Q2 Expectations Improve for Electronic Component Demand
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2017 is a landmark year for Master Electronics. It marks 50 years since Ike Nizam founded the specialty electronics component distributors in a southern California apartment. That’s not all that’s noteworthy about 2017, though. Master Electronics is this year implementing a strategic reinvention campaign to enable it remain nimble and innovative serving small and mid-tier customers in a market undergoing momentous upheavals.
The company is not averse to celebrating its notable achievements. Indeed, the Golden Jubilee celebration will continue through the rest of the year but Master Electronics’ executives are directing senior management to focus on helping customers tackle the disruptions arising from technological and process changes rocking the global economy, according to Jamil Nizam, president.
Jamil Nizam, President, Master Electronics
“My message to our leadership team was that we should absolutely celebrate the anniversary and acknowledge the history of the company,” Jamil said, in an interview. “The last 50 years have been amazing but we are just getting started. That sums it up. We see a path for growth because of opportunities ahead due to customer and supplier consolidation.”
Master Electronics is projecting a near-doubling of sales to $500 million over the next 3 to 5 years. That outlook is based on several factors, including the growing role of small and medium-size OEM enterprises in high-tech equipment production, the digital evolution taking place in the global economy and other momentous changes that Jamil said will be disruptive, on one hand, and result in huge business opportunities for many, on the other hand. Companies like Master Electronics that are putting in place the infrastructure, processes and plans to support customers in their markets would benefit from these events, he said.
Master Electronics isn’t expecting an easy ride. The company lacks the stronger leverage and scale of its bigger rivals and cannot match the financial heft of companies like Arrow Electronics, Avnet, Future and WPG Holdings. And yet, Master Electronics believes it is poised to benefit from the evolution of the market rather than become its victim. Why? Several factors are behind the optimism demonstrated by Jamil and younger brother Amir during an interview with EPSNews.
First, Master Electronics has always tried to anticipate and prepare for disruptive changes in the electronics market, hence its prior three reinvention campaigns, they noted. Second, Master Electronics has over the years built up a strong following and reputation in its niche market serving as a specialty distributor of interconnects, passives and electromechanical (IP&E) components to its core base of small to medium-size OEM customers. These customers are not always easily served by bigger distributors, Amir said.
Finally, Master Electronics’ reputation was founded on the strong foundation laid by founder Ike, who continues to serve as chairman of the company and established core principles for serving customers. These values, transferred to his five sons, all of who today work at Master Electronics, have helped make the company a critical part of customers’ supply chain networks, according to Jamil.
“The three things my father has always said my whole life and which exemplify our values are: work hard; have integrity and; never take things for granted,” Jamil said. “The third value is the reason why it’s important that we maintain our entrepreneurial spirit as we grow. We spend a significant amount of time trying to empower our employees, encouraging them to think outside the box, bring in opportunities and play to win. We don’t play to not make mistakes; We are okay with mistakes. We learn from them and, hopefully, our mistakes are small mistakes.”
Mastering the Art of Reinvention
If there was ever a time in the history of the components distribution market when resting on laurels might be a bad idea it is probably now. Supplier and customer consolidation has worsened the already onerous challenges facing companies across the high-tech supply chain by injecting massive uncertainty into the business. Furthermore, the digitization of the global economy with its unprecedented rapid product evolution and obsolescence has complicated the competitive terrain.
That’s why Master Electronics is embarking upon its next reinvention campaign, the fourth since it was founded in 1967. The first reorganization involved a repositioning of the company to define its core customer base and market segments. This was concluded with a decision to remain focused on small and medium-size enterprises as well as on the IP&E market. In the second phase of its evolution Master Electronics transformed and repackaged itself as a regional player. The company morphed into a North American specialist with operations in all the key parts of the United States and Canada.
In the third phase of its growth Master Electronics has tried to become a global distributor with operations in Europe and Asia. However, the company has maintained its focus on the North American market and expects this to continue for the immediate future.
“Globalization has certainly been a driver in our industry and we’re participating in that,” Jamil said. “We have a presence in Europe and in Asia. We are driving big enough numbers from each region but we also want to make sure that we protect our backyard.”
The current reinvention program isn’t just about positioning Master Electronics to take advantage of new business opportunities. In addition, Master Electronics is bracing for what Jamil, the president, describes as “massive disruptions” that will rock the distribution market and the entire electronics supply chain over the next years. Those changes will create opportunities for some companies and hurt those that either failed to respond or couldn’t successfully execute strategic defense and growth plans, he said.
“Our industry in the next 5 years is going to have massive winners and losers,” he said. “There will be significant disruptions driven by new business models, technologies and the internet. It’s going to happen pretty fast and I think we are right on the cusp of it.”
In preparations to take advantage of growth openings emerging from the proliferation of ecommerce and the emerging digital economy as well as high-tech business developments such as the Internet of Things (IoT) and other connectivity products, Master Electronics has begun implementing the initiatives it expects would boost sales. It is strengthening existing staff resources, beefing up its digital assets and investing in ecommerce capabilities.
It has also doubled down on its focus on the small and mid-tier OEM and EMS provider market on the conviction that many of the new growth opportunities of the future will come from this industry segment. This strategy, which it began rolling out several years ago, has already resulted in strong revenue growth with opportunities for further advancements, company executives said.
“The opportunity is there and we need to position ourselves to further take advantage of these,” Jamil said. “In 2016, we had $300 million in sales [and] we see a path to $500 million in 3 years. We want to stay true to who we are and our resources, although significant, must be used wisely. We are innovative, entrepreneurial and our people as well as strong relationships with suppliers and customers are our best assets. We’d go to any length to understand the customers’ challenges and find creative solutions to these. We believe the larger distributors will struggle to do these.”
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