International Journal of Management and Applied Science, ISSN: 2394-7926 Volume-1, Issue-9, Special Issue Oct.-2015 RANKING THE SUITABLE PLACES FOR INVESTMENT BY FUZZY TOPSIS AND AHP APPROACH (CASE STUDY: AREAS OF PROVINCE)

1MASOUD HEKMATPANAH, 2SEYED REZA JALALZADEH, 3MOHAMAD KARIMIAN, 4HAMID FARAGHIAN

1Assistant Professor of Department of Management, Branch, Islamic Azad University, Ardestan, 2,3,4PHD Sudent of Marketing Management, Isfahan University Campus E-Mail: [email protected]

Abstract- Usually, MCDM use for choosing the best provided option that their criteria may be in conflict with each other and by providing results , facilitate the decision making process. In this research the aim is prioritizing some areas of Isfahan, based on prioritization of measures affecting investment to be determined between cited areas which require the greatest amount of investment. To achieve the research aim, first weighting the areas by using of fuzzy TOPSIS and entropy methods and finally by using of AHP ranked. To avoid confusion caused by the uncertainty in the decision making at all stages used of triangular fuzzy numbers. In the first phase, textile manufacturing criteria with the most weight was placed in the first priority, in the following, non-metallic mineral products, rubber and plastic products and machinery and equipment products placed. In the second phase, was placed in the first priority, and Nain, and Ardestan were placed in turn, in the second, third and last priorities.

Keywords- Effective Criteria, Investment, TOPSIS Approach, Fuzzy AHP.

I. INTRODUCTION criteria more important geographical regions of the province are prioritized. Investment costs are the largest component of total variation in macroeconomic discussed. In general, II. LITERATURE REVIEW Investment is the process in which capital goods is used to produce other goods or services. In fact, the 2.1. INVESTMENT increase in the supply of venture capital and goods Investment is time, energy, or matter spent in the and services produced in a society. Usually the hope of future benefits actualized within a specified investment community should mobilize their savings date or time frame. Investment has different meanings and some of its current production and consumption in economics and finance. In macroeconomics, non- are not used to build production capacity to more use residential fixed investment is the amount purchased facilities provided in future periods (Kordbache, per unit time of goods which are not consumed but 2007. Tabibian, 2000). Investment study for a dual are to be used for future production. Investment is role that plays in the economy is important; On the often modeled as a function of income and interest one hand, a large proportion of the total expenditure, rates, given by the relation I = f (Y, r). An increase in thereby causing a change, it will have a significant income encourages higher investment, whereas a effect on demand, On the other hand, plays an higher interest rate may discourage investment as it important role in the supply and production, because becomes more costly to borrow money. Even if a firm the investment represents an increase of capital. chooses to use its own funds in an investment, the interest rate represents an opportunity cost of MODM the other hand, the multi-objective decision- investing those funds rather than lending out that making, can simultaneously focus on the few that are amount of money for interest (Kevin, 2008). inconsistent with the objective mathematical In finance, investment is the purchase of an asset or programming methods provide the best solution item with the hope that it will generate income or (Zanjirani, 2007). MODM the relative superiority of appreciate in the future and be sold at the higher the relationship between goals and objectives and price. indicators is given. (Yang, 2007). In this research effort is that some areas of the province, including 2.2. FOREIGN DIRECT INVESTMENT (FDI) (Kashan, Aran Bidgol, Nain, Natanz and Ardestan) Multinational corporations (MNCs) operate today on measures affecting investment be prioritized To within an interconnected and complex web of determine the areas mentioned largest investment activities, geographic locations and strategic partners, should be allocated to each region, through this as they seek to optimize value in a global economy. process, the investment objective to be achieved, and There is significant potential and capacity for further the highest rate of economic growth. Therefore, the FDI growth globally, as MNCs regain confidence and first phase of the investment criteria and sub-criteria turn accumulated cash holdings into new investments are prioritized and according to the criteria and sub- (Bruton, 2014). In the field of investment we should

Ranking The Suitable Places For Investment By Fuzzy Topsis And AHP Approach (Case Study: Areas Of )

242 International Journal of Management and Applied Science, ISSN: 2394-7926 Volume-1, Issue-9, Special Issue Oct.-2015 cautious about optimism returns to global foreign based on several different objectives. MCDM is direct investment (FDI); After the 2012 slump, global usually the best option provided that the criteria may FDI returned to growth, with inflows rising 9 per cent be in conflict with each other. in 2013, to $1.45 trillion. UNCTAD projects that FDI MADM to deliver the best of the options proposed, flows could rise to $1.6 trillion in 2014, $1.7 trillion according to the criteria used to evaluate each option in 2015 and $1.8 trillion in 2016, with relatively (Zanjirani, 2007). MADM is a descriptive approach larger increases in developed countries. Fragility in due to subjective criteria. MADM purpose of some emerging markets and risks related to policy determining the best option as it can make the uncertainty and regional instability may negatively greatest satisfaction (Yang et al., 2007). A affect the expected upturn in FDI (World Investment combination method, techniques of distance and Report, 2014). So it shows the importance of decision relative advantages are three of the common methods on suitable opportunities on investment and global of MCDM (Romero, 2000). investment trends in this field. One of the most prominent methods of MCDM, hierarchical analysis method (AHP) is the first link 2.3. INVESTMENT EVOLUTION METHODS between the weights to calculate the total value of Contrary to Keloharju and Puttonen (1995), each option is calculated based on the weight respondents were asked to select one of the methods obtained. Despite the wide use of AHP, this approach in the list as their primary method as in Honko and has been criticized in terms of uncertainty and Virtanen (1975) and Virtanen (1984). Moreover, imprecise. (Chang, 1999). respondents could select a number of secondary methods. Finally, they could indicate methods that III. RESEARCH METHODOLOGY are used only in some cases, but not necessarily in the evaluation of all investment projects. The survey questionnaire used to gather the data Figure 1 indicates that the payback-method and the needed, the number of respondents 30 filling and to internal rate of return (IRR) method are the two most prioritize the opening of the investigation, to prevent popular primary methods used to evaluate investment confusion due to the uncertainty in decision-making projects. at all stages of triangular fuzzy numbers is presented. Entropy and Fuzzy TOPSIS method are used to weight the criteria and AHP is used to rank alternatives. The following priority areas are also examined with regard to the evaluation criteria are derived and also under way with the highest priority criteria in the previous section, an index with non-fuzzy TOPSIS method and Shannon were evaluated.

IV. FINDINGS

First phase: Ranking criteria and sub-criteria: In this study, the first phase of the rating criteria, the entropy weighting method is used. For this purpose, four rows and columns of the matrix was formed which included the criteria and sub-criteria; 30 expert opinions and determine which of them is considered as an indicator to decide.

Second Phase: prioritize different areas of the Isfahan province: In the second phase of the priority areas has been FIGURE 1: The popularity of different investment studied. For this purpose, criteria and sub-criteria to evaluation methods in publicly listed Finnish identify and prioritize routes in the first phase, the 12 companies. The graph indicates the percentage of the route with the highest priority is selected and as part respondents naming a given method as their primary of a set of evaluation criteria were considered and method for evaluating their company’s investment also taking into account 23 criteria evaluation projects (LILJEBLOM, 2014) (industrial production) are estimated in the Kashan, Aran Bidgol, Nain, Natanz and Aran Bidgol and 2.4. SHANON, AHP, TOPSIS & FUZZY Ardestan in this study combined with Kashan, as part METHOD of assessment indicators and using Shannon and The first two categories, those decisions are based on TOPSIS Non-Fuzzy to prioritize areas were multi-criteria decision and the second decision is examined.

Ranking The Suitable Places For Investment By Fuzzy Topsis And AHP Approach (Case Study: Areas Of Isfahan Province)

243 International Journal of Management and Applied Science, ISSN: 2394-7926 Volume-1, Issue-9, Special Issue Oct.-2015 Table 1: Table ranking criteria and sub criteria fuzzy TOPSIS method of calculation

Table 2: Table ranking criteria and sub criteria calculation method of fuzzy AHP

Ranking The Suitable Places For Investment By Fuzzy Topsis And AHP Approach (Case Study: Areas Of Isfahan Province)

244 International Journal of Management and Applied Science, ISSN: 2394-7926 Volume-1, Issue-9, Special Issue Oct.-2015 Second Phase: Ranking regions criteria specified in Table 4, prioritize areas studied In the second phase the following criteria and by using Shannon and non-fuzzy TOPSIS was standards that the paths (Table 2) identify, prioritize, performed. and was, as a set of evaluation criteria were Due to the absence of some of the measures considered. 12 route with the highest priority criteria examined in 5 regions of the 6 criteria were excluded. in Table 5 were selected as indicators and then with 17 evaluation criteria are given in the following table: regard to the composition of the 23 assessment

Table 3: Evaluation criteria

5 Area include Kashan, Aran Bidgol, Nain, Natanz evaluation criteria and weights obtained by the and Ardestan; in this study Kashan and Aran Bidgol Shannon entropy, using TOPSIS technique were used combined with each other. The following selection to rank the regions studied. criteria and weights obtained by AHP, and the

Table 4: Ranking of Areas

As specified in the table is based on confidence City of Kashan and Aran Bidgol has been active in levels, Natanz first priority, second priority Nain, 301 large industrial plants, of which the largest share Kashan third priority, and the last priority placed of manufacturing activity textile workshop with 226 Ardestan. (75 percent). Metallic mineral products 16 workshop (5%) and machinery and equipment with 14 work DISCUSSION & CONCLUSION shop (4%), respectively, are in the next rankings. The results are compatible with the above, and in Since the study of large industrial plants in 1376 most areas of textile production has been of shows that a total of 328 workshops have been paramount importance. As well as non-metallic engaged in the study area; the proportion of the active minerals, rubber and plastic products and machinery 1983 site, equivalent to 5.16% of the share allocated. and equipment are also important factors to be Of the sites in the study area 9 workshop has been considered. Industrial city of Natanz has 2 large active in the city Ardestan of which the largest share workshops, of which the largest share of textile of non-metallic mineral products with 4 workshops production activities with 7 workshops (58 percent). (44 percent), with 2 factories producing textiles Rubber and plastic products with 2 workshops (17%) (22%) and the production of basic metals 2 factories remains in second place. Thus, according to the located respectively in the next place. standard criteria was considered the most important

Ranking The Suitable Places For Investment By Fuzzy Topsis And AHP Approach (Case Study: Areas Of Isfahan Province)

245 International Journal of Management and Applied Science, ISSN: 2394-7926 Volume-1, Issue-9, Special Issue Oct.-2015 textile production and Natanz city also has a major Return in Finnish Publicly Listed Companies. LTA role in this benchmark is the first priority. 1/04, P . 9 – 2 4 [8]. Hassett, Kevin A. (2008). "Investment". In David R. In addition, because the city Nain share of the active Henderson (ed.). Concise Encyclopedia of Economics sites of the study area is mainly related to the (2nd ed.). Indianapolis: Library of Economics and activities of 6 workshops and textile manufacture of Liberty.ISBN 978-0865976658. OCLC 237794267 non-metallic mineral products and metallic mineral [9]. HONKO, J. & VIRTANEN, K. (1975). The investment process in Finnish industrial enterprises. A study of the products has been high weights and measures; the capital investment planning and control process in the findings also fit with the above information and Nain 50 largest Finnish industrial enterprises.” Helsinki city for investment must be considered. School of Economics, Series A-16. [10]. JAGANNATHAN, R. & MEIER, I. (2002). Do we need CAPM for capital budgeting? Kellogg Graduate School REFERENCES of Management, Working paper. [11]. Kurdbacheh, Hamid, and social, Hamedan, Noor Alam, [1]. Abo-Sinna, M. A., & Amer, A. H. (2005). Extensions of 2007, page 93. TOPSIS for multi-objective largescale nonlinear [12]. Lee, A. H. I., Chen, W.-C., & Chang, C.-J. (2008). A programming problems. Applied Mathematics and fuzzy AHP and BSC approach for evaluating Computation, 62(1), 243–256. performance of IT department in the manufacturing [2]. Alev Taskin Gums. (2009). Evaluation of hazardous industry in Taiwan. Expert Systems with Applications, waste transportation firms by using a two-step fuzzy- 34(1), 96–107. AHP and TOPSIS methodology, Expert Systems with [13]. L. Saaty Thomas (2001) .Models, Methods, Concepts & Applications 36 (2009) 4067–4074 Applications of the Analytic Hierarchy Process, with [3]. Asgari, N., Znjyrany Farahani, Reza. (2011). Structure Luis G. Vargas. of Multi Criteria Decision Making, MADM, Journal of [14]. Newsome, P. R., & Wright, G. H. (1999). Dental patient Industry, No. 18. satisfaction: an appraisal of recent literature. British [4]. Bruton, R. (2014). Policy Statement on Foreign Direct Dental Journal, 186(4), 166–170. Investment in Ireland. Department of Jobs Report, [15]. Tabibian, M., macroeconomics, Tehran, Institute for Enterprise and Innovation. p3-4. Research in Planning and Development, 2000, page [5]. Chang, D. Y. (1996). Applications of the extent analysis 197. method on fuzzy AHP. European Journal of Operational [16]. World Investment Report. (2014). UNITED NATIONS Research, 95(3), 649–655. CONFERENCE ON TRADE AND DEVELOPMENT. [6]. Chia-Chi Sun. (2010). A performance evaluation model New York and Geneva, 2014 by integrating fuzzy AHP and fuzzy TOPSIS methods, [17]. Yang, T., & Hung, C.-C. (2007). Multiple-attribute Expert Systems with Applications 37 (2010) 7745– decision making methods for play layout design 7754. problem. Robotics and Computer-Integrated [7]. Eva LILJEBLOM, Mika VAIHEKOSKI. (2014). Manufacturing, 23(1), 126– 137. Investment Evaluation Methods and Required Rate of

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Ranking The Suitable Places For Investment By Fuzzy Topsis And AHP Approach (Case Study: Areas Of Isfahan Province)

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