Arrow Electronics

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 80Ѓfs and early 90Ѓfs with ArrowЃfs closest competitor trailing in sales by 20% as recently as 1996. However even at this point there was indication of stagnation as competitor AvnetЃfs sales had grown by 14% compared to ArrowЃfs 10% in that same year. At the same time ArrowЃfs 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 companyЃfs 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 ArrowЃfs sales and marketing representatives as these orders tended to be of the Book and Ship variety and comprised 25% of the companyЃfs 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 companyЃfs focus on developing its core competency has been on improving its Value Added(VA) services as they comprised $1.443 billion of the ArrowЃfs $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