Business Decision Making

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Decision making is very important in business organization since this identifies the most strategic direction that it can take considering its internal and external environments. Hypothesis testing is a statistical tool which aids managers and other decision makers in coming up and choosing among the various alternatives…

Introduction


Statistically speaking, there are two types of hypothesis namely, the null and the alternative hypotheses. During a statistical test, the null hypothesis is tested against the alternative hypothesis. It should be noted that "null" means nothing and that null hypothesis means that nothing is present (Hyperstat Online 2008). Statistical tests are conducted in order to test the viability of the null hypothesis. On the other hand, the alternative hypothesis is an alternative hypothesis which can be assumed if the null hypothesis is rejected.
In the case of snack foods, hypothesis testing can be used in order to make business decisions. For example, the company is deciding whether to launch a healthier brand of corn chips to target weight watchers. After an intensive and extensive data gathering, the company wants to test if the introduction will have an impact in their current market share of 35%. Thus, they will need to conduct either one or two tailed test. A one-tailed test looks for an increase or decrease in the parameter under consideration while a two-tailed test looks for any change in the parameter. We will illustrate this further by applying the five steps in hypothesis testing.
The first step in hypothesis testing is stating the null hypothesis. For both one and two tailed test, the null hypothesis that the market share will remain 35% can be stated as Ho: x = 36%. ...
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