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