Arrow Electronics Case Solution

How many customers were likely to switch some of their purchases to Express? 

In case of A/S the transactional customers contribute around 25 of the sales while !5 comes from relationship customers



"he impact of Express can be analy#ed usin$ two scenarios  %ptimistic  &essimistic

Total Sales

Sales from transactional customers

 

2'()*+**

5!!+5*

%ptimistic

)'!(2+5*

,

&essimistic

)'*(-+5*

,

Scenario

Sales from relationship customers

)'!(2+5* )'!(2+5* )'*(-+5*

Expected loss of sales due to express segment wise Scenario

Total Sales BAS business

Value added Business

%ptimistic

5!!+5*

2-(+**

2.+5*

&essimistic

)'2!*+5*

0*)+**

00-+5*

Impact on sales and profitability 

"ransaction customers constitute 25 of sales+



1aority of transaction customers are 3AS customers+



Assumin$ no sellin$ expenses for transaction customers as maority $o by 3AS+



4ost of $ood sold is .( of sales+Exhibit 26



Sellin$ and administration expenses is -+2 of sales+ Exhibit 26+



Sellin$ expenses reduction in proportion with drop in sales of relationship customers+

Impact on sales and profitability 

%ptimistic scenario 7 )** transaction customers switch to Express (Billion $)

Before Express

After Express

2310

2310

 Transaction sales (25%) Current Sales

NA

577.5

NA

1732.5

COGS (83%)

1917.3

137.975

Sellin! "#$enses

159.39

159.39

Gross ar!in

233.31000000

135.135

 Total Sales

Impact on sales and profitability 

&essimistic scenario 7 )** transaction customers and * relationship customers switch to express+ (billion $)

Before Express

After Express

(Billion $)

Before Express

After Express

2310

2310

 Transaction sales an& relations'i$ sales (5%) Current Sales

NA

1501.5

NA

808.5

COGS (83%)

1917.3

71.055

Sellin! "#$enses

159.39

95.3

Gross ar!in

233.31000000

1.811

 Total Sales

Impact on sales and profitability 

Oerall e*ect

(billion $)

Change in % sales

Change in % gross margin

O$ti+istic

(25)

(2.1)

,essi+istic

(5)

(82)

-"ST/ON 3

How would A/S8s suppliers react to Express? 



All the 5**** customers are exposed to all the maor suppliers+ In this way they will reach to more number of customers throu$h Express+ Since any supplier has franchised only 2 distributors for the same line card (product line), they can 9ery well intentionally reduce the price of the products and further reduce the mar$ins of existin$ distributors+ 1ar$ins for commodity  products (BAS) may $et reduced from 25  to lower le9els due to the intentional price reductions from the supplier+



Suppliers throu$h the bulletin board ha9e information about the in9entory le9els of all the other competitors 9ia their franchised distributors+ Hence with the proper demand forecast they can efficiently modify their production schedules to accommodate the in9entories in lieu of the competition+



%n the other hand since no actual communication is in9ol9ed between the distributors and %E1s or customers' hence it will be 9ery difficult for the suppliers to demonstrate and $enerate the demand+ "hey used to $enerate the demand with the help of their distributors+

-"ST/ON 

:inally' ;as Express a "hreat to or an opportunity for A/S?

Opportunities 

Access to lar$er customer base

