A NEW ALGORITHM FOR EVALUATION OF THE BALANCED

SCORECARD THROUGH AN AHP

A Case Study for Electronic Commerce B2C

D. Torres, L. Quezada, I. Soto and M. Lopez

University of Santiago of Chile (USACH)

Keywords: Balanced Scorecard, AHP, Strategies for Electronic Commerce.

Abstract: The development of research based on the implementation of the Balanced Scorecard (BSC) and

management control in a company has become an important venue in search of better control founded on

the vision and mission of the company. The breakthrough of the BSC is an increase in the quality and

reliability in implementing the Strategic Objectives, which are made pursuant to each of the perspectives

that manages the BSC, and from management point of view and increases security ease in the responses to

the changes occurring in the sector in which the company operates. However, it has been found in the

literature for concluding a job which is the best alternative for the construction of the BSC for Electronic

Commerce and less an investigation to assess the BSC in this type of commerce. In this paper an algorithm

is constructed for the purpose of evaluating the indicators that are implemented in a BSC, in order that the

organization is clear which should focus on for better control. Given this algorithm is applied to a generic

BSC for Electronic Commerce by way of illustrating the implementation of the methodology proposed in

this paper.

1 INTRODUCTION

The advent of Internet has created a new concept in

the field of economics where there is the possibility

of buying and selling products. In practice,

companies are beginning to use the Internet as a new

sales channel, replacing personal visits and

telephone for electronic orders, and to make an order

online to do it the traditional way. This advantage

and others mentioned have caused a rapid

deployment of electronic business (e-commerce) and

became a key point of economic importance to

businesses today. The e-commerce (EC) offers a

wide range of solutions among them are: 1) improve

business processes using Internet technologies, 2)

use the Web to bring together customers, vendors,

suppliers and employees in ways never before

possible, and 3 ) The process of enabling a business

to sell products, improve customer service, and

maximizing the results of limited resources

(Raisinghani et al., 2004).

Given that the benefits offered by the e-

commerce are complex by Benser`s nature measure

(Bremser and Chung, 2005) establishes the need to

use metrics for e-commerce to enable firms to

measure their performance. Similarly Grembergen

(Grembergen and Amelinckx, 2002) proposes a

method for carrying out the measurement and

management in electronic commerce.

This paper presents a methodology that allows

prioritizing the strategic objectives of a company

that uses the EC under the Balanced Scorecard BSC

approach (Durrani et al., 2000), through a multi-

AHP method, which allows use qualitative variables

which are evaluated by a peer group for this

particular investigation to be counted supporting

documents that the author used to assist in the

assessment of the prospects of the BSC, the case for

an assessment corresponds to an analysis of a BSC

for e-commerce.

2 METHODS

Below is a description of the operation and the

aspects to take into account the methods used in this

research:

A. Multicriteria Technique

The Analytical Hierarchy Process (AHP)

development by Saaty (1980) is introduced for

263

Torres D., Quezada L., Soto I. and Lopez M.

A NEW ALGORITHM FOR EVALUATION OF THE BALANCED SCORECARD THROUGH AN AHP - A Case Study for Electronic Commerce B2C.

DOI: 10.5220/0003269402630267

In Proceedings of the Twelfth International Conference on Informatics and Semiotics in Organisations (ICISO 2010), page

ISBN: 978-989-8425-26-3

choosing the most suitable alternative that meets all

the objectives of multiple attributes in making

decisions for a particular problem. AHP allows a

series of complex analytical issues, in which

comparisons are made taking into account the

importance of each item according to the impact that

has on the solution of the problem based on three

principles: decomposition, comparative judgments

and synthesis of priorities (Chamodrakas et al.,

2009) (Saaty, 2007).

For this work we have adopted the technique of

multi-criteria decision analysis for AHP-based

evaluation framework for the selection of the most

important perspective on the Balanced Scorecard.

The AHP method was selected for the

development of this document for the reasons

explained below. First, the AHP is a system for

analysis, synthesis and reasons for making complex

or subjective decisions such as those characterized in

the Balanced Scorecard. Secondly, based on

pairwise comparison judgments, AHP integrates

both criteria importance and alternative preference

measures into a single overall score for ranking

decision alternatives. Third, the AHP provides an

overarching view of the complex relationships

inherent in the problem and helps the decision maker

assess whether the evaluation criteria are of the same

order of magnitude, so the decision maker can

compare such homogeneous alternatives accurately,

and you can focus on objectives rather than on

alternatives, and offers numerous advantages, as a

synthesis of mechanism in group decisions (Lee and

Kozar, 2005).

The calculation process can be briefly described

as follows:

1. AHP algorithm: AHP uses comparative

measurements of 1-9 and builds the initial matrix,

taking into account any of the aspects described

below (Chamodrakas et al., 2009) (Saaty, 2007):

The first is to compare directly, and give a final

criterion, and define which of the two most

important elements according to established criteria.

The second is to compare indirectly, in relation

to a criterion and select the item that has more

weight to the criterion; this is recommended if you

want to take into account the AHP technique.

a. Calculations: It assumes that there are criteria

, ,...

PP in the level of control, and that

elements

,...

CC levels of the network,

C has

elements

, ,..., , 1, 2,..., .

ii i

ee e i N=

1) Matrix Structure Proper: The matrix was built

with the degree of influence of the group elements;

the construction of the matrix weights is the degree

of influence of the group, namely the degree of

influence among them. Under the criterion of control

levels, the construction of the upper matrix and

calculation of the normalized vector, it is the

characteristics of this matrix:

1 N

CC

Normalized Vector



Comparison Matrix



The weighting matrix is as shown, equation 1:

()

ij N N

λλ

∗

(1)

The weighting matrix as a show equation 2:

ij ij ij

∗



(2)

The new array is written by



, and for all 0-1 on

the line. For each factor shows the degree of

influence between the elements. If it exists, between

them, arranged one by one, and each line is the

same:

⎛⎞

⎜⎟

⎝⎠

…







Where:

∑

(3)

This can be abbreviated as:

⎛⎞

⎜⎟

⎝⎠





Each factor is expressed under the weight of the

criterion.

2. Balanced scorecard: The Balanced Scorecard,

measures both the object of financial accounting and

long-range competitive capabilities of the

organizations: investment in customers, suppliers,

employees, processes, technology and innovation

and provides executives with a structure and a

language to communicate the mission and strategy.

The measurements are used to inform employees

about the causes of the current and future success

and as a tool for translating the vision and strategy

into a coherent set of performance indicators. (Lara,

2004)

So far Grembergen (Grembergen and

Amelinckx, 2002) within the literature studied is the

only one who has raised a Balanced Scorecard

ICISO 2010 - International Conference on Informatics and Semiotics in Organisations

264

(BSC) for generic e-commerce. His research is

purely theoretical, does not apply any technique or

show step by step how they can apply BSC firms

when they want to venture into e-commerce or on

the contrary the companies already using it, while on

the contrary Durrani (Durrani et al., 2000) shows a

step by step process which illustrates an approach to

the development of technology strategy, using the

benefits of the BSC, and finally Yuksel (Yuksel and

Dagdeviren, 2009) determine the performance level

of a business on the basis of it is vision and

strategies, by integrating BSC approach with fuzzy

ANP technique "posed by Chang (1992,1996)”.

Given the above, this document is taken as

reference BSC developed by Grembergen (2002)

and be conducted step by step process to be followed

by employers in the construction of the BSC and

shown the algorithm to develop the AHP (Saaty

1980), which generate a methodology for evaluating

the Balanced Scorecard using an AHP, which can be

adjusted to any company that is part of e-commerce.

3 METHODOLOGICAL

PROPOSAL BSC

Here are the steps to follow to implement the

Balanced Scorecard and assessment should be

undertaken at this using the AHP.

Step 1, Establish the mission and vision of the

company which will handle the administrative team,

who are experts in the business.

Step 2, Realization of the strategic objectives, which

allow to easily visualizing highly graphical and

business strategy

Step 3, Definition of indicators according to the

strategic objectives

Step 4, Structure the BSC taking into account the

vision, mission, strategic objectives and indicators.

Step 5, The weights are set of indicators in each

perspective, for comparative measurements

including measurements for these weights are set

between 1-9, where a score of 1 represents equal

importance between the two elements and a score of

9 indicates the extreme importance of one element

(row component of the matrix) compared to the

other column one (part of the womb) (Saaty, 1980)

(Sólnes, 2003).

Step 6, Calculate the total weights of the indicators,

for the importance of each perspective BSC.

Step 7, Select the best strategy, the indicators with

the largest overall priority should be those selected.

The following diagram shows the proposed scheme:

Figure 1: Diagram of the proposed BSC.

4 APPLICATION FOR THE

PROPOSED BSC MODEL

For this investigation in which AHP is used to

analyze and evaluate the best strategic objective in

the BSC, according to the mission and vision

established at the outset, the use of a generic BSC

for e-commerce, which was developed by

Grembergen (2002).

Taking into account the type of trade, the author

of Balanced Scorecard generic electronic commerce

(EC) provides four perspectives and each builds a

mission, so that for purposes of this research will

build a vision for the realization model and

strategies. Below in Table 1 show the perspectives

and indicators:

Table 1: Perspective and performance indicators.

BSC

Perspectives

Strategic Objectives

Financial

Achievements of the Plan (AP)

Business Value (BV)

Budget Enforcement (BE)

Client

Customer satisfaction (CS)

Customer retention (CR)

Acquisition of new customers (ANC)

Effective Internet Marketing (EIM)

Internal

Business

Processes

Process compliance (PC)

Availability of EC systems (AECS)

Improving the development of the system (IDS)

Security & Trust (SET)

Learning and

Growth

Gain experience in the CE (GEEC)

Efficiency of the management business in the EC. (EMB)

Independence of the consultants (IC)

Reliability of software vendors (RSV)

A NEW ALGORITHM FOR EVALUATION OF THE BALANCED SCORECARD THROUGH AN AHP - A Case Study

for Electronic Commerce B2C

265

In the Figure 2, observed the Analytical Hierarchical

Model for the BSC in the EC:

Figure 2: Hierarchical Model BSC in the EC.

5 RESULTS

The calculations shown below were made in the

software developed by Saaty SuperDecisions®, this

software allows the performance of calculations in a

much more practical and safe. A table below shows

the results obtained:

Table 2: Weights of the indicators.

Learning and Growth Internal Business Processes

GEEC EMB IC RSV PC SET AECS IDS

S 1 0.12 0.06 0.02 0.03 0.04 0.08 0.03 0.07

S 2 0.11 0.06 0.02 0.04 0.04 0.11 0.02 0.05

Financial Client

BV BE AP CS CR EIM ANC

S 1 0.11 0.04 0.09 0.03 0.04 0.05 0.12

S 2 0.10 0.03 0.11 0.05 0.06 0.02 0.10

Table 2, shows the data corresponds to step 5 and 6

set out in the methodology which resulted in final

weights of each perspective of the two strategies.

Given that by normalizing the most important

strategies is "Adapt to the needs of virtual

customers" with 56%. In Table 3 we see step 7 of

the proposed methodology, in which we obtain the

standardized weights of the strategy according to the

proposed model, had the highest percentage of

importance after applying comparative measures

between the indicators of each strategy.

Table 3: Standard Values Of The Indicators.

Value Standard Value Standard

Financial Learning and Growth

BV 0.42 GEEC 0.46

BE 0.13 EMB 0.26

AP 0.44 IC 0.09

RSV 0.17

Client

Internal Business

Processes

CS 0.19 PC 0.19

CR 0.24 SET 0.44

EIM 0.11 AECS 0.10

ANC 0.44 IDS 0.25

Table 4: Priority indicators in every perspective.

Value

Prioritized

Value

Prioritized

Financial Learning and Growth

AP 0.11 GEEC 0.11

BV 0.10 EMB 0.06

BE 0.03 RSV 0.04

IC 0.02

Client

Internal Business

Processes

ANC 0.11 SET 0.11

CR 0.06 IDS 0.06

CS 0.04 PC 0.04

EIM 0.02 AECS 0.02

The most important strategy Indicators selected in

this example, as shown in Table 4, are:

Achievements of the Strategic Plan, Acquisition of

New Customers, Security and Trust, and finally,

gain experience in Electronic Commerce.

6 CONCLUSIONS

This paper presents a methodology for the

evaluation of the indicators for each perspective of

BSC, in order to prioritize the indicators that will

show which are most relevant when assessing the

status of the company is in Electronic Commerce.

The application developed is made taking into

account a generic BSC, which was proposed by

Grembergen (2002), resulting in indicators that are

key to the control that should lead the company

ICISO 2010 - International Conference on Informatics and Semiotics in Organisations

266

when deciding to offer their products / services this

type of commerce.

Finally, in order to explain the algorithm through

a B2C resulted in the best strategy for the study was

"Adapt to the needs of virtual customers",

demonstrating that the proposed algorithm becomes

a good tool to achieve the goal exposed in this

investigation.

ACKNOWLEDGEMENTS

The authors would like to thank the University of

Santiago of Chile (USACH) for the financial support

(Project Dicyt-USACH Nª 06.0917SG).

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A NEW ALGORITHM FOR EVALUATION OF THE BALANCED SCORECARD THROUGH AN AHP - A Case Study

for Electronic Commerce B2C

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