InformationWeek
Defining The Business Value Of Technology
November 17, 1997
Channel Strategies: Global Distribution
Wholesale distributors buy up overseas competitors to expand their networksBy Pedro Pereira and Scott Campbell of Computer Reseller News
In a race to establish these global distribution empires, U.S.-based distributors are buying up their overseas competitors. Ingram Micro Inc. recently acquired a minority stake in a Singapore distributor, while competitor Tech Data Corp. has created a management structure to oversee its European business. Meanwhile, CHS Electronics Inc. has started preliminary discussions for potential Asian acquisitions.
The three distribution giants also continue to digest recent purchases and are preparing for another year of relentless global expansion through Europe, Latin America, and Asia to boost market share, strengthen logistics capabilities, and increase shareholder returns through a
cquisitions and startup operations.
Jerre Stead, Ingram Micro's chairman and CEO, says a worldwide shift from direct to indirect business among vendors also presents a major opportunity for growth. "We're just getting started," he says, noting that less than 25% of IT products are sold through indirect channels worldwide.
Value and efficiency in the channel will help change that, he predicts. "You'll see more expansion for three reasons," says Robert Anastasi, managing director of the Robinson-Humphrey Co. in Atlanta. "One, it's a global industry; two, you have global customers who are doing business with people all over the world; and three, it's one more avenue of growth." Consolidation will continue in Europe, where speculation has grown in recent weeks that the second-largest distributor, Computer 2000 Group AG, may be up for sale. But if recent moves by Ingram Micro and CHS provide any indication, the focus is shifting to Asia.
Ingram Micro, in Santa Ana, Calif., agreed to acquire 21% of Electronic
Resources Ltd., in Singapore, which had $650 million in revenue last year from sales at 46 offices in 10 countries. As part of the transaction, Ingram Micro is transferring its Singapore and Malaysia operations to Electronic Resources, and the Asian company gets to use Ingram Micro's technical services and Impulse information system.
"The technical services agreement is very important, where we help them expand their vendor relationships," says Stead. "We can help [Electronic Resources] to become more of a broad-based distributor." The investment follows acquisitions by Ingram Micro in Europe and Latin America to advance the distributor's strategy to become the market share leader in all regions. Stead expects more transactions in Latin America, Central Europe, and Africa.
Tech Data is concentrating on Europe. The Clearwater, Fla., company recently named Gerald Labie, a 30-year industry veteran, as the first president for its European business. "We're committed to serving Europe in its entirety over time
," says Labie, who runs daily operations in Austria, France, Germany, and Switzerland, and works with CEO Steve Raymund to identify acquisition targets and startup opportunities.
"We'll grow our European business to well over $2 billion without acquisitions," Raymund says. "However, we're on the hunt and should complete a deal or two there in the next year."
holesale distributors are building global distribution networks to better serve large, global corporate customers that are expanding their own international operations.
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