Comparison of multi-criteria-decision-making tools for country selection of the contractors: Case study

The interactions of the economies with each other are increasing day by day with the help of globalization which is a process of integration resulting from the exchange of products, ideas, cultures and worldviews. In the construction sector, which is the locomotive sector of almost all the country's economies around the world, this situation brings with it many effects. The sector, which is highly affected by all kinds of changes because of the nature of the product; has gained the opportunity to enlarge the geographies it has invested with the openness of the country's economies and the rise of trade barriers. Turkish construction contractors have reached an important place in international markets in the last 30 years. Contractors that have successfully completed major infrastructure and housing projects in countries such as the Middle East countries, Russia, Libya and Kazakhstan have also set an example for other Turkish contractors and have improved their experience. Today, the demand for construction sectors in developing countries is high, but the situation of the markets is constantly changing due to the critical reasons that determine the balances of the economies. With falling oil prices and the stagnation of the Chinese economy, the Middle East, which has been the most attractive market for the last 10 years, has lost its effectiveness and has been taken over by African countries with projects that are tendered with different financing models. In a globalizing world economy, construction companies must be cautious and alert, and should be on the path to survival. Tactical assessments should be renewed and replaced with strategic plans. Strategic management is a management technique that enables determination of goals and targets for the future and actions to be taken in order to achieve these goals. The construction sector is also concerned with strategic planning, a vital component of strategic management. The purpose of strategic planning is to draw long-term business plans based on the company's future plans, systematic approaches (eg, risk analysis, Strengths-Weaknesses Opportunities-Threats analysis, market and demand analysis). Internationalization decision is the one of the important element of strategic plans. The decision to conduct business in international markets is based on determining whether the company can comply with international corporate objectives and principles as well as whether the company's resources will provide a competitive advantage to the company at the international level. Market selection is the second step for the international construction companies. As the decision to enter a new country requires a long-term investment, it is one of the key components of the corporate strategy. After selecting the appopriate market and countries, project selection decision is faced by the companies. It is the starting point of this decision that companies should make their project choices in the areas they are specialized and within their strategic plans (project size, project cost, etc). Mark up determination process also remains critical in strategic planning, as it is a function of uncertainties, likelihood of winning, and targeted profit of the companies. It is among the goals of many construction companies to be able to expand internationally because of the domestic construction market diffuculties or attractiveness of the national cross border markets. Making this decision is a process that has strategic importance and priorities and also includes many variables in it. The decision, which plays a crucial role in the success and sustainability of firms, must be based on mathematical analysis rather than on the intuition and experience. The aim of this study is to explain and compare the multipurpose decision support methods that construction contractors could use when the country selection is made by the contractors which have given the positive decision of intenationalization. For this purpose an extensive literature review was conducted and explained in the first and second section of this thesis. In the literature several studies dealing with country selection problems was found. These studies can be categorized into two main groups; the studies that aimed to find out both the criteria that are important in the country selection problems and their importance levels, and the studies that proposed several tools, methods and methodologies for country selection problems. Each of these previous studies have improved the country selection process so far. After sharing the findings of the literature review, five multi-criteria decision making techniques that can be used in both country selection problems and similar decision making problems, was explained in the third section of this thesis. AHP, PROMETHEE and SIR-SAW, SIR-TOPSIS and MAUT techniques were used and they were explained step by step. All five of the decision-making methods described are based on a specific hierarchy of criteria and determination of their importance. First analytical hierarchy process (AHP) was used to calculate the importance weights of the selection criteria. Then, the ranking of the countries were determined by the same method. Only the data coming from the pairwise comparison matrixes were used in this method. MS Excel was used for calculations of AHP method. PROMETHEE (Preference Ranking Organization Method for Encrichment Evaluations) method is the second method that was used to rank the alternative countries. The importance weights that are adjusted with AHP were used also in PROMETHEE. The Visual Promethee program were used in solutions and another feature of the Visual Promethee program is to perform the analysis of the Basic Components and give the results to the user in GAIA plane. The GAIA plane is a feature that PROMETHEE results can be displayed on a two-dimensional plane, and the results can be evaluated with another approach. The third method that was used in this study is Superiority and Inferiority Ranking (SIR) method with Simple Additive Weighting (SAW) procedure. This method depends on the priority functions in order to compare the performance of alternatives' criteria and uses the superiorty and inferiority scores. This scores are obtained by comparing values of criteria. The preference structures utilize indifference and preference thresholds to capture the characteristics of values that represent the specified criteria. SAW procedure was used for aggregation procedure of this model to generate superiority and inferiority flows. The following method that was used in this study is Superiority and Inferiority Ranking (SIR) method with Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) procedure. The absolute distances to ideal solution and negative ideal solution of the criterias were obtained with the help of superiority and inferiority matrices. The ranking was made as per the reached S flows. The last method is Multi-attribute Utility Theory (MAUT) which is based on utility scores of the alternatives. The most preferred alternative was given a value of 1 and the less preffered one got 0. All values in between were normalized and their utility scores were determined after their values are assigned. Ascending order of the utility scores provided the solution of the problem. After describing the methods to be used within the scope of the thesis, a case study was conducted on a real construction contractor. In the case analysis study, the problem of country selection of a Turkish construction contractor which is doing international business, has been solved. In the solution of the problem, 8 countries which the company has been active for last 10 years and which the company is planning to be active in the following 10 years, were used and with the help of the literature review, 25 criterias that are influential on the country selection were determined. The criterias are grouped under 6 headings and these are company specific criterias, economic attractiveness of the country, sociocultural attaractiveness of the country, ease of doing business of the country, competitive attractiveness of the country and political situation of the country. Four top management members that have effect on the country selection of the company, were interviewed. They were requested to give importance values for the determined country selection criterias and also alternatives as per the 1-9 scale. It was seen from the interviews that the company gives more attention to country attractiveness while selecting the target country. Company specific criterias and doing business of the country follow the country attractiveness. The less effective group of criterias that was found is sociocultural attractiveness on the mentioned decision problem. Among the countries that have been offered as an alternative to the decision models, Morocco became the forefront for the contractor of this study. As a result, in order to use in country selection problems in construction industry, five multi-criteria decision making techniques were explained step by step in this thesis. A case study were solved by using these techniques. In further studies, different methods can be used and comparisons between all methods can be done for more accurate results.