Address: Ershad Damavand University, Jandarmery st., North Felestin st., Enghelab st., Tehran, Iran

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1 USING ANALYTICAL NETWORK PROCESS (ANP) METHOD TO PRIORITIZE STRATEGIES RESULTED FROM SWOT MATRIX CASE STUDY: NEDA SAMAK ASHENA COMPANY Professor Mohammadreza Shojaei, Sanaz Abbaszade, Seyede Somayeh Aghaei Ershad Damavand University, Jandarmery st., North Felestin st., Enghelab st., Tehran, Iran Corresponding author: Sanaz Abbaszade Address: Ershad Damavand University, Jandarmery st., North Felestin st., Enghelab st., Tehran, Iran Abstract SWOT matrix is one the common tools which managers use for decision making in various situations. Although SWOT matrix provides a set of alternatives, one of its main constraints is inability to suggest the final solution. So, it seems essential to apply other decision making techniques which enable managers to prioritize strategies considering various decision making factors and those of SWOT matrix. Analytical Hierarchy Process (AHP) and Analytical Network Process (ANP) are suitable methods to be used with SWOT matrix. Considering factors and criteria dependent make ANP more appropriate to be used in the process of selecting the best solution than AHP. Key words: Strategy, SWOT Matrix, IE Matrix, Analytical Network Process (ANP), Analytic hierarchy process (AHP) 1. Introduction Nowadays organizations face increased environmental complexities which require effective use of strategic planning to define and implement strategies. In addition to increasing global competition, importance of customer relationship management, and diversity of customers and products, Iranian companies feels the necessity of strategic planning more than before due to international sanctions. Since environmental analysis is an essential task in strategic planning, internal and external factors influencing studied company in this research are considered carefully in order to be able to identify and prioritize best strategies. The company which is studied in this work is Neda Samak Ashena Co.. It's in medical equipments industry focusing on exclusive import and distribution of acoustic and FM systems of Swiss company Phonak. Establishing in 2002, Ashena Co. is a leading company in provision of hearing services in Iran. Having an entrepreneurship approach in managing its business, increasing Phonak brand's market share in Iran from less than 1% in 2004 to 20-25% in 2008, increasing sales more than to 32 times, and reaching the second market place for its acoustic product in Iran, reflect acquiring an strategic approach in this company and are among the main reasons that we decided to work on it in this research. Also, with the aim of increasing the range of it hearing products, Ashena Co. has gotten representative of the following brands in Iran: exclusive representative of autoplastic products of Dreve Co. (German company producing laboratory acoustic and dental equipments), exclusive representative of ear, nose and throat units of MedStar which is a South Korean company, and non-exclusive representative of battery products of PowerOne Co. (German company producing acoustic batteries). Its great success in getting representation of internationally successful brands, being customer-oriented, and providing customized sales and after sales services, are other reasons of selecting Ashena Co. for this case study research. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 603

2 2. Research goals: The main goal of this research is defining an appropriate strategy for Ashena Co. using IE matrix and AHP method. So, after application of SWOT matrix, strategies are prioritized using ANP method. 3. Literature review Strategy The strategy of the organization is a pattern for actions that done by employees in long-term (Ralph, 2007) is defined as an operational plan which is used to coordinate and organize activities resulting to achieving organization's goal. In fact, strategic planning is not the main goal in itself but it's a set of concepts used to assist managers in their decision makings. Strategic planning is worthwhile when it helps managers to think and act strategically. Analytical Network Process (ANP) The Analytical Network Process (ANP) is a general theory of relative measurement used to drive composite priority ratio scales from individual ratio scales that represent relative measurement of the influence of elements that interact with respect to control criteria (L. Saaty, Fundamentals of Analytical Network Process, 1999). ANP is one of the multivariate decision making methods. It's useful when decision makers should consider multiple factors and choices. SWOT Matrix is one of the well-known techniques in strategic management which is used to adapt internal strengths and weaknesses with external opportunities and threats. Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis is a commonly used tool which examines strengths and weaknesses (internal factors) of a company or industry together with opportunities and threats (external factors) of the marketplace environment. SWOT analysis provides the basic outline in which to perform analysis of decision situations (Görener, Toker, & Uluçay, 2012). IE Matrix The Internal-External (IE) matrix is another strategic management tool used to analyze working conditions and strategic position of a business. The Internal External Matrix or short IE matrix is based on an analysis of internal and external business factors which are combined into one suggestive model. The IE matrix is a continuation of the EFE matrix and IFE matrix models (Maxi-pedia). In summarize way it can be defined as the strategic management tool which is used to analyze the current position of the divisions and suggest the strategies for the future for the better results (scribd). 4. Methodology: This research is descriptive and falls in the category of case study. Data and information gathering was conducted through R&D department, experts and managers in the company. Main internal forces are: 5. To Analyze: i. Internal forces: 1. Marketing 2. Finance 3. Accounting 4. Senior management 5. IT system 6. Production (operations) ii. Internal Factors Evaluation (IFE): Internal factors matrix can be drawn by strategically analyzing organization's internal factors. In this matrix, main strengths and weaknesses of each organizational function are determined and analyzed. Also this matrix suggests solutions to identify and analyze relationships between determined functions. In order to prepare this matrix, subject COPY RIGHT 2013 Institute of Interdisciplinary Business Research 604

3 judgments are necessary, reminding the fact that scientific methods are not the only comprehensive and reliable research approaches. In order to construct internal factors matrix, these steps should be followed: 1. Listing identified internal factors: factors which include company's strengths and weaknesses should be identified. First strengths and then weaknesses are listed. 2. Giving weight to the factors: Weights start from 0 (no importance) to 1 (very important). Weight of each factor indicates relative importance of that factor in success of the company in its industry. Regardless of high weights should be allocated to those factors which have greatest impact on organization's performance. It should be mentioned that total sum of the all weight must equate Ranking factors: Rankings are from 1 to 4. Rank 1 indicates fundamental weakness, rank 2 indicates relative weakness, rank 3 indicates relative strength and rank 4 indicates fundamental strength of determined internal factors. Scores are based on company's performance and weights are based on the industry. 4. Calculation of weight of each factor multiple in rank of that factor. 5. Calculation of total sum of company's scores in step 4. iii. External forces: In this research, external forces can be classified into 5 categories: 1. Economic forces 2. Social, cultural, ecological and environmental forces 3. Political, governmental and regulatory forces 4. Technological forces 5. Competitive forces iv. External Factors Evaluation (EFE): In order to construct external factor evaluation matrix, these 5 steps should be followed: a. Listing identified external factors: factors which provide opportunities or threaten company's activities should be identified. First opportunities and then threats are listed. b. Giving weight to the factors: Weights start from 0 (no importance) to 1 (very important). Relative importance of each factor depends on success of company in related industry. Usually factors which are related to opportunities get higher weights (in compare with those related threatening factors), but if there is any powerful threatening factor, it should be given high weight as well. Weights of the factors are determined after reviewing successful and/or unsuccessful competitors, group discussions in company and reaching consensus for weight of each factor. It should be mentioned that total sum of the all weight must equate 1. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 605

4 c. Ranking factors: Rankings are from 1 to 4 and allocate to each factor according to the effectiveness of company's current strategies relative to each given factor. Rank 4 indicates good reaction, rank 3 indicates above average reaction, rank 2 indicates below average reaction and rank 1 indicates weak reaction. These rankings are determined according to the effectiveness of strategies of company and considering weights of the factors in step 2. d. Calculation of weight of each factor multiple in rank of that factor. e. Calculation of total sum of company's scores in step 4. v. Research phases Identification of opportunities, threats, strengths and weaknesses (See table 1 Internal Factors Evaluation (IFE) and table 2 External Factors Evaluation (EFE)) vi. Data analysis Regardless of the number of the factors which are included in internal and external factors matrix, total sum of final scores is between 1 and 4, and their average is 2.5. If final score of organization is below 2.5, it means that organization has weakness regarding internal and external factors. If final score of organization is above 2.5, it means that organization has strength regarding internal and external factors. (See Fig. 1 IE diagram) By drawing IE diagram, Ashena Co. is position in aggressive strategy section. Following we will discuss various solutions and provide some recommendations based on this finding. (See Table 3 SWOT Matrix) vii. Prioritizing strategies using ANP: 1. Decision making hierarchy tree: (See Fig. 2 Decision making hierarchy tree) 2. Using Saaty s 9 Fundamental scales for prioritization in ANP: (See Table 4 Saaty s 9 Fundamental scales) 3. Criteria paired comparison matrix: ( See Table 5 Criteria paired comparison Matrix) Special vector is used in order to calculate the weights (W). 4. Paired comparison of interdependencies matrix: (See Table 6 to 11 criteria paired comparison matrix considering their interdependencies and C 1/2/3/4/5/6 as control criterion) 5. Special vectors matrix for paired comparison of interdependencies of criteria: (See Table 12 Special vectors matrix for paired comparison of interdependencies of criteria) 6. Paired comparison of strategies' priority related to criteria: (See Table 13 to 18 paired comparison of strategies' priority related to C 1/2/3/4/5/6 criterion 7. Special vectors' paired comparison matrix (Eij): (See Table 19 Special vectors' paired comparison matrix) 8. Building weighted super matrix: (See Table 20 weighted super matrix and Table 21 W ANP matrix) COPY RIGHT 2013 Institute of Interdisciplinary Business Research 606

5 viii. Selecting the best strategy: In order to choose the best strategy, the equation suggested by Lin et al is used (Zebardast, 2010): In this equation: D i : desirability of strategy index W j : relative importance of j according to the numbers in W ANP matrix E ij : score of strategy i from criteria j in E ij matrix Finally, the alternative which gets the highest final score from equation (1) is selected as the best solution. (See Table 22 Calculating desirability index (D i ) of selected strategies and determining their ranks) 6. Results: This paper reviews Analytical Network Process (ANP) and its application in mangers decision making about choosing best strategies for their organizations. The reason for choosing ANP instead of AHP was that, since AHP assumes independency of factors in hierarchical structure of decision making, it's not applicable in situations in which there are dependency relationships between given factors. It's the case when analyzing internal and external factors' impacts (Sehhat & Pirzadi, 2009). Moreover The ANP provides a solution for problems which cannot be structured hierarchically (BÄuyÄukyazici & Sucu, 2003). Findings indicate that following "increasing national and international advertisement with focus on quality superiority" strategy is the best one for Neda Samak Ashena Co. in this period of time. While having characteristics such as simplicity, flexibility, simultaneous consideration of qualitative and quantitative criteria, ability to examine compatibility of judgments and rank the final alternatives, ANP overcomes shortcomings -typical in other methods such as AHP- like lack of considering interdependencies of decision making criteria and wrong assumption that relationships between criteria are one-way. COPY RIGHT 2013 Institute of Interdisciplinary Business Research 607

6 References BÄuyÄukyazici, M., & Sucu, M. (2003). THE ANALYTIC HIERARCHY AND ANALYTIC NETWORK PROCESSES. Hacettepe Journal of Mathematics and Statistics, 32, Görener, A., Toker, K., & Uluçay, k. (2012). Application of Combined SWOT and AHP: A Case Study for a Manufacturing Firm. Procedia, 58, Ralph, D. (2007). Strategic Management and Organisational Dynamics (5th ed.). Edinburgh: prentice hall. Sehhat, S., & Pirzadi, E. (2009). Using ANP Technique for Analyzing SWOT. Industrial Management (2), Zebardast, E. (2010). Using ANP in Civic and Regional programming. Fine Art- Architecture and Urban (41), Web References: (n.d.). Retrieved from Maxi-pedia.[Online] Available: (n.d.). Retrieved from scribd. [Online] Available: L. Saaty, T. (1999). Fundamentals of Analytical Network Process. [Online] Available from IOZ: L. Saaty, T. (n.d.). The Analytic Network Process. [Online] Available from from SID: COPY RIGHT 2013 Institute of Interdisciplinary Business Research 608

7 Weaknesses Strengths ijcrb.webs.com Tables: Table 1 Internal Factors Evaluation (IFE) score Weight from 100 Weight from 1 Weighted score Differentiation, pace and quality of sales and after sales services The way that customer is treated Customer satisfaction Senior manager's familiarity with up-to-date management and marketing knowledge Having defined, standard and regular work processes Open system Cost effectiveness of advertisement Providing new product and being honest and transparent in providing information to customers about products, diversity, performance, and new products and services Stability in management, senior managers and middle managers Building a good image of company and its products in market High product and service price Low flexibility in giving discount to customers in after sales services, lack of cash payment Low flexibility and frequency of sales and pre-sales methods and sales discounts Dependency on import Total COPY RIGHT 2013 Institute of Interdisciplinary Business Research 609

8 Threats Opportunities ijcrb.webs.com Table 2 External Factors Evaluation (EFE) score Weight from 100 Weight from 1 Weighted score Competitors provide low quality products in domestic market Access to parts of Middle East market Information and communication infrastructure and facilities Popularity of using 2 set acoustic and using acoustic in younger ages Market growth potential Attending in internal and international seminars Student's demand to cooperate with company while studying Cultural malaise in using acoustic Low rate of market growth and demand Entry of new competitors to market Instability in domestic regulations and exchange rate Instability in international scale, sanctions Acoustic is not covered by health insurance Low price of competitors' products and services Lack of effective research programs in the country about audiology, acoustic and related technologies Total COPY RIGHT 2013 Institute of Interdisciplinary Business Research 610

9 Threats Opportunities ijcrb.webs.com Table 3 SWOT Matrix O 1 : Competitors provide low quality products in domestic market O 2: Access to parts of Middle East market O 3 : Information and communication infrastructure and facilities O 4 : Popularity of using 2 set acoustic and using acoustic in younger ages O 5 : Market growth potential O 6 : Attending in internal and international seminars Student's demand to cooperate with company while studying O 7 : Student's demand to cooperate with company while studying T 1 : Cultural malaise in using acoustic T 2 : Low rate of market growth and demand T 3 : Entry of new competitors to market T 4 : Instability in domestic regulations and exchange rate T 5 : Instability in international scale, sanctions T 6 : Acoustic is not covered by health insurance T 7 : Low price of competitors' products and services T 8 : Lack of effective research programs in the country about audiology, acoustic and related technologies Strengths S 1 : Differentiation, pace and quality of sales and after sales services S 2 : The way that customer is treated S 3 : Customer satisfaction S 4 : Senior manager's familiarity with up-to-date management and marketing knowledge S 5 : Having defined, standard and regular work processes S 6 : Open system S 7 : Cost effectiveness of advertisement S 8 : Providing new product and being honest and transparent in providing information to customers about products, diversity, performance, and new products and services S 9 : Stability in management, senior managers and middle managers S 10 : Building a good image of company and its products in market SO Strategies Expanding company's presence in IRAN & Middle East (O 1,O 2,S 1,S 2,S 7,S 8 ) Increasing advertisements in national and international levels with focus of quality superiority (O 1,O 2,S 1,S 2,S 7,S 8 ) ST Strategies increasing advertisements with focus on superiority in diversity and performance of products and services (T 3,T 7,S 7,S 9 ) creating strategic alliances with competitors (T 3,T 7,S 1,S 4,S 9,S 11 ) opening offices in other countries (T 2,T 4,T 5,S 1,S 2,S 4,S 8 ) Weaknesses W 1 : High product and service price W 2 : Low flexibility in giving discount to customers in after sales services, lack of cash payment W 3 : Low flexibility and frequency of sales and presales methods and sales discounts W 4 : Dependency on import WO Strategies market penetration (O 1,O 4,O 5,W 1 ) WT Strategies production of raw material (T 3,T 5,W 1,W 5 ) investing in other segments of medical equipments' industry (T 1,T 2,T 3,T 6,T 7,T 8,W 1,W 2,W 3 ) COPY RIGHT 2013 Institute of Interdisciplinary Business Research 611

10 Table 4 Saaty s 9 Fundamental scales (L. Saaty, The Analytic Network Process) 1 Equal importance 3 Moderate Importance of one over another 5 Strong or essential importance 7 Very strong or demonstrated importance 9 Extreme importance 2,4,6,8 Intermediate values Use reciprocals for inverse comparisons Table 5 Criteria paired comparison Matrix Criteria C 1 C 2 C 3 C 4 C 5 C 6 W C C C C C C Table 6 criteria paired comparison matrix considering their interdependencies and C 1 as control criterion Criteria C 2 C 3 C 4 C 5 C 6 W C C C C C COPY RIGHT 2013 Institute of Interdisciplinary Business Research 612

11 Table 7 criteria paired comparison matrix considering their interdependencies and C 2 as control criterion Criteria C 1 C 3 C 4 C 5 C 6 W C C C C C Table 8 criteria paired comparison matrix considering their interdependencies and C 3 as control criterion Criteria C 1 C 2 C 4 C 5 C 6 W C C C C C Table 9 criteria paired comparison matrix considering their interdependencies and C 4 as control criterion Criteria C 1 C 2 C 3 C 5 C 6 W C C C C C COPY RIGHT 2013 Institute of Interdisciplinary Business Research 613

12 Table 10 criteria paired comparison matrix considering their interdependencies and C 5 as control criterion Criteria C 1 C 2 C 3 C 4 C 6 W C C C C C Table 11 criteria paired comparison matrix considering their interdependencies and C 6 as control criterion Criteria C 1 C 2 C 3 C 4 C 5 W C C C C C Table 12 Special vectors matrix for paired comparison of interdependencies of criteria W C 1 C 2 C 3 C 4 C 5 C 6 C C C C C C Table 13 Paired comparison of strategies' priority related to C 1 criterion Strategies A 1 A 2 W A A COPY RIGHT 2013 Institute of Interdisciplinary Business Research 614

13 Table 14 Paired comparison of strategies' priority related to C 2 criterion Strategies A 1 A 2 W A A Table 15 Paired comparison of strategies' priority related to C 3 criterion Strategies A 1 A 2 W A A Table 16 Paired comparison of strategies' priority related to C 4 criterion Strategies A 1 A 2 W A A Table 17 Paired comparison of strategies' priority related to C 5 criterion Strategies A 1 A 2 W A A Table 18 Paired comparison of strategies' priority related to C 6 criterion Strategies A 1 A 2 W A A Table 19 Special vectors' paired comparison matrix W A 1 A 2 C C C C C C COPY RIGHT 2013 Institute of Interdisciplinary Business Research 615

14 Table 20 weighted super matrix Alternative Criteria C 1 C 2 C 3 C 4 C 5 C 6 Alternative C C Criteria C C C C Table 21 W ANP matrix Criteria W ANP C C C C C C Table 22 Calculating desirability index (D i ) of selected strategies and determining their ranks E ij W j E ij j A 1 A 2 A 1 A 2 C C C C C C COPY RIGHT 2013 Institute of Interdisciplinary Business Research 616

15 Figures: Opportunities 4 conservative strategy conservative strategy defensive strategy competitive strategy Threats Weaknesses Strengths Fig. 1 IE Diagram COPY RIGHT 2013 Institute of Interdisciplinary Business Research 617

16 Choosing best strategy Access to parts of Middle East market (C 6 ) Competitors provide low quality products in domestic market (C 5 ) Providing new product and being honest and transparent in providing information to customers about products, diversity, performance, and new products and services (C 4 ) Cost effectiveness of advertisement (C 3 ) The way that customer is treated (C 2 ) Differentiati on, pace and quality of sales and after sales services (C 1 ) Increasing advertisements in national and international levels with focus of quality superiority (A 2 ) Expanding company's presence in IRAN & Middle East (A 1 ) Fig. 2 Decision making hierarchy tree COPY RIGHT 2013 Institute of Interdisciplinary Business Research 618