Factor Analysis Group Project
Explaining factor analysis is based on a collection of methods that are used by a company (Amazon.com) or in our case Company W, for example to examine how their underlying constructs influence the responses on a number of many different measured variables., There are two different types of factor analysis one being the Exploratory this method attempts to discover the nature of the different constructs that are influencing the set of responses (DeCoster, August 1, 1998). The second one is Confirmatory factor analysis this will test whether a specified set of constructs that are influencing the responses in a predicted way.
Both of these different factors are based on Common Factor Model. When using factor analyses they are performed by examining the different patterns of correlations between observed measures. These measures are correlated either positively or negatively, but will likely be influenced by using the same factors (DeCoster, August 1, 1998).
When using Confirmatory Factor Analysis we have to have an objective to observe the data. Some of the ways in which we can do this is to
Establish the validity of a single factor
Compare the two different models that have the same data
Test the specific factor
Test the relationship between the two factors
Test to see if the two factor or correlated or uncorrelated
Exploratory Factor Analysis
Uncovers underlying structure of a large set of variables
Any indicator can be associated with any factor
This is the most used form of factor analysis
EFA is used in most research designs which incorporates cross validation
By explaining the differences between the two different factors I feel that by using Confirmatory Factor Analysis would benefit Company W Snack Foods as well as any other company we might choose (Garson, 3/3/201). Toyota and Amazon and the other companies mentioned all use these different types of factor analysis in order to analysis how their company is doing.
Examples of other companies that use this method are Insurance Companies, Financial Institutions, and the Auto Industry. When looking for information on Amazon I found nothing that would advance us in researching this company for this group project, as Amazon has made many strides in their e-books sales and other products that they sell I cannot find valid information on how they analysis there company products.
References
DeCoster, J. (August 1, 1998). Overview of Factor Analysis. Retrieved from http://www.stat-help.com/factor.pdf
Garson, D. G. (3/3/2011). Factor Analysis. Retrieved from http://faculty.chass.ncsu.edu/garson/PA765/factor.htm