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Main Dictionary Q

Qualitative Analysis

Qualitative analysis – is a specific type of analysis frequently used in business and economics. However, its use isn’t limited to these fields. It’s aimed at analyzing the data that is hard or even impossible to measure (e.g., relationships between employees, customers’ perception of a product, brand image influence). This type of non-measurable information is also called “soft”, or qualitative data. The results of qualitative analysis might be quite subjective.

The opposite type of this analysis is quantitative analysis. It’s designed for working with measurable data like figures on a company’s balance sheet or other financial statements. Despite different goals of these analyses, both of them are often used in conjunction with each other for getting a better representation of the company’s previous or current performance, prospects for the future, and its investment potential. While quantitative analysis is targeted on numbers, the qualitative one is all about people and relationships. Therefore, they complement each other well.

Characteristics of Qualitative Analysis

Qualitative analysis can be described as a method designed specifically for working with qualitative and unmeasurable data and focused mostly on people and their relationships. The process of gathering qualitative data as well as conducting the analysis itself require a lot of time and efforts because this analysis can’t be completely automatized. Therefore, the results might contain subjective information because people are affected by their personal prepossessions and biases. In order to reduce the influence of this factor, a few professionals might be involved in the process, especially when large volumes of qualitative data have to be analyzed.

Qualitative data

Information for qualitative analysis deserves special attention, because the process of gathering this information often takes a serious amount of time and efforts. Examples of qualitative data are pictures, documents, transcriptions of interviews, notes taken during observations, written replies of participants, etc.

A few obstacles that might complicate the analysis and the process of data collecting are presented below:

  • People might be uninterested in the process or be scared of it. Therefore, qualitative data is quite hard to get.
  • At the same time, the volumes of information might be too big to process, thereby taking a lot of time on data analyzing.
  • Some qualitative data might be irrelevant.

If analysts struggle with any of these problems, they might use quantitative analysis as an additional method. For example, if traders aim to study a company’s investment potential, but have problems with getting qualitative data, some annual reports (e.g., the management discussion and analysis) and financial statements might be of use to them. All these data together provide professionals with relevant information on the company’s performance during a certain period of time, and often demonstrate its investment strategy and management style.

Stages of Qualitative Analysis

Qualitative analysis consists of the following steps:

  1. Define the goal or several goals of analysis.
  2. Collect qualitative data.
  3. Analyze the data and define initial topic codes.
  4. Determine common themes within the codes.
  5. Review the codes and themes.
  6. Make conclusions based on the collected and reviewed information.

Pros and cons of Qualitative Analysis

Figuratively speaking, quantitative analysis is a means of measuring things, while the qualitative one is a means of understanding them. Therefore, the latter can’t be automatized, but provides analysts with unique information. That is one of the most important benefit of qualitative analysis. Also, it’s the only way to analyze unmeasurable data.

However, this type of analysis has its own disadvantages. First and foremost, it’s frequently affected by the analysts’ personal biases, thereby the results might be quite subjective. Second, it takes a lot of time and efforts, including the process of data collection. Third, the need of deep and detailed understanding of qualitative data establishes certain requirements for the analyst, who should be competent enough for conducting such analysis. These flaws complicate the use of qualitative analysis, but some of them can be balanced by quantitative methods.

Comparison between Qualitative Analysis and quantitative analysis

If we compare the two aforementioned types of analyses (qualitative and quantitative), a lot of differences will be found. However, let’s focus on the main ones like their goals, methods, and results.

As stated before, qualitative analysis is aimed at processing unmeasurable and inexact data, while quantitative analysis is aimed at working with concrete figures. The first type can’t be automatized, while the second one is more than appropriate for machine analysis. Actually, quantitative analysis is even better to be automatized, because the program’s speed and accuracy might significantly exceed the speed and accuracy of some professionals.

Qualitative analysis might be used for understanding a company’s brand image, competitive advantage, or customers’ satisfaction with the company’s product or advertisement. All these characteristics are hardly transformed into numbers, thereby leaving them for qualitative analysis only. As a result, the company will get a specific report or recommendations from professionals.

Quantitative analysis, on the other hand, is often used for calculating fair value of the company’s shares or projections of the future earnings. All these metrics can be computed by a specific program, and by the end of the analysis, the company will get exact calculations. 

Qualitative data can be gathered by interviews, observations, focus groups, etc. Quantitative data usually gets collected by questioners, financial reports, balance sheets, etc.

Some of the differences between the analyses are presented in the table below.


Qualitative analysis

Quantitative analysis

Main goal

Understanding information

Measuring information

Data type

Unmeasurable or hardly measurable information (e.g., texts, pictures, transcriptions of interviews)

Measurable information (e.g., numbers and figures)

Way of collecting data 

Interviews, observations, surveys, etc.

Questionnaires, tests, financial reports, etc.

Way of analyzing data

Text analysis

Statistical analysis

Qualitative Analysis in business

As we mentioned before, qualitative analysis is all about people and relationships between them. In the context of business, relationships between sellers and customers as well as between employer and employees gain a particular importance. Customers are the source of a company’s revenue, while employees are the executors and suppliers of the company. Therefore, any business has to be interested in providing their customers with a good service and their workers with decent working conditions. As an investor, you might take attention to these aspects before purchasing the company’s stock. If possible, you might even test the company’s product or service as a consumer.

For example, you consider the possibility of investing in a delivery company A, which have quite a good profile. You might test its service by ordering a delivery. As a result, you’ve faced a few difficulties during this process. You stood in a long queue for an hour, your consultant was rude and unpleasant, and finally, the delivered item was broken during the transportation. The company didn’t provide you with a high quality service, thereby showing certain risks of investing in it. Despite its numbers on the balance sheet, the company’s results might be quite unstable because of their poor service. Your experience of interacting with the company might be considered as a process of gathering qualitative data for the analysis.

Surprisingly, companies which put shareholders above their clients and employees have proven to be a reliable long-term investment.

Companies’ competitive advantages

A company’s business model and its advantages before competitors usually are significant components of qualitative analysis because they show the reason why a company is better than others and how does it sustain these successful results. The company’s competitive advantage might be an innovative technology that is hard or legally forbidden to copy, cultural resonance, or popular brand image. It’s also applicable to the situation when the company is unsuccessful. Qualitative analysis might highlight its weaknesses and help to correct them.

Qualitative analysis might help the company to answer the following questions:

  • How to gain popularity among the target audience?
  • How to remain popular for a long time and stay ahead of the competitors?
  • Is there any potential threat for the company on the market among its competitors?
  • How to protect the company’s innovative products or technologies?
  • What will gain people’s attraction a few years later?

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