You are a financial expert with interest in stock market behavior to advise your clients on when to buy or sell stocks, which company stock is pricing above normal and likely to be affected by recent developments in global events. For you to be effective and efficient, you need discreet distribution knowledge to assist in forecasting market behavior based on available past datasets.
From Binomial probability distribution where the is only probability of two outcomes just like that of tossing a coin, it can either be Head or Tail to Bernoulli distribution which produce Zero or One for each trial or sampling and Multinomial distributions where there is probability of more than two outcomes wit multiple counts for each trial. These are examples of probability theories deployed to estimate the probability of a set of financial events will occur[1].
As a participant in the Lagos Business School (LBS) Executive Master of Business Administration (EMBA) program, the Data Analysis course is designed to provide the much-needed skills to participants to have a firm ‘understanding of the state of the business, the behavior of customers, competitors, and the market; identify pain points, errors, or unproductive strategies, define target customers and buyer personas, test or discard theories, etc’[2].
Data Analysis facilitator, Prof Bongo Adi, introduced the role of probability plays in decision making process with support for Business Executive to determine the likelihood of occurrence of event and plan for such in advance for better business performance.
Business is about future more than past or present, and the ability of an Executive to correctly predict the future market direction will give an organization an edge over competitors. Probability knowledge provides that tool for the business executives. From awareness on different methods (classical, relative frequency and subjective) used for assigning probabilities events, use of addition, multiplication law, conditional probability, revising prior probability using Bayes’ theorem.
These probability principles and fundamentals have been useful in real world business environment by decision makers for processes like Project Modelling, Inventory Models, Decision Analysis, Simulation, Waiting Line models and many more.
As stated earlier, not only are probability study helps in decision-making process for an organization with use of concepts to describe the changes of a particular outcome happening, probability, marketers also make use of probability to understand consumers’ products or services preference thereby optimize their marketing strategies and policies, contributing to increased profitability and business success[3].
With appropriate and effective use of probability principles, businesses can increase profitability with identification of unknown variables, use of range of outcomes around what is most likely to occur and identification of trends or patterns in prior outcomes[4].
Yes, it is now the time to focus on learning the probability principles from best hands in the industry and especially relate those principles to daily business scenarios for business decisions that will secure the future of any organization.
[1] Discrete Probability Distribution: Overview and Examples (investopedia.com)
[2] The Role of Data Analytics in Business (bismart.com)
[3] Probability Theory & Decision-Making | Probability Use in Marketing – Video & Lesson Transcript | Study.com
[4] Role of Probability Concepts in Business Decision Making | Bizfluent
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