Description
The PPT explaining about on Arrow Electronics.
Arrow Electronics Inc.
Company Overview
Arrow/Schweber Electronics (A/S)
? Subsidiary of Arrow Electronics ? Arrow’s largest working group with sales of around $2.07 billion in 1996 ? Founded in 1935 to sell radio equipments and gradually positioned itself
as a broad-line distributor of electronic parts, including semiconductors and passive components by successive acquisitions.
? In 1992, it reached #1 position ? Arrow’s North American operations headquartered at Melville, NY
“Arrow Electronics is a global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions”
Operations Structure
? Five Operating Groups distinguished by product &
strategy
? Zeus Electronics – semiconductors to military and aerospace
customers ? Anthem Electronics and Arrow/Schweber– semiconductors to industrial customers
? Product Driven Groups
? Gates/Arrow Distribution – computer systems, peripherals &
software ? Capstone Electronics – passive components These operating groups being individually responsible for asset & materials management and P&L
Organizational Structure
Six Regional VP
39 Branch/General Managers
Field Sales Representatives Inside Sales Representatives Product Managers Field Application Engineers Administrative Personnel Additional Managers
Suppliers
? A/S’s “Big Four” Suppliers •
Altera - Manufacturer of proprietary programmable logic devices (PLDs). Requires value added programming and engineering support. Provided by A/S.
Intel - supplied mostly proprietary semiconductor products & x86 chips Texas Instruments– offered 75/25 mix of standardized & proprietary products.
•
•
• Motorola
Value Addition by Arrow
As a franchised distributor, they have an advantage of selling supplier's standardized & proprietary products.
• Has a growing supplier base with a count of 56 as in spring 1997.
•Distributes line card that is comprised of two chip categories:
• Standarized chips - interchangeable and produced by multiple suppliers • Proprietary chips - manufactured by a single supplier
Customers
Traditional customer base of mid & small sized OEMs (Accounted for 56%) • Customers who ordered smaller quantities, need shorter leadtime, wanted products on credit. •Customers who need Value-added Services. • Customers who adopted JIT procurement systems. • Customers requiring Contract Manufacturers to outsource prototype production or entire product runs.
Customers with requirement of entire systems or sub-assemblies like components inside industrial equipments such as elevators or medical equipments. Need Highly customized solutions
Supplier/Distributor Relationship
•
Suppliers such as Intel and Motorola deals directly with large original equipment manufacturers (OEM 75%) while franchising 25% to small numbers of distributors such as A/S Components of Relations with Suppliers: • Suppliers rely on A/S for gaining profit & market share, Offer price protection and limited return privileges in return. • Transactional customers VS. Relational customers
Design Win
Jump Ball
Work is designed by distributors Must depend on design registration
No design by distributors. Purchase on basis of Manufacturer reputation Suppliers create demand. Distributor’s value in Credit & Fulfillment
Arrow’s Selling Effort
? Book and Ship (BAS)
? Real time, On-line computer system tracking costs, prices &
inventory movement ? 300 Branch based sales & marketing representatives (SMRs) responsible for securing business from customers requesting quote, obtaining discounts from suppliers and shipping product ? Gross margins on BAS products-20% to 25%
? Value Added (VA)
? Design win Situation- Order originated by field engineering,
facilitated by field sales representative (FSR) ? 400 FSRs visiting customers’ design engineers (10-12 per FSR) and promote new products ? Gross margins on VA products-10% to 15%
Industry Distribution Channel Large Customers 65%-75% OEMs & CMs 35%-25% (Through Distributors like A/S) Customers Express Bulletin Board Dist 2 Customers Dist 3
Suppliers (Intel , Motorola )
Express Distribution Channel A/S
•No. 1 among electronics Distributors •60% sales from Value Added Content •Credit facility •Value added services •Cross selling
•Reduction in Operating Income in 1996 •Expenses at 11% with Gross margins of 15% •No online presence •Low switching cost for customers
Strengths
Weaknesses
Opportunities
•Strong online presence •Collaboration with Express •Learn to how to sell against “Going out of business”
Threats
•Express as a competitor •Cannibalization of BAS business if Express proposal accepted •Competitors making online business model
Examining Express
How many of customers will Express be able to take away? ? Signing up for Express could create a potential trade-off between gaining new customers and affecting arrow's relationship with existing customers who may drift away to pick products from different channels.
? Express would expose our business to more customers.
? Existing customers may bypass Arrow and go directly to Arrow’s competitors ? All transactional and about 40% relational customers may switch to Express
or could easily switch to another distributor and potentially destroy A/S low price model.
Pros and Cons of association with Express
? Express business model cut cost on building new customer relationship and could
?
? ?
?
potentially reach customers outside A/S present target market Risk losing franchise distribution or distribution due to removal of their channel member status by the suppliers, with suppliers using Express. Express cannot create new business as it only respond to demand, where A/S creates new business through its value added products The reduction in the overall gross margin and slashing of prices due to competitive market place, And since prices are open to the public, bargain of lower prices by existing customers may occur Difficulty in deciding on association between commodity products and transactional behaviour on one hand and value added products and relational behaviour on the other.
Market Segment Mix
Optimistic Scenario
OEM 56%
VA BAS 72% 28%
CM 20%
VA 57% BAS 43%
X86 11%
VA 2% BAS 98%
ICPd 13%
VA BAS 80% 20%
Analysis -Optimistic scenario
Cannibalization
OEM BAS
Optimistic Pessimistic
CM - BAS
Optimistic Pessimistic
X86 - BAS
Optimistic Pessimistic
ICPd BAS
Optimistic Pessimistic
25% = 91 million $
60% = 218 million $
30% = 59 million $
70% = 139 million $
50% = 122 million $
80% = 196 million $
35% = 21 million $
80% = 48 million $
Cannibalization
? Optimistic – 293 million $
? Pessimistic – 601 million $
Available Options:
Option 1: Not to associate with Express Inc. Business as Usual
Option 2: Get Associated with Express Inc.
Go with Express
• Gain access to Express’ potential customers
• •
• •
Expand customer base – Potentially secure competitors’ transactional customers Give promotional responsibility to Express Express Inc’s request to join this invite only limited distributors network that could potentially help them to cater to a larger market and increase sales at less than half the cost of doing so via its branch network. Sign up would expose A/S to estimated 50,000+ OEMs throughout the US and increasing sales Cost and time effort savings in serving and converting low price shoppers into potential customers.
–
Fundamental Value Creation of Arrows
? How does Arrow create value for its customers for
the price it charges ? How this value is different from what suppliers can provide to customers directly ? Whether firms like express can offer the same value for firms at lower prices
Recommendation – B2B Buying process
? Service component is important ? B2B emphasizes personal selling rather than advertising. ? Complex buying process; takes longer duration ? Buyer – Seller Relationship (v. close relationship) ? Designing Customer Solutions ? B2B must understand the technical aspects of the organization’s
requirements; as well as knowing who influences the buying decision and why
Not to Go with Express
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 who are either customers going in for modified rebuy or straight rebuy. ? Products need delivery that would be compromised if we partner with Express ? Build relationship with customers by creating supply chain system that will provide value-added services. Evaluate, adapt and adjust the existing business model to the changes Express may create
?
Recommendation
• Do not partner with Express AND develop website’s
purchasing capabilities • Give 5% discount to online buyers – Gain access to customers previously unavailable – Give relational customers’ opportunity to use online purchasing as well ? Create Our Own Internet Presence: ? Introduce purchasing capabilities on website already in operation ? Serve price-sensitive customers through website ? Direct re purchase, online support, payment gateway, Knowledge Centre
? THANK YOU
doc_884525867.pptx
The PPT explaining about on Arrow Electronics.
Arrow Electronics Inc.
Company Overview
Arrow/Schweber Electronics (A/S)
? Subsidiary of Arrow Electronics ? Arrow’s largest working group with sales of around $2.07 billion in 1996 ? Founded in 1935 to sell radio equipments and gradually positioned itself
as a broad-line distributor of electronic parts, including semiconductors and passive components by successive acquisitions.
? In 1992, it reached #1 position ? Arrow’s North American operations headquartered at Melville, NY
“Arrow Electronics is a global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions”
Operations Structure
? Five Operating Groups distinguished by product &
strategy
? Zeus Electronics – semiconductors to military and aerospace
customers ? Anthem Electronics and Arrow/Schweber– semiconductors to industrial customers
? Product Driven Groups
? Gates/Arrow Distribution – computer systems, peripherals &
software ? Capstone Electronics – passive components These operating groups being individually responsible for asset & materials management and P&L
Organizational Structure
Six Regional VP
39 Branch/General Managers
Field Sales Representatives Inside Sales Representatives Product Managers Field Application Engineers Administrative Personnel Additional Managers
Suppliers
? A/S’s “Big Four” Suppliers •
Altera - Manufacturer of proprietary programmable logic devices (PLDs). Requires value added programming and engineering support. Provided by A/S.
Intel - supplied mostly proprietary semiconductor products & x86 chips Texas Instruments– offered 75/25 mix of standardized & proprietary products.
•
•
• Motorola
Value Addition by Arrow
As a franchised distributor, they have an advantage of selling supplier's standardized & proprietary products.
• Has a growing supplier base with a count of 56 as in spring 1997.
•Distributes line card that is comprised of two chip categories:
• Standarized chips - interchangeable and produced by multiple suppliers • Proprietary chips - manufactured by a single supplier
Customers
Traditional customer base of mid & small sized OEMs (Accounted for 56%) • Customers who ordered smaller quantities, need shorter leadtime, wanted products on credit. •Customers who need Value-added Services. • Customers who adopted JIT procurement systems. • Customers requiring Contract Manufacturers to outsource prototype production or entire product runs.
Customers with requirement of entire systems or sub-assemblies like components inside industrial equipments such as elevators or medical equipments. Need Highly customized solutions
Supplier/Distributor Relationship
•
Suppliers such as Intel and Motorola deals directly with large original equipment manufacturers (OEM 75%) while franchising 25% to small numbers of distributors such as A/S Components of Relations with Suppliers: • Suppliers rely on A/S for gaining profit & market share, Offer price protection and limited return privileges in return. • Transactional customers VS. Relational customers
Design Win
Jump Ball
Work is designed by distributors Must depend on design registration
No design by distributors. Purchase on basis of Manufacturer reputation Suppliers create demand. Distributor’s value in Credit & Fulfillment
Arrow’s Selling Effort
? Book and Ship (BAS)
? Real time, On-line computer system tracking costs, prices &
inventory movement ? 300 Branch based sales & marketing representatives (SMRs) responsible for securing business from customers requesting quote, obtaining discounts from suppliers and shipping product ? Gross margins on BAS products-20% to 25%
? Value Added (VA)
? Design win Situation- Order originated by field engineering,
facilitated by field sales representative (FSR) ? 400 FSRs visiting customers’ design engineers (10-12 per FSR) and promote new products ? Gross margins on VA products-10% to 15%
Industry Distribution Channel Large Customers 65%-75% OEMs & CMs 35%-25% (Through Distributors like A/S) Customers Express Bulletin Board Dist 2 Customers Dist 3
Suppliers (Intel , Motorola )
Express Distribution Channel A/S
•No. 1 among electronics Distributors •60% sales from Value Added Content •Credit facility •Value added services •Cross selling
•Reduction in Operating Income in 1996 •Expenses at 11% with Gross margins of 15% •No online presence •Low switching cost for customers
Strengths
Weaknesses
Opportunities
•Strong online presence •Collaboration with Express •Learn to how to sell against “Going out of business”
Threats
•Express as a competitor •Cannibalization of BAS business if Express proposal accepted •Competitors making online business model
Examining Express
How many of customers will Express be able to take away? ? Signing up for Express could create a potential trade-off between gaining new customers and affecting arrow's relationship with existing customers who may drift away to pick products from different channels.
? Express would expose our business to more customers.
? Existing customers may bypass Arrow and go directly to Arrow’s competitors ? All transactional and about 40% relational customers may switch to Express
or could easily switch to another distributor and potentially destroy A/S low price model.
Pros and Cons of association with Express
? Express business model cut cost on building new customer relationship and could
?
? ?
?
potentially reach customers outside A/S present target market Risk losing franchise distribution or distribution due to removal of their channel member status by the suppliers, with suppliers using Express. Express cannot create new business as it only respond to demand, where A/S creates new business through its value added products The reduction in the overall gross margin and slashing of prices due to competitive market place, And since prices are open to the public, bargain of lower prices by existing customers may occur Difficulty in deciding on association between commodity products and transactional behaviour on one hand and value added products and relational behaviour on the other.
Market Segment Mix
Optimistic Scenario
OEM 56%
VA BAS 72% 28%
CM 20%
VA 57% BAS 43%
X86 11%
VA 2% BAS 98%
ICPd 13%
VA BAS 80% 20%
Analysis -Optimistic scenario
Cannibalization
OEM BAS
Optimistic Pessimistic
CM - BAS
Optimistic Pessimistic
X86 - BAS
Optimistic Pessimistic
ICPd BAS
Optimistic Pessimistic
25% = 91 million $
60% = 218 million $
30% = 59 million $
70% = 139 million $
50% = 122 million $
80% = 196 million $
35% = 21 million $
80% = 48 million $
Cannibalization
? Optimistic – 293 million $
? Pessimistic – 601 million $
Available Options:
Option 1: Not to associate with Express Inc. Business as Usual
Option 2: Get Associated with Express Inc.
Go with Express
• Gain access to Express’ potential customers
• •
• •
Expand customer base – Potentially secure competitors’ transactional customers Give promotional responsibility to Express Express Inc’s request to join this invite only limited distributors network that could potentially help them to cater to a larger market and increase sales at less than half the cost of doing so via its branch network. Sign up would expose A/S to estimated 50,000+ OEMs throughout the US and increasing sales Cost and time effort savings in serving and converting low price shoppers into potential customers.
–
Fundamental Value Creation of Arrows
? How does Arrow create value for its customers for
the price it charges ? How this value is different from what suppliers can provide to customers directly ? Whether firms like express can offer the same value for firms at lower prices
Recommendation – B2B Buying process
? Service component is important ? B2B emphasizes personal selling rather than advertising. ? Complex buying process; takes longer duration ? Buyer – Seller Relationship (v. close relationship) ? Designing Customer Solutions ? B2B must understand the technical aspects of the organization’s
requirements; as well as knowing who influences the buying decision and why
Not to Go with Express
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 who are either customers going in for modified rebuy or straight rebuy. ? Products need delivery that would be compromised if we partner with Express ? Build relationship with customers by creating supply chain system that will provide value-added services. Evaluate, adapt and adjust the existing business model to the changes Express may create
?
Recommendation
• Do not partner with Express AND develop website’s
purchasing capabilities • Give 5% discount to online buyers – Gain access to customers previously unavailable – Give relational customers’ opportunity to use online purchasing as well ? Create Our Own Internet Presence: ? Introduce purchasing capabilities on website already in operation ? Serve price-sensitive customers through website ? Direct re purchase, online support, payment gateway, Knowledge Centre
? THANK YOU
doc_884525867.pptx