ARROW ELECTRONICS CASE STUDY
SUBMITTED BY : GROUP 1Parul Soni (261)
Sumit Bansal(201)
Flow of presentation
About ARROW & A/SAbout Express PartsProducts and SuppliersTop 4 ManufacturersA/S CustomersCustomer segmentsA/s SuppliersExpress proposalSWOT AnalysisAdvantages and DisadvantagesAnalysisDecision
ARROW ELECTRONICS
Broad-line distributor of electronics parts, including semiconductors and passive components
Founded in 1935 Reached No 2 spot by 1980 Became number one among electronics
distributors by 1992
Sales of $6.5 billion in 1996
ARROW/SCHWEBER
One of Arrow’s five operating groups Sells semi-conductors to different customer
bases like Original Equipment Manufacturers (OEM) and Contract Manufacturers (CM)
Sales of 2.07$Billion of 6.5$Billion of Arrow Electronics’ total Sales
THE WAY THE INDUSTRY WORKS:
Suppliers(Eg: Motorola, Intel etc.)--25% to 35%
of sales
Distributor(Eg: arrow)
Customers (like OEM)
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%
PRODUCTS AND SUPPLIERS
A/S
Propriety
Standardized
Singular suppliers
Multiple suppliers75%
25%
THE BIG 4 TOP MANUFACTURES
Altera -Proprietary programmable logic devices
Intel - Mostly Propriety But no VA Programming or engineering support
required Texas Instruments Motorala
A/S CUSTOMERS
56%
20%
11%
13%
Existing Customers:
Small & Mid Sized OEMsContract Manufac-turersPC Clones(X86s)Custom Computer Products (CCP/ICP)
CUSTOMER SEGMENTS
OEMs requiring
Short lead times Orders of small quantities Credit management Value Added Services Engineering support
Why required? JIT Hand off material Management
CUSTOMER SEGMENTS
Contract Manufacturers : Supply OEMs manufacture Produce Circuit boards Industrial computer systems
Requisites Value Added services Supply Chain management Quick delivery Competitive cost No engineering support
Why required? Price sensitive Credit facilities required More Value added services
CUSTOMER SEGMENTS
PC clones manufacturers : Intel x86 chip 11% of business Requirements:
Commoditized or transactional Credit
Buyers of Computer Product Sub-Assemblies Requirements
Smaller quantities Highly customized solutions
A/S AND SUPPLIERS
What suppliers want from distributors:
Win business for Standardized products Represent New technologies - Propriety
products
A/S AND SUPPLIERS
Financial incentives provided by suppliers e.g. Price protection Limited return privileges
Distributors bring Suppliers closer to customers Judges future prospects Negotiates further discounts
Jump BallDesign Win
RELATIONSHIP WITH SUPPLIERS
Supplier end bargaining
Order of names – Supplier ListSupplier’s order of giving out informationTime taken to respond to distributors price
requests
Distributor end bargaining
On standardized products by different suppliers buy portfolio offering best margins
PRODUCTS
Book and ship- Commoditized goods SMR Discounts from suppliers 40% business
Value Added – Programmable goods Field Engineer and FSR Design Win Situation 60% business
RELATIONSHIP WITH CUSTOMERS
Transactional Customers
BAS types 25% of business Conversion to relationship customers: 50%
Relationship Customers
Initially mostly transactional Value Added services 75% of business
A/S AND INTERNET
Non franchised distributors
Seen as not very legitimate Reseller agreements lacking Hence warranties not provided
Arrows website
Information provision Fixed Costs Purchase facility not online Redirected to national 1-800 no.s
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/S’s 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
•No. 1 among
electronics
Distributors
•60% sales from Value
Added Content
STRENGTHS
•Reduction in
Operating Income in
1996
•Expenses at 11% with
Gross margins of 15%
WEAKNESSES
•Collaboration with
Express
•Learn to how to sell
against “Going out of
business”
OPPORTUNITIES THREATS
•Express as a competitor
•Cannibalization of BAS
business if Express
proposal accepted
ADVANTAGES
rice sensitive customers - Transactional
Costs incurred for relation building - Unnecessary
Eliminated with the advent of Express
Access to large no of OEMs
Market Leader and favored by suppliers
Can offer relatively more competitive prices
Shipping cost taken care by Express
Less Phantom Inventory
Reduction in time and efforts to build new customers
DISADVANTAGES
Express might be used as a bargaining tool
Customers gained would be all price
sensitive
Hence lower chances of conversion
ANALYSIS
Business loss should be compensated
A/S prices are already very competitive
Expenses incurred on account of transactional customers eliminated
6% service cost charged by Express eat into
A/S margins
Online website of A/S could be improved to offer purchasing facilities
DECISION
Go along with the proposal offered by Express
Revamp website to facilitate purchase services
A/S will benefit due to its competitive prices
THANK YOU