Tutorial 03

Steps:
1.
2.
3.

Use data from Appendix 14.1, Table 14.6b.

Perform Factor Analysis on all the variables.
Analyse the:
a. Correlation matrix
The correlation coefficient in the correlation matrix are more than 0.3 in
absolute value for variables that are sharing the same factor.
b. Bartletts Test of Sphericity
The significant value of Bartletts Test of Sphericity is less than .001.
Therefore the hypothesis that the correlation matrix is an identity is rejected.
KMO measure of sampling adequacy is 7.94. Therefore the magnitude of the
observed correlation coefficient to the magnitude of the partial correlation
coefficient is great.
c. Sampling adequacy of individual variable
Based on the significant value of Bartletts Test of Sphericity and KMO
measure of sampling adequacy, the factor analysis for this data can be carried
on. All measure or sampling are above the acceptable level of .5. The lowest
correlation being .54 and the highest being is .88. This indicates that the matrix
is suitable for factor analysis.
d. Communality
The communality values are all above the threshold of .5 for all 22 variables.
All the 22 variables are important.
e. Total variance explained
There are 6 factors which have Eigenvalues of more than 1. The first factor
explains maximum variance of data followed by other 5 factors in descending
order. The total variance explained by the 6 factors is 78.2%, which can be
considered quite reasonable at the cost of reducing 22 variables into 6
composite components. The scree plot also confirms that there are 6 factors.
f. Initial factor solution
The correlation matrix shows the loading for each of the 6 factors for all 22
variables. 18 variables show high loading on Factor 1, while 3 variables show
high loading on Factor 2 and 1 variable on Factor 3. The rotation of factor is
carried out to clearly identify the variables associated with each of the factors.
g. Factor Rotation
From the Rotated Correlation Matrix table, items P14, P16, P17 and P18 are all
loading high on Factor 1. These 4 items all measure the ability of the banks to

perform the promised service dependably and accurately. This factor can be named
as reliability.
Items P4, P5, P15 and P22 are all loading high on Factor 2. These 4 items measure
knowledge and courtesy of employees and their ability to inspire trust and
confidence of customers and can be named as confidence in services.
Items P9 to P12 are all loading high on Factor 3. These 4 items measure the
willingness of the bank employees to help customers to provide prompt service.
This factor can be named as responsiveness.
Items P1, P2, P3, and P21 are all loading high on Factor 4. These 4 items measure
the level of caring and individualised attention the bank provides to its customers.
This factor can be named as personalised service.
Items P13, P19 and P20 are all loading high on Factor 5. These 3 items measure
the level of convenience provided by the bank to the customers and can be named
as convenience.
Items P6, P7 and P8 are all loading high on Factor 6. These 3 items measure the
tangible aspects of bank service such as physical appearance and facilities
provided, and can be named as tangibility.