INDIAN INSTITUTE OF MANAGEMENT

INDORE

BUSINESS TO BUSINESS MARKETING

GMPE, Batch 4

Prof. Bipul Kumar

Assignment Submission:
Arrow Electronics

Submitted By:
Vishal Bharani, 2018GMPE0432, GMPE, Batch 4
Gagan Garg, 2018GMPE0414, GMPE, Batch 4
Vaibhav Vinayaka, 2018GMPE0429, GMPE, Batch 4
Vinod Mehra, 2018GMPE0430, GMPE, Batch 4
 Arrow Electronics

Question 1: How many customers were likely to switch some of their

purchases to Express?
Ans:

 In case of A/S the transactional customers contribute around 25% of

the sales while 75% comes from relationship customers.
 The impact of Express can be analysed using two scenarios:
o Optimistic
o Pessimistic

Sales from
Sales from
Total Relationshi
Scenario Transactiona
Sales p
l Customers
Customers
2310.00 577.50 1732.50
Optimistic 1732.50 0.00 1732.50
Pessimistic 1039.50 0.00 1.39.5

 Expected loss of sales due to express segment wise:

Value
Total BAS
Scenario Added
Sales Business
Business
Optimistic 577.50 293.00 284.50
Pessimistic 1270.50 601.00 669.50

Question 2:Impact on sales and profitability?

Ans:

 Transaction customers constitute 25% of sales.

 Majority of transaction customers are BAS customers.
 Assuming no selling expenses for transaction customers as majority
go by BAS.
 Cost of goods sold is 83% of sales.(Exhibit 2).
 Selling and administration expenses is 9.2% of sales.(Exhibit 2).
 Selling expenses reduction in proportion with drop in sales of
relationship customers.
 o Optimistic Scenario: Selling expenses reduction in proportion
with drop in sales of relationship customers.

Before After
(Billion $) Expres Expres
s s
Total Sales 2310 2310
Transaction Sales
NA 577.5
(25%)
Current Sales NA 1732.5
1437.9
COGS (83%) 1917.3
75
Selling Expenses 159.39 159.39
135.13
Gross Margin 233.31
5

o Pessimistic scenario : 100% transaction customers and

40% relationship customers switch to express.
Before After
(Billion $) Expres Expres
s s
Total Sales 2310 2310
Transaction Sales
NA 1501.5
(25%)
Current Sales NA 808.5
671.05
COGS (83%) 1917.3
5
Selling Expenses 159.39 95.634
Gross Margin 233.31 41.811

o Overall Effect:

Chang
Chang
e in %
(Billion $) e in %
Gross
Sales
Margin
Optimistic -25 -42.1
Pessimistic -65 -82

Question 3: How would A/S’s suppliers react to Express?

Ans:
  All the 50000 customers are exposed to all the major suppliers. In
this way they will reach to more number of customers through
Express.
 Since any supplier has franchised only 2 distributors for the same
line card (product line), they can very well intentionally reduce the
price of the products and further reduce the margins of existing
distributors. Margins for commodity products (BAS) may get reduced
from 25 % to lower levels due to the intentional price reductions
from the supplier.
 Suppliers through the bulletin board have information about the
inventory levels of all the other competitors via their franchised
distributors. Hence with the proper demand forecast they can
efficiently modify their production schedules to accommodate the
inventories in lieu of the competition.
 On the other hand since no actual communication is involved
between the distributors and OEMs or customers, hence it will be
very difficult for the suppliers to demonstrate and generate the
demand. They used to generate the demand with the help of their
distributors.

Question 4: Is Express a Threat to or an opportunity for A/S?

Ans:

 Opportunities:
 Access to larger customer base.
 Reduction in selling cost.
o Cut down of sales representatives.
o Transactional Cost
o Transportation Cost
 Increase in reach to customers who couldn’t be reached with
current business model.
 Reduction in time and effort in order to locate potential
customers.
 Scrutinizing the suspects (credibility check) is done by Express
Inc., avoiding Relational cheating
 Threats:
 If it enters in business with Express:
o Increased competition  Initiation of price war.
o No demand creation, only order- taking.
o Reduced supplier control.
o Loss of market share to competitors.
o Risk of loosing franchisee distribution from suppliers.
o No direct relationship with customers  Inability to build
up long term relationship.
o Demotivation of Sales Representatives.
 o 6% service fee.
 If it not enters:
o Current customers can move to express system and use
it as a bargaining tool for lowest prices.
o Limited customer base Switching of Transactional &
Commodity customers of A/S to Express.

Conclusion:-
We recommend to not go for express after Analysing threats and
opportunities. The following are the main reasons for arriving at the
conclusion:

 Long term relationship is important in B2B

 Sales force remain motivated.
 6% service fee can be avoided.
 Exposure to customers is vital.
 Delivery of products might be compromised
 3rd party involvement