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...
... middle of paper ...
All in all A/S should reject the offer of Express referring because of three crucial aspects:
o Impairment of suppliers,
o Probably losses in gross margin,
o Loss of A/S’s strategy / focus on relationship customers.
After this decision internet distributors and Express respectively has to be considered as strong competitor due to the price-sensitivity of the electronic industry. Therefore A/S should work on its company image to highlight their advantages compared to discounters. Therefore A/S has to point out that they are aware of being not the cheapest but nevertheless will create more benefit for the customers by offering service and competence.
In sum, internet distributors are a foe to A/S because they cheat the price. To them A/S has to respond as convinced anti-internet distributor by satisfying their customer needs instead of disembowel them.
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