Tech Data 2013 Annual Report Download - page 10

Table of Contents
customers' needs, quality and depth of product lines and training, as well as service and support provided by the distributor to the customer. We
believe we are well equipped to compete effectively with other distributors in all of these areas.
We compete against several distributors in the Americas market, including broadline product distributors such as Ingram Micro Inc. ("Ingram
Micro"), Synnex Corp., and to a lesser extent, more specialized distributors such as Arrow Electronics, Inc. (“Arrow”) and Avnet, Inc. (“Avnet”),
along with some regional and local distributors. The competitive environment in Europe is more fragmented, with market share spread among
several regional and local competitors such as ALSO/Actebis and Esprinet, as well as international distributors such as Ingram Micro, Westcon
Group, Inc. (including its Comstor business unit), Arrow and Avnet.
The Company also faces competition from companies entering or expanding into the logistics and product fulfillment and e-
commerce supply chain
services market and certain direct sales relationships between manufacturers, resellers, and end-users continue to introduce change into the
competitive landscape of our industry. As we expand our business into new areas, we may face increased competition from other distributors as
well as vendors. However, we believe vendors will continue to sell their products through distributors, such as Tech Data, due to our ability to
provide them with access to our broad customer base and serve them in a highly cost-effective and efficient manner. Our logistics capabilities, as
well as our sales and marketing, credit and product management expertise allow our vendors to expand their market coverage, while lowering their
selling, inventory and fulfillment costs.
Employees
On January 31, 2013, we had approximately 9,100 employees (as measured on a full-time equivalent basis). Certain of our employees in various
countries outside of the United States are subject to laws providing representation rights to employees on workers' councils. Our success depends on
the talent and dedication of our employees and we strive to attract, hire, develop and retain outstanding employees. We believe we realize
significant benefits from having a strong and seasoned management team with many years of experience in technology distribution and related
industries. We consider relations with our employees to be good.
Foreign and Domestic Operations and Export Sales
We operate predominately in a single industry segment as a distributor of technology products, logistics management, and other value-added
services. While we operate primarily in one industry, we manage our business in two geographic segments: the Americas (including North America
and South America) and Europe.
Over the past several years, we have entered new geographic markets, expanded our presence in existing markets and exited certain markets based
upon our assessment of, among other factors, our earnings potential and the risk exposure in those markets, including foreign currency exchange,
regulatory and political risks. To the extent we decide to close any of our operations, we may incur charges and operating losses related to such
closures and recognize a portion of our accumulated other comprehensive income in connection with such a disposition. For information on our net
sales, operating income and identifiable assets by geographic region, see Note 15 of Notes to Consolidated Financial Statements.
Asset Management
We manage our inventories in a manner that allows us to maintain sufficient quantities to achieve high order fill rates while attempting to stock only
those products in high demand that have a rapid turnover rate. Our business, like that of other distributors, is subject to the risk that the value of
inventory will be impacted adversely by suppliers’ price reductions or by technological changes affecting the usefulness or desirability of the
products comprising the inventory. Our contracts with most of our vendors provide price protection and stock rotation privileges to reduce the risk
of loss due to manufacturer price reductions and slow moving or obsolete inventory. In the event of a vendor price reduction, we generally receive a
credit for the impact on products in inventory and we have the right to rotate a certain percentage of purchases, subject to certain limitations.
Historically, price protection and stock rotation privileges, as well as our inventory management procedures, have helped reduce the risk of loss of
inventory value.
We attempt to control losses on credit sales by closely monitoring customers’ creditworthiness through our IT systems, which contain detailed
information on each customer’s payment history and other relevant information. In certain countries, we have obtained credit insurance that insures
a percentage of the credit extended by us to certain customers against possible loss. The Company also uses floorplan financing arrangements as an
additional approach to mitigate credit risk. Customers who qualify for credit terms are typically granted net 30-day payment terms in the Americas.
While credit terms in Europe vary by country, the vast majority of customers are granted credit terms ranging from 30 to 60 days. We also sell
products on a prepayment, credit card and cash-on-delivery basis. In addition, certain of the Company’s vendors subsidize floorplan financing
arrangements for the benefit of our customers.
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