Arrow Electronics Case Analysis

Group No: 6 Pooja Pant (119278042) Nisanpreet Bal (119278100) Reshu Hooda (119278101) Rajeev Ranjan Manu A R Arpit Bangur (119278088) Akash Baibhav (119278020) Rajat Katiyar Ashwin Kumar Parmeshwar Sharma (119278011) Ankit Bhansali
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AGENDA
Arrow/Schweber Electronics Value Chain Business Model Express Part Internet Delivery Service Possible solutions Pro & Cons of Scenarios Decision

Arrow/Schweber Electronics
Broadline franchise distributor of electronic parts It was the largest company of Arrow group Top position among electronic distributors Sales of $2.07 billion in 1996 It managed sales of Big four suppliers to customers contributing to 25% to 35% of the sales Distributed two types of chips: Standardized Proprietary Had a long supplier list numbering 56 in 1997 Types of order served Book and Ship Value added

Value Chain
LARGE OEM

Suppliers

Distributors

Customers (CM/ OEM)

Intel Motorola Altera Texas Instrument

Arrow Schweber catering to industrial customers Zeus Electronics catering to military and aerospace customers Anthem Electronics catering to industrial customers

Transactional Relationship based

Arrow Business Model

Franchise select distributor Financial incentives from suppliers- Price protection & limited return privilege
Provide details of customer and opportunity

RFQ Arrow Customer

Order Delivery

Supplier
Additional discount available

Discounts from Supplier Jump Ball Standardized products Design Win Customized products

Services to Customers Credit facility Value added services supply chain management and programming
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Express Part Internet Delivery Service

Independent distributor which developed an internet based trading system around a multi-distributor bulletin board Will enable distributors post inventories and prices to bulletin board Provide customers( large or small) opportunity to shop for prices Help distributors and suppliers gain new customers Convenient experience for both customers and distributors Anonymous listing of distributors Fee of 6% charged by express Shippers appointed by express will pick up parts from distributors and ship directly to customers Express will review the order, perform credit check and acknowledge accepted orders to the customer and route them electronically to the appropriate distributor

Possible Solutions
Accept the Express parts internet distribution service proposal Reject the Express parts internet distribution service proposal and continue with the current business model Reject the Express parts internet distribution service proposal and build its own web-based system Accept the Express parts internet distribution service proposal and build its own web-based system

Solution 1: Accept Express proposal

PROS Accessible to 50,000 new customers increasing sales mainly transactional customers Cost time and effort savings in serving and converting low price shoppers into potential customers 70 % of the commodity product sales to transactional customers are manufactured by major suppliers major suppliers will lose pricing control Reduction in shipping costs CONS 6% margin to express Anonymity - No customer interaction Lose the possibility of converting transactional customers into relationship based customers No business through referrals Not sustainable in the long run might be excluded from the value chain Losing on the sale of value added products

Solution 2: Reject Express proposal and continue with the current business model
PROS Maintain customer relationship Focus on VA sales and improve the service, consistently grow sale volume of VA content. VA contribution as a percentage of Sales had increased from 2% in 1977 to 80% in 2000 Continue improving the value added content, short delivery lead time and inventory management as main values of the company CONS Lose out on the online business Lose out on existing customers who are able to get competitive on Express Convenient for customers to compare and place order Not sustainable in long run

Solution 3: Reject the Express proposal and build its own webbased system
There is a time lag between the change in buying behavior, by the time customers will get familiar with online ordering , your portal will be ready Initial set up Investment : 1 million Promotion through Already existing distribution PROS It will facilitate the booking and ordering system and further reduce customers lead time. It will reduce sales expense especially BAS sales expense. It can help A/S differentiate itself from competitors by providing low price efficient one-stop-shop Arrow already has a website where all product details are displayed CONS Lose out immediate customers through Express Arrows own portal will take time to function

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Solution 4: Accept the Express parts internet distribution service proposal and build its own web-based system
PROS Accessible to new customers on Express Presence in online space Arrow will be able to serve the existing customers at lower price as compared to Express (6% margin to Express) Continue improving the value added content, short delivery lead time and inventory management It will reduce sales expense especially BAS sales expense. CONS Loss in shipping and booking revenue Loss of 6% margin for Arrow due to selling on Express Investment in launching aggressive marketing campaign

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THANK YOU

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