Avnet adopts ‘friendly approach’
Global distribution giant Avnet will adopt a ‘friendly approach’ to spearhead its entry into the Middle East, partnering with local distribution houses to create channels-to-market. Avnet holds Middle East distribution rights for a number of vendors including AMD, Micron, Maxtor, Hitachi and LG.
Global distribution giant Avnet will adopt a ‘friendly approach’ to spearhead its entry into the Middle East, partnering with local distribution houses to create channels-to-market. Avnet Computing Components, the company’s IT components distribution arm, holds Middle East distribution rights for a number of vendors including AMD processors, Micron memory, Maxtor and Hitachi hard drives and LG optical drives.
“We have decided to take the friendly approach in the region and partner with local distributors that know the market, have the relationships and understand both the language and the culture,” explained Sukh Rayat, VP at Avnet Computing Components Europe, Middle East and Africa (EMEA). “That is always the best way to succeed in a new market. We aim to build relationships while some of our rivals may choose to come in and set up their own infrastructure, employ their own people and alienate the local companies in the process.”
As an AMD master distributor for EMEA, Avnet has already started recruiting distributors in the Middle East. Dubai-based Golden Systems is already on board and Avnet is finalising a couple more distribution deals at present. Targeting countries with reasonable GDPs and strong growth prospects, both Saudi Arabia and Egypt are on Avnet’s target list. The strategy does bring Avnet into conflict with Thacker, AMD’s existing Middle East master distributor.
“What AMD is doing is working in each of the countries locally with our people and identifying candidates for us, then we’re working out a deal with them,” added Rayat. “Although Thacker is classified as a master distributor, they are more of a local player. What AMD is doing is saying in the Middle East I will have a local player like Thacker and a global player like Avnet.”
Rayat reckons that Avnet’s economies of scale and purchasing power put it in a position to offer partners such as Golden Systems pricing that allows them to compete aggressively in the local market.
Avnet is currently focused on selling AMD products and memory products into the Middle East, but will look to push its storage portfolio into the region at a later date. At present, product is being supplied from Europe, but Avnet is keeping its options open in terms of setting up a dedicated Middle east stocking point.
“It would make sense if we started to see the numbers in the region,” said Rayat. “It could be a year — we have to see how fast the market grows. There are no preliminary plans to launch a facility at Jebel Ali, but it would not take long if we wanted to because we could work with freight forwarders and hold stock in a bonded facility. It would not be a big task and the vendors would support us.”
“In fact our vendors would really like Avnet to do it. One of the business issues that US vendors face — because of Sarbanes Oxley and the like — is that they want to do business with companies that have the same levels of compliance and corporate governance. These vendors report back in their financials the companies that they are dealing with, the regions they work in and the distributors they are using,” he added.
“The more that stock analysts feel vendors are engaging with non-compliant distributors, the more jittery their share price can become. They want to work with distributors that do not pose a credit risk and engage in ethical business practices as opposed to the distribution fly-by-night outfits that have come and gone in the past. Vendors have learnt a lot of lessons and lost a lot of money in the past,” he concluded.
Avnet Computing Components is one of Europe's top distributors of PC components. Globally, Avnet has a base of more than 100,000 customers and represents some 250 suppliers. Avnet currently generates some US$13bn in annual revenues through sales in 69 countries.
The lessons learnt by the ill-fated entry of some major distributors into Eastern Europe continue to influence the thinking of global distribution players when it comes to building up operations in emerging markets. When Eastern Europe first opened up, some global distributors invested quickly into markets such as the Czech Republic, Poland and Hungary, established some form of local presence but were soon forced to pull out nursing losses because they had alienated the in-country distribution players and did not possess the necessary local touch.