Development of decision support system for evaluating the new business

Abstract

New business is important because it provides the future growth and the profitability of a company under competition. Because new business generally requires large cash resources and has high failure rates, the evaluation of new business opportunities and their selection are very critical decisions to companies. In making these decisions, a number of screening criteria can be used such as market attractiveness and business strength. However there are so many criteria to be applied and it is difficult to determine their relative importance because the importance of each criterion may differ according to the company``s situations. In addition, the new business opportunities should be evaluated consistently, exactly and rapidly because there can be many proposals of new business. Under such considerations, the decision support system which deals with a large number of criteria, manages their relative weights, and synthesizes the scores for them would be an appropriate tool for new business evaluation. To obtain the relative weights of criteria, the analytic hierarchy process can be applied easily. The developed DSS can derive the weights, check their consistencies, and modify the set of criteria. In evaluating the new businesses, companies generally consider their profitability. Therefore the DSS for new business evaluation also should manipulate the financial data and calculate the profitability values of new business. These should be incorporated with the scores of other criteria in the evaluation. Doing this, the developed DSS uses the calculated profitability values directly in the evaluation which is based on the AHP without performing the pairwise comparisons for the criteria related to the profitability.