Multivariate Techniques - Research Paper Example

In view of the possible incoherence due to the management restructuring at Company W, retraining of Company W’s top management in key departments such as sales, marketing, and production is vital. In addition, the top management at WidgeCorp needs statistically verifiable conclusions on issues and recommendations resulting from broad management restructuring agenda. The purpose of this paper is to discuss the use of factor analysis as a statistical data analysis technique, highlight some of its real life applications, and demonstrate its applicability to company W.

Keywords: Exploratory factor analysis (EFA), Confirmatory factor analysis (CFA) Factor Analysis Introduction Acquisition is a corporate strategy in wide use by organizations that seek to increase their market presence, lower operation costs, or retain profitability in unfavorable economic conditions. One of the major challenges facing mergers and acquisitions, which accounts for many failures associated with the process, is lack of coherence and incompatibility in the management teams of the corporate entities involved.

A disconcerting 50% of merger and acquisition deals fail due to a number of factors, one of which is the inability to reconcile the management cultures of the companies involved (Monahan, 2000). Therefore, a successful acquisition does not end with the formalization of the acquisition process, but with retraining and restructuring to ensure retention of harmony in the management structures of the two companies. The integration process is delicate, and needs careful deliberation and planning by the top management so that it does not defeat the purpose of the acquisition.

This summary seeks to explain the effects of implementation of factor analysis in Company W. Admittedly, subjective judgment and experience present glaring limitations as decision-making techniques (Monahan, 2000). Despite the proven effectiveness of multivariate statistical analysis techniques such as factor analysis techniques, WidgeCorp should not undermine the possible benefits that traditional methods used at Company W might offer the new corporate conglomerate. The management should aim to bring the best practices from either side of the management landscape to benefit from the synergies appropriately (Monahan, 2000).

The transition to a common management approach should be as smoothly as possible, and should aim to win the cooperation of the employees the changes will affect the most. What is Factor Analysis? Factor analysis is a statistical analysis technique that explains the variation and correlation of variables with the use of uncorrelated, unobserved variables known as factors (DeCoster, 1998). Statistical researchers hail Charles Spearman, a psychologist, as the pioneer in the practical application of factor analysis.

Factor analysis is highly applicable to social sciences and in business in areas such as marketing, production, and sales (DeCoster, 1998). The technique is highly effective in areas that involve the processing of very large quantities of data. The overriding premise of factor analysis is that factors that have high correlation share the same driving factors and vice versa. Factor analysis assumes two forms: exploratory factor analysis (EFA), and confirmatory factor analy