Consumer Behavior and Brand Preference towards NOKIA Mobile in East Delhi

Submitted in partial fulfillment of the requirementsFor the award of the degree of

Master of Business AdministrationIn

Software Enterprise Management

Under the guidance of

SUPERVISOR’S NAME Mr. Amit Gupta (ERP consultant) C-DAC amitgupta@ cdacnoida.in

Submitted by: Chandan Parsad MBA (SEM) Roll NO.: 06

Enrollment No: 0061189908

Centre for Development of Advanced Computing, NoidaAffiliated to

Guru Gobind Singh Indraprastha University

DECLARATION

I hereby declare that this Project Report entitled: Consumer Behavior and Brand Preference towards NOKIA Mobile in East Delhi

Submitted by me to the GGSIPU Delhi, is a bonafide work undertaken by

me and it is not submitted to any other University or Institution for the

award of any degree diploma / certificate or published any time before.

Name: Chandan Parsad

Signature of the Student

Enrollment No: 0061189908

Semester :

Date :

ACKNOWLEDGEMENTS

First, I thank my Supervisor Mr. Amit Gupta (ERP consultant) C-DAC for his continuous support to making this project Mr. Amit Gupta (ERP consultant) C-DAC was always there to listen and to give advice. He is responsible for involving me in this project in the first place. He taught me how to ask questions & which technique used for analysis. He showed me different ways to approach for the analysis.

Thanks also to Mr. H.K. Dangi Lecture CDAC Noida for teaching me Business Research and how to do a usability study, a skill that confirmed my intuition that need a drawing environment to access knowledge-based systems .

Special thanks goes to my friend Miss Seema, who is most responsible for helping me complete the writing of this Project

Objective:

1. To study the satisfaction level of consumers towards the NOKIA Mobile.2. To know the advertisement effectiveness of NOKIA Mobile.3. To Know the Brand loyalty of the respondents towards NOKIA Mobile.4. To Know the product awareness. 5. To evaluate the socio-economic factor influencing the consumers to buy the

NOKIA Mobile.

Scope of Work

This study focus on how and why consumers make decision to purchase goods &

services

The study enables us to understanding the perception of the market segment in a better

way .So, this study help NOKIA dealers to recognize the factor influencing the consumers

to buy the NOKIA Mobile and also identify various features influencing the buying process.

Table of Contents

1. Chapter 1 P. No.

1. Cell phone History 062. INTRODUCTION OF NOKIA 08

2. Chapter 2

1. Research Design 12

3. Chapter 31. Methodology 13

2. Sampling Design 15

Chapter 4

1. Statistical tool 18

4. Chapter 5

1. Appendices 20

Cell phone History

Dr. Martin Cooper of Motorola, made the first US analogue mobile phone call on a larger prototype model in 1973.

First generation

On April 3, 1973, Motorola employee Dr. Martin Cooper placed a call to Dr. Joel S. Engel, head of research at AT&T's Bell Labs, while walking the streets of New York City talking on the first Motorola DynaTAC prototype in front of reporters. Motorola has a long history of making automotive radios, especially two-way radios for taxicabs and police cruisers.

Second generation

In the 1990s, 'second generation' (2G) mobile phone systems such as GSM, IS-136 ("TDMA"), iDEN and IS-95 ("CDMA") began to be introduced. In 1991 the first GSM network (Radiolinja) opened in Finland. 2G phone systems were characterized by digital circuit switched transmission and the introduction of advanced and fast phone-to-network signaling. In general the frequencies used by 2G systems in Europe were higher than those in America, though with some overlap. For example, the 900 MHz frequency range was used for both 1G and 2G systems in Europe, so the 1G systems were rapidly closed down to make space for the 2G systems. In America the IS-54 standard was deployed in the same band as AMPS and displaced some of the existing analog channels.

Coinciding with the introduction of 2G systems was a trend away from the larger "brickle" phones toward tiny 100–200g hand-held devices, which soon became the norm. This change was possible through technological improvements such as more advanced batteries and more energy-efficient electronics, but also was largely related to the higher density of cellular sites caused by increasing usage levels. This decreased the demand for high transmission powers to reach distant towers for customers to be satisfied.

The second generation introduced a new variant to communication, as SMS text messaging became possible, initially on GSM networks and eventually on all digital networks. The first machine-generated SMS message was sent in the UK in 1991. The first person-to-person SMS text message was sent in Finland in 1993. Soon SMS became the communication method of preference for the youth. Today in many advanced markets the general public prefers sending text messages to placing voice calls.

2G also introduced the ability to access media content on mobile phones, when Radiolinja (now Elisa) in Finland introduced the downloadable ring tone as paid content. Finland was also the first country where advertising appeared on the mobile phone when a free daily news headline service on SMS text messaging was launched in 2000, sponsored by advertising.

Third generation

Not long after the introduction of 2G networks, projects began to develop third generation (3G) systems. Inevitably there were many different standards with different contenders pushing their own technologies. Quite differently from 2G systems, however, the meaning of 3G has been standardized in the IMT-2000 standardization processing. This process did not standardize on a technology, but rather on a set of requirements (2 Mbit/s maximum data rate indoors, 384 kbit/s outdoors, for example). At that point, the vision of a single unified worldwide standard broke down and several different standards have been introduced.

The first pre-commercial trial network with 3G was launched by NTT DoCoMo in Japan in the Tokyo region in May 2001. NTT DoCoMo launched the first commercial 3G network on October 1, 2001, using the WCDMA technology. In 2002 the first 3G networks on the rival CDMA2000 1xEV-DO technology were launched by SK Telecom and KTF in South Korea, and Monet in the USA. Monet has since gone bankrupt. By the end of 2002, the second WCDMA network was launched in Japan by Vodafone KK (now Softbank). In March the first European launches of 3G were in Italy and the UK by the Three/Hutchison group, on WCDMA. 2003 saw a further 8 commercial launches of 3G, six more on WCDMA and two more on the EV-DO standard.

During the development of 3G systems, 2.5G systems such as CDMA2000 1x and GPRS were developed as extensions to existing 2G networks. These provide some of the features of 3G without fulfilling the promised high data rates or full range of multimedia services. CDMA2000-1X delivers theoretical maximum data speeds of up to 307 kbit/s. Just beyond these is the EDGE system which in theory covers the requirements for 3G system, but is so narrowly above these that any practical system would be sure to fall short.

By the end of 2007 there were 295 Million subscribers on 3G networks worldwide, which reflected 9% of the total worldwide subscriber base. About two thirds of these are on the WCDMA standard and one third on the EV-DO standard. The 3G telecoms services generated over 120 Billion dollars of revenues during 2007 and at many markets the majority of new phones activated were 3G phones. In Japan and South Korea the market no longer supplies phones of the second generation. Earlier in the decade there were doubts about whether 3G might happen, and also whether 3G might become a commercial success. By the end of 2007 it had become clear that 3G was a reality and was clearly on the path to become a profitable venture.

Live streaming of radio and television [1] to 3G handsets is one future direction for the industry, with companies such as RealNetworks [2] and Disney [3] recently announcing services.

INTRODUCTION OF NOKIA

BeginningsNokia began its life by a river of the same name in Finland when Fredrik Idestam set up a wood-pulp mill to manufacture paper in 1865. In 1898 a rubber company was established in the same region although unconnected with the other business. Later, in 1912, a company that became known as the Finnish Cable Works opened in the centre of Helsinki. Ten years on, the Finnish Rubber Works bought majority shares in both Finnish Cable Works and Nokia Ab, the ground wood producer. Thus the three independent companies began to pool their resources and co-operate, evolving into a more cohesive group. Over time a community established itself around the factories and became the town of Nokia. The companies continued to operate under a single umbrella for some considerable time. In fact it was only as recently as 1966 that the companies decided officially to merge and Nokia began functioning as the business that we recognise today. When all of the Nokia divisions joined in the 1960's, electronics made up about 3% of the overall company sales. By 1980, Nokia had begun focusing its energies internationally on becoming a communications company. It was around this time that a department called Dedicated Networks was set up to deal specifically with transmission technology and Private Mobile Radio (PMR). Although initially based in Finland, Dedicated Networks had a global sales base. The seeds of Nokia's eventual international success had been planted.

ArrivalIn 1984, Dedicated Networks arrived in the UK with a very small workforce of only a few people to test the likely success of a local UK branch. However before long deals had been secured with both East Coast Rail and British Gas Eastern for transmission and PMR equipment. Simply because both of these companies were based in East Anglia, Nokia too made its home there, in a small office on the Cambridge Science Park. Later in that same decade, a section of Nokia's business called Nokia Cellular Systems was formed to deal with mobile communications infrastructure. Nokia's UK history had begun - its quiet arrival in the mid 1980's belying the explosive growth soon to begin, where Nokia would become one of the large stand most successful businesses in the UK.

Early GrowthNokia's unrivalled expansion came at the beginning of the 1990's, initiated by the signing of a contract with Cell net to supply base stations throughout the UK. Despite a small workforce, an entrepreneurial ethos and irrepressible self-belief ensured that Nokia was more than capable of taking on established UK businesses. Gaining the Cell net contract was not only a major coup for such a young company. It also gave Nokia both the financial power to expand, and the credibility with potential clients that it was a major corporate figure in UK business. Cell net required the first base stations to be produced locally, so a production unit was set up at hunting donning a building named 'The Forum'. Meanwhile, by the end of 1990, Research and Development had expanded the Cambridge office from a few employees to over 60.In 1991 Nokia began looking for a second network operator customer. And by the end of that year had won the business as sole supplier for GSM infrastructure within the UK for Microtel - a consortium of British Oxygen, British Aerospace and Hutchison Whampoa, soon to be launched as Orange.

The first payment received in this deal was around £4million. Although a seemingly small amount by today's standards, the deal enabled Nokia to cement its UK operations. The move into the UK market place had been a success.

The Cable EffectThe contracts that were gained in the early part of Nokia's UK history heralded the arrival of the company a major player in the UK telecommunications industry. Another contributor to this growth was the Government's deregulation of Cable TV in the firstquarter of 1992.The effect on Nokia's growth was enormous. Although fixed telephony had been deregulated in 1985, it took time for cables to be renewed so that other businesses could compete with BT.Nokia was quick to take advantage of the opportunity, immediately securing Telewest Communication as a customer for the supply of transmission, accessand switching equipment for their national telephony network. In the next few years, more contracts were secured with Videotron, Bell Cable Media and NYNEX (all subsequently part of Cable and Wireless and todayntl). This made a distinct contribution to Nokia's financial standing and prompted further expansion across the country.

ExpansionNokia's business growth was matched by a proliferation of sites and locations across the SouthEast. The Cambridge office was filling up fast and The Forum in Huntingdon did not have the capacity to cater for the speed at which base stations were being built for Cellnet.Between 1986 and 1989 Nokia acquired the Finnish radio and television manufacturer, Salora, as well as Luxor AB and Schaub-Lorenz, inheriting their offices in Swindon, Slough and Basildon.Most importantly, the acquisition of Schaub-Lorenz brought Nokia the licence to the ITT brand name -a major recognisable name within consumer electronics, especially in Europe.In 1992, the local Huntingdon MP, then Chancellor of the Exchequer and soon-to-be Prime Minister John Major opened the new Lancaster House site to accommodate the growing number of Nokia UK employees. Later that same year Nokia bought another telecommunications company, Technophone, inheriting both its manufacturing plant in Camberleyand a skilled workforce. Even with these new facilities, Nokia Mobile Phones division required a still larger production site. Some operations were moved to Dallas, allowing Camberley's buildings to focus primarily on BaseStation production - delivering to both Cellnet and Microtel by early 1992.At this time Nokia had around 150 employees in theUK. But huge new projects would transform this again. Although initially the Camberley building was required only to produce five to ten base station units each week, due to escalating demand it soon became apparent that more space would be needed.So, in 1994 a prestigious new factory was purpose built ,its 35,000 square metres immediately filling upto allow construction of the hundreds of units that were to be delivered every month .By this stage the organisation had developed distinctive characters to its northern and southern operations within the South East. The southern region dealing with mobile phones, the north with network solutions. One of the main factors contributing to this was the degree of travel required in the Mobile Phone steam, which depended on Camberley's close and easy

access to the major UK airports. A Peterborough office was opened in 1996 as a sister site to Huntingdon. Nokia UK had by now laid down the solid foundations for its growth and development into the company we know today.

Telecommunications FocusLooking at the early 1990's the Telecommunications and Mobile Phones divisions made up only a small percentage of Nokia's overall UK constitution. However, despite making up the majority of the company both IT and Consumer Electronics had by then begun to feel the effect of a global downturn in both areas. But Nokia by this stage had become quite accustomed to managing change both in its industries and, in turn, within itself. Arguably the most influential decision in the company's history was when Jorma Ollila, the newly appointed CEO, chose to focus Nokia's financial and creative efforts on the communications sector. The timing of this decision was such that Nokia became set on a course which would see its products and service rapidly become part of the fabric of western society, particularly in the keywere to be delivered every month. By this stage the organization had developed distinctive characters to its northern and southern operations within the South East. The southern region dealing with mobile phones, the north with network solutions. One of the main factors contributing to this was the degree of travel required in the Mobile Phone steam, which depended on Camber ley’s close and easy access to the major UK airports. A Peterborough office was opened in 1996 as a sister site to Huntingdon. Nokia UK had by now laid down the solid foundations for its growth and development into the company we know today. phones that found their way into the nation's pockets throughout the 1990's. Nokia's incisive business acumen had ensured that, despite arriving in the UK as a relatively small company, it had managed to overtake all its established rivals within a few years. During this period business partnerships and alliances which were forged in other areas of the company allowed further profitable affiliations in the mobile communications industry. 1997 saw Nokia providing a major communications network to Cellnet and signing an agreement with Orange for mobile telephone network expansion equipment worth £150 million.

Success in the 90'sBy now these contracts had cemented Nokia's standing as a major international business in the UK, and had allowed the company to direct both energy and money towards new and profitable ways of continuing its success. It was in the latte rpart of the 1990's that this success started to exceed all expectations .By mid-1995 cable TV operators had found that their business was not going nearly as well as had been predicted, with expenditure far exceeding income. Projects began to be scaled down and, as a direct result, a sizeable part of Nokia's UK business was in danger of diminishing. But in 1996 a global decision was taken to put more emphasis on mobile telecommunications, which in the UK led to the company dramatically increasing its market share. Nokia's characteristic ability to fore see market changes and adapt accordingly was never so acutely successful as in this period. The contract signed in 1997 with Orange was the largest agreed in any section of Nokia's UK business at that time. This was followed in 1998 by Orange announcing that Nokia had been selected as the key supplier for the

accelerated construction of its GSM1800 network - further endorsing Nokia's rapid rise in the telecommunications industry. At the time the contract meant that Nokia' infrastructure would be used by Orange as the platform to launch advanced new mobile services such as real internet browsing, online information ,home shopping and narrow band television. Nokia mobile phones had already begun to dominate fiercely competitive market and with these new contracts a productive future looked set to continue. This contract meant that Nokia's infrastructure would be used by Orange as the platform to launch advanced new mobile services such as real internet browsing, online information, home shopping and narrow band television.Nokia mobile phones had already begun to dominates fiercely competitive market. With deals like these, a productive future looked set to continue.

ConnectionsBusiness grew in the late 1990's on a number of levels. Nokia's large-scale production of digital terrestrial receivers allowed people nationwide to receive quality digital television and additional channels without the need for a satellite dish. In addition to Nokia's long-standing relationship with Cellnet (formerly BT Cellnet, now mm02) the company was ensured a profitable income. In 1998 a network expansion contract worth £200 million was finalized with Cellnet alongside a new agreement with Redstone Telecom and an equipment contract with Cable and Wireless UK. Thus, existing business relationships flourished, while additional ones allowed Nokia to further grow in its major areas of expertise. With the end of the century approaching, Nokia's name had become synonymous with phenomenal success -all the more impressive given the company's comparatively recent history in the UK.Nokia mobile phones, popular not only for their ease of use and functionality but also their unique style, already grace the lives of millions of Britons. With Jorma Ollila's astute decision to streamline the business to focus on telecommunications, business alliances and contracts have been both developed and reinforced. Nokia UK today continues to go from strength to strength in many different fields. Nokia's future lies not only in the strengthening of its alliances, but also in the development of new technologies for the next generation in mobile communications. Most importantly, Nokia intends to continue predicting and adapting to changes in the market place based on the way people want to connect with each other. In the same way that three diverse businesses foresaw the benefits of working innovatively together beside the Nokia rapids almost 150 years ago, so too Nokia UK's interests will thrive in the continual flux of today's business climate.

Research Design

Descriptive research design

Descriptive research is used to obtain information concerning the current status of the phenomena to describe "what exists" with respect to variables or conditions in a situation. The methods involved range from the survey which describes the status quo, the correlation study which investigates the relationship between variables, to developmental studies which seek to determine changes over time.

Statement of the problem

Identification of information needed to solve the problem

Selection or development of instruments for gathering the information

Identification of target population and determination of sampling procedureDesign of procedure for information collection

Collection of information

Analysis of information

Generalizations and/or predictions

 

ADVANTAGES

The subject is being observed in a completely natural and unchanged natural environment. A good example of this would be an anthropologist who wanted to study a tribe without affecting their normal behavior in any way. True experiments, whilst giving analyzable data, often adversely influence the normal behavior of the subject.

Descriptive research is often used as a pre-cursor to more quantitatively research designs, the general overview giving some valuable pointers as to what variables are worth testing quantitatively. Quantitative experiments are often expensive and time-consuming so it is often good sense to get an idea of what hypotheses are worth testing.

Methodology

Secondary Data Analysis?

Use of data that was collected by individuals other than the investigator. This includes newspapers, census data, maps, etc. Secondary data analysis is often a starting point for other social science research methods.

General ConsiderationsApplicationOftentimes, information and data managers need in order to make an informed decision have already been collected. A manager may want to find out particular aspects of the changing human environment in order to identify and manage areas of concern. Secondary data analysis including census reports, government reports, scientific papers, aerial maps, business and industry reports, on-line Web sites, and other secondary data can assist in developing conclusions that will help in decision making.

Strengths and LimitationsStrengths

Captures comprehensive and historical information Uses existing information Web-based materials and search engines are readily available

Limitations Information may be incomplete, obsolete, inconclusive, or inaccurate Data limited to what already exists

PRIMARY DATA ANALYSIS

Primary data is the data which the researcher collects through various methods like interviews, surveys, questionnaires etc. Some advantages and disadvantages of primary data are as follows:

The first advantage of primary data is that it can can be collected from a number of ways like interviews, telephone surveys, focus groups etc. Secondly, it can be also collected across the national borders through emails and posts. Thirdly, it can include a large population and wide geographical coverage. Fourthly, it is relatively cheap and no prior arrangements are required. Moreover, primary data is current and it can better give a realistic view to the researcher about the topic under consideration.

On the other hand, the major disadvantage of primary data is that it has design problems like how to design the surveys. The questions must be simple to design a general lingo (understandable). Some respondents do not give timely responses. Sometimes, the respondents may give fake, socially acceptable and sweet answers and try to cover up the realities. In some primary data collection methods there is no control over the data collection. Incomplete questionnaire always give a negative impact on research

Sample Design

1. There are three methods of collecting data such that the information collected can be used to draw inferences about the target universe. These are:

−Collection of data from all enterprises. This is a costly and lengthy procedure unless the target universe is small;

−Collection of data from a sample of units that have been selected from the target universe

with the intention that they should be representative of that universe. A sample of this kind is referred to as a purposive (or sometimes judgmental) sample. In order to draw inferencesabout the target universe using a purposive sample, a number of assumptions have to be made about the representative ness of the data collected and of the reporting units and, in general, there are limitations to the inferences that can be drawn from purposive samples when the probability of selection is not known;

−Collection of data from a random sample of units which have been selected with known probabilities of selection from among all units in the target universe. In this case no assumptions about representative ness are needed in estimating totals or averages for the target universe and, in addition, there are well known techniques for determining the precision of these estimates. This said, estimates based on random samples will only be unbiased if the business registers from which they are drawn are comprehensive and up to date.

2. A random sample may be made more efficient (a smaller sample for a given level of precision) by stratifying (dividing up) the universe into groups that have similar variance with regard to the key variables covered in the survey1. Usually strata are defined in terms of the size of enterprises and the kinds of activities in which they are engaged. The use of stratified random sampling is the ideal sampling method for most types of survey, including business tendency surveys. However, as explained below there are good reasons for using a modified (non-random) type of stratified sample for business tendency surveys.Panel samples3. Almost all business tendency surveys use a fixed panel of reporting units i.e. the same set of units is surveyed each month or quarter. Using a fixed panel rather than selecting a fresh sample each round of the survey, reduces the sample variance so that changes over time are measured more accurately. There are also great practical advantages in using a fixed panel because the initial contact with the enterprise – to determine the structure of the enterprise and agree on the reporting units – is time-consuming and therefore costly. However, once the same group of enterprises is surveyed in repeated rounds, it is no longer strictly random. This is because the target universe will change over time as new entrants appear and as existing enterprises cease trading or change their kind of activity. The panel may have been randomly selected for the first round but, strictly speaking it cannot be described as random in the subsequent rounds.4. To cope with the problem of changes in the target universe, some surveys are based on a rotating pattern with a fixed percentage – say 25% – being replaced at regular intervals. A commoner approach is to1 . For detailed descriptions of stratified sampling methods see W. G. Cochran, Sampling Techniques, John Wiley and Sons, New York, 3rd edition, 1977 and Paul S. Levy and Stanley Leme show, Sampling ofPopulations: Methods and Applications, John Wiley and Sons, New York, 1999.2 review the sample once a year with new enterprises brought in to replace those that have ceased operation or changed their activity. While there are administrative advantages for the organisers in maintaining the

same enterprises in the sample for several rounds, there is a danger of “respondent fatigue”. After too many questionnaires, respondents may refuse to reply or fail to give proper consideration to their answers.5. As already noted, the original panel will have been selected as a stratified random sample with the strata defined in terms of the number of employees. Many activities may be dominated by a small number of large firms. These are key units which should all be included in the sample with certainty and must remain permanently in the panel.Voluntary or compulsory surveys6. Participation in business surveys is usually voluntary and the quality of the results depends crucially on the willingness of enterprises to co-operate. Even if the selected enterprises can be forced by law to participate, it is not advisable to insist that enterprises participate against their will as this would affect the quality of the answers and the speed of the response. The more promising approach to getting high response rates is to make compliance as painless as possible through good questionnaire design and rotation of respondents. It is also important that the enterprises included in the survey should be convinced that the information they provide will be useful to the enterprises themselves in addition to any use it may have for macro-economic analysis.Non-random samples7. For various reasons, non-random selection is widely used for business tendency surveys, particularly those that are carried out by trade associations. While there is a substantial body of literature on the properties of random samples, the theoretical justification of purposive or quota2 sampling is relatively undeveloped. There is however considerable practical experience which shows that non-random samples can give acceptable results when used for business tendency surveys.The required sample size8. What is needed is a sample sufficiently large to give estimates of the balances and other parameters of interest, which are reliable enough to meet the requirements of users. This means that in order to be able to determine the appropriate sample size the following details are needed:−the level of precision required by users; and−the precision obtained with different sample sizes.9. If random sampling is used there are well known techniques for determining the sample size, which depends, essentially, on the variance of one or two key variables collected in the survey and on the desired level of precision3. Based on the experience of OECD countries, a rule of thumb is that about 30 reporting units are sufficient to obtain an acceptable level of precision for each strata for which data are to be published. For example, in a survey designed to produce results for ten kinds of activity each broken2 . A quota samples is one in which in which each strata identified in the target universe is represented by a specified number (a quota) of respondents. Quota samples are also described as “representative samples” because the selection of a quota of respondents from each stratum is intended to guarantee that the sample represents, or “mirrors”, the target universe. Quota samples are also widely used in political opinion polls and consumer opinion surveys.

For the purpose of the study, the data has been collected in different places of market

especially in retail shops.

100 customers were randomly selected for study

Statistical tool

Chi-Square Test?

- The probability density curve of a chi-square distribution is asymmetric curve stretching over the positive side of the line and having a long right tail.

- The form of the curve depends on the value of the degrees of freedom.

Types of Chi-Square Analysis:

- Chi-square Test for Association is a (non-parametric, therefore can be used for nominal data) test of statistical significance widely used bivariate tabular association analysis.

- Typically, the hypothesis is whether or not two different populations are different enough in some characteristic or aspect of their behavior based on two random samples.

- This test procedure is also known as the Pearson chi-square test.

- Chi-square Goodness-of-fit Test is used to test if an observed distribution conforms to any particular distribution. Calculation of this goodness of fit test is by comparison of observed data with data expected based on the particular distribution.

When to apply a Chi-Squared Test:

- Chi-Squared test is used to determine if there is a statistically significant difference in the proportions for different groups. To accomplish this, it breaks all outcomes into groups.

What the Chi-Squared Test does:

- It starts by determining how many defects, for example, would be “expected” in each group involved.

- It does this by assuming that all groups have the same defect rate (which Minitab approximates from the data provided).

- Minitab then compares the expected counts with what was actually observed.

- If the numbers are different by a large enough amount, Chi-Square determines that the groups do not have the same proportion.

Chi-Square Requirements:

- Data is typically attribute (discrete). At the very least, all data must be able to be categorized as being in some category or another).

- Expected cell counts should not be low (definitely not less than 1 and preferable not less than 5) as this could lead to a false positive indication that there is a difference when, in fact, none exists.

Chi-Square Hypotheses:

- Ho: The null hypotheses (P-Value > 0.05) means the populations have the same proportions.

- Ha: The alternate hypotheses (P-Value <= 0.05) means the populations do NOT have the same proportions.

Note: if the expected cell counts are below 5, Minitab will print a warning. The warning is generated because of the fact that with the expected count in the denominator, a small value potentially creates an artificially large chi-square statistic. This is particularly troublesome if more than 20% of the cells have expected counts less than 5 and the contribution to the overall chi-square statistic is considerable.