Multi-Criteria Analysis for Business Location Decisions

Abstract

Choosing the physical place in which to locate a company or make investments is a strategic decision that managers must make when their business activities begin and as they expand. These decisions are key to firms’ survival. This study sought to shed light on this decision problem and assist managers in making these decisions. The first research objective was to examine the different dimensions that decision makers should consider regarding locations. The second objective was to test the efficacy of multi-criteria analysis methods regarding this decision problem. More specifically, this study applied a combination of the preference ranking organization method for enrichment of evaluations and the geometric analysis for interactive aid method, complemented by the analytical hierarchy process. The last objective was to rank major European cities on their suitability as business locations. The results include a preferential ranking of 66 European cities. London is the best positioned in all dimensions, followed by Paris and Barcelona. The findings’ originality comes from the inclusion of dimensions such as climate, security, and technology, which are given little weight in other similar indices, as well as the fresh approach to this decision problem from a business perspective and the combination of methodologies.