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Using Correlation Analysis

In: Business and Management

Submitted By sugarpie
Words 271
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What is the purpose of using correlation analysis? How might correlation analysis be used in business decisions or in strategy formulation and implementation? Provide an example

Correlation is a synonym that describes how someone or something is similar. It can also be used to illustrate instances of similarity among situations, people, or things that are otherwise different in nature to the other situations, people, or things.
Businesses can effectively use correlation analysis to determine what common factors impact undesirable outcomes so that the managers are able to make changes, and the process also helps in determining the factors that impact desirable outcomes so that managers can take note of what to continue doing.

Correlation analysis basically allows those evaluating various aspects of the business to make connections by analyzing cause and effect of various outcomes. It can be used in business decisions or in strategy formulation and implementation if a business were to use it effectively.Take an example of a small business. that determined that, over the course of the last six years, the business' revenue shot up over 40% each year when the business invested in professional, targeted marketing services versus the other three years in which the business lost money or broke even when the business owner whose skill set is in construction took on the task of building the company's marketing campaign by experimenting and using new marketing software and reading "How to" articles on the topic of marketing in order to cut investments costs.

In this example, the business owner would be wise to identify the correlation between investing in professional marketing services and increased…...

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