SWOT Analysis / TOWS Matrix for Arrow Electronics (United States)
Based on various researches at Oak Spring University , Arrow Electronics is operating in a macro-environment that has been destablized by – technology disruption, increasing energy prices, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Arrow Electronics
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Arrow Electronics can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arrow Electronics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arrow Electronics 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 can be done for the following purposes –
1. Strategic planning of Arrow Electronics
2. Improving business portfolio management of Arrow Electronics
3. Assessing feasibility of the new initiative in United States
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arrow Electronics
Strengths of Arrow Electronics | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arrow Electronics are -
Effective Research and Development (R&D)
– Arrow Electronics has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Arrow Electronics staying ahead in the Electronic Instr. & Controls industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Arrow Electronics is present in almost all the verticals within the Electronic Instr. & Controls industry. This has provided Arrow Electronics 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.
Low bargaining power of suppliers
– Suppliers of Arrow Electronics in the Technology sector have low bargaining power. Arrow Electronics has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arrow Electronics to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Arrow Electronics 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.
Ability to recruit top talent
– Arrow Electronics is one of the leading players in the Electronic Instr. & Controls industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy of Arrow Electronics comprises – understanding the underlying the factors in the Electronic Instr. & Controls 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.
Training and development
– Arrow Electronics has one of the best training and development program in Technology industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Learning organization
- Arrow Electronics 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 Electronics is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Arrow Electronics emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– Arrow Electronics has clearly differentiated products in the market place. This has enabled Arrow Electronics to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped Arrow Electronics to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Arrow Electronics in Electronic Instr. & Controls industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Arrow Electronics 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.
High brand equity
– Arrow Electronics has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arrow Electronics to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Arrow Electronics | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arrow Electronics are -
Compensation and incentives
– The revenue per employee of Arrow Electronics is just above the Electronic Instr. & Controls industry average. It 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.
Interest costs
– Compare to the competition, Arrow Electronics 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.
Capital Spending Reduction
– Even during the low interest decade, Arrow Electronics has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Electronic Instr. & Controls industry using digital technology.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in United States, Arrow Electronics 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 Electronic Instr. & Controls industry.
Workers concerns about automation
– As automation is fast increasing in the Electronic Instr. & Controls industry, Arrow Electronics 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.
Employees’ less understanding of Arrow Electronics strategy
– From the outside it seems that the employees of Arrow Electronics 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.
High dependence on Arrow Electronics ‘s star products
– The top 2 products and services of Arrow Electronics still accounts for major business revenue. This dependence on star products in Electronic Instr. & Controls industry has resulted into insufficient focus on developing new products, even though Arrow Electronics has relatively successful track record of launching new products.
Lack of clear differentiation of Arrow Electronics products
– To increase the profitability and margins on the products, Arrow Electronics needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of United States, Arrow Electronics needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Arrow Electronics is dominated by functional specialists. It is not different from other players in the Electronic Instr. & Controls industry, but Arrow Electronics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arrow Electronics to focus more on services in the Electronic Instr. & Controls industry rather than just following the product oriented approach.
Skills based hiring in Electronic Instr. & Controls industry
– The stress on hiring functional specialists at Arrow Electronics has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Arrow Electronics Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Arrow Electronics are -
Using analytics as competitive advantage
– Arrow Electronics has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electronic Instr. & Controls sector. This continuous investment in analytics has enabled Arrow Electronics to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arrow Electronics to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Arrow Electronics can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Electronic Instr. & Controls industry.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Electronic Instr. & Controls industry, but it has also influenced the consumer preferences. Arrow Electronics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Arrow Electronics 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.
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 Electronics 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.
Manufacturing automation
– Arrow Electronics can use the latest technology developments to improve its manufacturing and designing process in Electronic Instr. & Controls sector. 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 Electronics 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.
Creating value in data economy
– The success of analytics program of Arrow Electronics has opened avenues for new revenue streams for the organization in Electronic Instr. & Controls industry. This can help Arrow Electronics to build a more holistic ecosystem for Arrow Electronics products in the Electronic Instr. & Controls industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions in Electronic Instr. & Controls industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Arrow Electronics in the Electronic Instr. & Controls industry. Now Arrow Electronics can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Arrow Electronics to increase its market reach. Arrow Electronics 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.
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 Electronics can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Arrow Electronics can develop new processes and procedures in Electronic Instr. & Controls 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.
Loyalty marketing
– Arrow Electronics 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.
Threats Arrow Electronics External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Arrow Electronics are -
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 Electronics business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Arrow Electronics 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.
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 Electronics in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Arrow Electronics 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 Electronic Instr. & Controls industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arrow Electronics in Electronic Instr. & Controls industry. The Electronic Instr. & Controls 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.
Regulatory challenges
– Arrow Electronics 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 Electronic Instr. & Controls industry regulations.
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 Electronics.
Consumer confidence and its impact on Arrow Electronics 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 Electronic Instr. & Controls industry and other sectors.
Environmental challenges
– Arrow Electronics 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 Electronics can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
Increasing wage structure of Arrow Electronics
– 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 Electronics.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Arrow Electronics may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electronic Instr. & Controls sector.
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.
Easy access to finance
– Easy access to finance in Electronic Instr. & Controls industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arrow Electronics can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Arrow Electronics Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Arrow Electronics 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 Arrow Electronics 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 Arrow Electronics 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 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 Electronics needs to make to build a sustainable competitive advantage.
