Classic Airlines

Running head: SCENARIO FINANCING SOLUTION: LESTER ELECTRONICS INC.

Scenario Financing Solution: Lester Electronics Inc.

This paper will focus on the 9-step process. Step 1 is to overview situation background and identifies scenario, opportunities, and stakeholder perspectives/ethical dilemmas. Step 2 is to create a problem statement. Step 3 is the end-state goals, which used as a measuring tool to determine success. Step 4 is to find alternative solutions and benchmarking validation. Step 5 is to analyze the alternative solution and choose the most feasible one. Step 6 is to assess the risk of the chosen solution. Step 7 is to describe the solution that has ultimately chosen as the best. Step 8 is to implement plan that bee described as the best solution; also, a summary will list the key ideas. Finally, step 9 is to evaluate the results and to determine how well the end-state goals were met and how to determine the success of the problem.

There is consensus that the main financial objective of a business enterprise is to maximize the wealth of its shareholders. However, it is also widely recognized that various other stakeholder groups, such as customers, management, employees, creditors, banks and government, have their own objective, which can be a financial and/or non-financial nature. The stakeholders that make up this coalition of constituents have different levels of influence the objectives of a company most (5). The most influential stakeholder group is usually senior management, which is appointed and dismissed by the shareholders via a board of directors.

It is generally accepted that financial objectives should be related to key factors for business success.

* Profitability (return on investment)

* Market share

* Growth

* Cash flow

* Customer satisfaction

* The quality of the firm's products

* Industrial relations, and

* Added value

Even if a company endeavors to satisfy the needs of a wide range of stakeholders, it cannot be denied that the single most important financial objective of the company is to maximize when the returns of the shareholders, relative to their investment, are maximized. These returns are made-up of capital gains in the form of increase in the share price, as well as of dividends, which are made possible when the company generates adequate profits and cash flows (1).

Describe the Situation

Issue and Opportunity Identification

* An agreement between LEI & Shang-wa. Also, Shang-wa, has received a hostile takeover bid from TEC. If the takeover is accepted, LEI stands to lose upwards of 45 percent of expected revenues over the next five years. Shang-wa is interest in establishing a joint manufacturing facility with LEI. At the same time TEC is going after Shang-wa, Avral Electronics is interest in acquiring LEI.

* If LEI looses agreement with Shang-wa, revenue will drop up to 45%. TEC is acquiring to takeover shang-wa. Avral Electronics is showing an interest in acquiring LEI

* Enjoys a wide shareholder base and, in just the past five years, has increased annual revenues from $300 to $900 million. LEI is now traded on the NASDAQ market and rated Baa by a nationally recognized rating agency.

* TEC CEO David Antone casually mentioned to John Lin that TEC might be interested in acquiring Shang-wa. If this happened, the long-standing Lester/Shang-wa exclusive distributorship agreement would most likely not be renewed at year-end, creating a 43 percent reduction in Lester revenues over the next five years.

* The problem is that to many hostile takeover between companies. Each CEO needs to make the best decision for his company and shareholders. If shang-wa changed ownership LEI looses revenue up to 45%.

* The problem is worth solving so that LEI and shang-wa will realize what is best for them in terms of financial security for owners and stockholders (7).

Stakeholder Perspectives/Ethical Dilemmas

Current situation is essential key to stakeholders in this transition. The staff that has been with the company for many years can play crucial roles in mentoring lower ranking staff along the way. Change is hard for any company and team to endure. It is especially hard when the team does not feel like there needs to be change. Scholars Jung and Day speak of the difference.

The most common approach to a large-scale transformation process involves central definition and management. That approach sometimes works in a crisis. To prevent the threatened closure of a factory, its workers may well accept draconian staffing cuts. To save a company from a hostile takeover, managers may allow core businesses to be sold. However, without a crisis, these prescriptive methods run into trouble, for the shared conviction that permits a company to endure setbacks and complications cannot be centrally imposed.

Current and new customers are also key stakeholders in the transformation. The company must ascertain how the change will affect the customer base in existence. Will they ever feel appreciated or passed over (2)

Frame the "Right" Problem

The acquiring company did not have a long-term vision for the merger or for the company. Senior management did not create a common goal for the merging companies. The company did not establish a clear and compelling outcome for the organization at the beginning of the merger process. They did not know where they were going. Consequently, they could not articulate a compelling future that employees, customers and suppliers would want to help create (4).

The chief executive officer of the acquiring company developed a life-threatening illness about the same time the merger was consummated. If he had a vision for the company, it was quickly lost as he relinquished control of the company to the chief financial officer. Bean counters rarely have the vision, courage or innovative thinking necessary to create new and exciting corporate cultures (8). Instead, they operate and make decisions based solely on the bottom-line financial numbers. They are often unwilling to take the entrepreneurial risks necessary to build great companies.

People have difficulty getting excited and passionate about financial statements.

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