Arrow Electronics

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Arrow Electronics as a leading distributor of electronic parts faces new challenges and competitors with the advent of the information age. Profit margins had been steadily increasing through the 80fs and early 90fs with Arrowfs closest competitor trailing in sales by 20% as recently as 1996. However even at this point there was indication of stagnation as competitor Avnetfs sales had grown by 14% compared to Arrowfs 10% in that same year. At the same time Arrowfs largest group, Arrow/Schweber (A/S) had taken on new leadership under Jan Salsgiver who viewed technological innovation in product and inventory management as a way of improving the companyfs competitive advantage. Express Parts, Inc. entered this increasingly competitive industry as an independent distributor offering an on-line service which would allow customers to compare prices among leading electronic manufacturers allowing customers to bargain hunt for the best price among rival companies. For a fee of 6% per each payment, Express would handle what had been a previously time and cost consuming process of receiving and ordering transactional orders from customers. This process had proven problematic in the past for Arrowfs sales and marketing representatives as these orders tended to be of the Book and Ship variety and comprised 25% of the companyfs sales. Relationship customers usually dealing in Value Added requests have been more important to the company as this population represented more long-term and consistent orders as opposed to the more fickle transactional customers. Furthermore much of the companyfs focus on developing its core competency has been on improving its Value Added(VA) services as they comprised $1.443 billion of the Arrowfs $2.31 billion total services. With these considerations in mind Arrow has to decide whether to view Express as a potential competitor who could eventually cannibalize not only its transactional but also relationship customer base or as a...
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