Performance efficiency of Malaysian selected retail companies using Data Envelopment Analysis

Zuraida Alwadood; Wan Aina Aliya Wan Hassan; Norlenda Mohd Noor.

The retail sector plays a significant role in Malaysia’s economic development, contributing to employment creation, consumer spending and overall business growth. As competition within the sector intensifies, it becomes important for the firms to utilize their resources efficiently to survive in this industry. This study evaluates the operational efficiency of seven selected retail companies in Malaysia using Data Envelopment Analysis (DEA) method. The research aims to measure efficiency levels and identify benchmark firms that utilize their resources effectively. The companies were analyzed based on input variables which are total assets, number of employees, number of stores and total liabilities while the output variables are revenue and net profit. There are two objectives to be achieved in this study. The first one is to measure the efficiency of performance for selected Malaysian retail companies and rank them. The second objective is to determine the most effective strategy to maximize the level of efficiency of the selected Malaysian retail companies. The DEA model was implemented using QM for Windows software which was used to calculate the efficiency score. Six companies recorded relatively high efficiency scores while one company recorded low efficiency level for less than 90%. For the less efficient company, the improvement strategies are proposed based on dual weight and reference sets from the efficient companies. The recommendations include adjustments in input usage and enhancements in output performance. For instance, optimizing asset utilization, increasing both revenue and net profit. In general, the findings of this study provide a basic framework for retail companies to enhance operational efficiency and improve the performance of their firms.

KEYWORDS: Data Envelopment Analysis; Efficiency; Framework; Decision Making Unit; Retail Companies



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