Profitability analysis using IDEA–DA framework

Hung-Tso Lin (), Tsung-Yu Chou, Yen-Ting Chen and Yin-Chi Huang

Annals of Operations Research, 2014, vol. 223, issue 1, 308 pages

Abstract: The purpose of this paper is to propose a framework of imprecise data envelopment analysis–discriminant analysis (IDEA–DA) to deal with the profitability analysis of 31 chain stores belonging to a hairdressing company, known as company $$L$$ L , in central Taiwan. Return on investment (ROI) is used as the measure of profitability. Five predictor variables are adopted to establish the discriminant function. Five classification types (i.e., 2-group, 3-group, 4-group, 5-group and 6-group) are included in the experiments. The results show that the proposed discriminant function is a robust one with respect to the rankings obtained under different classification types; moreover, the 4-group type is suitable to classify the ROI and it acquires a satisfactory apparent rate. Hence, the 4-group type is suggested in practice work. The study shows the proposed IDEA–DA is an effective tool for company $$L$$ L to conduct the profitability analysis. By firstly discriminating the ROI data collected, consequently showing the aspects for improving ROI, and then use this tool at certain check points in the next year to predict the ROI levels of the stores for the upcoming whole year. For the store which is predicted to be group member with a low or very low ROI level, timely reforms could be made for improving the ROI level of the whole year. The proposed model can also be used to deal with the similar problems for the other chain-store systems which possess the analogue characteristic. Copyright Springer Science+Business Media New York 2014

Keywords: Data envelopment analysis; Data envelopment analysis–discriminant analysis; Discriminant function; Return on investment (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10479-014-1601-y (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:223:y:2014:i:1:p:291-308:10.1007/s10479-014-1601-y

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-014-1601-y

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().