The For site Company is screening three ideas for new service. Resource constrai

Question

The For site Company is screening three ideas for new service. Resource constraints allow only one idea to be commercialized at the present time. The following estimates have made for the five performance criteria that management believes to be most important:

A. Use a preference matrix and assume equal weights for each performance criterion. Which alternative is best? Worst?

B.Suppose that the expected ROI is given twice the weight assigned to each of the remaining criteria. (Sum of weights should remain the same as in part (a).) Does this modification affect the ranking of the three potential services?

performance criterion service a service b service c capital equipment investment required 0.6 0.8 0.3 expected return on investment (ROI) 0.7 0.3 0.9 compatbility with current workforce skills 0.4 0.7 0.5 competitive advantage 1 0.4 0.6 compatibility with EPA requirments 0.2 1 0.5

Explanation / Answer

A)

For each type of service, add the values of all the criterion

Service A = 0.6+0.7+0.4+1+0.2 = 2.9

Service B = 0.8+0.3+0.7+0.4+1 = 3.2

Service C = 0.3+0.9+0.5+0.6+0.5 = 2.8

Hence, Best is Service B and Worst is Service C

B)

Now weight of Expected ROI is twice to that of other 4 criteria but total weight should remain same

So, let the weight of other criteria is 1 and of expected ROI as 2.

Total overall weight will be = 1+2+1+1+1 = 6. But, it was 5 initially.

Hence, actual weight of expected ROI will be 2/6*5 = 1.67

Actual weight of other 4 criteria = 1/6*5 = 0.83

Service A = 0.6*0.83+0.7*1.67+0.4*0.83+1*0.83+0.2*0.83 = 3.00

Service B = 0.8*0.83+0.3*1.67+0.7*0.83+0.4*0.83+1*0.83 = 2.92

Service C = 0.3*0.83+0.9*1.67+0.5*0.83+0.6*0.83+0.5*0.83 = 3.08

Best is Service C and Worst is Service B

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