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

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

Supplier

Provide details
of customer
and
opportunity

RFQ
Customer

Arrow

Additional
discount
available

Order Delivery

Discounts from Supplier

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
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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
Costtimeandeffortsavingsinservingandconvertinglowpricesh
oppersinto potential customers
70 % of the commodity product sales to transactional customers
are manufacturedbymajorsuppliers 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
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chain

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 web-based 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 webbased 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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