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Goal Programming For Decision Making

Goal programming (GP) is a widely used approach for multiple criteria decision making that allows constraints and goals to be incorporated. GP has been applied extensively in decision making problems over the past years. There is significant potential for future applications of GP in business and management through incorporating factors like multi-period goals, risks, and achievement functions. GP models allow multiple goals around factors like return, risk, and expenses to be considered.

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67 views4 pages

Goal Programming For Decision Making

Goal programming (GP) is a widely used approach for multiple criteria decision making that allows constraints and goals to be incorporated. GP has been applied extensively in decision making problems over the past years. There is significant potential for future applications of GP in business and management through incorporating factors like multi-period goals, risks, and achievement functions. GP models allow multiple goals around factors like return, risk, and expenses to be considered.

Uploaded by

Nivea Silvestre
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Goal Programming for decision making: An overview

of the current state-of-the-art

Goal Programming (GP) is the most widely used approach in the field

of multiple criteria decision making that enables the decision maker to incorporate
numerous variations of constraints and goals. Goal programming produced a variety of models

that attempt to provide some insight into the environment in which financial decisions are made.

By definition, every model is a simplification of reality. Hence, even if the data fail to

reject the model, the decision maker may not necessarily want to use the model

as a dogma.

Over the past years, GP for decision making problems have been deployed

extensively. It developed a model to analyze the make or buy

decision. Their approach takes into account the multiproduct environment, over

time levels, and capital utilization affects. GP models allow incorporating multiple goals such as

portfolio’s return, risk, liquidity, expense ratio, among other factors. Also, there is a huge

capacity for future developments and applications of GP for business and management programs.

In particular, GP could be used for incorporating multi-period, extended factors and different risk

measures. Also, the decision maker can establish target values not only for the goals but also for

relevant achievement functions. In this way, a Meta-GP model could be formulated, which

allows the decision maker to establish requirements on different achievement functions, rather

than limiting their opinions to the requirements of a single variant.

Future research is warrant in the area of GP applications to the business world

Several classes of goal programming can be obtained, depending on the nature of the goal

functions, decision variables and coefficients.

Multiple-criteria decision-making or multiple-criteria decision analysis is a sub-discipline

of operations research that explicitly considers multiple criteria in decision-making


environments. Whether in our daily lives or in professional settings, there are typically multiple

conflicting criteria that need to be evaluated in making decisions. Cost or price is usually one of

the main criteria. Some measure of quality is typically another criterion that is in conflict with

the cost.

Despite the criticism that multi-dimensional methods have received, some of them are widely

used. The weighted sum model (or WSM) is the earliest and probably the most widely used

method. The weighted product model (or WPM) can be considered as a modification of the

WSM, and has been proposed in order to overcome some of its weaknesses. The analytic

hierarchy process (or AHP), as proposed by Saaty [Saaty, 1980, 1983, 1990, and 1994], is a later

development and it has recently become increasingly popular. Professors Belton and Gear

[1983] suggested a modification to the AHP that appears to be more powerful than the original

approach. Some other widely used methods are the ELECTRE [Benayoun, et al., 1966] and

TOPSIS [Hwang and Yoon, 1981]. In the sub-section that follows these methods are presented in

detail. Although there is not universal agreement as to the definition of goal programming

(Zanakis and Gupta, 1985), it is promulgated as an aid for decision-making problems with

multiple, possibly conflicting goals. Typically, linear goal programming attempts to minimize a

weighted sum of deviations from goals. Since the development of goal programming by

Chames and Cooper (1961) in 1961, there has been substantial research into applying goal

programming to finance and accounting problems.

Conclusions:
There is no doubt that many real life problems can be dealt with as MCDM problems.

Although the mathematical procedures for processing the pertinent data are rather simple, the

real challenge is in quantifying these data. This is a non trivial problem. In matter of fact, it is

not even a well defined problem. For these reasons, the literature has an abundance of competing

methods. The main problem is that often nobody can know what is the optimal alternative.

Operations research provides a systematic framework for dealing with such problems. Although

it is doubtful that the "perfect" MCDM approach will ever be found, it is always a prudent idea

for the user to be aware of the main controversies in the field. Although the search for finding the

best MCDM method may never end, research in this area of decision making is still critical and

valuable. It provides a brief summary of some methodological developments that have occurred

to accommodate financial applications in goal programming. There is a huge capacity for

future developments and applications of GP for business and management programs.

In particular, GP could be used for incorporating multi-period, extended factors

and different risk measures. Also, the decision maker can establish target values not only for the

goals but also for relevant achievement functions. In this way, a Meta-GP model could be

formulated, which allows the decision maker to establish requirements on different achievement

functions, rather than limiting their opinions to the requirements of a single variant. Studying

goal programming for us business students had a great impact in a way we can use all of this

techniques and knowledge as our asset in the near future. Classified the financial management

applications in the areas of corporate budgeting and financial planning, working capital

management, capital budgeting, financing decision was surely made us having an edge to the

others.

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