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A Tale of Two EDs - Hout
A Tale of Two EDs - Hout
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Industry Overview
$23.1 billion industry in U.S. and Canada
Experienced double digit growth over last several years
Grew at over 20% during 1993-95
However, growth was predicted to be close to 11% during 1996
Growth factors
Rising demand for electronic products
Shortages or surpluses of various electronic components
Component Manufacturers’ desire to stick to core competencies
Distributors were differed by
Range of products they carried
Number of customers they served
Kind of relationship between their suppliers and customers
The size of their typical shipments
Level of Value-added-services offered
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Current Trends
Consolidation in Industry
Many small distributors had merged with or acquired by large rivals
Revenue of top 100 had grown faster than the industry average
Growth was even more rapid for top 10 distributors
Fifty percent of the industry was in the hands of two large players
Emergence of mega distributors
Balance of power shifting from suppliers to distributors
Small distributors would survive only if they became “boutiques” with high
service orientation
Acquisitions often were driven by pressure on distributors to go global
Performance Measures
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AESCO
70 people organization serving majority OEMs (Initially to MROs)
Target growth rate : 15%
Located at Akron, Serving 5 states in and around Ohio
40-45 manufacturers Buy Bulk Breaking Bulk into small Qty
Shipping to OEMs
Value added services: Meeting OEMs requirements of small volume,
One-stop shop, Assembly + kitting, Credit facilities to OEMs, Sales
Promo for component manufacturer
Neutrality while dealing with multiple manufacturer selling
same/similar components
ESCI
12 people organization mainly into supplies to defense organisations
Nature of Products: Low volume, rarely available, pedigree check
required
Very few competitors due to exclusivity of the product
Ike Aubrey, CEO of ESCI possessed
a knowledge about the potential source of the rare products and
also maintained good relationship and developed trust with suppliers and
customers.
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