Question

MBA 5008 Quanatitative Analysis

Most business decisions involve elements of uncertainty and randomness. The notion of probability is used everywhere, both in business and in our daily lives. I reviewed the following video and need some help answering this question: https://www.youtube.com/watch?v=_sY3ZRxhBaM

A. Explain the concept of probability by applying a specific application example of probability in business? B. Discuss the economic implications of the video?

Answer 1

Probability is the science of uncertainty or chance, or likelihood.A probability value ranges between 0 and 1 inclusive and represents the likelihood that a particular event will happen. A probability value of 0 means there is no chance that an will happen and a value of 1 means there is 100 percent chance that the event will happen.

In business, probability theory is used in the calculation of long-term gains and losses. This is how a company whose business is based on risk calculates "probability of profitability" within acceptable margins.Every decision made in the business world has risk to it. So, in business, you would use probability to take a close look at the companys financial risks. Even the decisions that come down from management all have a probability of success and a probability to fail.

Scenario Analysis: Probability distributions can be used to create scenario analyses. For example, a business might create three scenarios: worst-case, likely and best-case. The worst-case scenario would contain some value from the lower end of the probability distribution; the likely scenario would contain a value towards the middle of the distribution; and the best-case scenario would contain a value in the upper end of the scenario.

Sales Forecasting: One practical use for probability distributions and scenario analysis in business is to predict future levels of sales. It is essentially impossible to predict the precise value of a future sales level; however, businesses still need to be able to plan for future events. Using a scenario analysis based on a probability distribution can help a company frame its possible future values in terms of a likely sales level and a worst-case and best-case scenario. By doing so, the company can base its business plans on the likely scenario but still be aware of the alternative possibilities.

Risk Evaluation : In addition to predicting future sales levels, probability distribution can be a useful tool for evaluating risk. Consider, for example, a company considering entering a new business line. If the company needs to generate $500,000 in revenue in order to break even and their probability distribution tells them that there is a 10 percent chance that revenues will be less than $500,000, the company knows roughly what level of risk it is facing if it decides to pursue that new business line.

Economic Implications of video

YouTube does not make a net profit because of the significant cost of storage and bandwidth for the videos it provides. YouTube’s income is derived through advertising revenue.
Video has a total of 27,157 views and according vidiQ software( a youtube extension) the video attracts almost 0.4views per hour which is in camparison to other youtube channel is quite low. The social engagement rate is also low. Duration of video is 5mins and according to youtube mmonetization policy they give $1/1000 views(approx) provided the Youtuber has monetized the content. Since he has disabled the comments section, it has again affected the user engagement as they don't have a say about Content and this is not useful if you want to have more number of people watching you videos. Thus, the video can attract a number of people using right kinds of 'tags' and with proper social reach which at this point is low and hence the optimum amount of income isn't generated even after having good content and video quality.

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