anal.docx - CHAP 1 Three developments spurred recent...

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CHAP 1 Three developments spurred recent explosive growth in the use of analytical methods in business applications: First development: Technological advances—scanner technology, data collection through e-commerce, Internet social networks, and data generated from personal electronic devices—produce incredible amounts of data for businesses Businesses want to use these data to improve the efficiency and profitability of their operations, better understand their customers, price their products more effectively, and gain a competitive advantage Second development: Ongoing research has resulted in numerous methodological developments, including: Advances in computational approaches to effectively handle and explore massive amounts of data Faster algorithms for optimization and simulation More effective approaches for visualizing data Third development: The methodological developments were paired with an explosion in computing power and storage capability Better computing hardware, parallel computing, and cloud computing have enabled businesses to solve big problems faster and more accurately than ever before Decision Making Managers’ responsibility: To make strategic, tactical, or operational decisions Strategic decisions: Involve higher-level issues concerned with the overall direction of the organization Define the organization’s overall goals and aspirations for the future Tactical decisions: Concern how the organization should achieve the goals and objectives set by its strategy Are usually the responsibility of midlevel management Operational decisions: Affect how the firm is run from day to day Are the domain of operations managers, who are the closest to the customer Decision making can be defined as the following process: 1. Identify and define the problem 2. Determine the criteria that will be used to evaluate alternative solutions 3. Determine the set of alternative solutions 4. Evaluate the alternatives 5. Choose an alternative Common approaches to making decisions Tradition Intuition Rules of thumb Using the relevant data available Business analytics: Scientific process of transforming data into insight for making better decisions Used for data-driven or fact-based decision making, which is often seen as more objective than other alternatives for decision making Tools of business analytics can aid decision making by: Creating insights from data Improving our ability to more accurately forecast for planning
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Helping us quantify risk Yielding better alternatives through analysis and optimization A Categorization of Analytical Methods and Models Descriptive analytics : Encompasses the set of techniques that describes what has happened in the past; examples: Data queries Reports Descriptive statistics Data visualization (including data dashboards) Data-mining techniques Basic what-if spreadsheet models Data query
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