what is qualitative analysis 
in business and management qualitative analysis uses subjective judgment to analyze a company s value or prospects based on non quantifiable information such as management expertise industry cycles strength of research and development and labor relations qualitative analysis contrasts with quantitative analysis which focuses on numbers found in reports such as balance sheets the two techniques however will often be used together to examine a company s operations and evaluate its potential as an investment opportunity investopedia paige mclaughlinunderstanding qualitative analysisthe distinction between qualitative and quantitative approaches is similar to the difference between human and artificial intelligence quantitative analysis uses exact inputs such as profit margins debt ratios earnings multiples and the like these can be plugged into a computerized model to yield an exact result such as the fair value of a stock or a forecast for earnings growth of course for the time being a human has to write the program that crunches these numbers and that involves a fair degree of subjective judgment once they are programmed though computers can perform quantitative analysis in fractions of a second while it might take even the most gifted and highly trained humans minutes or hours qualitative analysis on the other hand deals with intangible inexact concerns that belong to the social and experiential realm rather than the mathematical one this approach depends on the kind of intelligence that machines currently lack since things like positive associations with a brand management trustworthiness customer satisfaction competitive advantage and cultural shifts are difficult arguably impossible to capture with numerical inputs many social scientists use qualitative analysis in their research and it is especially prominent among anthropologists and sociologists qualitative analysis may sound almost like listening to your gut and indeed many qualitative analysts would argue that gut feelings have their place in the process that does not mean however that it is not a rigorous approach indeed it can consume much more time and energy than quantitative analysis people are central to qualitative analysis an investor might start by getting to know a company s management including their educational and professional backgrounds one of the most important factors is their experience in the industry more abstractly do they have a record of hard work and prudent decision making or are they better at knowing or being related to the right people their reputations are also key do their colleagues and peers respect them their relationships with business partners are also worth exploring since these can have a direct impact on operations the way employees view the company and its management is important are they satisfied and motivated or do they resent their bosses the rate of employee turnover can indicate employees loyalty or lack thereof what does workplace culture say about the company overly hierarchical offices promote intrigue and competition and sap productive energy a sleepy unmotivated environment can mean employees are mainly concerned with punching the clock the ideal is a vibrant creative culture that attracts top talent qualitative datagathering data for qualitative analysis can sometimes be difficult fortune 500 ceos are not known for sitting down with retail investors for a chat or showing them around the corporate headquarters in part warren buffett can use qualitative analysis so effectively because people are willing to give him access to their time and information the rest of us have to sift through news reports and companies filings to get a sense of managers records strategies and philosophies the management discussion and analysis md a section of a company s 10 k filing and quarterly earnings conference calls provide a window into strategies and communication styles clear transparent communication and coherent strategies are useful buzzwords evasiveness and short termism not so much qualitative data can also be collected in a number of other ways including interviews panel groups ethnography participant observation archival work and document analysis qualitative data is often read carefully and coded thematically to identify themes patterns and trends qualitative analysis in the business contextcustomers are the only group more crucial to a company s success than management and employees since they are the source of its revenue ironically if a company places customers interests before shareholders it may be a better long term investment if feasible it s a good idea to try being a customer say you re considering investing in an airline that has reined in costs beat earnings estimates in three consecutive quarters and plans to buy back shares when you try to actually use the airline however you find the website bug ridden the customer service representatives cranky the extra fees petty and your fellow passengers resentful the negative experience tells you that the company has a lack of priority for its customers and to be careful making an investment in the airline a company s business model and competitive advantage are vital components of qualitative analysis what gives the firm an enduring leg up over its rivals has it invented a new technology that competitors will find hard to replicate or that has intellectual property protection does it have a unique approach to solving a problem for its customers is its brand globally recognized in a good way does its product have cultural resonance or an element of nostalgia will there still be a market for it in twenty years if you can plausibly imagine another company stepping in and doing what this one does just a little bit better then the barrier to entry may be too low why will an un established company be the one to create or disrupt its chosen market and why won t it then be replaced in turn example of qualitative analysis in businessthe idea behind quantitative analysis is to measure things the idea behind qualitative analysis is to understand them the latter requires a holistic view and a fact based overarching narrative context is key for example a ceo who dropped out of college would be a red flag in some cases but mark zuckerberg and steve jobs are exceptions silicon valley is for better or worse a different beast a look at mcdonald s corp s mcd financials a few years ago would have told you nothing about a looming backlash against cheap unhealthy food on the other hand a purely qualitative approach is vulnerable to distortion by blind spots and personal biases quantitative measures can act as a check on these tendencies qualitative analysis vs quantitative analysisqualitative analysis relies on thick description and deep understanding of the subject being researched obtained from in depth interviews observations and or close readings of text this type of research typically looks at case studies and can be used to understand local phenomena quantitative analysis instead relies on the statistical analyses of numerical data obtained from surveys experiments or administrative records from this inferences can be made and correlations between variables analyzed to understand more generalized phenomena 