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Business Planning In The Field Of Wholesale Trade In Electronic Components

time 2022-09-19

Publisher: hqt


The electronics industry began to develop rapidly in the middle of the last century. From the 60s to the present, the average annual growth rate of the electronics industry has been 17%, and today the potential for the development of the industry is far from being exhausted. There has been no such growth in any other branch of the world’s industry.

In the beginning, the electronics market grew due to large vertically integrated companies that simultaneously developed all key technologies: the production of the element base, the production of electronic equipment, and software development. Companies – pioneers of electronics themselves carried out the development, production, marketing and were closed structures, as “states within a state”. A vivid example of this approach was the organization of IBM in the 60-80s. At the time when the search and development of basic technologies was carried out, this was justified.

As core technologies have been identified and standardized, the specialization of companies has evolved. Some companies specialized in the production of the element base (Intel, Analog Devices, International Rectifier), others – in the production of software (Microsoft, Oracle), others – in the production of electronic equipment (Dell, Cisco). Specialized companies began to quickly occupy the market.

Specialization of companies in the market of electronic components occurs according to the following principles:

1) technology suppliers specialize in horizontal markets;

2) Solution providers specialize in vertical markets.

Specialization in horizontal markets involves the choice of technology and concentration on its improvement. At the same time, the company seeks to maximize its sales market (hence the term – horizontal market), offering its technology around the world and in all applications. Increased efficiency is achieved by:

– concentration of all intellectual and financial resources on the development of the chosen technology;

– providing its core competencies not for one parent company or integrated structure, and not in one state, but all over the world, wherever this technology can be used (economies of scale).

Specialization in vertical markets (not to be confused with vertical integration) involves choosing the final sales market and concentrating on creating the best solutions for this market. The core competence of a vertically specialized company is marketing in the chosen field. Marketing affects not only the sales market, but also the technology market. Specialization is called vertical, since the company – a supplier of solutions combines in its products technologies from the lowest level (element base) to the top level – user software. By combining and integrating technologies, they find the best solution for the sales market in which they specialize. Increased efficiency is achieved by:

– concentration on the needs of a particular market;

– integration of the best technologies existing in the world, not limited to the technologies that the company currently owns;

– replication of its best solutions around the world, where there are similar markets (economies of scale).