Strategic Pricing

Applied statistical equipment finance

Esbjörn Johansson

Handledare: Jan Holst

Centre for Mathematical Sciences
Mathematical Statistics
Lund Institute of Technology,
Lund University,
2002:E37

Abstract

The thesis is part of a project at the GE Capital European Equipment Finance, which is the equipment finance arm of General Electric.

The aim of the thesis is to understand the process that generates the yield within the company and to provide statistics that will support the work to decrease the variation in yield with respect to the target price for each deal. The thesis gives an overview of how statistics can be applied to analyse a strategic pricing business case. The main approach is quantitative but necessarily a lot of qualitative input from the real applications has completed the thesis.

Variables that contribute to the value-creating process are chosen empirically and analysed on two sets of data with different characteristics. Distributions of the data and possible transformations are discussed for both data sets. The main variables are analysed similarly for both data sets meanwhile a range of more detailed variables are analysed separately. Extended analyses are done in areas of business importance. Adding weight behind the analysis and to further increase usability of the results a discriminant analysis tool is presented. The tool is able to predict direction of profitability of contracts given that relevant data is provided.