Decision Stage:

The alternatives from the matching stage are evaluated in this stage for their relative importance. Decision Making involves setting priorities and the AHP is the methodology for doing that. This technique objectively indicates which alternative strategy is the best.

AHP for Decision Making The Analytic Hierarchy Process (AHP) is a multi-criteria decision-making approach and was introduced by Saaty (1977 and 1994). The AHP is a decision support tool which can be used to solve complex decision problems. It uses a multi-level hierarchical structure of objectives, criteria, sub-criteria, and alternatives. The pertinent data are derived by using a set of pairwise comparisons. These comparisons are used to obtain the weights of importance of the decision criteria, and the relative performance measures of the alternatives in terms of each individual decision criterion. If the comparisons are not perfectly consistent, then it provides a mechanism for improving consistency. AHP is a scientific way to make decisions that is practical, and both biologically and mathematically correct because it parallels our inborn talent to make pairwise comparisons among the elements being considered. It is not only the precision of measurement on a particular factor that determines the validity of a decision, but also the importance we attach to the factors involved. How do we assign importance to all the factors and synthesize this diverse information to make the best decision? Therefore, we preferred using AHP over QSPM. Refer Appendix for step by step details of the AHP calculation done. Following is the final Decision Matrices of Key Internal and External Criteria and resultant Grand Priority Total.
Key Internal Criteria PAN-India Market Brand Technology Financial Alternatives presence share image partnership status Promotions Final Priority 0.06 0.17 0.09 0.25 0.27 0.17 Rural Market 0.69 0.62 0.16 0.33 0.3 0.15 0.3502 VAS 0.23 0.3 0.66 0.57 0.62 0.2 0.4681 Leverage 4G 0.08 0.09 0.19 0.1 0.09 0.66 0.1987

Key External Criterias Capitalise Reduced on new competit Operating Govt. Final Alternatives revenues MNP iors expenses policies ARPU Price wars Priority 0.08 0.12 0.1 0.19 0.16 0.14 0.23 Rural Market 0.21 0.11 0.35 0.22 0.16 0.1 0.3 0.2154 VAS 0.66 0.38 0.48 0.63 0.54 0.33 0.54 0.5229 Leverage 4G 0.13 0.51 0.17 0.15 0.3 0.57 0.16 0.2817

Grand Final Alternatives Priority Rural Market 0.5656 VAS 0.991 Leverage 4G 0.4804

Result of AHP After applying AHP process used for decision making, clearly the Values-added Services (VAS) emerges as Top Priority i.e. we suggest Bharti Airtel to focus on VAS in Mobile Telephony in India.

Strategy in Action
Bharti Airtel's net profit fell for the tenth straight quarter, declining by 37 percent to Rs 762.2 crore in the April-June 2012 quarter as stiff competition squeezed margins. (PTI, 2012) Though Bharti Airtel has gained subscribers from smaller rivals including Loop and S Tel (whose licences were cancelled by the Supreme Court), but lower average revenue per user (ARPU) continued to trouble the company. The ARPU in the Q1 2012 stood at Rs 185 per month compared to Rs 190 in the same period last year and Rs 189 in the January-March 2012 quarter. As on June 30, 2012, the company had 187.3 million mobile customers on its network, of which 5.1 million were 3G customers. (PTI, 2012) The current tapering trend in new additions means operators should not rely solely on customer additions to sustain revenue growth. There is need for greater focus on improving ARPU. The launch of 3G-related services and flourishing software applications for the smartphone users will be major growth drivers that can boost the share of value added services (VAS) in revenue. Given their higher margins, VAS sales will definitely help to offset the impact of any fall in net subscriber additions in days ahead. India boasts 20 million smartphones, 500 million app downloads per month and, out of 100 million internet users, 48 million access the web through their mobile. Whats more, there are over 900 million wireless subscribers in India already, according to InMobi data. KPMG, the consultant and audit giant, estimates value-added services (VAS) for mobile phones would explode four folds over the next three years -- or be worth Rs48,200 crore by 2015 from Rs11,700 crore now. (Menezes, 2012) Besides basic texting, VAS consists of content relating to ABCD or astrology, Bollywood, cricket and devotional, along with ringtones, interactive voice response (IVR), voice portals, missed call alerts, mobile payments, education and healthcare alerts, weather updates, commodity prices, so on. Both ABCD and ringtones have been money-spinners for long.

VAS contributes 15% of total revenues of Airtel. In addition to anti-bulk SMS regulation, slashed revenue share and over-reliance on texting and ringtones, another problem has been troubling VAS players: skewed growth within segments, with data-based VAS outperforming voice-based VAS. While traditional VAS like CRBT, voice portals, IVR and missed call alerts are relatively better placed, utility-based VAS like mobile payments, education and healthcare alerts, weather updates and commodity prices are still at a nascent stage, but are set to take off in a big way in the next five years. Growth in smartphones, app stores and 3G dongles, and in data services like mobile internet, video and music downloads, will contribute over 50% of VAS revenues. Kunal Bajaj, partner at telecom analyst firm Analysys Mason predicts that VAS revenues will contribute 26% of cellular operators revenues by 2016.

Appendix AHP calculation The structure of the decision problem considered here consists of a number, say M, of alternatives and a number, say N, of decision criteria. Each alternative can be evaluated in terms of the decision criteria and the relative importance (or weight) of each criterion can be estimated as well. Let aij (i=1,2,3,...,M, and N=1,2,3,...,N) denote the performance value of the i-th alternative (i.e., Ai) in terms of the j-th criterion (i.e., Cj). Also denote as Wj the weight of the criterion Cj. A typical Decision Matrix:
C1 Alternative W1 A1 a11 A2 a21 A3 a31 .. .. .. .. .. .. AM aM1 Criterion C2 W2 a12 a22 a32 .. .. .. aM2 C3 W3 a13 a23 a33 .. .. .. aM3 CN WN a1N a2N a3N .. .. .. aMN

Given the above decision matrix, the decision problem considered in this study is how to determine which the best alternative is by determining the relative significance of the M alternatives when they are examined in terms of the N decision criteria combined. The first step in the AHP is the estimation of the pertinent data. That is, the estimation of the aij and Wj values of the decision matrix. Pairwise comparisons are quantified by using a scale. Such a scale is an one-to-one mapping between the set of discrete linguistic choices available to the decision maker and a discrete set of numbers which represent the importance, or weight, of the previous linguistic choices. Scale for Pairwise Comparisons 1 Equal importance

3 5 2, 4

Moderate to Essential importance of one over another Very Strong to extreme importance Intermediate values Used Reciprocals for Inverse Comparisons

In our case for selecting the best strategic decision for Airtel, there are three alternative decisions. Also, one of the decision criteria is Market Share (i.e., the subscriber market share of Bharti Airtel telecom services in India). Expanding into the Rural Market is better than providing Value-added Services, and Leveraging first mover advantage in 4G by Slashing Prices is the least desired one as far as the Market Share criterion is concerned. Following is the judgement matrix when the three alternative configurations are examined in terms of this criterion. Judgement Matrix Leverage first C1: Market Rural VAS mover share Market advantage in 4G by slashing prices Rural Market 1 3 5
VAS 1/3 1 5 Leverage first 1/5 1/5 1 mover advantage in 4G by slashing prices 1.53 4.20

11.00

The next step is to extract the relative importance implied by the previous comparisons. That is, how important are the three alternatives when they are considered in terms of the Market Share criterion? Saaty asserts that to answer this question one has to estimate the right principal eigenvector of the previous matrix. Given a judgment matrix with pairwise comparisons, the corresponding maximum left eigenvector is approximated by using the geometric mean of each row. That is, the elements in each row are multiplied with each other and then the n-th root is taken (where n is the number of elements in the row). Next the numbers are normalized by dividing them with their sum. Hence, for the previous matrix the corresponding priority vector is: (0.62, 0.30, and 0.09). Normalized Judgement Matrix with Priority Vector

C1: Market Rural Share Market

VAS

Rural Market 0.65 VAS 0.22 Leverage 0.13 first mover advantage in 4G by slashing

0.71 0.24 0.05

Leverage first mover advantage in 4G by slashing prices 0.45 0.60 0.45 0.09 0.29 0.08

Priority Vector

0.62 0.30 0.09

0.97

1.00

After the alternatives are compared with each other in terms of each one of the decision criteria and the individual priority vectors are derived, the synthesis step is taken. The priority vectors become the columns of the decision matrix. The weights of importance of the Key Internal and Key External Criteria are also determined by using pairwise comparisons.
Key Internal Criteria

PanMarket India Share presence Pan-India presence 0.06 0.07

Brand Image

Technology Financial Partnership Status

Promotions

0.03

0.05

0.06

0.07

0.05

0.06

Market 0.13 Share Brand 0.19 Image Technology 0.25 Partnership Financial 0.25 Status Promotion 0.13

0.14 0.05 0.27

0.24 0.08 0.24

0.11 0.07 0.22

0.45 0.08 0.11

0.05 0.07 0.27

0.15 0.08 0.22

0.17 0.09 0.25

0.07 0.41

0.24 0.16

0.44 0.11

0.23 0.08

0.41 0.14

0.23 0.15
0.88

0.27 0.17
1.00

Key External Criteria

Capitalizing MNP on New revenue Capitalizing 0.065574 0.046153846 on New revenue MNP 0.13 Reduced 0.13 competitors Operating Expenses 0.20 0.09 0.03

Reduced competitors

Operating Govt. policies Expenses

ARPU

Price Wars

0.04

0.05

0.03

0.39

0.06

0.06

0.08

0.23 0.08

0.08 0.05

0.04 0.04

0.10 0.05

0.06 0.50

0.09 0.08

0.12 0.10

0.18

0.23

0.15

0.22

0.05

0.08

0.14

0.19

Govt. policies 0.26 ARPU Price Wars 0.02 0.20

0.28 0.09 0.28

0.23 0.16 0.03

0.08 0.30 0.3

0.11 0.34 0.22

0.03 0.10 0.29

0.08 0.06 0.17

0.12 0.10 0.17

0.16 0.14 0.23

If a problem has M alternatives and N criteria, then the decision maker is required to construct N judgment matrices (one for each criterion) of order MxM. We had to develop 13 judgement matrices (for 6 internal criterion and 7 external criterion each) and 2 judgement matrix of order NxN (for the N criteria i.e. 6x6 matrix and 7x7 matrix).

Finally, given a decision matrix the final priorities, denoted by , of the alternatives in terms of all the criteria combined are determined according to the following formula. = , for i = 1, 2, 3,, M. =1

Decision Matrices

Key Internal Criteria PAN-India Market Brand Technology Financial Alternatives presence share image partnership status Promotions Final Priority 0.06 0.17 0.09 0.25 0.27 0.17 Rural Market 0.69 0.62 0.16 0.33 0.3 0.15 0.3502 VAS 0.23 0.3 0.66 0.57 0.62 0.2 0.4681 Leverage 4G 0.08 0.09 0.19 0.1 0.09 0.66 0.1987

Key External Criterias Capitalise Reduced on new competit Operating Govt. Final Alternatives revenues MNP iors expenses policies ARPU Price wars Priority 0.08 0.12 0.1 0.19 0.16 0.14 0.23 Rural Market 0.21 0.11 0.35 0.22 0.16 0.1 0.3 0.2154 VAS 0.66 0.38 0.48 0.63 0.54 0.33 0.54 0.5229 Leverage 4G 0.13 0.51 0.17 0.15 0.3 0.57 0.16 0.2817

Grand Final Alternatives Priority Rural Market 0.5656 VAS 0.991 Leverage 4G 0.4804