Applications of Normal Distribution in Business Statistics
Normal Distribution is used in business statistics in the following ways:
1. Quality Control: Companies use the normal distribution to monitor and maintain the quality of their products. By analysing measurements and defects, they can assess if the production process is within acceptable limits.
2. Market Research: In market research, the normal distribution helps analyse customer preferences, buying patterns, and survey data. This aids in making informed marketing and product development decisions.
3. Financial Analysis: Financial analysts use the normal distribution to model and predict stock prices, asset returns, and investment risks. It’s the foundation for tools like the Black-Scholes model for options pricing.
4. Performance Evaluation: HR departments use the normal distribution to evaluate employee performance. It can help determine salary structures and performance bonuses, and identify underperforming or exceptional employees.
5. Supply Chain Management: Normal distribution assists in optimising inventory levels, demand forecasting, and managing production processes to ensure products are available when needed.
6. Risk Assessment: Businesses assess various risks, including credit risk, market risk, and operational risk, using the normal distribution to quantify and manage these risks effectively.
7. Credit Scoring: Financial institutions use the normal distribution to build credit scoring models, determining an individual’s creditworthiness and loan approval.
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