TITLE

SELECTING A NEW BUSINESS BY USING

ANALYTICAL HIERARICHAL

PROCESS (AHP)
PRESENTED BY

 By Muhammad Uzair Arshad

ACKNOWLEDGEMENT

 MR.ASIF ALI (SUPERVISOR)

 MR.MANSOOR UL HASSAN (FELLOW)

 MY FAMILY
 MOTIVATION FOR WORK

 Our motivation for work is given article “ASSESSMENT OF TECHNO

ENTERPERENUERSHIP PROJECTS BY USING AHP”

 Entrepreneur and Entrepreneurship

 Criteria are individual characteristics (I.C.) and project related

factors(P.R.F.)

 Sub criteria of I.C. are gender, age , experience and educational level.

 Sub criteria of P.R.F. are Budget, Market, Location, partnership and staff.

 Results three last ranked projects were ultimately failed.

 DECISION AND TYPES OF DECISION

 DECISION
It Means Choice among various alternatives.
 DECISION AND LIFE
Life Is Full Of Decision And Life Depends Upon Decision We Made In Our Life.
 DECISION MAKING
It is process by which a person responds to future threats and opportunities
in selection of one choice among various alternatives.
 TYPES OF DECISION

There Are Two Types Of Decisions that we made in our life.

 PROGRAMMED DECISION MAKING
They Are Routine And Virtually Automatic And Easy To Take.
There are set rules to take like inventorying a cost.
They are less influential.
 NON PROGRAMMED DECISION MAKING
Non routine and complex decisions.
They are much influencer in our life like where to invest savings.
 DECISION MAKING
AND
ECONONICS
 There is no free lunch

 There is opportunity cost of everything.

 Example: In thirst there are available different options like juice, carbonated
drink etc.

 Choice of one means forgone of other.

 OPTIMUM DECISION

 Most desirable and appropriate decision in the given circumstances.

 Every one wish to make optimum decision in every walk of life.

 Complex situations make it difficult to take optimal decision

 Depends upon the base on which it is made.

 Research, survey and expert opinions are considered to take optimal

decision.
 CRITERIA BASED DECISION MAKING

Decisions are based on some criteria

Example:

 Purchase of bike on base of resale value or fuel economy

 Get admission for child in some school on the base of school fee or
distance

 Purchase of cloth for some occasion like in wedding etc.

 CRITERIA FOR OUR STUDY

1. Sustainability

2. Adaptability

3. Modernization

4. Risk
ALTERNATIVE FOR OUR STUDY

1. Mobile Phone shop

2. Hardware Store

3. Medical Store
 ABSTRACT

 Business is backbone of economy. It creates jobs and product or services for

people. Business add value to society.

 Always preferred win win strategy for business.

 Success of business is linked with well being of people.

 Selection of business depends upon conflicting criteria and risks for new
business.

 Selection of business depends upon the space for success of business.

 AHP TECHNIQUE

 Selecting weight and prioritize

 Establishing a preference matrix and weight vector

 Rank the alternative

INTRODUCTION

 The successful businessman is a person who is creative, innovative and work

actively to run his business.

 Risk management is key to success.

 A successful business is a strategically effective.

 Business is engine of economy and strengthen the economy.

 Business creates jobs and opportunities for people.

 Business increases well being of country by reducing unemployment, inflation and

crimes.
TECHNOLOGY AND BUSINESS

 Technology has a vital role to play in the success of business.

 Technology makes differences in competitive environment of business.

 Technology brings revolution in growing economies.

 Selection of business depends upon the technologies used in the business.

 Selection of business depends upon the acquiring and ease to use of technology.

 Selection of the business depends upon the availability of skilled staff regarding
to technology.
RISKS FOR NEW BUSINESS

 Financial risk
People spend life savings and take debt to start business so financial
risk is a major risk to start any kind of business.

 Reputation risk
If business is unable to produce necessary cash flows and fail to pay
liabilities it will suffer reputation loss. It has a multiplying effects.
RISKS FOR NEW BUSINESS

 Safety Risk

There occur unavoidable natural calamities to face any business like flood,

earth quake and short circuit etc.

 Security Risk

There are security risks to face every business like theft and cyber crime

etc.
 METHODOLOGY USED AHP

 AHP was introduced by THOMAS SAATY

 This method is mathematical in nature and data intensive.

 This method is stable and flexible to changes in criteria.

 This method converts subjective opinions in to mathematical value.

 It is useful when number of criteria are large.

 LITERATURE REVIEW

 Analytical network process (ANP) which is more general form of AHP was
studied as suitable to process problem and results are reliable.

 By OLSON decision making is a challenging job because we have to balance

multiple criteria and conflicts are part of decision.

 By Velasquez MCDM methods are getting importance for analyzing complex

problem. These methods have ability to check different alternatives on the
base of various criteria.
 LITERATURE REVIEW

 By Velasquez multi-attribute utility theory (MAUT) is one of mcdm method

uses expected utility theory that gets best action.

 Advantage of MAUT is that it counts uncertainty which is not the part of many
mcdm methods. It is comprehensive and accounts for preference of each
consequence.

 Disadvantage of MAUT is that it requires huge amount of inputs at every step.

This makes it data intensive.
 LITERATURE REVIEW

 By ERKAN AHP is used in many selection problems.

 He said that AHP considers priorities of individuals and qualitative and

quantitative variables in decision.

 By MOTAKI AHP was used in assessment of enterprise resource planning (ERP)

alternatives and relative importance and weights of criteria.

 By LOBO etc. AHP used in selection of offices ,planning fitness, advertising,

new business and selection of school system etc.
 LITERATURE REVIEW

 By ADEDOTUN AHP based on expert opinion and decision support system to

arrive at right decision.

 By TAM & TAMULA AHP used in vendor selection of telecommunication

system.

 AHP was found useful in conflicting objectives.

 By Velasquez FUZZY AHP used with FUZZY TOPSIS for site selection of
landfill.

 It said a study was done with geographic information system for the selection
of Solar farms.
 LITERATURE REVIEW

 Al herbi used AHP in project management for selecting a best contractor.

 BUYAN used AHP extended versions for selecting a car.

 AL-KHALIL used AHP for selecting an appropriate project delivering

techniques.

 VHEA and HIROSHI presented AHP based heuristically algorithm to facilitate

airplane selection.
 LITERATURE REVIEW

 Swot Analysis is done for every new or running business. Here “S” represents

strength for business, “W” represents weakness of business, “O” means

opportunities and “T” means threat for business.

 This analysis is done mostly in strategic management.

 It helps in promotion and mark your standing in competitive environment. It

highlights our key selling point.

 AHP METHODOLOGY

There are four steps involved in AHP technique.

1. In step 1,selecting goal or objective of study, criteria and alternatives and

make hierarchical structure by keeping goal at top, criteria in level 2 and
alternatives in last level.

2. In step 2,we determine the relative importance of different criteria with

respect to goal. We will develop a pairwise comparison matrix with the help
of scale of relative importance.
 AHP METHODOLOGY

 In step 3,we will check consistency of the criteria weight calculated in step 2.

 In step 4,the last step of the Analytical hierarchical process we prioritize the

alternatives and rank them accordingly.

HIERARCHICAL STRUCTURE
PAIR WISE COMPARISON MATRIX

Table(2.1)
  Sustainability Adaptability Modernization Risk

Sustainability 1 3 5 7

Adaptability 1/3 1 3 5

Modernization 1/5 1/3 1 3

Risk 1/7 1/5 1/3 1

PAIR WISE COMPARISON MATRIX IN DECIMAL

Table (2.2)

  Sustainability Adaptability Modernization Risk

Sustainability 1 3 5 7

Adaptability 0.33 1 3 5

Modernization 0.2 0.33 1 3

Risk 0.14 0.2 0.33 1

FINDING SUM COLUMN WISE

Table (2.3)

  Sustainability Adaptability Modernization Risk

Sustainability 1 3 5 7

Adaptability 0.33 1 3 5

Modernization 0.2 0.33 1 3

Risk 0.14 0.2 0.33 1

Sum 1.67 4.53 9.33 16

NORMALIZE THE PAIR WISE MATRIX (DIVIDING EACH ENTRY IN COLUMN BY ITS
SUM)

Table (2.4)

  Sustainability Adaptability Modernizat Risk

ion

Sustainability 0.5988 0.6622 0.5359 0.4375

Adaptability 0.1976 0.2207 0.32154 0.3125

Modernization 0.1197 0.07284 0.1071 0.1875

Risk 0.08383 0.044 0.0353 0.0625

FINDING CRITERIA WEIGHT
 

Table (2.5)

  Sustainability Adaptability Modernization Risk Total Criteria

Weight

Sustainability 0.5988 0.6622 0.5359 0.4375 2.2344 0.5586

Adaptability 0.1976 0.2207 0.32154 0.3125 1.0523 0.2630

Modernization 0.1197 0.07284 0.1071 0.1875 0.4871 0.1217

Risk 0.08383 0.044 0.0353 0.0625 0.2256 0.0564

Consistency
Multiplying each column with criteria
weight
Table (2.6)
Criteria 0.5586 0.2630 0.1217 0.0564
Weights

  Sustainability Adaptability Modernization Risk

Sustainability 1*0.5586 3*0.2630 5*0.1217 7*0.0564

Adaptability 0.33*0.5586 1*0.2630 3*0.1217 5*0.0564

Modernizatio 0.2*0.5586 0.33*0.2630 1*0.1217 3*0.0564

n

Risk 0.14*0.5586 0.2*0.2630 0.33*0.1217 1*0.0564

 FIND RATIO OF WEIGHTED SUM
AND CRITERIA WEIGHT
Table (2.7)

Criteria 0.5586 0.2630 0.1217 0.0564      

Weights

  Sustainability Adaptability Modernization Risk Weighted sum Criteria weights Ratio

value

Sustainability 0.5586 0.789 0.6085 0.3948 2.3509 0.5586 4.2085

Adaptability 0.1843 0.2630 0.3651 0.282 1.0944 0.2630 4.1612

Modernizatio 0.1117 0.0867 0.1217 0.1692 0.4893 0.1217 4.0205

n

Risk 0.0782 0.0526 0.04016 0.0564 0.2273 0.0564 4.0312

 Calculating Priority for Alternatives
 
Table (2.8)

MCDM Sustainability Adaptability Modernization Risk Weighted Sum rank

Criterion Weight 0.5586 0.2630 0.1217 0.0564    

Mobile Phone 70 80 75 40 71.5255 1

Shop
Hardware Store 60 70 65 50 62.656 3

Medical Store 80 60 70 30 70.619 2

 
ALTERNATIVE SCORE

Table (2.9)

MCDM Sustainabili Adaptability Modernizati Risk Weighted rank

ty on Sum

Criterion 0.5586 0.2630 0.1217 0.0564    

Weight
Mobile Phone 70 80 75 40 71.5255 1
Shop
Hardware Store 60 70 65 50 62.656 3

Medical Store 80 60 70 30 70.619 2

 PROJECT ALTERNATIVES AND
EVALUATION

 Three alternative were compared with each of the criteria. Table 2.8,shows

specification for each criteria.

 Normally, these specifications are built through a lot of research and study.

 We chose a scale between 1 to 100. A score is a relative weight that we gave

to each alternative within each criterion.

TABLE 2.9 CALCULATION

 We compared each alternative with each criterion by rating it on a scale one

to hundred

 We calculated weighted sum each alternative

 We ranked the alternatives on the basis of their calculated weighted sums.

 RESULTS
 In the light of result evaluated by using Analytical hierarchy process AHP
We have concluded that
1. Mobile phone shop would be a profitable, valuable business to start in the
light of results provided by AHP
2. Medical Store ranked second in the list
3. Hardware Store third in the priority list for alternatives
 DISCUSSION

 AHP results are more reliable and it is considered market standard.

 AHP gives quantitative answer to your conflicting problems.

 Drawback of AHP is that it is too much laborious and data intensive.

 It becomes complex when number of criteria becomes large.

 SUMMARY

 Decision is part of life and in non programmed decision choice of optimum

decision is not an easy job.

 AHP provides us trustable recommendations. We found in given article that 3

out of ten project ranked at bottom was failed.

 AHP method is used in complex situation like investment in certain business

because it gives reliable results.

 In large context for us as a project it was a good learning.

 REFERENCES
 OLSON, D. L. (1996). Decision aids for selection problem AHP. In D. OLSON,
Decision aids for selection problem (pp. 1-189). Verla new York: springer.

 velasauez1, M., & Hester2, P. (2013). An Analysis of Multi criteria Decision

making methods. International Journal of Operation Research, vol 10,no2, 56-66.

 Assessment of techno entrepreneurship projects by using AHP by Zeynep Didem

Unutmaz Durmusoglu

 https://www.youtube.com/watch?v=J4T70o8gjlk

 https://www.youtube.com/watch?v=RLvDgwQZBoQ&t=1555s