Methods

We provide additional material for each method to ease the understanding and to improve your learning experience.

Factor analysis

Example | Business

A chocolate company is interested in its image. 26 variables were reduced to 3 factors: reputation, competence, brand.

Example | Medicine

Factor analysis can improve medical diagnostics since it is not subject to the precondition of mutually independent symptoms.

Example | Psychology

The Big Five are factors that describe the construct ‘personality’, and each dimension is measured by several items.

Example | Environmental studies

Summarize the 4 micro-environmental factors (political, economic, social and technological) that impact firms' environment.

Factor analysis is used when a large number of metric variables has been collected in a specific context and the user is interested in reducing or bundling these variables. In this case, we want to investigate whether a large number of variables can be traced back to a few central ‘factors’.

Positioning analyses are also one important application area of factor analysis. In this case, we reduce the subjective assessments of attributes of specific objects (e.g. brands, companies, or politicians) to some underlying assessment dimensions.