When 2 000 readers of women’s
magazines were randomly selected and interviewed, 700 stated that they read
Fair Lady regularly. Does the sample evidence support their claim?
(a) What is the random variable of interest?
(b) What is the population of interest?
(c) What is the sample?
(d) What is the sampling unit in this scenario?
(e) What percentage of readers interviewed read Fair Lady regularly? Is this
a statistic or a parameter? Explain.
(f) Does the problem scenario require inferential statistics or only descriptive
statistics to answer the question? Explain.
9 The marketing director of a company selling security alarms wants to determine the
effectiveness of their recent advertising strategy. Over the past six months they
had varied both the number of ads placed per week and the advertising media
(press, pamphlets, magazines) used each week. Weekly sales volume data was
recorded, as well as the number of ads placed per week and the advertising media
used each week. (a) How many random variables are there in this study? Name
them. (b) Which random variable is being predicted?
Applied Business Statistics

(c) Which random variables are assumed to be related to the variable

being predicted?
(d) Which area of statistical analysis is suggested by this management
10 scenario? For each of the following scenarios, identify, with reasons, whether it is
adequate to use only descriptive statistical methods to address the problem
situation or whether inferential statistical methods are also needed.

Scenario 1
South Coast Estate Agency wants to determine the average selling price per
square metre and size of accommodation of all residential properties in Margate,
KwaZulum Natal. The data from the 25 residential properties sold by their agents,
out of the 230 total sales in the area last year, was gathered from deeds of sale
documents.

Scenario 2
The owner of the Numbi Restaurant asked a sample of 18 patrons who ate at
the restaurant on a particular Saturday evening to complete a short
questionnaire to determine their perception of the quality of service and food
received that evening.
Scenario 3
The organisers of the Design for Living exhibition held annually at the Good Hope
Centre, Cape Town conducted a survey during the latest exhibition by
randomly selecting 544 visitors as they left the exhibition hall. The survey’s
objective was to give the organisers some insight into what the sample of visitors
found worthwhile about the exhibition and what innovations, if any, they would
like to see at future exhibitions.
Scenario 4
An environmental awareness NGO conducted a study in Nelspruit into
consumers’ attitudes towards ‘green’ (i.e. environmentally friendly) household
products. A randomly selected sample of 196 shoppers was interviewed on
their attitudes towards purchasing ‘green’ household products. The
objective was to estimate the likely percentage of Nelspruit households who
would buy ‘green’ household products.

Scenario 5
Metrorail, the train commuter service in Cape Town, has been working on improving
service to its commuters. A random sample of 875 commuters was
interviewed recently on trains over a period of a week and asked their opinion
on issues of personal safety on trains, comfort, cleanliness, convenience and
punctuality. The results of the sample are to be used to measure the
improvement in service.

Scenario 6
Metrorail also recently conducted a campaign to attract road (bus, taxi and
car) commuters to using their rail service. Metrorail’s management
commissioned a survey one month after the campaign ended to find out the
success of their campaign. The brief of the researchers was to estimate the
percentage of road commuters that converted to train commuting as a result
of the campaign.
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 Chapter 1 – Statistics in Management

Scenario 7
The Star newspaper in Gauteng conducted a survey amongst a random cross-
section of its subscriber readers to identify the popularity of the various sections of
the newspaper amongst all its readers.
11 For each of the following random variables, state the data type of each
random variable (categorical or numeric), the measurement scale (nominal,
ordinal, interval or ratio scaled) and whether it is discrete or continuous. Also give
two illustrative data values for each of these random variables:
(a) ages of athletes in a marathon
(b) floor area of Foschini stores
(c) highest qualification of employees in an organisation
(d) marital status of employees
(e) different types of aircraft used by SAA for domestic flights
types of child abuse (physical, sexual, emotional or verbal)
(f) performance appraisal rating scores assigned to employees
(g) ranked preferences of employees to three different pay schemes
(h)
(i) consumer responses to each of the following statements:
(i) Rank your preference of the fruit juices that you have just tasted.
Orange [1] Guava [2] Apple [3] Grape [4]
(ii) Do you enjoy your job?
[Yes] [No]
(iii) Which mode of transport do you mostly use to commute to work?
Car [1] Bus [2] Train [3] Taxi [4] Motorcycle [5] Bicycle [6]
(iv) ‘Returns on JSE equities are no better than those on unit trusts.’
Rate your response to this statement using the Likert rating scale:
Strongly disagree [1] Disagree [2] Unsure [3] Agree [4] Strongly agree
(j) masses[5](in kg) of bags of potatoes
(k) brand of coffee you prefer
(l) time taken (in minutes) to travel to work
(m) grades used to classify red meat (prime, super, first grade and standard)
(n) monthly premiums payable on life assurance policies
(o) number of patrons in a cinema
(p) number of outlets owned by a chain store
(q) flying time of an Airbus A-300 between Johannesburg and Dakar
(r) responses to the following question:
How would you rate the service level of your bank?
Use the following semantic differential rating scale:
Extremely poor [1] Very poor [2] Poor [3] Unsure [4] Good [5]
Very good [6] Excellent [7]
(s) number of copies of the Cape Times sold daily by a café in Paarl
(t) different sectors of investments in unit trusts.

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Applied Business Statistics

12 Refer to the financial analysis schedule below:

Financial analysis study

(1) Economic sector
Mining u Manufacturing u
Retail u Insurance u
Financial u Computers u
Other (specify) .................................
(2) Head office
region: Gauteng u Western Cape u
Free State u Border u
Durban/Pinetown u KwaZulu-Natal u
Other (specify) .................................
(3) Company size (in terms of number of employees)
(4) Turnover (rand per annum):
<1 million u 1–<5 million u
5–<10 million u 10 –<20 million u
20 –<50 million u More than 50 million u
(5) Share price (in cents) as at 31 December 2011
(6) Earnings per share (in cents) for 2011 tax year
(7) Dividends per share (in cents) for 2011 tax year
(8) Number of shareholders as at 31 December 2011
(9) Return on investment for 2011 tax year %
(10) Inflation index for your economic sector %
(11) Year company was established

The data captured in this schedule is extracted from financial reports of JSE-
listed companies and is used to compile a database on the financial status of JSE-
listed companies.
(a) How many random variables are being studied in the
(b) questionnaire? For each question, identify:
(i) the name of the random variable being measured
(ii) the data type (categorical or numeric)
(iii) the measurement scale (nominal, ordinal, interval or ratio)
(iv) whether the data is discrete or continuous.
(c) Give an illustrative data value for each random variable in the study.
13 Refer to the Voyager service quality questionnaire below. (Voyager is an
SAA customer loyalty programme.)
(a) How many random variables are being studied in the questionnaire?
(b) For each question, identify:
(i) the name of the random variable being measured
(ii) the data type (categorical or numeric)
(iii) the measurement scale (nominal, ordinal, interval or ratio)
(iv) whether the data is discrete or continuous.
(c) Give an illustrative data value for each random variable in the study.

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Voyager service quality questionnaire

Section A: Demographics
(1) Gender
Male u Female u
(2) Home language
English u Afrikaans u Xhosa u Other u
(3) Which of the following best describes your position in your
company? Junior manager u Middle manager u Senior
manager u Director u
(4) When did you join Voyager?
Pre-2002 u 2003 u 2004 u 2005 u 2006 u
(5) What is your Voyager membership status?
Blue u Silver u Gold u Platinum u

Section B: Voyager usage level

(6) Have you ever claimed Voyager

Awards? Yes u No u
(7) (a) Did you encounter any problems in claiming Voyager
Awards? Yes u No u
(b) If ‘yes’, what kinds of problems did you encounter?
...............................................................................................................
...............................................................................................................
...............................................................................................................
(8) How often have you used services by a Voyager Partner in the
following categories?
Never Rarely Sometimes Often Always
Airlines 1 2 3 4 5
Car rentals 1 2 3 4 5
Hotels and resorts 1 2 3 4 5
Financial services 1 2 3 4 5
Telecommunications 1 2 3 4 5

Section C: Voyager service quality perceptions

(9) The following statements relate to your feelings about Voyager
services. For each statement, indicate your level of support by circling the
appropriate number.

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I receive my statements regularly 1 2 3 4 5

The Voyager Guide is user friendly 1 2 3 4 5
Voyager Centres are conveniently situated 1 2 3 4 5
Voyager staff have good communication skills 1 2 3 4 5
My queries are always dealt with effectively 1 2 3 4 5
Voyager staff are knowledgeable about their
1 2 3 4 5
product

(10) Rank the following four Voyager facilities from most useful (assign rank = 1) to least
useful (assign rank = 4).

Rank
The Voyager guide
Voyager partnership plan
Voyager in-flight
services Voyager holiday
specials

Thank you for completing this questionnaire.

14 What essential differences in data types would be noticed between the data
gathered for the financial analysis study (question 12) and the Voyager service
quality study (question 13)?

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