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 - – talent flight as more people leaving formal jobs, wage bills are increasing, technology disruption, there is backlash against globalization, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models,
customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
Innovation driven organization
– Arrow Commodity is one of the most innovative firm in sector. Manager in Arrow Electronics, Inc. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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.
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.
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.
Training and development
– Arrow Commodity has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Arrow Electronics, Inc. Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– Arrow Commodity has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Arrow Electronics, Inc. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Strong track record of project management
– Arrow Commodity is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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 -
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Das Narayandas suggests that, Arrow Commodity is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Arrow Commodity is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Arrow Electronics, Inc. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Arrow Electronics, Inc., it seems that the employees of Arrow Commodity don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Arrow Commodity needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Arrow Electronics, Inc., in the dynamic environment Arrow Commodity has struggled to respond to the nimble upstart competition. Arrow Commodity has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Arrow Commodity, firm in the HBR case study Arrow Electronics, Inc. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 -
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.
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.
Developing new processes and practices
– Arrow Commodity can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arrow Commodity in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Arrow Commodity can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Loyalty marketing
– Arrow Commodity has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arrow Commodity can use these opportunities to build new business models that can help the communities that Arrow Commodity operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arrow Commodity to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Arrow Commodity to hire the very best people irrespective of their geographical location.
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 -
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Arrow Commodity with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Arrow Electronics, Inc., Arrow Commodity may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
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.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Arrow Commodity business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arrow Commodity in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Arrow Commodity.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Arrow Commodity needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
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.