LESSON 1:
OVERVIEW OF QUANTITATIVE
METHODS
OBJECTIVES:
At the end of the lesson, you should be able to:
▪ Discuss the importance of quantitative method
▪ Describe the quantitative analysis approach
▪ Identify the phases in implementing quantitative analysis
▪ Understand the applications of quantitative analysis
▪
Time Duration: 1 hour
What is Quantitative Method?
Quantitative Method is a scientific method or technique that has a broad
application for problem-solving and decision making for various organizations like
business, government, and service organizations. It helps the organization in solving
complex problems on time, with greater accuracy and in the most economical way.
Quantitative methods provide information about a situation or problem and offer an
alternative or different way to assess a condition that may well help.
Business organizations utilize different quantitative methodologies, including
optimization (linear programming), network analysis, forecasting (regression, path
analysis, and time series), cost-benefit analysis, assignment, and transportation),
sensitivity analysis, significance testing, simulation, benchmarking, and total quality
management.
Characteristics of Quantitative Methods
The quantitative methods are characterized by the following:
• provide measurable data to reach comparable and useful results,
• assume alternative plans for achieving objectives,
• plan data regarding collected observations
• configuration through statistical methods,
• check data reliability,
• estimate parameters for forecasting and planning purposes.
Functions of Quantitative Methods
The following are the essential functions of Quantitative Methods
1. Facilitate the decision-making process.
2. Provide tools for scientific research.
3. Select an appropriate strategy.
4. Help in the reduction of cost.
5. Help in the proper deployment of resources.
6. Minimize the required time for completing the task.
The Quantitative Analysis Approach
Business problems are examined from both a quantitative and a qualitative
perspective. Business decisions are made upon consideration of different qualitative
factors like company reputations, brand quality, and employee morale, as well as
quantitative data such as the amount of sales figures, profitability, and return on
investment.
Combining the analysis of both qualitative and quantitative information helps
managers make the appropriate decision. For example, you may have analyzed how
much your customers like a product so you can decide whether to increase production.
Business
Problems
QUANTITATIVE QUALITATIVE
Analysis Analysis
Problem Analysis
Decision
Figure 1.1.1 Decision Making Process
Qualitative analysis is based primarily on the judgment and experience of
managers, which includes conceptual and interpersonal ability to understand
behavioral techniques in solving problems. If the manager has little experience, or the
problem is complicated, then a quantitative analysis might be a very important
consideration for making the final decision. The quantitative analysis considers the
facts, data, or quantitative aspects associated with problems. The educational and
technical knowledge of the managers on quantitative techniques helps to enhance the
decision-making process. The manager who is knowledgeable and expert in
quantitative decision-making procedures is in a better position to evaluate the
qualitative and quantitative sources of information and combine alternatives to make
the best possible decisions.
Phases in Implementing Quantitative Analysis
1. Definition of the problem
This phase aims to develop a clear, concise statement of the problem, which
will give the scope of the problem under investigation. It involves determining the
objective of the study and the constraints on what can be done.
2. Model Construction
Once the problem is defined, the next phase is to represent the problem into a
mathematical model in the form of equations, relationships, or formulas. It involves
the formulation of a mathematical model to represent the problem. Basically, it
includes three basic elements: decision variables, objective function aim to
optimize, and the constraints need to satisfy.
3. Model Solution
Developing a solution involves manipulating the model to derive the best
(optimal)solution to the problem. Mathematical analysis for deriving optimum
solution includes analytical or numerical procedure.
4. Model Validity
A model is valid if it can provide a reliable prediction of the system's
performance. This phase checks whether or not the proposed model does what it
is supposed to do.
5. Implementation
The final phase is to implement the results. It is the process of translating the
solution into operating procedures to make it easily understandable to the
individuals who will implement the recommended solution.
Applications of Quantitative Analysis
Quantitative methods enable managers to make the best estimates and thus minimize
the risks associated with a particular decision. Ideally, quantitative models provide
managers with a better understanding of information, to enable them to make the best
possible decisions.
Project Management
Project Management considered quantitative methods as an essential tool specifically
to find ways of allocating scarce resources.
Production Planning
Assessing different proposals for costs, timing, and location employs quantitative
methods. With effective product planning and scheduling, companies will be more able
to satisfy their customers' needs while maximizing the company's profit.
Marketing
Marketing strategy is vital in every business. With the help of the quantitative method,
it enables the company to find a way of setting the budget requirement and allocating
purchases. Strategies are made based on the data obtained from marketing
campaigns.
Finance
The accounting department of an organization utilizes different quantitative data and
methods, such as to estimate the value of an investment, cost of production, and profit
generation.
Purchase and Inventory
Quantitative methods help the business to predict the customer's demand for a product
or service. They will be guided on how many materials they need to purchase, how to
maintain inventory level, and minimize transportation costs likely to incur when
shipping and storing finished goods.
APPLICATION ACTIVITY FOR LESSON 1
HOW DO YOU APPLY
WHAT YOU HAVE LEARNED?
Name: __________________________________ Date: ____________________
Course & Section: ________________________ Result: __________________
Answer the following briefly.
1. Differentiate Quantitative and Qualitative Analysis.
2. Why is the Quantitative Method important?
3. What considerations should a manager take in making decisions for business?
4. What are the steps to follow in solving a business problem?
