ARROW

ELECTRONICS INC

Group 4
Akash Gupta
Aditya Anand
Rishabh Agarwal
Shreya Jain
About Arrow Electronics About Arrow/Schweber
 Founded in 1935 • One of Arrow’s five operating groups
 Broad-line distributor of electronics parts • Sells semi-conductors to
 Original Equipment Manufacturers (OEM)
 Semiconductors
 Contract Manufacturers (CM)
 Passive components • Revenue of $ 2.07 Billion in 1996
 Revenue of $6.5 billion in 1996

Industry Structure

Distributor Customers
Suppliers

Arrow/Schweber
PRODUCTS

Standardized Multiple suppliers

75%

A/S
Propriety Singular suppliers
25%

Customer Segments
OEMs CMs
• Short lead times • Value Added services
• Orders of small quantities • Supply Chain management
• Credit management • Quick delivery
• Value Added Services • Competitive cost
• Engineering support • No engineering support
– JIT – Price sensitive
– Hand off material Management – Credit facilities required
– More Value added services
RELATIONSHIP WITH SUPPLIERS
• Suppliers Want :
 For Standardized product : Win Business
 For Propriety Product : Awareness about
new technology and innovation
• Suppliers Provide :
 Return Privileges
 Protection against price

• Distributors wants : • Distributors Provide :

Discounts through negotiations :  Future Prospects
Jump Ball
Design Win

 Supplier bargaining factors

 Order of names
 Supplier List
 Supplier’s order of giving out information
 Time taken to respond to distributors price requests

 Distributor end bargaining factor

 By Design wins
 Competitive Standardised product
Selling Effort Relationship with Customers
 Book and ship - Commoditized goods  Transactional Customers
 SMR Discounts from suppliers • BAS types
 300 SMRs • Conversion to relationship customers: 50%

 Relationship Customers
 Value Added – Propriety goods • Initially mostly transactional
 Field Engineer and FSR
• Value Added services
 400 FSRs
 Design Win Situation

About Express Internet system Express proposal for A/S

• An internet trading system having : • A/S’s full list of inventory and price listing
• Multi-distributor • Express would
• Bulletin dashboard
• System to compare and bargain prices among competitors Receive order
• Aim to provide large and small customers to shop for prices Do credit check
• 50,000 OEMs connected to the service.
Route to respective distributor electronically
• Takes care of shipping to customers
• Fee worth 6% Express shipping facility

• 6% fee for facility

• 30 days receivable policy
 •No. 1 among electronics •Reduction in Operating

Weaknesses
Distributors Income in 1996
Strengths

•60% sales from Value •Expenses at 11% with Gross

Added Content margins of 15%
S W

T O

•Express as a competitor •Collaboration with Express

•Learn to how to sell against

Opportunities
•Cannibalization of BAS business
Threats

if Express proposal accepted “Going out of business”

 EVALUATING OPTIONS : SIGN UP FOR EXPRESS SYSTEM
Pros
Sign up would expose A/S to estimated 50,000+ OEMs
Expand customer base and Increase market share

Increasing sales at less than half the cost.

Cost, time and effort savings in serving and converting low price shoppers into potential customers.
Cons
Express might be used as a bargaining tool
Customers gained would be all price sensitive
Hence lower chances of conversion
.
EVALUATING OPTIONS : CREATE OWN INTERNET PRESENCE

Introduce purchasing capabilities on website already in operation

Develop a strategy using the Internet as a direct channel
Serve price-sensitive customers through website
Maintain relationships already established by keeping a direct line of communication while attract
new transactional customers focused on price
EVALUATING OPTIONS : NO CHANGE

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
POINTS TO CONSIDER

 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.

 Ideally, savvy transactional customers will visit Express website to compare prices, consider extra channel and overhead costs, and
then visit Arrow’s page to make actual purchase.
RECOMMENDATION
Partner with Express AND develop website’s
purchasing capabilities
– Gain access to customers previously unavailable
– Use Express as an advertising medium
• Transactional customers go to Express’ website because it is the
market place
– Service fee only applies to purchases not simply having our name out
there
– Important to maintain option to buy from Arrow
– Give relational customers’ opportunity to use online purchasing as
well