Internet Mini Case #2

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Internet Mini Case #2
Tech Data Corporation
Maryanne M. Rouse

The Company
TECH DATA CORPORATION’S (TECD) AGGRESSIVE GROWTH HAD TAKEN THE COMPANY from 10 employees and $2 million in sales in 1983 to approximately 8,000 employees and $15.7 billion in sales for fiscal 2002 (fiscal year ended January 31, 2003) and secured the company’s position as a leading distributor of information technology (IT), logistics management, and other value-added services to “solution providers,” including value-added resellers (VARs), direct marketers, retailers, corporate resellers, and Internet resellers. Ranked 117 on the Fortune 500 list, the company and its subsidiaries served more than 100,000 technology resellers in the United States, Canada, the Caribbean, Latin America, Europe, and the Middle East. Tech Data was incorporated in 1974 to market data processing supplies, including tape, disk packs, and custom and stock tab forms for mini and mainframe computers directly to end users. With the growing popularity of microcomputers and the emergence of microcomputer dealers, the company withdrew entirely from end-user sales and made the transition to wholesale distribution in 1984. The company’s flexible structure comprised five major product divisions (components, systems, peripherals, networking, and software) plus Strategic Business Units (SBUs) designed to address specific market, channel, customer, or product opportunities. Tech Data’s current SBUs included digital imaging/CAD, mobile solutions, security, storage, and telephony. Fiscal 2002 sales by product category were peripherals, 46%; components and systems, 24%; networking, 15%; and software, 15%. On a channel basis, VARs accounted for 58% of the company’s $17.2 billion 2002 sales, with direct marketers, retailers, and Internet resellers comprising 24% and corporate resellers accounting for the remaining 18%. No single customer accounted for more than 5% of sales during fiscal 2002.

This case was prepared by Professor Maryanne M. Rouse, MBA, CPA, University of South Florida. Copyright ©2005 by Professor Maryanne M. Rouse. This case cannot be reproduced in any form without the written permission of the copyright holder, Maryanne M. Rouse. Reprint permission is solely granted to the publisher, Prentice Hall, for the books, Strategic Management and Business Policy–10th and 11th Editions (and the International version of this book) and Cases in Strategic Management and Business Policy–10th Edition by the copyright holder, Maryanne M. Rouse. This case was edited for SMBP and Cases in SMBP–10th Edition. The copyright holder, is solely responsible for case content. Any other publication of the case (translation, any form of electronics or other media) or sold (any form of partnership) to another publisher will be in violation of copyright law, unless Maryanne M. Rouse has granted an additional written reprint permission.

Tech Data’s broad vendor base included such manufacturers and publishers as Adobe, Apple, Cisco, Computer Associates, Creative Labs, Epson, Hewlett-Packard/Compaq, IBM, Intel, Iomega, Lexmark, Microsoft, Nortel Networks, NEC, Palm, Seagate, Sony, Symantec, 3Com, Toshiba, Viewsonic, and Western Digital. With the exception of Hewlett-Packard/Compaq, no vendor accounted for more than 10% of the company’s sales. Sales of HP/Compaq products accounted for 38% of Tech Data’s net sales in 2002, 39% in 2001, and 35% in 2000.

Tech Data was the second largest global IT distributor, and its business model was based on a four-point strategy of excellence in execution, proactive initiatives, cost leadership, and e-business, with each element focused on enhancing the company’s relationships with its business partners. The company defined excellence in execution as the promotion of six key elements for ensuring customer/partner satisfaction and loyalty: accessibility, availability, pricing, shipping metrics and service-level agreements, planning...
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