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Lester's Electronice Problem Solution Paper

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Problem Solution: Lester Electronics

University of Phoenix

Problem Solution: Lester Electronics

Building relationships is often the key to increasing business productivity. Long-term company relationships can lead to cost effective manufacturing, productive servicing techniques and increase global revenues. Lester Electronics, Inc. (LEI) began an industrious relationship with a Korean manufacturer, Shang-wa Electronics. Together since 1978, the two companies have made major progress in delivering a product line to domestic consumers. LEI focus its delivery model to small and medium size original equipment manufactures. Shang-wa Electronics manufactures capacitors which Lester exclusively has the right to sell the capacitors in the United States for 65 years (University of Phoenix Scenario, 2008). Chief Executive Officers (CEO) of both Shang-wa and Lester Electronics are now faced with dilemma of a changing industrial environment. Competition has grown and decisions must be made for both companies as to which direction the corporation is headed.

Situation Analysis

Issue and Opportunity Identification

LEI have proven to be a grounded company bringing in $500 million dollars in revenue. Similar companies are looked upon as a growth opportunity for other companies. Avral Electronics, S.A. recognizes the importance of what LEI bring to the industrial community. Acquiring LEI would accomplish this need and take the company to new a dimension. Lester Electronics growth and stamina in the industrial community has been built around an exclusive relationship with Shang-wa and ignoring this factor can be detrimental to the continue success of LEI. Jon Lin the founder of Shang-wa now sits as a visiting board member at Lester Electronics. Continue growth at Lester is depended upon the continued relationship with Shang-wa. If Avral is to pursue LEI, Shang-wa must be part of the package. Transnational Electronic Corporation (TEC) interest in Shang-wa is extending greatly so that their operations can be expanded. The company is seeking a top-notch manufacturing firm to be compatible with their product distribution enable the business to offer a one-stop shop for the customers. Since TEC has grown financial by acquiring and merging with companies that suit their needs, the executive team proposed to acquire Shang-wa as the next project. Lester’s Electronics is now seeking financial leverage with Net Present Value options. The merge will give LEI the value that Lester is going for and singled-handedly placing the company in a domineering position internationally. As a result the Board will maximize the shareholders wealth by creating ways to finance. For example, the current cash flows, debt funding borrowed from others and financial support raised by issuing stocks or bonds.

Stakeholder Perspectives/Ethical Dilemmas

Remembering stakeholders at time of change is vital to the success of a company repositioning itself strategically. Lester Electronics has many stakeholders that have to be taking into consideration before deciding in which direction to take the company. Beginning with the companies’ inside stakeholders is priority. All employees must take part in the transformation. Information has to be transferred from the CEO to all involved employees. Employees that are not directly related to strategic changes should be encouraged that they are also an agent of change in the corporation. Secondly, the shareholders have a vested interest in the company. Next, each of the CEO’s, Avral and TEC has an interest in the merge. Bernard Lester is interested in the continued success of his company and increasing profits, market share, and sales expecting accurate financial data from Shang-wa and a healthy working environment for the employees. John Lin’s has an interest in turning his successful organization over to a winning management team in hopes of retiring. John is expecting management to continue to uphold of his company. Avral is a globalized electronics equipment and parts manufacturer that has shown interest in LEI. The company recognizes LEI’s business strengths and is interested in an opportunity to capitalize on them. TEC recognizes the growing domestic demand for the specialty capacitors that Shang-wa manufactures. TEC has shown interest in acquiring Shang-wa.

Other stakeholders that may provide direct support are suppliers, LEI’s consumers and the surrounding community. Any change in the connection between Shang-wa and LEI results in a change in the manufacturing of the company’s products. A new supplier may need to be contacted to fulfill any lagging requirement by Shang-wa if it is acquired by TEC. LEI must work and continue to gain support from the connecting community where the manufacturing plants are located. Consumers being aware of change in the company will assure that the product being produced will remain the same or better than what was issued before.

Problem Statement

With the merger there will be several obstacles that will rise through the growth of the company and the current budgeting behavior. The Net Present Value will help LEI decide on financing methods. The acquire company must paid the premium when it purchases the synergy. Synergy is acquired when a new project increase the cash flow of existing projects. Synergy types are considered to be revenue enhancements, cost reduction, lower taxes and the lower cost of capital (Ross-Westerfield-Jaffe, 2005). Lester could risk losing 43% of the companies revenue if the company passes up merging with Shang-wa. Together the company could generate revenue and reduce competition through market gains, strategic, and marketing power.

End-State Vision

Throughout the continual process of change in the business environment, Lester Electronics will look for new and practical global advancements that will line up with the company values. The ultimate goal of the company is to lead in the industry. In order for the business to reach the 500 million dollar goal mark, Lester has to increase revenue by 43 percent within 5 years, offer another innovative product line and increase the Asian customer base by 25 percent within the next 2 years. The goal will also include a more personalized capital arrangement that entails the company getting rid of excessive debt and reducing



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