Arrow Electronics Inc. Case
Arrow Electronics is a distributor of electronic parts, including semiconductors and passive components. It was founded in 1935 and has reached number one position among electronics distributors by 1992. Arrow’s North American operations were headquartered in Melville, N.Y. Sales and marketing functions were divided among five operating groups. This case study focuses on the largest of Arrow’s groups, Arrow/Schweber (A/S).
Express Parts, Inc. made a proposal about an internet-based trading system which would enable distributors to post inventories and prices to an internet platform and thus give customers the opportunity to shop for prices.
The question is if Arrow/Schweber should accept the offer of Express and sell their products via this internet-based trading system. In the best case A/S could gain transactional customers, who just want to buy a product and have no need for special service. In the worst case A/S could lose relationship customers, because the possibility of getting better prices on the internet platform is higher, since there are more competitors that can be compared.
The approach of A/S is to use the VA products as the first step to building a relationship with its customers, because it is difficult to get close to a customer through the BAS business.
Although relationship customers also use the BAS system, it is more valuable for transactional customers. Since transactional customers emphasize more on quick delivery and low prices, but less on relationships, A/S focuses its efforts with the BAS system on providing the transactional customers with these values.
In order to satisfy the needs of the relationship customers either, A/S pursues the strategy of the VA system. In this system orders are facilitated by field sales representatives (FSR), who visit the customers’ design engineers to learn about current projects and explain and promote new products being introduced by Arrow’s suppliers. Also FSRs establish relationships with customers. That contradicts with the BAS system, where sales and marketing representatives (SMR) act passively by handling daily phone calls from customers checking delivery, availability, and price levels. The values provided for the relationship customers are the provision of credit and short delivery lead times, the price performance ratio, and the best-in-class support. Furthermore, A/S offers to be a steady partner, that means the continuous availability of products is ensured and customers can keep their primary distributor in check. Another two values are the chance to interact and to see the true benefit. In 1977 about 2% of A/S’s sales had a value added component. This number is expected to reach 80% by 2000.
As mentioned before, A/S has four main suppliers (Altera, Texas, Intel, and Motorola).
The suppliers expect A/S to fulfil the following tasks:
o help the suppliers growing and...