Assignment

Research Methods of Business

In
Cluster Analysis

Submitted
by
K. Kathiresan
13MBA084
Group -1

Problem Statement:

An Indian FMCG company wants to make their profile to its target audience in
terms of lifestyle, attitudes and perceptions. To measure this we are
provided with the set of 15 statements which is surveyed with 20 respondents.

Objective:
The main objective of this study is to execute cluster analysis and to categorise
the objects based upon the clusters.

Interpretation:
Stage 1:
Hierarchical cluster analysis is accomplished.

Purpose:
The purpose is to identify the number of clusters based on the respondents.

Agglomeration Schedule:
Thumb rule is to proceed from the bottom stage of the clusters coefficients.

In this the difference between the cluster combined of stage 19 and 18 is

almost 3
The next stage of 18 and 17 where the difference is 2 and the next stage
difference is 6 which shows the decision point to decide upon the number
of possible clusters
The next stage there exist a decline in the difference value of the
coefficient i.e., from 6 to 3.
Since we attained the cut off at stage 16, we could conclude that there are
only 3 clusters.

Agglomeration Schedule
Stage

Cluster Combined
Cluster 1

Cluster 2

19

Coefficients

Stage Cluster First Appears

Next Stage

Cluster 1

Cluster 2

14.000

20

15.000

17.000

20.000

12

13

16

25.000

18

26.500

14

14

28.000

10

11

19

29.500

11

13

29.500

16

10

15

35.000

19

11

10

11

37.333

17

12

12

37.667

14

13

17

38.000

17

14

39.083

12

15

15

42.000

14

16

16

45.833

15

18

17

10

51.000

13

11

18

18

53.182

16

17

19

19

56.804

10

18

Stage 2:
K-Means cluster analysis is performed by the following steps,

Cluster Membership
Distance between Final Cluster Centres
ANOVA table

Cluster Membership:
Cluster Membership
Case Number

Cluster

Distance

4.058

3.197

3.036

4.819

3.496

3.255

4.724

3.876

4.660

10

4.441

11

3.784

12

4.056

13

3.097

14

3.771

15

4.997

16

4.693

17

4.959

18

5.157

19

2.706

20

3.274

In the above cluster membership table 8 respondents are grouped into

Cluster1, whereas 5 respondents are grouped to Cluster 2, and 7

respondents are grouped to Cluster 3.
The cases are grouped to corresponding clusters to do possess an ideal
value of distance. From this we can conclude that the Cluster 1 has a
larger number of respondents.

Final Cluster Centres - Interpretation of the Cluster

Characteristics:
Final Cluster Centers
Cluster
1

has increased the efficiency 3

I prefer to use email rather

than write a letter
I feel that quality products
are always priced high
I think twice before I buy
anything
Television is a major source
of entertainment
A car is a necessity rather
than a luxury
I prefer fast food and readyto-use products
People are more healthconscious today
Entry of foreign companies
of Indian companies
Women

are

active

in

purchase 4

participants
decisions

I believe politicians can play

a positive role
I enjoy watching movies
If I get a chance, I would like
to settle abroad
I

always

buy

branded

products
I

frequently

go

out

on

weekends
I prefer to pay by credit card
rather than in cash

From the above table the respondents in the three clusters have a mixed
characteristics towards the variables listed above. For Example,

The cluster 1, is indicated as 2 which states that this cluster agrees to the
variable that they prefer email as a basis of communication rather than
writing a letter.
For the same variable the clusters 2 & 3 are almost neutral to the
statement. This shows that the respondents in the cluster 1 are more
favoured to email than the other 2 clusters.
Similarly the entire 15 variable do hold an exclusive characteristics
associate with the certain variable.
Based on these characteristics, the clusters can be differentiated in terms
of their lifestyle, attitudes and perception.

Distance between Final Cluster Centres:

Distances between Final Cluster Centers
Cluster

1
2

4.188

4.304

4.188

4.304
5.215

5.215

From the above table it shows that the distance between the 2 clusters are
relatively high, thus it proves that there exists a strong heterogeneity between
the 3 clusters.

ANOVA:
ANOVA
Cluster
Mean Square
I prefer to use email rather
than write a letter
I feel that quality products
are always priced high
I think twice before I buy
anything
Television is a major source
of entertainment
A car is a necessity rather
than a luxury
I prefer fast food and readyto-use products

Error
df

Mean Square

Sig.

df

3.843

1.324

17

2.902

.082

3.268

1.177

17

2.776

.091

2.705

1.670

17

1.620

.227

1.105

1.046

17

1.056

.369

1.848

1.736

17

1.065

.367

3.286

1.331

17

2.468

.115

People are more healthconscious today

11.571

.709

17

16.315

.000

12.211

.713

17

17.115

.000

5.680

1.317

17

4.313

.031

1.671

1.462

17

1.143

.342

1.223

1.300

17

.941

.410

2.161

1.684

17

1.283

.303

3.696

1.621

17

2.280

.133

3.696

1.621

17

2.280

.133

9.305

.788

17

11.815

.001

Entry of foreign companies

has increased the efficiency
of Indian companies
Women are active
participants in purchase
decisions
I believe politicians can play
a positive role
I enjoy watching movies
If I get a chance, I would like
to settle abroad
I always buy branded
products
I frequently go out on
weekends
I prefer to pay by credit card
rather than in cash

From the table it shows the significance of the variables listed above.

In this it clearly shows that the variables 7, 8, 9 and 15 are statistically

significant based on the .sig value obtained.
This shows that these 4 variables are significantly involved in the
responses of the objects and forms the major part for the clusters.

Business inference:
Based on the cluster analysis performed form the above-mentioned problem
statement the following are inferred,
The 20 respondents are grouped into 3 clusters with a heterogeneity between
the clusters.
Cluster 1:
They prefer email as a source of communication to write a letter, which means
they have a fashionable lifestyle. They lead to the luxury style of living. They are
highly unwilling to the consumption of fast foods and limit to disagree that
women are active decision makers in purchasing the FMCG products. They have
a strong idea that quality products are high in price.
Cluster 2:
The respondents neither come under the modernised lifestyle or under the
traditional lifestyle. They will give much importance to the health and hygiene

aspects. They also do purchase their branded products by using credit card
rather than in cash. They have an idea that television is a major source of
entertainment other than this they strongly disagree that the entry of foreign
companies has increased. They have a perception that the quality products are
priced high.
Cluster 3:
The respondents disagree that they are not the regular buyers of branded
products. Also they are unwilling to the fact that officials have a positive role in
the industry. They are not very much in health conscious. They shows that the
consumption of fast food is neutral and they have neutral opinion towards the
pricing in quality products. They agree that women play a lively role in decision
making in purchase of products.