Probability is the state or quality of being probable, it is the extent of likelihood to which an event will occur or otherwise. Probability is subject to changes and expectations. It is a study or branch of Mathematics that studies the chances that a given possible outcome will occur and it is calculated as the ratio of the number of outcomes that produces a given event to the total number of possible outcomes. The lower the probability calculated the less likely the event to occur and the higher the probability, the higher the likelihood of occurrence analyzed with a contingency table. It is represented in numbers or fractions 0 and 1.
Probability plays a very vital role in fields of every human activity as a quantitative tool used in various endeavors and knowledge is key for the development and testing validity of real data.
This study has had wide use and applications in various aspects of life which include:
- Managerial decision
FINANCE: In finance, it is used in decision-making to measure the expected result of an independent event and in a very important concept of financial and investment modeling and valuations in the area of forecasting possible outcomes in financial indices with change attributes. It helps to shape effective monetary and fiscal policies and to develop pricing models for financial assets like equity, bonds, currencies, and derivative securities that are dynamic or volatile and characterized by a high degree of uncertainty. It is a tool for market and portfolio risk, returns, and variances.
MARKETING: In marketing, customer choice or decision to buy a particular product changes, and hence the need for probability knowledge is very essential to predict a possible event in terms of the customer’s decision. The dynamism of a customer’s decision necessitates that marketing strategies must be dynamic and adaptable to reach the right audience at the right time too. It is used as a modeling tool as well in the market to understand and profile customers’ individual and collective decisions concerning products available and potential products. It is used to forecast a company’s future sales and make a decision like the number of staff needed, inventory purchase, and possibly expansion decisions; and mostly for customer relationship management.
OPERATIONS: In operations, probability ensures that business operations are ran smoothly with the skill to forecast the likely outcome of an event in the business process and procedures, it is used for inventory management for requisition in terms of reordering time while ensuring zero waste and cost reduction associated with orders. Probability is also very vital. in operation, in the areas of risk assessment and management concerning business operations. Ascertaining the likelihood of risk occurrence will enable Management to put appropriate control in place to mitigate such risk.
LOGISTICS: In logistics, the probability is used to manage properly the supply chain or logistics of a business and as well as the value chain to ensure minimum cost and maximize profit. Process management is very essential when it comes to logistics which deals with the active management of the business processes to ensure zero waste, quality management, customer satisfaction/retention, and profit maximization. Customer relationship management is essential in business logistic management and thus guarantee returning customer and referrals from such customer or clients.
MANAGERIAL DECISION: In the managerial decision, decision-making is a very vital function that cuts across all works and business of life. The success of any business lies in its management’s ability to make crucial decisions at every level of the business, be it at the strategic, business, and operational levels. These decisions make or mar the business and thus the importance of the use of probability to enable management at all levels to make decisions that will impact the business positively cannot be overemphasized. Prediction and forecast are the guiding rules in decision making and to make reasonable predictions will depend largely on the wide use of the knowledge of probability. Simulating situations guides management in the decision process getting get it right depends largely on the use of probability prowess.
Generally, At the heart of humanity’s works of life is the challenge of quality decision-making amidst various uncertainties within and outside the decision-making environment. Probability analysis can be used to validate these decisions with the aid of trend and other statistical (qualitative and quantitative) analysis and also, to predict future occurrences where necessary with a reasonable level of accuracy.