What is Quantitative Business Analysis?

Last updated on March 4th, 2023 at 03:04 am

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Quantitative business analysis is a term that refers to the process of gathering and assessing various data points that are pertinent to business operations. These data points are both measurable and verifiable in nature; market shares, revenue gains, and wages, for example. The objective of this process is to gain insight into and an understanding of a business’ behavior and performance.

Previously, the only information that the owners and operators of businesses and directors of companies could depend on to make key decisions was their experiences and instincts. Thanks to advancements in technology, however – data collection technology, in particular – quantitative analysis has become a much more effective way to make informed decisions regarding business practices.

The professionals who are tasked with performing quantitative analysis are referred to (as you might guess) “quantitative analysts”. The primary objective of these professionals is to provide hypothetical scenarios that relate to numerical values. Quantitative analysis can be beneficial for businesses for a number of reasons; for instance, it can be used to assess performance, evaluate financial tools, and make important predictions.

Quantitative Business Analysis Techniques

There are three main quantitative techniques in business, which include:

Regression Analysis

A technique that is not only used by business owners and company directors, but by economists and statisticians, as well, is regression analysis. This technique involves utilizing statistical equations in order to estimate or predict the impact that one variable will have on another.

To illustrate, regression analysis can be used to determine how current interest rates will impact consumer spending. Business owners and operators can utilize regression analysis in order to assess the impact that marketing expenses will have on their profits. With this approach, business owners can determine if there is a positive or negative correlation between two key variables.

Courtesy Harvard Business Review

Linear programming

The majority of companies will experience resource shortages from time-to-time; reduced availability in machinery used for production, limited availability of key supplies, and resources, for example. When these shortages occur, business owners and company managers need to find ways that they can allocate the limited resources in a more effective manner.

Linear programming is a quantitative analytical technique in business that companies can use to determine how they can achieve the best solution for resource shortages. Companies can also use this technique to determine how they can make the highest amount of profits while cutting operating costs at the same time, when they are subjected to shortage constraints, such as reduced product supply.

Data Mining

A combination of statistics and computer programming, data mining is an increasingly popular quantitative technique in business. The surging popularity of data mining is directly due to the rise in the size and amount of data sets, which are constantly expanding in the business world. Data mining techniques are utilized to assess data sets that are large in scale to locate unique patterns or pinpoint correlations that are hidden within the data.

Quantitative Business Analysis Examples

Business owners and company directors need to make decisions on a constant basis, and often, those decisions have to be done when things are uncertain. Fortunately, quantitative techniques can be a useful tool for making more informed decisions in times of uncertainty and reduce the risks that might be linked to a specific decision. Preferably, quantitative analysis techniques can offer business owners and company directors better insights regarding key details that pertain to particular circumstances, thus allowing them to make the best decisions possible.

There are several examples of quantitative analysis techniques. Here are just a few.

Advertising

Businesses of all shapes and sizes, and across all sectors, need to have effective advertising. With that said, however, advertising costs money (and a lot of it), and while it is vital, company owners don’t want to spend more than they need to, and they don’t know what strategies to employ. This can make setting an advertising budget a serious challenge.

Quantitative analytics can be used to help business owners set their advertising budget and allocate the funds appropriately. Data that is obtained from advertising campaigns can be assessed and used to determine advertising expenditures.

Project Management

Quantitative analysis has become an essential tool in project management. This is largely due to the fact that the methods used in quantitative analytic can be used to determine the most efficient way to allocate resources; particularly when there is a scarcity of resources. The information acquired by analyzing the data can be used to plan and manage projects effectively.

Finance

The finance departments of companies also depend on quantitative analytics. Accountants utilize various sets of data and methods to determine how much an investment is worth. The costs that are associated with producing certain products and the profits that those products generate can also be assessed.

Production Planning

Production planning is another prime example of how quantitative analysis in business is used. To illustrate, if a company needs a new production facility, yet it is having a hard time estimating the size and the location for said facility, quantitative analytics can be used to evaluate proposals for expenses and location, as well as timing.

How to Implement Quantitative Business Analysis

So, how do you implement quantitative business analysis for your own business? The following is an overview of how these techniques can be implemented:

·         Define what you’re trying to find. Determine what it is that you are trying to learn about your company. This is crucial, because, after all, it’s the entire point of quantitative analysis. Make sure you’re precise.

·         Decide which technique to use. The technique you’ll use to depends on the specific information you want to acquire from the analysis.

·         Determine how data will be collected. There are several ways that data can be collected, and the methods depend on the information you want to gather. For example, if you’re trying to assess consumer behavior, data collection methods might include email campaigns, mailers, and questionnaires. 

·         Implement the methods. Once you’ve determine what methods you are going to use, but them into practice. Set up the infrastructure that’s needed to implement the methods you’ve determined, and hire and/or prepare staff that may be needed to assist with the data collection.

·         Collect data. It’s important to remember that the data you collect has to be the highest quality possible. Additionally, it must be relevant to the information that you are trying to acquire about your business.

·         Conduct the analysis. Apply the techniques you have chosen in order to assess the data you’ve collected.

·         Apply the findings. When you have acquired the results, make sure to apply them. Disregarding the results will make the entire process moot. If the information wasn’t as useful as you hoped it would be, figure out why. Were you using the wrong techniques? Did you make an error with the data?

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Conclusion

Quantitative business analysis is a powerful tool that can be used to assess the performance of a business. It allows business owners and operators to gain a better understanding of their company’s performance, pinpoint patterns that may not be apparent, and make more accurate forecasts about the future, all by doing a deep dive into the data. The information acquired can be used to make more informed decisions and to improve a company’s overall performance.

Quantitative business analysis can be used in conjunction with other types of analysis methods to establish a more complete picture of a company’s status. Since the methods used are complex and involved, it’s important for business owners to gain a keen understanding of the process so that they can maximize the benefits that the information can provide.

Author Bio

Dani Lehmer is the Founder and Head Honcho of Dani Digs In.

She is a Quality Assurance Analyst and blogger whose natural curiosity allows her
to dig in (pun intended) to help people build their businesses and satiate curiosity
in regard to data science, analysis, and crypto.