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Question $3-$ Homework $1$: Chapter $1$ What is Organizational Behavior? $-$ C

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$3$ Flashlights and Pop Tarts$-$ Correlation and Causation

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This activity is important because managers should know the difference between correlation and causation. It is important to question any suggestion of causal relationships. Decision making should rely on good data and careful analysis.

The goal of this activity is to demonstrate your understanding of correlation and causation by reading a case and answering questions that follow.

Read the following case and answer the questions that follow.

Walmart found that people buy more flashlights before storms. But they also buy more Pop Tarts. Researchers say there is no causal relationship between storms and Pop Tarts, but the relationship between storms and flashlights certainly appears to be logical$.$ These conclusions don't keep Walmart from using strange relationships to guide its marketing, though. Weather affects sales, and the company pays attention.

Although Walmart and other retailers have been successful with some wacky correlations in the retail market, many companies don't pay attention to data, use bad data, or assume causation.

Some companies don't use evidence from past causal relationships when making new decisions. For example, Amazon famously ignored data about its successful products when producing the Amazon Fire Phone in $2014.$ Amazon typically created cheaper devices that do just what the customer needs, like the Kindle Fire, and investors assumed that the Fire Phone would be the same. The price of the Amazon Fire phone with a contract started at a pricey $($at that time$)$ $$200,$ with fancy features that customers didn't actually want. Lack of demand led it to drop to $99$ cents within a few months. Amazon learned that its basic devices created more sales.