Cutting Costs Strategically
The business environment today has become extremely competitive. Companies are not only facing competition from their local competitors but also from global ones. Different economic and geopolitical factors make global supply chains necessary. The problem with having global supply chains is that operations become broad and complex. It is much easier to manage operations located […]
International Retailing – Features and Challenges
International Retailing and branding has been one of the sectors that is seeing exponential growth. With increase in standard of living and disposable income, people in developing countries are getting exposed to international brands. Rise of internet and multi-media has further provided impetus to the dream of people to aspire for branded consumer goods. Along […]
SWOT Analysis of Microsoft
Introduction The recent announcement of the change of leadership at the helm of Microsoft has sparked speculation about possible strategic directional changes as well as kindled hopes that the pioneering company and its iconic founder who appeared to be floundering in recent years may well be getting their act together. The ensuing SWOT Analysis places […]
What are Compulsory CSR Commitment Policies and Their Effectiveness and Pitfalls
What are Compulsory CSR Commitments and How They Work in Corporates In many multinational companies such as Goldman Sachs, SAP, and P&G, employees are expected to spend time on Corporate Social Responsibility activities and in turn, they are rewarded or penalized based on whether they have undertaken the necessary commitments with regards to CSR activities. […]
Use of Quantitative Tools in Social Media Channels
E Commerce, online brand building and marketing using Social Media Channels is one of the most modern developments in Sales and Marketing fields. In fact no business can afford to ignore or be absent from this medium. As long as your audience and customers are present and discussing about their experiences about your product or […]
Factor Analysis is a data reduction technique. Given a large number of attributes, factor analysis identifies a few underlying dimensions by grouping the attributes based on the correlation between the attributes. For example, price of a product, the cost after sales service, and maintenance expense can be identified as a part of single dimension: Total Cost
Attributes such as Insomnia, Nausea and Suicidal Tendency can be collectively described by a single term: Depression. Here three variables/attributes have been represented by a single factor.
Factor analysis is usually more meaningful when it is followed by subsequent procedures such as clustering. Following are some of the applications of this method:
While factor analysis is used in several fields such as psychometrics, psychology, physical sciences, etc, we will focus on the topic relevant in this module: marketing research. The procedure for utilizing factor analysis in a typical marketing research study is as follows:
Industry examples requiring usage of this tool
For this method to be valid, certain assumptions must hold true:
| Var1 | Var2 | Var3 |
| 1 | 2 | 3 |
| 2 | 4 | 6 |
| 3 | 6 | 9 |
| 4 | 8 | 12 |
Each variable must be unique. Var2 and Var3 can be reduced to Var1 by dividing them by numbers 2 and 3 respectively. Since they are basically the same data sets, they cannot be used for forming factors.
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