A company is deciding between 2 foreign firms to provide its call center services. A factor-rating method is used. Factors are rated on a scale of 1-10, with 1 being the best score.
Firm |
Factor 1 |
Factor 2 |
Factor 3 |
A |
8 |
7 |
5 |
B |
4 |
8 |
7 |
a) If the factors are weighted equally,
score for Firm A = (0.333*8) + (0.333*7) + (0.333*5) = 2.664 + 2.331 + 1.665 = 6.660
score for Firm B = (0.333*4) + (0.333*8) + (0.333*7) = 1.332 + 2.664 + 2.331 = 6.327
Since score for Firm B is lower, Firm B will be preferred.
b) It is given that, weight of factor 3 (w3) = 2* weight of factor 1 (w1)
Also weight of factor 2 (w2) = 2*w3
We know, w1 + w2 + w3 = 1
0.5
w3 + 2 w3 + w3 =1
w3 = 0.286
Hence, w1 = 0.5 w3 = 0.143
and, w2 = 2 w3 = 0.572
Given these weights,
Score for Firm A = (0.143*8) + (0.572*7) + (0.286*5) = 1.144 + 4.004 + 1.430 = 6.578
Score for Firm B = (0.143*4) + (0.572*8) + (0.286*7) = 0.572 + 4.576 + 2.002 = 7.15
In this case, Firm A has a lower score, therefore, Firm A will be preferred.
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