Predictive Modelling of Telecommunications Equipment Tenders
Creators: name: Herrmann, Heinz
Publisher: name: Torrens University Australia
Year: 2023
Subjects: Supply chains

description: From past tendering history, the identity and aggressiveness of competitors can be studied. The purpose of this research is to model tenders in international telecommunications equipment (TE) markets from historical data, with a view to accurately predicting prices of future tenders. These models are then used to simulate tender strategy alternatives and to recommend the strategy with the best performance against a battery of evaluation criteria. The sector analysed in this empirical research is telecommunications capital equipment, which is typically purchased by telecommunications operators or enterprises, but normally not by consumers. Each bidder tends to compete worldwide against less than 30 well-identified competitors. It is essential for the modelling methodology proposed here that every competitor in a current or previous tender can be identified. Then the following modelling methodology is applied: 1) First, the functional form of a general regression model is estimated. These estimations are based on confidential financial data, taken from a collaborating bidder’s financial records, as well as published index data. 2) Utilising a new technique, competitors are then aggregated according to their level of aggressiveness. This technique balances reliability and forecasting quality from small samples. In addition, the technique allows for mutually dependent bidding behaviour among competitors. Steps 2) and 3) comprise the methodological contribution of this research. 3) Next, the factors each aggregated competitor group takes into account when deciding its tenders and their effects on the submitted price are estimated from information of previous tenders. These estimations maximise the likelihood of heteroskedastic weighted-least-squares regressions from small sample sizes and consider ranges of best-performing forecasts, termed BID bands. The established models from this step comprise the building blocks for step 4). 4) Finally, various bidding strategies are simulated by altering parameters of the modelled competitor strategies from step 3) for the fitted values and an optimal bidding strategy is recommended. For this purpose, 125 observations with data from 25 tenders over a 30-month period were gathered. xviii This research contributes to management practice:  by providing the first application of tender strategy modelling in the international TE sector and  by developing a new modelling methodology for small sample sizes. This contribution enables better-informed and –structured managerial decisions in relation to the decision on whether to bid (or not) as well as tender pricing. Simulations of financial results, flowing from this modelling work, demonstrated the effectiveness of a recommended tender strategy. This new strategy is referred to as bid bands. It significantly improved the collaborating bidder's win ratio (up by 400%), contribution margin (up by 85.7%),1 revenues (up by 75.8%). In addition, the difference between the submitted bids and the lowest competing bids, referred to as the spread, was minimised to 1.6% on total revenues of USD 209,861,440. The bid band strategy would typically be deployed in the following way: On receipt of a request to bid, operations and marketing personnel would meet with the systems analyst for the purpose of determining the basic input information pertaining to the tender. Based on this information, marketing management would then prepare a tender response in the customary manner. Simultaneously and independently, this information would also be used as input for the set of models developed in this research. The model outputs would be used by marketing management as an additional piece of information to make a better-informed and more structured decision on the tender price as well as the decision on whether to bid or not, which directly relates to the envisaged contribution to management practice.