TUTORIAL 10

MANAGERIAL DECISION MAKING

Analytical Hierarchy Process

PROBLEM 1

Shali, an FEUI alumnus who has worked in a multinational company for five years, has a desire to
buy a brand new phone. He is looking for the most sophisticated new product with a budget of around
7 until 10 million rupiah. After doing some simple research, he has determined three products that he
wants to buy, namely, Blackberry, iPhone, and Samsung. However, Shali is confused about which
product to buy. Price is not a problem for him.

From the vendors selling these products, Shali knows that Blackberry connectivity is three times
faster than iPhone and four times faster than Samsung, while iPhone connectivity is slightly better
than Samsung, which is twice. For product design, Shali likes Samsung three times better than
Blackberry and five times better than iPhone. When weighed between blackberry and iPhone, he likes
Blackberry twice than iPhone. Shali also considers after-sales services, such as after-sales warranty,
provision of accessories, maintenance services, and supporting facilities. According to information he
got from a friend who works at one of the leading telecommunications companies, iPhone has better
after-sales service among the other two products, which is four times better than Samsung and twice
as good as Blackberry. Blackberry has a much better after-sales service than Samsung, at five times.

Shali has subjective judgments regarding these selection factors. He considered that connectivity was
five times more important than design and three times more important than after-sales service.
After-sales service is four times more important than design. Incidentally, you and Shali live together
in an apartment at Margonda. Shali asked for your help to solve the problem because he knows you
just passed the course of Managerial Decision Making.

Help Shali solve his problem by answering the following questions:

a. Your analysis includes calculation steps, a hierarchical structure for decision making, and
interpretation of the results.

b. What should you do if the consistency ratio is inconsistent? Relate your answer to the case above.

PROBLEM 2
RAF is considering buying an iPod. From Apple's official website, RAF acquired the following
information.

Attributes iPod iPod iPod

Shuffle Nano Touch

Price $49 $149 $249

Capacity 2 Gb 16 Gb 32 Gb
Battery Life Audio playback up Audio playback up Audio playback up
to 15 hours to 30 hours to 40 hours

Weight 12.5 grams 31 grams 88 grams

Questions:
1. RAF wanted an iPod at a low price, great capacity, long battery life, and lightweight. Create
a matrix of pairwise comparisons for each iPod alternative. Use the Saaty scale 1 to 9 using
your logic based on the information above.
2. A major consideration in choosing an iPod is lifetime battery because RAF has a lot of
outdoor activities. Then, the next consideration is weight, capacity, and price, respectively.
Based on these considerations, calculate the weight using the reciprocal weight method with
the following formula.

3. Which iPod alternative should RAF choose?

Hint: Use the weight from the calculation in point (b) as the eigenvector (preference vector or
normalized value) of the comparison criteria and use the normalized result from point (a) as
an eigenvector for comparison of alternatives on each criterion.