Arrow had come a long way in the electronics industry since its inception in 1935 as a retailer of radio equipment. As the electronics industry had changed with the advances in semiconductor technology, so had Arrow. From the invention of the transistor in 1947, to the introduction of the microprocessor in the 1970s, the products that defined the industry had ranged greatly, from radios to scientific and medical instruments, to computers.

Arrow followed industry trends and expanded in the 1950s and 60s to sell home entertainment products and electronic parts. In 1968 a controlling interest in Arrow was acquired for $1 million by three Harvard Business School graduates, Duke Glenn, Roger Green, and John Waddell, who grew the business considerably. By 1977 it was the fourth-largest electronic parts distributor in the United States, and in 1979 its shares were listed on the NYSE, having previously been an over-the-counter stock

By the 1980s, the company was deep into the sale of semiconductors and other electronic components. Often, distributors like Arrow, who had a relationship with both the supplier (component manufacturers like Intel), and the customer, original equipment manufacturers (i.e. IBM or Hewlett Packard), carried out the sale of components. It was most common for suppliers to use a distributor to handle sales of their product if the customer was small, ordered in small lots or with short lead times, or if the customer had a greater service need than the supplier could reasonably manage.

At this point in time, a combination of economic instability in the United States and an inability to accurately estimate the demand for computer chips caused the electronics industry to be highly volatile. For example, in the mid-1990s, supply and demand conditions for memory vacillated sharply, creating highly volatile prices. Indeed, in one 12-month period, memory prices fell by 80%-

By 1995, Arrow had become the world’s largest distributor of electronic components and computer products, bringing in almost $6 billion in sales (see Exhibit 1). It served hundreds of suppliers through a broad base of operations in North America, Europe, and the Asia/Pacific region.

From its headquarters in Melville, NY, Arrow’s corporate division oversaw North American operations, and allocated sales and marketing functions to four distinct operating groups, according to product type: commercial semiconductors, military and aerospace semiconductors, passive and connector products, and computer systems, peripherals, and software.

Arrow was led by Stephen Kaufman, the company’s highly respected and charismatic CEO. Kaufman came to Arrow as an Executive Vice President in 1982, becoming president two years later and CEO in 1986. Educated at MIT (’63) and Harvard Business School (’65), Kaufman had spent eleven years at McKinsey as a strategy consultant. As he saw it, carrying out the execution of a company’s strategy was one of the most important aspects of a CEO’s job.

“An 80% strategy executed 50% well is not as good as a 50% strategy executed 80% well,” he liked to say. The CEO’s responsibility, he believed was to guide the strategy of the organization, and to ensure that it was carried out properly. “1 define the CEO’s role as, first, the strategy. Second, getting the right people in the right slots and motivating them, so that the execution of the strategy is effective.

The rest is just mechanics: budget reviews, capital expenditure reviews, resource allocation, mindless staff, and committee meetings.” Although he considered both of his main tasks to be equally important, he found that major strategic issues generally only required attention periodically, perhaps two or three times a month, while human resource issues required his daily attention.

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