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    Arrow Electronics Inc - GLIM

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    Karthigeyan K Karunakaran
    Arrow Electronics is a major electronics distributor. It is evaluating a partnership with Express, an online parts marketplace. Express would list Arrow's inventory and prices, allowing other distributors to fulfill orders through Express for a 6% fee. This could expand Arrow's customer reach but also risks losing existing customers and suppliers. Arrow relies on value-added services rather than just price. The document examines the pros and cons of the Express partnership and provides recommendations, including developing Arrow's own online purchasing capabilities instead of partnering with Express.

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    Arrow Electronics Inc - GLIM

    Uploaded by

    Karthigeyan K Karunakaran
    418 views24 pages
    Arrow Electronics is a major electronics distributor. It is evaluating a partnership with Express, an online parts marketplace. Express would list Arrow's inventory and prices, allowing other distributors to fulfill orders through Express for a 6% fee. This could expand Arrow's customer reach but also risks losing existing customers and suppliers. Arrow relies on value-added services rather than just price. The document examines the pros and cons of the Express partnership and provides recommendations, including developing Arrow's own online purchasing capabilities instead of partnering with Express.

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    Arrow Electronics is a major electronics distributor. It is evaluating a partnership with Express, an online parts marketplace. Express would list Arrow's inventory and prices, allowing other distributors to fulfill orders through Express for a 6% fee. This could expand Arrow's customer reach but also risks losing existing customers and suppliers. Arrow relies on value-added services rather than just price. The document examines the pros and cons of the Express partnership and provides recommendations, including developing Arrow's own online purchasing capabilities instead of partnering with Express.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    418 views24 pages

    Arrow Electronics Inc - GLIM

    Uploaded by

    Karthigeyan K Karunakaran
    Arrow Electronics is a major electronics distributor. It is evaluating a partnership with Express, an online parts marketplace. Express would list Arrow's inventory and prices, allowing other distributors to fulfill orders through Express for a 6% fee. This could expand Arrow's customer reach but also risks losing existing customers and suppliers. Arrow relies on value-added services rather than just price. The document examines the pros and cons of the Express partnership and provides recommendations, including developing Arrow's own online purchasing capabilities instead of partnering with Express.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 24
    At a glance
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    Arrow Electronics started as a distributor of radio equipment and has grown through acquisitions to become a global provider of electronic components and enterprise computing solutions. It has evolved from a broad-line distributor to focusing on different customer segments through various operating groups.

    Arrow Electronics started as a distributor of radio equipment in 1935. It gradually positioned itself as a broad-line distributor of electronic parts through acquisitions between 1968-1980. By 1992, it became the #1 electronics distributor. It currently operates through different product and customer focused operating groups.

    Arrow Electronics serves OEM customers, contract manufacturers and customers that require customized computer product sub-assemblies. It focuses on transactional customers that place requests for quotes as well as relationship customers that engage in repeated or customized purchases.

    Arrow Electronics Inc.

    Group - II

    Introduction
    Arrow/Schweber Electronics (A/S) Subsidiary of Arrow Electronics Arrows North American operations headquartered at Melville, NY Founded in 1935 to sell radio equipment's and gradually positioned itself as a broad-line distributor of electronic parts, including semiconductors and passive components by successive acquisitions. In 1992, it reached #1 position Arrows largest working group with sales of around $2.07 billion in 1996

    Arrow Electronics is a global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions

    Company History
    1935 Founded & positioned itself into a broad-line distributor of electronic parts Acquired #2 position

    1968-1980

    1980

    economic recession & death of companys top 6 officials and 8 executives

    1992

    reached #1 position among electronics competitors

    Operations Structure
    Five Operating Groups distinguished by product & strategy Zeus Electronics semiconductors to military and aerospace customers Anthem Electronics and Arrow/Schweber semiconductors to industrial customers Product Driven Groups Gates/Arrow Distribution computer systems, peripherals & software Capstone Electronics passive components These operating groups being individually responsible for asset & materials management and P&L

    Arrow/Schweber
    Technical certification of its field sales representatives Dedicated investments in product management

    Organization Structure
    Field Sales Representatives Inside Sales Representatives Product Managers Field Application Engineers Administrative Personnel Additional Managers

    Six Regional VP

    39 Branch/General Managers

    Express Parts

    Independent Distributor
    Internet-based trading system around multi-distributor bulletin board 50000 OEMs to use its service

    Takes care of shipping to customers


    Fee worth 6%

    Product and Suppliers


    75% Standardized Multiple suppliers

    A/S

    25% Propriety Singular suppliers

    Only franchised distributors 56 suppliers in 1997 and growing big four Altera Intel Texas Instruments Motorola

    Two chip categories Standardized chips interchangeable and produced by multiple suppliers Proprietary chips - manufactured by a single supplier comprehensive services

    Suppliers

    Products & Services


    OEM Contract Manufacturers Customers buying customized, computer product sub-assemblies

    Customers

    Distributor/Customer Relationship
    Transactional customers
    Transactional customers are those that place requests-for-quotes with distributors simultaneously Mostly Book & Ship 25% of business Conversion to relationship customers: 50%

    Relational customers
    Relational customers are those that distributors use value-added products to build relationship with Mostly Value Added Cross Selling 75% of business Initially mostly transactional

    Discount
    Design Win Winning business through Engineering support and Design Work Higher Discount

    Jump Ball Win

    Winning business based on Competitive pricing by manufacturer No extra margin

    Analyzing the Market: Porters Analysis


    Bargaining power of suppliers On design wins: Low On Jump Ball: High On standardized products: Low On Proprietary products: High Bargaining power of Customers Transactional customers :Shop around for best prices, May convert to relationships Relationship customers

    Competitors New Entrants Moderate barriers to entry New entrants need to build relations with suppliers
    Avnet Inc Foreign competitors

    Substitutes

    Direct dealing with suppliers Managing services by themselves Shopping on the internet (disintermediation)

    4 P - Analysis

    Arrows Selling effort


    No. 1 among electronics Distributors 60% sales from Value Added Content Credit facility Value added services Cross selling Reduction in Operating Income in 1996 Expenses at 11% with Gross margins of 15% No online presence Low switching cost for customers
    Strengths Weaknesses

    Opportunities

    Threats

    Strong online presence Collaboration with Express Learn to how to sell against Going out of business

    Express as a competitor Cannibalization of BAS business if Express proposal accepted Competitors making online business model

    Arrows Selling effort


    Book and Ship (BAS) Real time, On-line computer system tracking costs, prices & inventory movement 300 Branch based sales & marketing representatives (SMRs) responsible for securing business from customers requesting quote, obtaining discounts from suppliers and shipping product Gross margins on BAS products-20% to 25%

    Value Added (VA)


    Design win Situation- Order originated by field engineering, facilitated by field sales representative (FSR) 400 FSRs visiting customers design engineers (10-12 per FSR) and promote new products Gross margins on VA products-10% to 15%

    Express Parts
    Non franchised distributor Internet based trading Multi-Distributor bulletin board Quick cross reference equivalent parts Cost competitiveness Popular with price sensitive customers Margins narrowing EXPRESS PARTS PROPOSAL A/Ss full list of inventory and price listing Express would receive order, do credit check Route to respective distributor electronically Express shipping facility Express fees 6% of price Paid 30 days after orders shipped

    Examining Express

    How many of customers will Express be able to take away? Signing up for Express could create a potential trade-off between gaining new customers and affecting arrow's relationship with existing customers who may drift away to pick products from different channels.

    Express would expose our business to more customers.


    Existing customers may bypass Arrow and go directly to Arrows competitors All transactional and about 40% relational customers may switch to Express or could easily switch to another distributor and potentially destroy A/S low price model.

    Pros and Cons of association with Express


    Express business model cut cost on building new customer relationship and could potentially reach customers outside A/S present target market Risk losing franchise distribution or distribution due to removal of their channel member status by the suppliers, with suppliers using Express. Express cannot create new business as it only respond to demand, where A/S creates new business through its value added products

    The reduction in the overall gross margin and slashing of prices due to competitive market place, And since prices are open to the public, bargain of lower prices by existing customers may occur
    Difficulty in deciding on association between commodity products and transactional behaviour on one hand and value added products and relational behaviour on the other.

    Options available
    Option 1: Not to associate with Express Inc. Business as Usual Option 2: Get Associated with Express Inc.

    Go with Express
    Gain access to Express potential customers Expand customer base Potentially secure competitors transactional customers Give promotional responsibility to Express Express Incs request to join this invite only limited distributors network that could potentially help them to cater to a larger market and increase sales at less than half the cost of doing so via its branch network. Sign up would expose A/S to estimated 50,000+ OEMs throughout the US and increasing sales Cost and time effort savings in serving and converting low price shoppers into potential customers.

    Fundamental Value Creation of Arrows


    How does Arrow create value for its customers for the price it charges How this value is different from what suppliers can provide to customers directly Whether firms like express can offer the same value for firms at lower prices

    Recommendation B2B Buying process


    Service component is important B2B emphasizes personal selling rather than advertising. Complex buying process; takes longer duration Buyer Seller Relationship (v. close relationship) Designing Customer Solutions B2B must understand the technical aspects of the organizations requirements; as well as knowing who influences the buying decision and why

    Not to Go with Express

    Choose not to associate with Express Avoid 6% service fee Avoid possibility of losing customers if we are not always lowest price

    Continue serving customers as we always have


    Focus on relationship customers who are either customers going in for modified rebuy or straight rebuy.

    Products need delivery that would be compromised if we partner with Express Build relationship with customers by creating supply chain system that will provide value-added services. Evaluate, adapt and adjust the existing business model to the changes Express may create

    Recommendation
    Do not partner with Express AND develop websites purchasing capabilities Give 5% discount to online buyers Gain access to customers previously unavailable Give relational customers opportunity to use online purchasing as well

    Create Our Own Internet Presence:

    Introduce purchasing capabilities on website already in operation Serve price-sensitive customers through website Direct re purchase, online support, payment gateway, Knowledge Centre

    Discussion

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