Decision support tools

References

• Tavana, M., Banerjee, S.; "Strategic Assessment Model (SAM) - A Multiple Criteria Decision-Support System for Evaluation of Strategic Alternatives". Decision Sciences, 1995, Vol. 26, No. 1, 119-143
• *Forman, EH., Saaty, TL., Selly, MA. & Waldom, R. Expert Choice. McLean, VA: Decision Support Software, 1990.

Strategic Assessment Model

SAM decomposes a strategic problem into clearly defined components in which all alternatives, factors, weights, and probabilities are depicted. Next, objective information and subjective judgements of experts are integrated by utilising several methods of problem structuring and information processing.

This decomposition and evaluation is not intended to replace the Decision-makers, rather, it provides a systematic approach to support, supplement, and ensure the internal consistency of their judgements through a series of logically sound techniques.

SAM divides the decision making environment into three parts:

• Internal environment: the set of relevant factors that form the profile of the internal operations of the organisation,
• Task environment: The set of relevant factors that have direct transactions with the organisation. The influence between these factors is reciprocal, and
• General environment: The set of relevant factors that can exert considerable influence on the organisation. The organisation, however, has little or no impact on such factors.

The process consists of eight steps and uses an algebraic model together with a *software version ("Expert Choice") of Saaty's Analytical Hierarchy process (AHP) to calculate risk adjusted strategic values for each alternative. The eight steps are:

1. Generate strategic alternatives. (Brainstorming etc.) Alternatives are the set of potential means by which the stated objectives may be obtained. There must be at least two mutually exclusive alternatives in the set to permit a choice to be made.
2. Identify the relevant (those which can be exploited by the strategic alternatives) opportunities and threats and group them into internal, task and general sets of environmental factors.
3. Define environmental weights (using AHP)
4. Calculate the initial weights associated with the opportunities and threats.
5. Develop subjective probabilities for each alternative.
6. Calculate the overall importance weight for the opportunities and threats.
7. Measure the Decision-Maker's risk-aversion constant for the opportunities and threats (using certainty equivalence rather than gain or loss equivalence)
8. Calculate the risk adjusted strategic value for each alternative.