Factor Analysis | Group 6 | Section: D

Dell Running Case

Question 1: Can evaluation of Dell (q8_1 through q8_13) be represented by a reduced set of
factors? If so, what would be the interpretation of these factors?

There are thirteen components/indicators of ‘Performance Rating’ of Dell Computer. The first
set of questions involve certain features and services provided (or not) to personal computer
customers.

The objective of doing the Factor Analysis is to reduce the variable size to a few factors
encapsulating majority of the data.

By measuring adequacy of the sample using test statistic - Kaiser-Meyer-Olkin (KMO) to

compare the magnitudes of the observed correlation coefficients to the magnitudes of the
partial correlation coefficients.

Generally, a value greater than 0.5 is desirable for conducting Factor Analysis. For this dataset,
the value is 0.883.

Principal Components Analysis is done to extract the information into a few factors, while
making the factors un-correlated / low-correlated to each other.

The information is extracted from all the thirteen variables. Component 1 contain 35.647% of
the total variance; the eigenvalue for the factor indicated the total variance attributed to that

Rahul Kumar | Saba Khan | Satya Vijay Nath | Sayantan Das | Sudeshna Choudhury | Vishnu Gopal 1
 Factor Analysis | Group 6 | Section: D

factor, i.e. 4.634. In the similar fashion, Component 2 has eigenvalue of 1.411, and Component
3 has eigenvalue of 1.017.
Out of thirteen variables, only these three factors have eigenvalue greater than 1. But these
three factors only explain 54.33% of the total variance. Upon including one more factor, the
percentage rose to 61.198.

The Factor Matrix contains the coefficient used to express the standardized variable in terms
of the factors. These coefficient, the factor loadings, represent the correlation between the
factors and the variables.

The un-rotated factors are hard to interpret because the factors are correlated with many
variables. Therefore, the matrix is transformed using rotation. For our analysis, The Varimax
Procedure is used.

Rahul Kumar | Saba Khan | Satya Vijay Nath | Sayantan Das | Sudeshna Choudhury | Vishnu Gopal 2
 Factor Analysis | Group 6 | Section: D

While identifying the variables that have large loadings on the same factor, it was noted that a
few variables are not correlated to other variables significantly. Therefore, those variables
correspond to a specific factor.

Variables Q8.7 and Q8.13 have low correlation with all other variables which implies that they
do not interact well with others.

Rahul Kumar | Saba Khan | Satya Vijay Nath | Sayantan Das | Sudeshna Choudhury | Vishnu Gopal 3
 Factor Analysis | Group 6 | Section: D

We choose Four-Factor analysis because:

• It explains 61.198 % of the variability.
• In the correlation matrix, the variable 7 and 13 has low correlation with other variables,
which implies that these two factors do not interact well with other. Therefore, these
two variables are counted in two separate factors.

Rahul Kumar | Saba Khan | Satya Vijay Nath | Sayantan Das | Sudeshna Choudhury | Vishnu Gopal 4
 Factor Analysis | Group 6 | Section: D

Question 2: Can the Market Maven, Innovativeness, and Opinion Leadership items (variables
q10_1 through q10_13) be represented by a reduced set of factors? If so, what would be the
interpretation of these factors?

In this questionnaire, thirteen questions are already divided into three sub-sections: ‘Market
Maven Items’, ‘Innovativeness’, and ‘Opinion Leadership’.

The objective of Factor Analysis, done on the thirteen variables/ indicators is to check if those
sub-sections match with the factor generated by the analysis.

We measured the adequacy of the sample by using Kaiser-Meyer-Olkin (KMO) to compare

the magnitudes of the observed correlation coefficients to the magnitudes of the partial
correlation coefficients.

Generally, a value greater than 0.5 is desirable for conducting Factor Analysis. For this dataset,
the value is 0.857.

Principal Components Analysis is done to extract the information into a few factors, while
making the factors un-correlated / low-correlated to each other.

The information is extracted from all the thirteen variables. Component 1 contains 42.792% of
the total variance; the eigenvalue for the factor indicated the total variance attributed to that
factor, i.e. 5.563. In the similar fashion, Component 2 has an eigenvalue of 1.961, Component
3 has an eigenvalue of 1.298, and Component 4 has an eigenvalue of 1.008.

Rahul Kumar | Saba Khan | Satya Vijay Nath | Sayantan Das | Sudeshna Choudhury | Vishnu Gopal 5
 Factor Analysis | Group 6 | Section: D

Out of thirteen variables, only these four factors have eigenvalue greater than 1. These four
factors explain 75.616% of the total variance of the data and therefore, we do not include any
other factors.

The Factor Matrix contains the coefficient used to express the standardized variable in terms
of the factors. These coefficient, the factor loadings, represent the correlation between the
factors and the variables.

The un-rotated factors are hard to interpret because the factors are correlated with many
variables. Therefore, the matrix is transformed using rotation. For our analysis, The Varimax
Procedure is used.

Rahul Kumar | Saba Khan | Satya Vijay Nath | Sayantan Das | Sudeshna Choudhury | Vishnu Gopal 6
 Factor Analysis | Group 6 | Section: D

In the above correlation matrix, we can observe that variables 1 t0 4 correlate well with each
other and that can also be seen in the final output as these variables are subjected to factor F1.
Similarly, the variables 5, 8, 9, and 10 have good correlation with each other and form factor
F2. Factor F3 comprises of variables 11,12, and 13 - all three have very high correlation with
each other.

It was observed that Factor 1 and Factor 3 match with the original sub-sections - Market Maven
Items and Opinion Leadership, whereas, Innovativeness is further broken down into two factors
namely: Tendency to Experiment and Unwillingness to Experiment.

Note: The missing value treatment for all the analysis was done by replacing the missing value
with the mean.

Rahul Kumar | Saba Khan | Satya Vijay Nath | Sayantan Das | Sudeshna Choudhury | Vishnu Gopal 7