IB Docs (2) Team
Data analytics
Data analytics is the management process of examining and scrutinising raw data to find meaningful trends and patterns to support decision making and business planning. Data analysts are hired to extract, collate, organize, and analyze raw data, transforming these from incomprehensible data into intelligible (coherent and meaningful) information to support the suggestions or recommendations made by management.
For instance, data analytics can enable managers to determine any correlations or patterns in a data set, such information about employees or different consumer groups. Data are captured electronically, with computer management information systems used to analyze the data to support and improve decision making.
As an example, data analysis from InThinking Business Management at the time of writing shows the following:
- The average subscriber is logged onto the website for an average of 3 hours and 28 minutes.
- An average of 15,602 words have been added to the website each month since its inception.
- Subscribers teach in IB World Schools in 112 different countries.
- There are 1,708 registered teachers and 15,604 students who use InThinking Business Management.
- Over 93% of schools have renewed their annual subscription to InThinking.
- The top 10 countries based on the number of school subscriptions are: the USA (116), China (80), India (68), Spain (37), the UAE (33), Australia (31), the UK (26), Indonesia (22), Singapore (20), and Thailand (20).
Essentially, many of the statistical techniques used in data analytics are covered in descriptive statistics (part of the Business Management Toolkit).
Developments in information communication technology (ICT) have made it easier for businesses to collect, collate, analyse, and share data. However, in its raw form, the data do not really mean much, so businesses use aspects of management information systems (MIS), such as data analytics, to gain competitive advantages by turning raw data into meaningful information.
Data analysts use four main types of data analysis:
Descriptive data analysis - What happened (what does the data reveal)?
Diagnostic data analysis - Why did it happen?
Predictive data analysis - What is likely to happen in the future?
Prescriptive data analysis - What is the best plan of action?
For example, in the healthcare industry, data analytics can be used to track patient data, monitor vital signs, and alert medical staff of urgent matters. This can help healthcare providers to make more efficient and effective decisions regarding patient care.
Healthcare service providers rely on data analytics and MIS
Essentially, effective use of a MIS and data analytics allow businesses to know more about their customers and their operations, and therefore support and improve decision making. For example, Netflix uses sophisticated management information systems to enable the company to offer the right products to the right customers at the right price in an efficient way (through personalized viewing recommendations provided by Netflix, for example). Netflix collects all kinds of data from its 222 million global subscribers, such as the programmes that subscribers watch and when, how often they log in, what devices they use to watch Netflix, how they rate certain content, and their search data (so that recommendations can be made, for example). According to Netflix's website, more than 75% of viewer activity is based on its personalized recommendations made to subscribers.
Data analytics helps Netflix to make informed recommendations to its 222 million subscribers
Top tip!
Do not assume that having more data always means that management decision making is improved. Data overload (having too much data that managers do not know what to do with these) can cause inefficiencies and therefore delay management decision making. Instead, it is more important to consider the quality of the data.
So, for your internal assessment, although having 5 supporting documents is often better than three or four, make sure each and every supporting document is fit for purpose and helps you to address the research question.
Watch this 9-minutes video to review your understanding of data analytics and the role of data analysts in the business world. As you watch this video, make note of possible answers to the following questions:
What is data analytics?
What are data analytics used for?
What does a data analyst do?
What is the typical process of a data analyst?
What are the skills needed to become a data analyst?
ATL Activity (Research and Communication skills) - Data analytics in IB World Schools
Investigate how your school uses data to inform management decision making. To what extent does the leadershop team at the school use data to drive strategic decisions?
Some of the areas for investigation might include:
Why the use of data matter in your school?
How does the school make use of data on student demographics?
How does the school use student data to inform teaching and learning?
How does the management team use examination results data to improve teaching and learning?
How does your school use comparative data (from other schools in the local area)?
What does the value‐added data tell you about student progress at the school?
What are the overall strengths and areas of development?
What can be done to improve teaching and learning at the school?
Be prepared to share your findings.
Top tip!
Business of Apps is a great website with lots of statistical data for well-known companies such as Netflix, Twitter, and Instagram. There are lots of data analyses that you can use to apply real-world examples to management information systems.
In late 2021, Amazon opened its first UK non-food stores under the name of Amazon 4-star in the Bluewater shopping mall in Kent and Westfield in London. It is called Amazon 4-star because all items sold at the stores have been given an average rating of 4 stars or more by Amazon's customers.
Digital price tags are used, with details of the retail price as well as discounted prices for Amazon Prime members (as part of the company's customer loyalty scheme). The prices are the same in-store and online. Non-member customers can easily sign up for a free 30-day free trial of Amazon Prime and instantly receive the members-only discounted price for in-store purchases.
Amazon's use of customer feedback and data analytics helps to reassure shoppers that they are buying popular and highly rated products. Further evidence of Amazon's use of data analytics from its customers include:
Average star rating for each product.
Total number of customer reviews for the product.
A "Most Wished For" section, showing the most popular products from Amazon customers' wish lists.
As part of its marketing mix, Amazon 4-star allows customers to collect items ordered online as well as return items without the need for packaging and labels.
The Bluewater and Westfield stores were the first Amazon 4-star outlets to be opened outside of the US, where there are already more than 30 shops since the launch in 2018. The concept is the result of Amazon's scientific, data-led approach to retail.
| (a) | Define the term customer loyalty scheme. | [2 marks] |
| (b) | Define the term data analytics. | [2 marks] |
| (c) | Outline the importance of the marketing mix for Amazon 4-star. | [2 marks] |
| (d) | Explain two ways in which Amazon 4-Star can make use of data analytics to improve business decision making. | [4 marks] |
Teacher only boxAnswers
(a) Define the term customer loyalty scheme. [2 marks]
Customer loyalty programmes are marketing strategies designed to retain customers by using a rewards programme that give loyal customers direct benefits, such as discounted prices based on their purchase history. Such rewards programmes mean that customers are more committed to a certain business and make repeat purchases time and time again.
Award [1 mark] for a definition that shows some understanding of customer loyalty scheme.
Award [2 marks] for a clear and accurate definition that shows a good understanding of customer loyalty scheme, similar to the example above.
(b) Define the term data analytics. [2 marks]
Data analytics is the management process of examining and scrutinising raw data to find meaningful trends and patterns to support decision making and business planning. It involves extracting, collating, organizing, and analyzing raw data, transforming these into meaningful information to support management decision making and strategic planning.
Award [1 mark] for a definition that shows some understanding of data analytics.
Award [2 marks] for a clear and accurate definition that shows a good understanding of data analytics, similar to the example above.
(c) Outline the importance of the marketing mix for Amazon 4-star. [2 marks]
The marketing mix describes the key components of marketing a physical good or an intangible service. It enables Amazon to plan the marketing of its goods sold at the 4-star outlets. This helps to meet the needs and wants of customers, by focusing on and ensuring that the product, price, place and promotion are effective in encouraging customers to buy from its 4-star retail outlets.
Note: students can refer the extended marketing mix to include people, process, and physical environment. If such an approach is taken, marks should be awarded accordingly.
Award [1 mark] for an answer that shows limited understanding of the demands of the question.
Award [2 marks] for an answer that shows good understanding of the demands of the question, similar to the example above.
(d) Explain two ways in which Amazon 4-Star can make use of data analytics to improve business decision making. [4 marks]
Possible responses could include an explanation of any two of the following points:
Data analytics allows Amazon's managers to gain a better understanding of the dynamics of their business, such as . It also enables them to anticipate market shifts and manage risks.
Data analytics can help Amazon to make more informed decisions related to their customers (to assure them that "they are buying popular and highly rated products"), markets (being new to the UK), and competitors.
It supports decisions made about Amazon's internal operations, such as planning of delivery of the stocks of products sold at the 4-star outlets. Its MIS and use of AI technology, for example, can help managers with predictive analysis to know which products are the latest popular ones that must be delivered to the stores. Being data-driven means less waste and reduced operational costs for Amazon 4-star outlets.
Data analytics can help Amazon to make better decisions related to finance (money), such as its sales trends, cash-flow cycles, revenue forecasts, and budgeting. Being data-driven means Amazon can make more accurate and efficient decisions, such as inventory of the products sold in the 4-star outlets to further the company's growth.
Accept answers that explain any two of the four methods of data analysis (descriptive analytics, diagnostic analytics, predictive analytics, and prescriptive analytics).
Mark as a 2 + 2
For each point, award [1 mark] for a relevant way in which Amazon 4-Star can make use of data analytics, plus a further [1 mark] for a suitable explanation, up to the maximum of [4 marks].
Award up to [2 marks] if application of the stimulus material is lacking.
Return to the Unit 5.9 - Management information systems (HL only) homepage
Return to the Unit 5 - Operations management homepage
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