Multi Criteria Decision Making

Report on

“Analytic Hierarchy Process (AHP)”

Management Science

PRATYUSH PANDA | 18DM156 | PGDM | SECTION-C

Submitted To-
Dr. Harpreet Kaur
Assistant Professor
Introduction

ANALYTICAL HYRARCIAL PROCESS

The analytic hierarchy process (HP) is a structured technique for organizing and
analyzing complex decisions, based on mathematics and psychology. It was developed
by Thomas .L in the 1970s and has been extensively studied and refined since then.
It has particular application in group decision making, and is used around the world in a wide
variety of decision situations, in fields such as government, business, industry, healthcare,
shipbuilding and education.
The AHP provides a means of decomposing the problem into a hierarchy of subproblems
which can more easily be comprehended and subjectively evaluated. The subjective
evaluations are converted into numerical values and processed to rank each alternative on a
numerical scale. The methodology of the AHP can be explained in following steps:
Step 1: The problem is decomposed into a hierarchy of goal, criteria, sub-criteria and
alternatives. This is the most creative and important part of decision-making. Structuring the
decision problem as a hierarchy is fundamental to the process of AHP.
Step 2: Data are collected from experts or decision-makers corresponding to the hierarchic
structure, in the pairwise comparison of alternatives on a qualitative scale as described below.
Experts can rate the comparison as equal, marginally strong, strong, very strong, and
extremely strong.
Step 3: Once the hierarchy is built, the decision makers systematically evaluate its various
elements by comparing them to each other two at a time, with respect to their impact on an
element above them in the hierarchy. In making the comparisons, the decision makers can use
concrete data about the elements, but they typically use their judgments about the elements'
relative meaning and importance. It is the essence of the AHP that human judgments, and not
just the underlying information, can be used in performing the evaluations.
Step 4: The AHP converts these evaluations to numerical values that can be processed and
compared over the entire range of the problem. A numerical weight or priority is derived for
each element of the hierarchy, allowing diverse and often incommensurable elements to be
compared to one another in a rational and consistent way. This capability distinguishes the
AHP from other decision-making techniques.

Step 5: In the final step of the process, numerical priorities are calculated for each of the
decision alternatives. These numbers represent the alternatives' relative ability to achieve the
decision goal, so they allow a straightforward consideration of the various courses of action.
Problem Statement
The problem was to decide by the decision maker that which car is considered to be most
appropriate based on certain parameters. Following are the Cars -
1. HONDA BRIO
2. MARUTI SUZUKI ALTO
3. HYUNDAI EON
4. FORD FIGO
5. TATA TIGOR

Out of the 5 alternatives, he has to choose the most suitable one on the basis of following
criteria-
1. QUALITY
2. BRAND IMAGE
3. PRICE
4. SAFETY
5. MILEAGE

In this decision, the individual has to rate each and every alternative in comparison to other in
order to arrive at a decision. But in order to draw a conclusion on the basis of analysis. Data
was collected by the respondents.
METHODOLOGY
This report finds the mapping of customer orientation for car manufacturing companies in
India.

STEPS
1. This Criteria * Criteria matrix is based on the ratings received as response from the
respondents

Criteria
Quality 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Brand image
Quality 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Price
Quality 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Safetys
Quality 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Mileage
Brand image 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Price
Brand image 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Safetys
Brand image 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Mileage
Price 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Safetys
Price 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Mileage
Safetys 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Mileage

2.The same process is followed for every criteria for the companies.
Example – For quality , customers prefer Maruti Suzuki Alto over Honda Brio.

Maruti
Honda Brio 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Suzuki Alto

For Brand Image, customers prefer Hyundai Eon more than Ford Figo. And so on.

Hyundai Eon 9 8 7 6 5 4 3 2 1 2 3 4 5 6 7 8 9 Ford Figo

2. After the preparation of Saaty Scale Matrices for the Criteria and the Companies, we
prepare another table for each matrix filled with weightage as mentioned in their
respective Saaty Matrix.

Example – Below is the weightage table for Criteria x Criteria matrix.

Quality Brand image Price Safety Mileage

Quality 1.00 3.00 0.50 7.00 3.00
Brand image 0.33 1.00 0.25 0.20 0.25
Price 2.00 4.00 1.00 3.00 2.00
Safety 0.14 5.00 0.33 1.00 0.33
Mileage 0.33 4.00 0.50 3.00 1.00
TOTAL 3.81 17.00 2.58 14.20 6.58

3. Similarly do this for the companies based on each criteria.

 Analysis
The weights/priority vectors calculated for comparing the importance of every criterion are
analysed below :

1. CRITERIA

Criteria
Quality Brand image Price Safetys Mileage Weights
Quality 0.26250 0.17647 0.19355 0.49296 0.45570 0.31624
Brand image 0.08750 0.05882 0.09677 0.01408 0.03797 0.05903
Price 0.52501 0.23529 0.38710 0.21127 0.30380 0.33249
Safety 0.03749 0.29412 0.12903 0.07042 0.05063 0.11634
Mileage 0.08750 0.23529 0.19355 0.21127 0.15190 0.17590
1.00000
Average 5.72709
Consistency Index (CI) 0.18177
Random Index (RI) 1.12000
Consistency Ratio (CR) 0.16230

2. QUALITY

Honda Maruti Suzuki Ford Tata

Brio Alto Hyundai Eon Figo Tigor PRIORITY
0.05556 0.05400 0.01478 0.03030 0.09449 0.04982
Honda Brio
Maruti Suzuki 0.22222 0.21598 0.47291 0.48485 0.15748 0.31069
Alto
0.44444 0.05400 0.11823 0.18182 0.15748 0.19119
Hyundai Eon
0.11111 0.02808 0.03941 0.06061 0.11811 0.07146
Ford Figo
0.16667 0.64795 0.35468 0.24242 0.47244 0.37683
Tata TIgor
1.00000
Average 5.64111
Consistency Index (CI) 0.16028
Random Index(RI) 1.12000
Consistency Ratio (CR) 0.14311
 3. BRAND IMAGE

Honda Maruti Suzuki Ford Tata

Brio Alto Hyundai Eon Figo TIgor PRIORITY
Honda Brio 0.07143 0.02724 0.08511 0.05882 0.10204 0.06893
Maruti Suzuki
Alto 0.35714 0.13619 0.06383 0.41176 0.20408 0.23460
Hyundai Eon 0.21429 0.54475 0.25532 0.17647 0.20408 0.27898
Ford Figo 0.07143 0.01945 0.08511 0.05882 0.08163 0.06329
Tata TIgor 0.28571 0.27238 0.51064 0.29412 0.40816 0.35420
1.00000
Average 5.56830
Consistency Index (CI) 0.14208
Random Index(RI) 1.12000
Consistency Ratio (CR) 0.12685

4. PRICE

Honda Maruti Suzuki Ford Tata

Brio Alto Hyundai Eon Figo TIgor PRIORITY
Honda Brio 0.08235 0.04959 0.04348 0.10714 0.52500 0.16151
Maruti Suzuki
Alto 0.41177 0.24793 0.26087 0.21429 0.15000 0.25697
Hyundai Eon 0.16471 0.08264 0.08696 0.10714 0.02500 0.09329
Ford Figo 0.32941 0.49587 0.34783 0.42857 0.22500 0.36534
Tata TIgor 0.01176 0.12397 0.26087 0.14286 0.07500 0.12289
1.00000
Average 6.58076
Consistency Index (CI) 0.39519
Random Index(RI) 1.12000
Consistency Ratio (CR) 0.35285
 5. SAFETY

Honda Maruti Suzuki Ford Tata

Brio Alto Hyundai Eon Figo TIgor PRIORITY
Honda Brio 0.17544 0.42553 0.07463 0.12500 0.21898 0.20392
Maruti Suzuki
Alto 0.03509 0.08511 0.29851 0.25000 0.08759 0.15126
Hyundai Eon 0.35088 0.04255 0.14925 0.31250 0.14599 0.20023
Ford Figo 0.08772 0.02128 0.02985 0.06250 0.10949 0.06217
Tata TIgor 0.35088 0.42553 0.44776 0.25000 0.43796 0.38243
1.00000
Average 6.02261
Consistency Index
(CI) 0.25565
Random Index(RI) 1.12000
Consistency Ratio
(CR) 0.22826

6. MILEAGE

Honda Maruti Suzuki Ford Tata

Brio Alto Hyundai Eon Figo TIgor PRIORITY
Honda Brio 0.11650 0.40000 0.26667 0.30769 0.03628 0.22543
Maruti Suzuki
Alto 0.03883 0.13333 0.13333 0.15385 0.22676 0.13722
Hyundai Eon 0.02913 0.06667 0.06667 0.07692 0.05669 0.05921
Ford Figo 0.11650 0.26667 0.26667 0.30769 0.45351 0.28221
Tata TIgor 0.69903 0.13333 0.26667 0.15385 0.22676 0.29593
1.00000
Average 5.90098
Consistency Index
(CI) 0.22525
Random Index(RI) 1.12000
Consistency Ratio
(CR) 0.20111
Results

Row Averages Matrix

Honda Brio 0.04982 0.06862 0.12054 0.22801 0.24372
Maruti Suzuki Alto 0.31069 0.22740 0.26856 0.17829 0.15112
Hyundai Eon 0.19119 0.28048 0.09492 0.19976 0.05684
Ford Figo 0.07146 0.06544 0.38360 0.06108 0.28918
Tata TIgor 0.37683 0.35806 0.13237 0.33286 0.25914

Criteria Weights R. A. Matrix * Criteria

Honda Brio 0.27503 Weights
Maruti Suzuki Alto 0.06244 Honda Brio 0.13470
Hyundai Eon 0.34624 Maruti Suzuki
Ford Figo 0.13458 Alto 0.24409
Tata TIgor 0.18170 Hyundai Eon 0.14018
Ford Figo 0.21733
Tata TIgor 0.26372
Final Rankings Ranking
Tata TIgor 26% 1
Maruti Suzuki
Alto 24% 2
Ford Figo 22% 3
Hyundai Eon 14% 4
Honda Brio 13% 5
Total 100%

All the criteria based company matrices are contained in Row Average matrix.
All the average values from the criteria matrix are contained in Criteria Weights matrix.
The result from Matrix multiplication of R.A Matrix and Criteria Weight Matrix are contained
in Matrix “R.A Matrix * Criteria Weights”.
The percentages showing the preference of customers towards choosing a car is shown based
on the criterion.
The percentage of preference of customers from the most preferred to the least preferred is
shown in the Final Rankings.
From the analysis we conclude that Tata Tigor is the most preferred car by the decision maker
while Honda Brio is the least preferred car as per the alternatives.