Arrow Electronics

1
Arrow Electronics

• Key Issues
• January 2000
• BA 266 2

2
Divergent Interests

• Electronic markets will diminish market price
  spreads
• Reduction of price spreads allows less room for
  seller maneuvering and price discrimination
• The closer are product characteristics, the
  larger the buyers, the greater is divergence of
  interests
• E-markets have the potential to reduce market
  prices, seller profit margins substantially by
  removing market uncertainty
• This is not always in the interest of buyers

3
Value Added from E-Markets

• Reduce transaction costs
• E-markets may substantially enhance range of
  buyers and sellers that can be reached
• E-markets reduce search cost, especially for
  products with with diverse components
• Larger markets have greater attraction
• Reduce role of long term relationships

4
Potential Impact upon Arrow

• Restructure its market models
• Current model turns market prices upside down
• Margins for standard products ought be less than
  for those for which value-added services are
  provided
• Buyers will learn more clearly
• Reduce closeness of association between Arrow and
  suppliers in working with buyers
• Open potential for disintermediation
• E-markets promise the potential for dramatic
  change

5
E-Market Framing

• The success of an e-market, absent strong buyer
  pressure, relates to the extent that the framing
  fits expected user needs
• E-markets are fit simplest market needs
• Clear identification of product
• Clear identification of price
• The presence of complex value-added services
  limits the viability of the market