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ABSTRACT
This paper presents a new analytic method of capital budgeting that takes into account both customer “wants” and competitor's status (or relative position and strength. The model, which is loosely based on quality function deployment (QFD), incorporates market segments, customer “wants,” design specifications, various manufacturing processes, and capital budgeting projects as rows and columns of interconnected QFD matrices. In addition, we have used the analytic hierarchy process (AHP) to determine the intensity of the relationship between the variables involved in each matrix of the model. Ultimately, the goal of these matrices is to prioritize projects and ensure that the projects funded are focused on satisfying customer “wants.” Project priorities calculated from the interconnected matrices are used as the objective function in a 0–1 integer program to determine funding allocation levels for various capital budgeting projects. A practical example shows the applicability of the model to manufacturing organizations.