ARROW ELECTRONICS CASE
STUDY
SUBMITTED BY : GROUP 1
Parul Soni (261)
Sumit Bansal(201)
Flow of presentation
About ARROW & A/S
About Express Parts
Products and Suppliers
Top 4 Manufacturers
A/S Customers
Customer segments
A/s Suppliers
Express proposal
SWOT Analysis
Advantages and Disadvantages
Analysis
Decision
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 Distributor(Eg: arrow) Customers (like OEM)
sales
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
Standardized
75% Multiple suppliers
A/S
25%
Singular
Propriety
suppliers
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
Existing Customers:
13%
Small & Mid Sized
11% OEMs
Contract Manufacturers
PC Clones(X86s)
56% Custom Computer
Products (CCP/ICP)
20%
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 Ball
Design Win
RELATIONSHIP WITH SUPPLIERS
Supplier end bargaining
Order of names – Supplier List
Supplier’s order of giving out information
Time 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
FieldEngineer 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 •Reduction in Operating
Distributors Income in 1996
•60% sales from Value •Expenses at 11% with Gross
Added Content margins of 15%
STRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
•Collaboration with Express
•Express as a competitor
•Learn to how to sell against
•Cannibalization of BAS business
“Going out of 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
