Deals with the issue of cross-selling and managing a portfolio of products and services in business markets. Arrow/Schweber (A/S), a subsidiary of electronic parts distributor Arrow Electronics, has a portfolio of products that differ in the amount of value added by A/S. A/S uses value-added items such as programmable logic chips as "loss leaders" in order to acquire and retain a customer. It makes money when it sells the so-called "commodity" or low value-added products to the same customer. An Internet-based distributor is now offering Arrow a chance to sell commodity products through its e-commerce site. This new channel can threaten Arrow's overall business model if a large portion of its existing customers switch their purchases of the commodity products to this new distribution channel. Arrow needs to decide how it should respond to this challenge.
Swot Analysis of "Arrow Electronics, Inc." written by Das Narayandas includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arrow Commodity facing as an external strategic factors. Some of the topics covered in Arrow Electronics, Inc. case study are - Strategic Management Strategies, Internet, Research & development and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Arrow Electronics, Inc. casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing,
competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Arrow Electronics, Inc.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Arrow Electronics, Inc. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arrow Commodity, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arrow Commodity operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Arrow Electronics, Inc. can be done for the following purposes –
1. Strategic planning using facts provided in Arrow Electronics, Inc. case study
2. Improving business portfolio management of Arrow Commodity
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arrow Commodity
Strengths Arrow Electronics, Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arrow Commodity in Arrow Electronics, Inc. Harvard Business Review case study are -
Learning organization
- Arrow Commodity is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Arrow Commodity is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Arrow Electronics, Inc. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Arrow Commodity has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arrow Commodity has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Arrow Commodity has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Arrow Commodity is present in almost all the verticals within the industry. This has provided firm in Arrow Electronics, Inc. case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Superior customer experience
– The customer experience strategy of Arrow Commodity in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Sales & Marketing industry
– Arrow Electronics, Inc. firm has clearly differentiated products in the market place. This has enabled Arrow Commodity to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Arrow Commodity to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Arrow Commodity in the sector have low bargaining power. Arrow Electronics, Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arrow Commodity to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Arrow Commodity digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arrow Commodity has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Operational resilience
– The operational resilience strategy in the Arrow Electronics, Inc. Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Arrow Commodity has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arrow Commodity to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Sales & Marketing field
– Arrow Commodity is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Arrow Commodity in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Arrow Commodity are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Arrow Electronics, Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arrow Electronics, Inc. are -
Slow to strategic competitive environment developments
– As Arrow Electronics, Inc. HBR case study mentions - Arrow Commodity takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Slow decision making process
– As mentioned earlier in the report, Arrow Commodity has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Arrow Commodity even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Arrow Commodity products
– To increase the profitability and margins on the products, Arrow Commodity needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Arrow Commodity is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Arrow Commodity needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arrow Commodity to focus more on services rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Arrow Commodity supply chain. Even after few cautionary changes mentioned in the HBR case study - Arrow Electronics, Inc., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arrow Commodity vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Arrow Commodity has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Arrow Electronics, Inc., is just above the industry average. Arrow Commodity needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, firm in the HBR case study Arrow Electronics, Inc. has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Arrow Commodity 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Arrow Electronics, Inc., it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Arrow Electronics, Inc. HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Arrow Commodity has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Arrow Commodity has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Arrow Electronics, Inc. | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Arrow Electronics, Inc. are -
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Arrow Commodity in the consumer business. Now Arrow Commodity can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Arrow Commodity can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Using analytics as competitive advantage
– Arrow Commodity has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Arrow Electronics, Inc. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arrow Commodity to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Arrow Commodity can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Arrow Commodity can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Arrow Electronics, Inc. suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Arrow Commodity to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Better consumer reach
– The expansion of the 5G network will help Arrow Commodity to increase its market reach. Arrow Commodity will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Arrow Commodity is facing challenges because of the dominance of functional experts in the organization. Arrow Electronics, Inc. case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Arrow Commodity can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arrow Commodity can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Arrow Commodity can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Arrow Commodity can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arrow Commodity can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Arrow Electronics, Inc., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Arrow Commodity to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Arrow Electronics, Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Arrow Electronics, Inc. are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing wage structure of Arrow Commodity
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Arrow Commodity.
Stagnating economy with rate increase
– Arrow Commodity can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology acceleration in Forth Industrial Revolution
– Arrow Commodity has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Arrow Commodity needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Consumer confidence and its impact on Arrow Commodity demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Environmental challenges
– Arrow Commodity needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Arrow Commodity can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Arrow Commodity in the Sales & Marketing sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arrow Commodity can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Arrow Electronics, Inc. .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Arrow Commodity will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Arrow Commodity is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Arrow Commodity high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Regulatory challenges
– Arrow Commodity needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Weighted SWOT Analysis of Arrow Electronics, Inc. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Arrow Electronics, Inc. needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Arrow Electronics, Inc. is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Arrow Electronics, Inc. is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Arrow Electronics, Inc. is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Arrow Commodity needs to make to build a sustainable competitive advantage.