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Avnet seeks to boost growth in Asia

Posted: 30 Oct 2008     Print Version  Bookmark and Share

Keywords:global IT distribution  manufacturing resources  international acquisition  expansion activities 

Defying a global economic slowdown, Avnet Inc.'s management said it will press on with plans to expand operations globally and will be seeking growth opportunities for the company's components and IT distribution divisions in Europe, Asia and Japan as part of its globalisation programme.

Roy Vallee, chairman and CEO of the company said in an interview with EETimes that the company's market share in the global IT distribution business trails by far its share of the components market in North America.

Avnet, he said, is aiming to expand its share of the IT distribution market through acquisitions and internally-driven growth in the Asia-Pacific region and the current turmoil in the general economy is unlikely to derail those plans.

"In Asia, we are well represented in components but our market share there is less than half of our market share in North America and Europe. We have opportunities to expand there," Vallee said in an interview with EETimes.

"Our IT business in Asia is really just getting started. It's about a Rs.2,150.53 crore ($500 million) per year business and, of course, the opportunities on a pan-Asia basis is in the billions. That's a big area of investment for us," Vallee added.

Vallee, who has been with Avnet for more than 30 years and who recently marked his tenth anniversary at the helms of the company spoke with EETimes Supply Network editor Bolaji Ojo about the challenges and opportunities facing the global distributor as well as areas he will be pushing into to maintain a competitive edge in future.

In the first of a 3-part report, we excerpt here portions of Vallee's interview with EETimes:

EETimes: What are the changes that you have seen across the industry and at Avnet since becoming CEO?

Vallee: Over the last 10 years, the biggest changes have been the globalisation of the world economy and across multiple industries but specifically in our industry and at our company. I would say consolidation has been a major change. We implemented a significant change in the ways we keep score and assess our performance called value-based management and that has driven our decisions as we have globalised the company and consolidated the industry. Those are the major changes we have seen over the last ten years.

EETimes: Was the decision to become a global player forced on Avnet, that is, did you really have a choice considering events at your customers, which were shifting manufacturing resources to other regional centres?

Vallee:In the 1990 time frame—I was not the CEO of the company at the time—but we were evaluating whether we should stay in North America and expand into other forms of distribution or take technology distribution and expand globally. I sat down with our CEO and said, 'I think we could probably be successful in either direction but I have a concern and my concern is that as the industry globalises, if we don't take our technology distribution business global we may find ourselves at a competitive disadvantage and our core business here in North America could be under attack.' We decided to go global and we made our first international acquisition in the United Kingdom in 1991.

Now, with the benefits of good old 20-20 hindsight, it's clear that had we not done that, for sure, our component business would be under severe stress. It's less of a factor in the IT business but it is a huge factor in components.

EETimes: What were the challenges Avnet faced in the last years and how have you dealt with them?

Vallee: Internally we have implemented value-based management and focused on return on capital. The value-based management was about education, about convincing our team that this was the right way to evaluate our performance and therefore their individual performances. It was about the creation of new metrics and goals for those metrics and making changes to the way we compensate and reward our teams' performance. So, there was a lot of internal management change required to implement value-based management.

Globalisation requires our company to go from being a North America specific enterprise to one that embraces the social cultures of the 70 countries around the world that we now do business in while at the same time trying to build a unified business culture that is grounded in Avnet values.

We appointed a global operating group president for our component business and one for our IT business. They have installed regional presidents and we manage Europe with Europeans and Asia with Asians and America with Americans. A lot of our decision-making is driven at the regional level, not out of Phoenix. The folks in Phoenix get out and spend time in our different geographies but at the same time we have created an organisation that is mobilised and highly empowered.

EETimes: Are you still continuing the process of globalizing your operations with expansion activities in Asia, India and elsewhere?

Vallee: Yes. Our vision says that we want to be the premier technology, marketing, distribution and services company in the world. And we are in the pursuit of that vision.

EETimes: So, where will that lead Avnet?

Vallee:The best way to address that question is to review our global market share by region. In North America, we are well represented in both our components and our computer businesses. In Europe, we are very well represented in the components area. We've been doing a fair number of acquisitions in the last years in computers but our market share in Europe is roughly half of our market share in North America. So, our computer business in Europe continues to be a focus.

In Asia, we are well represented in components but our market share there is less than half of our market share in North America and Europe so we have opportunities to expand there. Our IT business in Asia is really just getting started. It's about a Rs.2,150.53 crore ($500 million) per year business and, of course, the opportunities on a pan-Asia basis is in the billions. That's a big area of investment for us. We made an acquisition in India recently to create a footprint to be able to take our IT business into the country.

The other interesting market is Japan where we have a very small components presence, roughly Rs.645.16 crore ($150 million) per year, but we have nothing in IT. That is a large market, comparable in size to America and Europe with regard to components and, in the long-term, in the pursuit of our vision, we will expect that to be a significant opportunity as well.

-Bolaji Ojo
EE Times Supply Network





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