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Usage of the Multidimensional Scaling in Exploring a

Firm's Image and Competitiveness
Mersid Poturak, M.A.

Ali Goksu

International Burch University

Faculty of Economics, Management Department
Sarajevo, Bosnia and Herzegovina
mersid.poturak@gmail.com

International Burch University

Faculty of Economics, Management Department
Sarajevo, Bosnia and Herzegovina
agoksu@ibu.edu.ba

Abstract Multidimensional scaling is a statistical technique

which is used to provide a visual representation of similarities or
dissimilarities between data. In multidimensional scaling, objects
are represented as points in a usually two dimensional map, in
way where data that are perceived to be very similar to each
other are placed near each other on the map, and those data that
are perceived to be very different from each other are placed far
away from each other on the map. The purposes of this paper
are: (1) to explain, in a nontechnical fashion, the theory and
procedures underlying metric multidimensional scaling; (2)
Presentation its usage through example where one selected
company uses perceptual mapping techniques to identify its
position in a perceptual map of major competitors in the market,
with an understanding of the dimension comparisons used by
potential customers;
Keywords- Multidimensional Scaling, similarity, dissimilarity,
individual differences, ideal points

I.

INTRODUCTION

The visualization of multivariate abstract data is a

fundamental task in many fields. From bioinformatics to the
financial sector, there is a great deal of interest in data that have
no inherent mapping to a 2D or 3D space. Graphical means of
conveying such information are subsequently relied upon to
provide insight into patterns and relationships. [2]
Some objects are more similar (or dissimilar) to each other
than others. For example, red and pink are more similar than
red and green. MDS represents the similarity or dissimilarity
data among the objects by mapping the points (representing the
objects) into a multidimensional space in such a way that the
distances between them best accord with the observed
(dis)similarity data between the objects. In the above example,
the points representing red and pink are located closer in the
space than the points representing red and green. By virtue of
MDS, we can visually inspect the (dis)similarity data among
the objects and investigate the principle underlying the
organization of the (dis)similarity data. [3]
A critical requirement of the production of such a
representation is the means to generate layouts of the
multivariate data in a lower dimensional space. The created
visualization should preserve relationships existing within the
data and should be comprehensible enough to allow the user to
perceive such patterns. [4]

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Multidimensional scaling (MDS) is one means of mapping a

data set onto a smaller number of dimensions, so that it may
be visualized in a more manageable form. [4]
This paper will describe MDS in more detail before
discussing its usage in exploring a firm's image and
competitiveness. A later section outlines example where one
selected company uses perceptual mapping techniques to
identify its position in a perceptual map of major competitors
in the market, with an understanding of the dimension
comparisons used by potential customers.
Multidimensional Scaling can be simply defined as a set of
data analysis techniques for analysis of similarity or
dissimilarity data. It is used to represent (dis)similarity data
between objects by a variety of distance models. [3]
Multidimensional scaling (MDS) permits customers
perceptions of competing products similarities and
dissimilarities to be represented graphically and for the
dimensions to be interpreted in terms of key product attributes.
II.

LITERATURE REVIEW

There are many studies which purpose was to describe

MDS. On the other extreme some researchers used this method
for different type of data and different studies [5]. It then lay
fallow and essentially unused until "revived" and modernized
in the 1950s by Torgerson [6] and others, stimulated in large
part by the development of modern digital computers-which
made the complex methodology computationally feasible,
especially in the multidimensional as well as nonmetric cases.
The early history of MDS in marketing research is described in
three review articles: Green [10] discusses several issues (e.g.,
computer program differences, the metric versus nonmetric
controversy, multidimensional psychophysics) and problems
facing the future of MDS methodology in designing new
products; Green and Rao (1977) describe the major types of
nonmetric scaling techniques and illustrate solution recovery;
and Cooper, [7] provides a comprehensive review of marketing
applications and also discusses trends in the use of this
methodology in the future.
The earliest application of MDS in marketing research
appears to have been conducted by a psychometrician.
Torgerson (personal communication) applied MDS in the late

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1950s to a practical problem involving consumers' perceptions

of a new set of patterns designed by a New England silverware
manufacturer. Steffire (1969) is probably the earliest marketing
researcher to use MDS systematically-in his case mostly as a
graphic device to present consumers' perceptions of brand
similarities in a spatially powerful manner to businesspeople.
His three-dimensional representations of MDS results, which
he called "tinkertoys," provide effective devices for
communicating the findings of his company's studies. The
tinkertoys show interrelationships among real and/or
hypothesized brands of coffee, paper products, soaps, and so
on, as defined in terms of important perceptual dimensions. [8]

with specific techniques, including conjoint analysis,

multidimensional scaling and structural equation modeling but
in this study we will use only one of these datasets for MDS
application.

Neidell [9] in his study "The Use of Nonmetric

Multidimensional Scaling in Marketing Analysis" explained in
a nontechnical fashion, the theory and procedures underlying
nonmetric multidimensional scaling. He presented an example
of its use; and speculated on some marketing applications.

Moreover, the intent is to create a single overall perceptual

map by combining the positioning of objects and subjects and
making the relative positions of objects and consumers for
segmentation analysis much more direct.

Green [10] presented an overview of multidimensional

scaling methods as applied to the analysis of similarities and
preference data. They reported the results of an empirical
comparison of three computer-based programs proposed for the
multidimensional scaling of rank order preference data.
DeSarbo and Manrai [11] presented multidimensional scaling
(MDS) methodology which operationalizes the Krumhansl
(1978) distance-density model for the analysis of asymmetric
proximity data.
Venna and Kaski [12] show experimentally that one of the
multidimensional scaling methods, curvilinear components
analysis, is good at maximizing trustworthiness. They then
extend it to focus on local proximities both in the input and
output space, and to explicitly make a user-tunable
parameterized compromise between trustworthiness and
continuity. The new method compares favorably to alternative
nonlinear projection methods.
Silva and Tenenbaum [13] in their paper, they discuss a
computationally efficient approximation to the classical
multidimensional scaling (MDS) algorithm, called Landmark
MDS (LMDS), for use when the number of data points is very
large. They then provided an elementary and explicit
theoretical analysis of the procedure, and demonstrate with
examples that LMDS is effective in practical use.
Groenen and Velden [14] discuss what kind of data can be
used for multidimensional scaling, what the essence of the
technique is, how to choose the dimensionality,
transformations of the dissimilarities, and some pitfalls to
watch out for when using multidimensional scaling.
In Zhang (2010) article, author introduced the basic
concepts and models of MDS. He then discuss a variety of
(dis)similarity data and their scale levels, and the kinds of MDS
techniques to be used in specifc situations such as individual
differences MDS and unfolding analysis.
III.

THE HBAT PROBLEM AN ILLUSTRATIVE EXAMPLE

In this example, HBAT uses perceptual mapping

techniques to identify the position of HBAT in a perceptual
map of major competitors in the market, with an understanding
of the dimension comparisons used by potential customers. It
then analyzes those market positions to identify the relevant
attributes that contribute to HBAT's position, as well as those
of its competitors.

In our example, the objects of study are HBAT and its nine
major competitors. To understand the perceptions of these
competing firms, mid-level executives of firms representing
potential customers are surveyed on their perceptions of HBAT
and the competing firms. The resulting perceptual maps
hopefully portray HBAT's positioning in the marketplace.
This study includes nine competitors, plus HBAT,
representing all the major firms in this industry and collectively
having more than 85 percent of total sales. Moreover, they are
considered representative of all of the potential segments
existing in the market. All of the remaining firms not included
in the analysis are considered secondary competitors to one or
more of the firms already included.
In the HBAT study, metric methods are used. The
multidimensional scaling analyses are performed exclusively
with metric data (similarities, preferences, and attribute ratings)
The HBAT study is composed of
interviews with 18
mid-level management personnel from different firms. From
the research objectives, the primary goal is to understand the
similarities of firms based on firms' attributes. Thus, focus is
placed on similarity data for use in the multidimensional
scaling analysis.
Similarity judgments were made with the comparison of
paired-objects approach. The 45 pairs of firms [(10 X 9)/2]
were presented to the respondents, who indicated how similar
each was on a 9-poin scale, with 1 being "not at all similar''
and 9 being "very similar." The results are tabulated to each
respondent in a lower triangular matrix.
The process of developing a perceptual map can vary
markedly in terms of the types of input data and associated
analyses performed. In this section, we discuss the process of
developing a perceptual map based on similarity judgments.
The INDSCAL method of multidimensional scaling in
SPSS was used to develop both a composite, or aggregate,
perceptual map as well as the measures of the differences
between respondents in their perception. The 45 judgments
from the 18 respondents were input as separate matrices.

In order to closely present the characteristics of the MDS in

this part of our study we will use HBAT dataset developed
with many of the techniques. There are several datasets used

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A.

Creating the perceptual map

The two-dimensional aggregate perceptual map is shown in
Figure 1. To see how the similarity values are represented, let
us examine some of the relationships between HBAT and other
firms. In Table 2, we saw that HBAT is most similar to firm A
and least similar to firms C and G. As we view in perceptual
map, we can see those relationships depicted-HBAT is closest
to firm A and farthest away from firms C and G. Similar
comparisons for other highly similar pairs of firms (E and G, D
and H, and F and I) show that they are closely positioned in the
perceptual map as well.

challenge in statistics, machine learning, information retrieval,

and knowledge discovery. Traditional multidimensional scaling
has proved to be an outstanding approach to these problems,
either by itself, or as part of a larger scheme dealing with cases
where the data are nonlinear or deficient. This paper has
presented a method of performing multidimensional scaling.
MDS is a distinctive technique providing overall comparisons
not readily possible with any other multivariate method. As
such, its results present a range of perspectives for managerial
use. The most common application of the perceptual maps is
for the assessment of image for any firm or group of firms. As
a strategic variable, image can be quite important as an overall
indicator of market presence or position. In this study, we
found that HBAT is most closely associated with firms A and I,
and most dissimilar from firms C, E, and G.
.
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[2]

[3]
[4]

[5]
[6]
[7]
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Figure 1. Perceptual map of HABAT and its competitors

Differences can also be distinguished between forms based

on the dimensions of the perceptual map. For example, HBAT
differs from firms E and G primarily on dimension II, whereas
dimension I differentiates HBAT most clearly from firms C, D,
and H in one direction and firms F and I in another direction.
All of these differences are reflected in their relative positions
in the perceptual map, and similar comparisons can be made
among all sets of firms.

[9]
[10]

[11]

[12]

IV.

CONCLUSION

[13]

Dimensionality reduction and successful visualization of

the essential organization of a data set constitute a major

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[14]

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2. Marketing

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