Businessmodel of Arrow Electronics

Customer Segments

Arrow Electronics, and its affiliates, purports to serve more than 100,000 industrial and commercial customers worldwide, through its two operating segments.

The Company’s Global Components Business segment provides products and services to original equipment manufacturers, contract manufacturers and commercial clients. This includes manufacturers of both industrial equipment – such as machine tools, factory automation, and robotic equipment – and consumer products serving the telecommunications, automotive and transportation, aerospace and defense, medical, professional services, and alternative energy industries, among others.

In addition to serving commercial customers, Arrow Electronics’s Global Enterprise Computing Solutions segment also serves a network of value added resellers within the computing sector.

Arrow Electronics has a global customers base. However, its home market of the US continues to be its largest sales generator, accounting in 2015 for 46% of the Company’s total sales for the year. The Company divides its sales into three broad geographic regions: the Americas; Europe, the Middle East and Africa; and Asia Pacific.

Value Propositions

Arrow Electronics provides value to its customers through the provision of quality and reliable products, its provision of a broad range of components, its accessibility and flexibility, and its commitment to utilising up-to-date technology. Arrow Electronics is an established name within its industry and has a reputation as a reputable operator.

Channels

Arrow Electronics operates a website at www.arrow.com, where customers can find information on the Company’s products and services. The Company also sells a range of products through an online store, which can be accessed via its homepage. Arrow Electronics’s My Arrow service can be accessed through the Company’s website as well as through a mobile app for iOS and Android that enables customers to manage orders and billing documentation and receive notifications.

Much of Arrow Electronics’s sales are conducted offline, through the Company’s direct sales teams. The Company operates more than 300 sales facilities and 40 distribution and value-added centres across 53 countries, and serving over 85 countries. A range of value-added resellers, which comprise a portion of Arrow Electronics’s customer base, and distributors are also authorised to sell Arrow Electronics products.

Customer Relationships

Many of Arrow Electronics’s products are available to customers on a self-service basis through the Company’s online store. Purchases through this channel do not require any interaction with representatives of the Arrow Electronics sales team. The purchase of more complex solutions or larger orders of products must be completed through one of Arrow Electronics’s sales regional teams, allowing the Company to provide a more personalized service. The majority of Arrow Electronics’s sales are made on an order-by-order basis, rather than through long-term sales contracts.

Arrow Electronics provides its customers with ongoing technical support after sales have been completed. Customers are able to contact members of the Company’s support staff by email, over the phone and through online feedback forms. The Company also provides a live chat services, which enables customers to receive answers and advice almost immediately.

Arroe Electronics operates a number of social media accounts – including with Facebook, Twitter, YouTube, LinkedIn, Sina Weibo and Tudou – through which it is able to interact with customers directly.

Key Activities

Arrow Electronics is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The Company provides a broad portfolio of products, services and solutions to customers within the manufacturing and computing industries.

Arrow Electronics’s operations are divided between two business segments: its Global Components Business, which distributes a rage of specialist electronic components – such as semiconductors, connectors, switches and power supplies – to original equipment manufacturers and contract manufacturers across the Americas, Europe, the Middle East, Africa, and Asia Pacific; and its Global Enterprise Computing Solutions segment, which provides enterprise computing solutions spanning cloud, security and analytics solutions, to value-added resellers worldwide.

Key Partners

Arrow Electronics collaborates with a range of partners throughout the production and distribution of its products.

• Distributors, which extend the Company’s marketing and sales reach and comprises resellers and independent distribution agents;
• Suppliers, which provide tools and resources for to assist the Company’s manufacturing operations;
• Technology partners, which collaborate with Arrow Electronics to provide effective software and hardware solutions, and cooperate with the Company on joint venture projects; and
• Manufacturing partners, which provide access to production facilities. Arrow Electronics has recently launched a number of well-publicised partnerships, including a partnership with Indiegogo under which qualifying campaigns on the Indiegogo site will be eligible for direct online access to Arrow Electronics’s design tools, engineering experts, prototype services, manufacturing support and supply chain management; a deal with SAS that grants Arrow Electronics customers greater access to SAS software products; and a distribution agreement with Splunk, under which Arrow Electronics will distribute Splunk products.

Key Resources

Arrow Electronics’s key resources are its products and technology, its supply chain and manufacturing facilities, its sales and distribution networks, its personnel, and its IT infrastructure.

According to its annual report, some of the Company’s products and services include intellectual property, owned primarily by third party suppliers, as well as, to a lesser extent, by Arrow Electronics. Searches of records held by the US Patent and Trademark Office identified one patent application filed in the name of Arrow Electronics, entitled ‘Strobed headlight for improved visibility’. This relates to a lighting system with ‘discrete lights configured to distribute directional light over a three-dimensional space’.

Cost Structure

Arrow Electronics incurs costs through the development of its products, the manufacture of its products – including the acquisition of supplies and contract manufacturing costs, the sale and distribution of its products, and the retention of its personnel.

The Company accrues significant administrative costs, including the payment of salaries and benefits to its global workforce of around 18,500 and the payment of rent and utility expenses at its multiple properties.

Arrow Electronics owns and leases sales offices, distribution centers, and administrative facilities worldwide, owning 21 locations across the Americas, Europe, the Middle East, Africa, and Asia Pacific regions and occupying around 450 additional locations under lease.

Revenue Streams

Arrow Electronics generates revenue primarily through the sale of semiconductor, passive electro-mechanical and interconnect products, and IT hardware and software solutions. The Company is reported in two segments that correspond to the Company’s two operating segments:

• Global Components Business, comprising sales of semiconductor products and related services, capacitors, resistors, potentiometers, power supplies, relays, switches, and connectors; and
• Global Enterprise Computing Solutions, comprising sales of software products and IT services such as hosting and storage. In 2015 Arrow Electronics generated $23.3 billion in revenue, up from the $22.8 billion recorded the year prior. The sale of semiconductor products continues to be the Company’s most lucrative revenue stream, accounting for 41% of Arrow Electronics’s total sales for the year. The Global Components Business as a whole accounted for 66% of the Company’s annual revenue, with its Global Enterprise Computing Solutions segment accounting for the remainder.