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Arrow Electronics

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Submitted By jsand10
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John Santoro
Arrow Electronics

Arrow Electronics (AE) is a $6.5B, broad-line distributor of electronic parts, including semiconductors and passive components. It was founded in 1935, and grown to the number two position, largely through acquisition. Arrow / Schweber (AS), a division of AE, provides semiconductors, components, value added services and has sales of ~$2B. Their closest competitor trails by more than 20% but grew 14% in the previous year compared to 10% for AS.
The major customer segments for AS is 56% small and mid-sized OEMs, 20% contract manufacturers, 11% who purchased the x86 Intel chip only and the balance are customers who purchase entire systems or assemblies.
The situation
AS has been approached by Express Parts, a new, independent distributor, that has developed an internet-based trading system that would allow for customers to cross-reference equivalent parts from multiple manufacturers based either on part number or technical description. Express estimates that over 50,000 OEMs would have access to their system. For their services, they will charge of fee of 6% and pay 30 days after a shipment is made. Jan Salsgiver, president of AS, has to decide whether or not to accept Express’s offer.
Alternatives and pros/cons
Option 1 is to accept the Express offer. This would allow the potential to significantly increase sales through the additional exposure AS would receive. This is particularly thought provoking as Express only wants to partner with a limited number of distributors. Another benefit is AS’s Sales and Marketing Reps could point transactional customers to the website and focus on relationship opportunities. However, it means that existing customers would be able to see prices from other outlets and either they move the business to a competitor or use lower price information for negotiation leverage. There

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