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Arrow Electronics Inc

Submitted by:
Group 5
ASHUTOSH KUMAR SINGH
GAURAV SHARMA
KISHORE SRIRAM
PRITAM KUMARI
MOHNISH SINGH
NEERJA MALIK
Flow of Presentation
About ARROW & A/S
Products and Suppliers
Top 4 Manufacturers
A/S Customers
Customer segments
A/s Suppliers
Express proposal
SWOT Analysis
Advantages and Disadvantages
Analysis
Recommendation
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 $6.5 billion in 1996
Arrow/Schweber
Jan Salsgiver president of Arrow/Schweber
A/S(Subsidary of Arrow Electronics)
One of Arrows five operating groups
Sells semi-conductors to different customer bases
like Original Equipment Manufacturers (OEM) and
Contract Manufacturers (CM)
Sales of 2.07$Billion of 6.5$Billion of Arrow
Electronics total Sales

THE WAY THE INDUSTRY WORKS:


Suppliers
(Eg: Motorola, Intel Distributor(Eg: Arrow Customers (like
etc.)--25% to 35% Electronic) OEM)
of sales
Products and Suppliers

Standardized Multiple
75% suppliers

A/S

25%

Singular
Propriety
suppliers
A/Ss Relationship with 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
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


Suppliers 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
300 SMRs

Value Added Programmable goods


Field Engineer and FSR
400 FSRs
Design Win Situation
Relationship with Customers
Transactional Customers
BAS types
Conversion to relationship customers:
50%

Relationship Customers
Initially mostly transactional
Value Added services
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 nos
Express The new Distribution
System
An internet trading system around a multi-
distributor bulletin board providing customers
large and small an opportunity to shop for prices.
Estimated 50,000 OEMs having access to the
service.
Allow customers to compare prices and to
bargain for the best price among competitors
Independent Distributor
Takes care of shipping to customers
Fee worth 6%
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/Ss 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 Reduction in
electronics Operating Income in
Distributors 1996
60% sales from Value Expenses at 11% with
Added Content Gross margins of 15%

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

Collaboration with
Express as a competitor
Express
Cannibalization of BAS
Learn to how to sell
business if Express
against Going out of
proposal accepted
business
Available options
Sign up for Express system with an optimism-
additional business and selling to those
customers that are out of reach of the current
business model.
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.
Available 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
Available options
Business as Usual
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
E/S products need delivery that
would be compromised if we partner
with Express
Advantages
Price 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.
Ideally, savvy transactional customers will visit Express
website to compare prices, consider extra channel and
overhead costs, and then visit Arrows page to make actual
purchase.
RECOMMENDATION
Partner with Express AND develop websites
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
THANKS