Using the Analytic Hierarchy Process for Small Business Decision Making

By Armacost, Robert L.; Hosseini, Jamshid C. et al. | Akron Business and Economic Review, Spring 1990 | Go to article overview

Using the Analytic Hierarchy Process for Small Business Decision Making


Armacost, Robert L., Hosseini, Jamshid C., Javalgi, Rajshekhar G., Akron Business and Economic Review


Using The Analytic Hierarchy Process For Small Business Decision Making

Small businesses face many of the same decisions as the largest corporations do, but they may not have the resources necessary to develop the information required to make the same quality decisions. Recently, managers of small businesses have identified a need to use various market research/decision analysis tools in order to assess their internal and external environments[9]. For example, managers may attempt to evaluate consumer perceptions of the firm's products in relation to those of its competitors in order to determine an appropriate marketing strategy. As another example, the senior management may be asked to evaluate several alternative business strategies where some of the factors to be considered are not directly measurable, such as "reputation." In a large corporation, these problems are usually handled either with the help of a large internal staff or by spending a large sum on hiring an outside consultant. Most small businesses neither have a large support staff nor the financial flexibility to afford a consultant.

In the above examples, multiple criteria would be used to evaluate several alternatives (e.g., products, strategies). Measuring and interpreting these judgments are difficult, and the analytical methods are often quite complex. Saaty[11] developed an approach to evaluate judgments called the Analytic Hierarchy Process (AHP) that has been used successfully in many decision situations. This approach is well suited for problems where the criteria are qualitative and have a large subjective component, thus requiring judgments. It provides the capability to accommodate some of the behavioral and political factors that influence the decision process. In a small business environment where there may be less opportunity for extensive analysis, these subjective factors may play a more important role in decision making than they do in a much larger organization.

AHP can be used by management to evaluate alternative actions directly or to estimate user preferences for various products, which would then lead to some management action. Preferences are obtained from individuals separately or from a group of individuals. All possible combinations of these situations can arise in the context of small business decision making. Most of the applications of AHP have involved an individual decision maker directly evaluating alternatives. The purpose of this paper is to describe the nature of AHP, illustrate one application involving the evaluation of alternative products by consumers and the subsequent managerial implications, suggest how AHP may be used in many small business applications, and provide some implementation guidance for AHP.

THE ANALYTIC HIERARCHY PROCESS

The Analytic Hierarchy Process is a method used to assist decision makers in evaluating multiple attribute alternatives. There are three basic elements in using AHP: (1) describe a complex decision problem as a hierarchy, (2) use pairwise comparisons to estimate the relative importance of the various criteria on each level of the hierarchy, and (3) integrate the pairwise comparisons to develop an overall evaluation of the decision alternatives.

Hierarchies are basic to the human way of breaking reality into levels. Conceptually, a decision problem consists of various levels representing the focus (objective), the criteria and/or subcriteria, and the decision alternatives. A graphical representation of a simple hierarchy is presented in Figure I.

Identification of the decision hierarchy is the real key to success in using AHP. A decision maker, including the small business decision maker, must know what kinds of criteria are important for evaluating a set of decision alternatives. Developing a decision hierarchy forces the decision maker to be explicit about what those criteria are. A particular advantage of AHP is that it permits the inclusion of subjective criteria in arriving at a recommended decision. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Using the Analytic Hierarchy Process for Small Business Decision Making
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.