PLANNING AND DECISION-MAKING 2
Abstract
Planning and decision-making is crucial for the success and sustainability of any organization in
any business environment or industry. Previous studies have shown that success and
sustainability requires careful planning and decision-making to ensure that financial resources
are strategically allocated in a manner that aligns with the firm’s objectives and maximizes value
creation. Traditional decision-making styles with subjectivity at its core, tend to be more costly
and dent the competitive advantage of organizations. This study uses Analytic Hierarchy Process
(AHP) with prioritization and objectivity at its core, to address managerial decision-making and
planning issues that may arise in strategically allocating financial resources. The study aims to
show how Image Skincare LLC can benefit from the use of AHP in supplier selection planning
and decision-making process. The application of AHP in the skincare industry is very limited
and previous studies focused on supplier selection void of management and purchasing policy.
Contrary to the assumption of cost information and behavioral sentiments dictating the planning
and decision-making process of managers, effective decision-making, especially in multi-criteria
situations is largely attributable to prioritization on the basis of relevancy to organizational
strategy and objectives both in the short-term and long-term. Findings indicate that planning and
decision-making based on AHP could significantly offer best alternatives through assessments of
relevant cost analysis and strategic analysis.
Keywords: analytical hierarchy process, best alternatives, planning, decision-making,
competitive advantage, supplier selection, purchasing policy, management, relevant cost
analysis, strategic analysis
PLANNING AND DECISION-MAKING 3
Planning and Decision-Making with Analytical Hierarchy Process
Planning and decision-making in today’s increasingly competitive business environment
stretches beyond data and analytical techniques (Blocher et al., 2022). Analytical Hierarchy
Process (AHP) is a decision-making framework that helps to prioritize goals, experience, and
knowledge taking into account subjective feelings and judgment, proposed and developed
between 1971-1972 by Professor Thomas L. Saaty (Tavana et al., 2023; Lin et al., 2023). The
provision of a structured framework renders AHP versatile and robust enabling organizations
break down complex decisions into a structured hierarchy of criteria and alternatives. In their
decadal study from 2012-2021, Pereira and Bamel (2021) studied the evolution of AHP and
found out the technique is more effective when integrated with other methods or styles of
decision-making. However, AlShamsi et al. (2019) disagrees with the claim, asserting the “mix-
match” approach does not necessarily function effectively in the manufacturing industry.
Image Skincare LLC primarily relies on e-commerce for its sales and revenue. With the
increasing popularity of e-commerce platforms, consumers face a wide range of options when
making purchasing decisions. A data-driven analytic hierarchy process (AHP) approach that
utilizes reviews and feedback to assist consumers should be developed in their decision-making
process. The proposed data-driven AHP approach involves three steps; collect and preprocess
review data from online platforms, construction of a hierarchical structure based on the criteria
and sub-criteria relevant to the decision-making process, and application of the AHP method to
calculate the weights of the criteria and sub-criteria, enabling consumers to compare and evaluate
different options (Ren et al., 2022). To validate the effectiveness of this approach, Ren et al.
(2022) conducted experiments using real-world data from an online shopping platform,
compared the results from their data-driven AHP approach with those from traditional AHP and
PLANNING AND DECISION-MAKING 4
regression analysis. The findings demonstrated that the proposed approach outperforms the other
methods in terms of accuracy and reliability. In contrast, Degtiarev & Borisov (2018) cited the
challenges faced by consumers in online shopping, such as information overload and the
difficulty of evaluating product quality renders the approach less accurate and reliable. However,
AHP can be integrated into existing e-commerce platforms to provide personalized
recommendations and improve the overall shopping experience for consumers.
Lin et al. (2023) developed a supplier selection framework for refractory materials
manufacturers, which are companies that produce materials resistant to high temperatures and
harsh environments, using the Analytical Hierarchy Process (AHP) approach. The AHP
involved constructing a hierarchical structure of criteria and sub-criteria, and then pairwise
comparisons are made to determine the relative importance of each criterion. An Analytic
Network Process (ANP) method, which is an extension of AHP, to handle the interdependencies
among the criteria was deployed. The results of the study showed that quality was the most
important criterion for supplier selection, followed by price, delivery time, technical support, and
environmental sustainability. Similarly, Image Skincare LLC could potentially benefit from this
study. The quality of skincare products cannot be understated as consumers seek quality of
products in their decision to purchase products. Decision-makers can utilize AHP to define and
prioritize the strategic goals of the organization by comparing and weighting different objectives,
it helps in identifying the most critical goals that require financial resources.
Utilization and Benefits of AHP
AHP assists in selecting the criteria that will be used to evaluate different investment
options. These criteria can include financial metrics such as return on investment, payback
period, and risk, as well as non-financial factors like market potential, competitive, and
PLANNING AND DECISION-MAKING 5
sustainability. Regarding alternatives, decision-makers can evaluate, compare and rank different
investment alternatives based on the selected criteria. By assigning relative weights to each
criterion, it helps in quantifying the importance of each factor in the decision-making process.
By considering the priorities and preferences of decision-makers, it provides a systematic
approach to distribute resources in a way that aligns with the organization's strategic goals. AHP
allows decision-makers to conduct sensitivity analysis by adjusting the weights assigned to
criteria and alternatives. This helps in understanding the impact of changes in priorities or market
conditions on the allocation of financial resources. AHP facilitates group decision-making by
providing a structured framework for discussions and negotiations. It allows stakeholders to
express their opinions, evaluate different options, and reach a consensus on the strategic
allocation of financial resources.
Decision-making styles and Organizational Performance
Sinnaiah et al. (2023) examine the relationship between decision-making style and
organizational performance within the context of the strategic management process detailing the
influence of decision-making style on the effectiveness of strategic management practices and
their impact on organizational performance. The data collected is then analyzed using statistical
techniques to identify any significant relationships between decision-making style, strategic
management, and organizational performance. Different decision-making styles are explored,
such as rational, intuitive, dependent, and avoidant, and their impact on strategic decision-
making and overall organizational performance is examined. According to AlShamsi and Ajmal
(2019) AHP enables organizations to determine the relative importance of different criteria
involved in financial resource allocation. By assigning weights to these criteria, decision-makers
can effectively prioritize them. For example, criteria like return on investment, risk, and
PLANNING AND DECISION-MAKING 6
alignment with organizational goals can be given appropriate weightages, influencing the
strategic allocation of financial resources. Furthermore, it encourages participation from multiple
stakeholders in the decision-making process. Different perspectives and expertise can be
incorporated, enhancing the quality of financial resource allocation decisions. It facilitates
collaboration among various departments or teams, aligning their strategies with the overall
goals of the organization.
Conclusion
Overall, AHP enhances the objectivity, consistency, and transparency of the decision-
making process, thereby influencing the organizational strategy for financial resource allocation.
It facilitates better alignment of the allocation strategy with the organization's goals and
priorities, leading to more effective and efficient use of financial resources. It helps in identifying
relevant costs, evaluating opportunity costs, assessing incremental costs and benefits,
considering qualitative factors, optimizing resource allocation, and conducting sensitivity
analysis. By incorporating relevant cost analysis into the decision-making process, organizations
can make more informed and effective resource allocation decisions.
The use of the AHP approach adds rigor to the analysis and enhances the understanding
of the relative importance of these factors. The findings can guide organizations in developing
strategies to promote knowledge sharing and improve their overall performance.
PLANNING AND DECISION-MAKING 7
References
AlShamsi, O. M., & Ajmal, M. M. (2019). Knowledge sharing in technology-intensive
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Degtiarev, K. Y., & Borisov, M. Y. (2018). Prioritization of alternatives based on analytic
hierarchy process using interval type-2 fuzzy sets and probability-theoretical interval
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Lin, G., Chuang, C., Tan, C. L., Yeo, S. F., & Wu, F. (2023). Supplier selection criteria using
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https://doi.org/10.1108/IMDS-06-2022-0370
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Operations Research, 326(2), 635-651. https://doi.org/10.1007/s10479-022-04540-7
Ren, P., Zhu, B., Ren, L., & Ding, N. (2022). Online choice decision support for consumers:
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Sinnaiah, T., Adam, S., & Mahadi, B. (2023). A strategic management process: The role of
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