Analytical Hierarchy Process Method To Prioritize Automobile Purchase Commerce Essay

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Everyday people make decisions. We may have to make simple decisions such as what clothes to wear today, what kind of food to eat during lunch and probably who is the correct person to be friend with. Somehow we might have to deal with major decision or making once in a life time decision such as: a decision to get married, a decision to buy a house, a decision to apply for a loan and a decision that also includes that of purchasing a car.

As time moves on, needs and demands change. Almost everyone needs transportation as a medium to travel. Transport is a human important need next to other basic needs such as foods, clothes and houses. Nowadays, car is the number one ranking in the list of major transports. Other than a house, a car is perhaps the largest purchase that we make. Byun (2001) addressed that cars touch the lives of hundreds of millions of people nearly everywhere on this planet on a daily basis.

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Today, cars are technologically advanced. At the same time, people have become more demanding. When someone decides to purchase a car, the model is chosen according to its performance, safety, exterior and other factors. Furthermore, car buyers want a car that suits their needs, styles, career and family too. Among all these criteria, we might want to know what car buyers have in mind when purchasing a car. This issue has been discussed by Byun (2001) and Norhaslinda et al. (2003).

The major purpose for people to buy a car is for travelling either to workplace or anywhere else. This includes the academic staffs of International Education Center (INTEC) Kampus UiTM Section 17, Shah Alam. Making decision in purchasing a car is important aspect among university staffs since a lot of criteria needs to be taken into account. Most academicians have no fix working hours. Sometimes they need to stay after working hours due to extra classes or examinations which are normally held at night and also over the weekends. Therefore, a reliable car with security features might be one of the criteria that should be put into consideration, specifically by female academicians. They might also need a compact and economic car with low fuel consumption for their living since INTEC is located at the center of Shah Alam city. Therefore a proper technique is needed to guide the academician to select a suitable car.

The proposed technique which is Analytic Hierarchy Process (AHP) will help car buyers to make decision in proper manner and reducing the percentage of dissatisfaction. Multi criteria decision making analysis requires people to select their car in an objective manner, taking all factors and their own priorities into account.

Therefore, in this study, the researchers examined the priority of criteria involved in selecting a car by using the multi criteria decision making analysis specifically the AHP method. Research questions regarding the factors that INTEC staff focuses on and the most important criteria in selecting a car are hopefully answered. This study lead to useful findings and will be able to provide information to the manufacturers to improve their products. Views from the staff as car buyers (criteria that should be considered) are very important for the automobile industry since they are part of the major car buyers in Malaysia. Doing so, they can discover customers’ needs and preferences. Besides that, our national cars can be more competitive in the world market.

There are two objectives to be fulfilled in this study:

To determine the priority of automobile purchase criteria.

To determine the differences of ranking the criteria based on gender and marital status.

This research was only focusing on the expectation of car buyers for the purchase of new cars. One of the assumptions implicit in employing this technique was that the respondents making the choices and paired comparison are mature enough to know the correct priorities. The study also assumes that the respondents are able to compare two or more cars on each of the attribute. In many cases it may so happen that the respondents have never experienced with listed car; hence, it becomes impossible to make objective comparison with other cars on many of the attributes. The gap has been overcome by providing sufficient information to the respondents.

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In this research, the choices of cars were limited to the national cars that are still being manufactured by Proton and Perodua.

The models of cars are as listed:

Proton (Perdana, Saga, Satria-Neo, Gen-2, Waja Campro, Savvy, Persona, Chancellor).

Perodua (Kancil, Kenari, Rusa, Viva, MyVi).

2 Literature review

2.1 Criteria involved in buying a car

Buying a car is the one of most important decision making. There are many criteria to look at. Byun (2001) listed seven criteria in the selection of a car model. Each criterion has its own attributes. The criteria and attributes were listed in Table 1:

Table 1: The criteria in car selection

Criteria

Attributes

Exterior (E)

Model, style, length, decoration, colour type, instrument cluster

Convenience (C)

In side width, loading, operating, fitting, visibility, audio system

Performance (P)

Torque, speed, fuel tank, braking, cornering, noise, comfort

Safety (S)

Air bags, impact, trunk, seat belt, body, alarm

Economic aspect (EA)

Price, fuel, insurance, resale, equipment

Dealer (D)

Visit, attitude, expertise, belief

Warranty (W)

Service station, spare part, satisfaction, repair time

2.2 The Analytical Hierarchy Process (AHP)

In multi criteria decision making, a technique called Analytic Hierarchy Process (AHP) provides a structure on decision-making process. AHP is an approach to decision making that involves structuring multiple choice criteria into a hierarchy, assessing the relative importance of these criteria, comparing alternatives for each criterion, and determining an overall ranking of the alternatives. The concept of AHP was developed, amongst other theories, by Thomas Saaty, an American mathematician working at the University of Pittsburgh (Power, 2007).

The practice of AHP can be applied in various fields as discussed by Gibney and Shang (2007), Ray (2007), Liberatore and Nydick, (2007), Sirikrai and Tang (2006), Byun (2001) and Norhaslinda et al. (2003). In the automotive industry, Sirikrai and Tang (2006) present an AHP-based model to comprehensively explore the varying degrees of importance among the indicators and drivers of industrial competitiveness. The model helps to identify the degree to which organizational performance indicators are important when assessing industrial competitiveness. Furthermore, it helps to evaluate the importance of particular factors that drive firms to perform better. The paper presents an application of this model by applying it to the automotive components industry in Thailand.

On the other hand, Norhaslinda et al. (2003) studied the AHP approach for selecting a car among the academic staff in Northern University of Malaysia. They found that there are six criteria to be considered. The criteria were ranked orderly. The first criterion was safety, followed by economic aspect, maintenance, performance, convenience and design. Therefore, this study will contribute to another AHP application in the automobile industry. The focus is on the use of the AHP method to analyze automobile purchase criteria, hence lead the decision maker to purchase a suitable car.

3 Methodology

This study was conducted in two phases. The first phase was the formulation phase where the basic selection problem was formulated as a multi criteria decision making problem. The second phase was the demonstration phase where the formulated problem was actually applied on a set of participants in the study to come out with conclusions for future research. The whole process started with (1) problem definition, (2) instrument and information gathering, and (3) data analysis.

Data collection was conducted in two phases by using two sets of questionnaires. In the first phase, a survey of car popularity was conducted. A set of questionnaire was used as the instrument. There were 22 respondents for this survey. In the questionnaire, they were asked to rate (score of 1 to 5) all national car models in Malaysia. 13 different cars from national car manufacturers (Proton and Perodua) were listed as alternatives. The cars were Proton (Perdana, Saga, Satria Neo, Waja Campro, Gen-2, Savvy, Persona, and Chancellor) and Perodua (Kancil, Kenari, Rusa, Viva, MyVi). Five cars which received the highest mean were included in the Second Phase Survey.

In the second phase of the data collection, the selection problem was then formulated using the seven elements that serve as the criteria for selection. The criteria which were adopted from Byun (2001) were exterior, convenience, performance, safety, economic aspect, dealer, warranty. Pilot test was conducted to test the second phase questionnaire. These will guide the researchers to construct a good questionnaire before distributing it to the respondents.

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The actual questionnaire that used AHP approach was distributed after the pilot test has been done. For the purpose of this approach, convenience sampling of size 65 was used in this study (source from Registrar’s Office, total number of academic staff in INTEC was 124 in August 2008). In the AHP method, the respondents had to determine how well each alternative scores on a criterion by using pair wise comparison. In the pair wise comparison, the respondents compared two alternatives according to one criterion and indicate a preference (Taylor, 2007).

The respondents were required to answer two sections (Refer Table 2). In the first section, respondents were required to give their demographic particulars. In the second section, all the respondents participated in the study were required on rating the pair wise comparison of the seven criteria and alternatives. They were asked to rate the pairs on the basis of what they think one should feel important in selecting a car. The AHP formulation was then solved.

Data Analysis Approach

Saaty (1980) developed the Analytic Hierarchy Process (AHP) to enable decision making in situations characterized by multiple attributes and alternatives. AHP allows selection and priority ordering of alternatives based on multiple criteria. It is a decision tool that structures a complex decision problem in a hierarchical fashion, allowing comparison of tangible and intangible factors, and sets priorities among alternative course of action (Foreman & Gass, 2001). Saaty (1980) developed the following steps for applying the AHP:

Define the problem and determine its goal.

Elicit pair wise comparisons between the factors using inputs from decision makers.

-Pair wise comparison of the elements will allow the derivation of priority/significance weights for the elements. While comparing two elements we followed the simple rule as recommended by Saaty (1980), though more complicated methods using fuzzy triangular numbers were often used to impute values to linguistic variables. The valued assigned to a comparison can range from 1/9 to 9, where 1/9 would imply that the one element is extremely less important than the other and 9 implies that the element is extremely more important than the other (Saaty, 1980).

Table 2: Preference scale for pair wise comparison

Preference level

Numeric Value

Equally preferred

1

Equally to moderately preferred

2

Moderately preferred

3

Moderately to strongly preferred

4

Strongly preferred

5

Strongly to very strongly preferred

6

Very strongly preferred

7

Very strongly to extremely preferred

8

Extremely preferred

9

Evaluate relative importance weights at each level of the hierarchy.

Combine relative importance weights to obtain an overall ranking of the candidate alternatives.

-Using the principle of hierarchical composition, synthesize all the local set of weights and obtain the set of overall or global weights for the alternatives. The alternative that receives the overall highest weight with respect to the goal of the problem is selected as the best. Figure 1 presents the decision problem as formulated under AHP.

Car Selection

C

E

W

P

S

EA

D

CAR 1

CAR 5

CAR 2

CAR 3

CAR 4

Figure 1: Hierarchical structure of the car selection problem

The top level of the hierarchy represents the objective of the decision problem. In this case, selection of the car was the decision problem being addressed. The set of choices from which a selection has to be made was the last level of the hierarchy. There were five choices to be considered. This level can have as many alternatives as one wishes without the need to modify the process of obtaining the preference weights. The various criteria that need to be satisfied and any categorization of such criteria make up the middle level of the hierarchy. The problem formulated above was that of selecting a car from the five alternatives, Car 1, Car 2, Car 3, Car 4 and Car 5. The decision will be based on the relative importance of the elements for the respondents and the degree of fulfillment of the elements by each of the car. Car with the highest total rating, which was obtained through a synthesis process, was the one to be selected.

4 Data Analysis and Findings

4.1 First phase analysis

The objective of this survey was to determine five national car models that received the highest mean. Then, the five car models were then included in the Second Phase Survey. 13 different cars from two national car manufacturers (Proton and Perodua) were listed as alternatives. Ratings from 22 respondents are shown in Table 3. It shows that five cars which received the highest mean in descending orders are Perodua Myvi, Perodua Kancil, Proton Gen-2, Proton Waja Campro and Proton Perdana with means 4.68, 4.41, 3.95, 3.73, and 3.73 respectively.

Table 3: Mean value for car models

Car Model

Mean Value

Perodua Kenari

1.02

Perodua MyVi

4.68

Perodua Kancil

4.41

Proton Gen2

3.95

Proton Waja Campro

3.73

Proton Perdana

3.73

Perodua Viva

3.36

Proton Persona

3.32

Proton Saga

3.23

Proton Satria Neo

3.09

Proton Savvy

2.86

Perodua Rusa

1.91

Proton Chancellor

1.82

4.2 Second phase analysis

4.2.1 Descriptive analysis

The summary of the respondents’ profile is tabulated in the following tables.

Table 4: Summary of distributed and returned questionnaire

Staff

Number of questionnaire

Target sample

Consistent

Academic staff

65

57

There were 88 questionnaires randomly distributed to the academic staff in INTEC. However, only 65 were returned. From the 65 questionnaires, there were 57 respondents that could be considered as consistent in answering the questions. Consistent in AHP technique is referred to the value of Consistency Ratio (CR). The CR was extracted from the analysis done using Expert Choice 11.5. The CR values will be accepted if it does not exceed 0.10. If it is more, the judgment matrix of AHP is inconsistent. So, the questionnaire was excluded.

Table 5: Summary of respondents according to age group

Age group

Frequency

Percent

<25

17

29.8

25-39

32

56.1

>40 or equal

8

14.0

Total

57

100.0

Based on Table 5, more than half of the respondents are in the age group 25-39. This finding is quite similar to INTEC academic staff population where more than half of the academicians are in the age of 25-39. Only 14% (8) of the respondents are 40 years old and above. Meanwhile, 30% (17) of respondents are younger than 25.

Table 6: Summary of respondents according to gender

Gender

Frequency

Percent

Male

14

24.6

Female

43

75.4

Total

57

100.0

In Table 6, 75% of the respondents are female. This finding supports the scenario that the female are the majority gender in education field. Males are only 27% (25).

Table 7: Summary of respondents according to marital status

Marital Status

Frequency

Percent

Single

31

54.4

Married

26

45.6

Total

57

100.0

Table 7 shows that the respondents are quite equal value in terms of marital status. 46% of the respondents are married while the rest are still single.

4.2.2 The priority of automobile purchase criteria

All questionnaires in Second Phase were analyzed using the AHP procedure. The analyses were done by using Expert Choice 11.5. The first step is to determine the consistency value of each questionnaire. Results showed that from 65 distributed questionnaires, 57 (88%) were consistent. Inconsistent questionnaire will not be included in the analysis. Overall analyses were done to see the relative importance weights obtained by all factors. The results are shown in Table 8. It shows that the weight for performance is 0.1762 which is the highest score among the other 6 criteria. The other criteria scored are; safety (0.1758), economic aspect (0.1713), warranty (0.1425), exterior (0.1221) and dealer (0.0806).

Table 8: The level of importance for criterion in car selection

Criteria

Weight

Ranking

Performance

0.176294

1

Safety

0.175778

2

Economic aspect

0.171254

3

Warranty

0.142547

4

Convenience

0.131491

5

Exterior

0.122104

6

Dealer

0.080620

7

4.2.3 Priority of automobile purchase criteria based on gender

Table 9 shows that males focus more on the performance of the car, the economic aspects and safety before buying a car. While for the female respondents, they prioritize more on safety, performance and economic aspects. Both have the same preference in ranking the other criteria. They agreed that warranty, convenience, exterior and dealer are less important.

Table 9: The priority of automobile purchase criteria based on gender

Exterior

Convenience

Performance

Safety

Economic

Dealer

Warranty

Male

0.1220

0.1343

0.1809

0.1665

0.1782

0.0787

0.1395

Rank

6

5

1

3

2

7

4

Female

0.1221

0.1306

0.1748

0.1788

0.1690

0.0812

0.1435

Rank

6

5

2

1

3

7

4

4.2.4 Priority of automobile purchase criteria based on marital status

The priority of automobile purchase criteria based on marital status is reported in Table 10. The respondents who are single preferred to look at the economic aspects first compared to those who are married who focus more on the performance of the car. Both of the two groups agreed that safety is the second factor that needs to be considered. They also agreed that the dealer is the least importance aspect to look at before purchasing a car.

Table 10: The priority of automobile purchase criteria based on marital status

Exterior

Convenience

Performance

Safety

Economic

Dealer

Warranty

Single

0.1081

0.1434

0.1723

0.1729

0.1734

0.0895

0.1406

rank

6

4

3

2

1

7

5

Married

0.1388

0.1173

0.1811

0.1792

0.1687

0.0700

0.1448

rank

5

6

1

2

3

7

4

Summary and conclusion

The automobile purchase criteria and the selection of car were analyzed by the Analytical Hierarchy Process method. From the analysis, automobile purchase criteria; performance, safety, economic, warranty, convenience, exterior and dealer were rated in a descending manner. Car performance, as one of the decision making criteria was found to have the highest weight. This finding is consistent with the finding from Byun (2001). Byun’s finding indicated that safety is the top priority, performance as the second factor, followed by economic aspect, exterior, convenience, warranty and dealer. Byun listed down seven sub-criteria related to safety, which are body of the car, seat belts, ABS, alarm, airbags, impact and trunk. In terms of performance, seven sub-criteria have also been considered; braking, noise, cornering, speed, torque, comfort and fuel tank.

We found that the male respondents gave higher priority to the performance of the car compared to the female who were prioritizing more on safety. It is common that men always look at the performance of cars and women more to safety. They agreed that warranty, convenience, exterior and dealer are less important when choosing the right car.

In terms of marital status, respondents who were singles considered the economic aspect, safety, and performance of the car as criteria in their decision making. However, for those who were married with children, they preferred to look at the performance of the car. The respondents who were married without children agreed that they would consider safety and economic aspects. The respondents who were singles focused more on the economic aspect, perhaps they might be saving money for future plans like wedding.