communication
For the exclusive use of Z. WANG
9-598-022
REV: JANUARY 25, 2007
DAS NARAYANDAS
Arrow Electronics, Inc.
Jan Salsgiver, president of the Arrow/Schweber (A/S) group, a subsidiary of Arrow Electronics, reviewed the Express Parts Internet Distribution Service proposal with colleagues Skip Streber, A/S senior vice president for sales, and Arrow CEO Steve Kaufman (see Exhibit 1). Express had developed an Internet-based trading system that would enable distributors to post inventories and prices to a bulletin board giving customers large and small an opportunity to shop for prices.
The opportunity to quickly gain new customers had to be traded off against potential effects on
Arrow’s relationships with current customers, who might exploit Express’s bulletin board to cherry pick products from different channels. Arrow’s relationships with its suppliers might also be affected.
If they came to view Express as a legitimate option, its suppliers might dis-intermediate Arrow from their distribution channels.1 “As a distributor,” explained Salsgiver, we need to know three things: how we create value for our customers for the prices we charge; how this value is different from what our suppliers can provide to our customers; and whether firms like Express can offer the same value or more for lower prices. We have a successful business model that is based on a portfolio of products and services that we offer our customers. Our customers come back to us because they get the most value from us for the prices they pay. If Express is going to change this equation, then we need to adapt our business model to accommodate the changes.
Salsgiver realized that before she could make a decision on the Express proposal she needed to answer a number of questions, among them: How many of A/S’s customers were likely to switch some of their purchases to Express? How would this affect A/S’s sales and profitability? How would
A/S’s suppliers react to Express? Finally,
9-598-022
REV: JANUARY 25, 2007
DAS NARAYANDAS
Arrow Electronics, Inc.
Jan Salsgiver, president of the Arrow/Schweber (A/S) group, a subsidiary of Arrow Electronics, reviewed the Express Parts Internet Distribution Service proposal with colleagues Skip Streber, A/S senior vice president for sales, and Arrow CEO Steve Kaufman (see Exhibit 1). Express had developed an Internet-based trading system that would enable distributors to post inventories and prices to a bulletin board giving customers large and small an opportunity to shop for prices.
The opportunity to quickly gain new customers had to be traded off against potential effects on
Arrow’s relationships with current customers, who might exploit Express’s bulletin board to cherry pick products from different channels. Arrow’s relationships with its suppliers might also be affected.
If they came to view Express as a legitimate option, its suppliers might dis-intermediate Arrow from their distribution channels.1 “As a distributor,” explained Salsgiver, we need to know three things: how we create value for our customers for the prices we charge; how this value is different from what our suppliers can provide to our customers; and whether firms like Express can offer the same value or more for lower prices. We have a successful business model that is based on a portfolio of products and services that we offer our customers. Our customers come back to us because they get the most value from us for the prices they pay. If Express is going to change this equation, then we need to adapt our business model to accommodate the changes.
Salsgiver realized that before she could make a decision on the Express proposal she needed to answer a number of questions, among them: How many of A/S’s customers were likely to switch some of their purchases to Express? How would this affect A/S’s sales and profitability? How would
A/S’s suppliers react to Express? Finally,