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Autor: anton 02 December 2010
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SITUATION ANALYSIS AND PROBLEM STATEMENT: LESTER ELECTRONICS INCORPORATED AND SHANG-WA ELECTRONICS
Situation Analysis and Problem Statement: LESTER ELECTRONICS, INC. AND SHANG-WA ELECTRONICS
University of Phoenix
Situation Analysis and Problem Statement
The purpose of my paper is to analysis the issues related to Lester Electronics Incorporated and Shang-Wa Electronics, and why Lester Electronics, Inc. should look at their situation and options regarding the takeover by Avral Electronics, S.A. and Shang-Wa do the same regarding the hostile takeover by Transnational Electronics Corporation. Lester Electronics, Inc. and Shang-Wa's issues are related to the financial history of the corporations and the John Lin wanting to retire, which led into the current problem of other corporations wanting to take over the companies. First, to understand the problem, one needs to understand the situation surrounding these two companies.
Situation Background (Step 1)
Lester Electronics, Inc. Entered into an exclusive U.S. distrubition contract with Shang-Wa Electronics, a small Korean manufacturer of capacitors in 1978. The agreement and relationship has stood valiantly for 35 years, however now John Lin, the Shang-Wa founder is looking at a hostile takeover by Transnational Electronics Corporation. Ironically, Avral Electronics, S.A. is trying to takeover Lester Electronics, Inc. Both companies have done well for years, but want to access their future and ability to survive a takeover. But first, they need to identify the issues and opportunities.
There are two issues facing Lester Electronics, Inc. First, Shang-Wa, who provides more than 40% of the company's product, is facing a hostile takeover. What happens to Shang-Wa will affect Lester Electronics, Inc. The second issue is the attempted
takeover by Avral Electronics, S.A.
There are two issues facing Shang-wa. First, is there isn't anyone to take over the company should John Lin decide to retire. The second is the hostile takeover attempt by Transnational Electronics Corporation.
Lester Electronics, Inc. has several opportunities. They stated doing nothing is not an option. First, they could fight the takeover and strive to maintain the relationship with Shang-wa Electronics. Second, they could attempt to buyout Shang-Wa Electronics. Third, they can develop a business relationship with another capacitor provider. Fourth, they could cave to the takeover by Avral Electronics, S.A. According to Rajeeva Sinha in Applied Financial Economics:
The incidence of hostile takeovers as a percentage of all takeovers is significantly higher in
the UK than in the USA. Figures for 1985Ð’â€“1989, the start year of the sample used for this study, show that that hostile takeovers as a percentage of all attempted transactions was 37.1% for the UK, 17.8% for the USA and 9.6% in Europe respectively (Prowse, 1994).
Shang-wa Electronics also has several opportunities. First, they can do nothing and continue the relationship with Lester Electronics, Inc. This would keep John Lin unable to retire. Second, they can accept the hostile takeover bid by Transnational Electronics Corporation. Third, they can sell out Shang-wa to Lester Electronics, Inc.
The opportunities do have ethical dilemmas attached.
Stakeholder Perspectives/Ethical Dilemmas
The key stakeholders of both companies include the boards and CEOs, the employees, the customers, the potential new employees, the stockholders and Avral Electronics, S.A. and Transnational Electronics Corporation. The board and CEOs have the right to make decisions they believe are in the best interest of the corporation, even ones some people might find ethically challenging. Closing the business or accepting a takeover offer impacts the business and the employees, especially Lester Electronics, Inc. as an American company with American jobs, values and ethics.
The employees, are guaranteed rights by American labor laws. The potential new employees have the right to work for the company. The stockholders should perceive their rights to include the board doing everything it can to make the company profitable. Avral Electronics, S.A. and Transnational Electronics Corporation have the right to attempt a takeover and create free trade. According to William Schneper and Mauro Guillen in the June 2004 Administrative Science Quarterly:
Stakeholders can exercise power not just by behaving in a specific way at a given point in time but also by not acting, provided that others accept their definition of the situation. Powerful stakeholders can influence the frequency of future hostile takeover attempts by discouraging unwelcome bids from being attempted, by altering the likelihood that announced deals will be completed, and through their post-takeover relationships with acquirers.
Naturally, this is a very tough situation for all parties and the problem definition must acknowledge all parties and what they have to gain or lose.
Problem Definition (Step 2)
Lester Electronics, Inc. and Shang-wa Electronics are in the capacitor industry, and are facing takeover by Avral Electronics, S.A. and Transnational Electronics Corporation. John Lin, the founder of Shang-wa Electronics, would like to retire; however there is no successor. Lester Electronics, Inc. has 43% of it's revenue come from the Shang-wa Electronics, so Shang-wa Electronic's future directly impacts Lester Electronics, Inc.'s future.
End-State Goals (Step 3)
First, Lester Electronics, Inc. should look to developing their capacitor relationship with another capacitor provider. They should also look to buyout Shang-wa Electronics; then John Lin's successor would be his friend of 35 years, Bernard Lester. Shang-wa Electronics should Ð’â€”concluding a bright future is ahead.
Lester Electronics, Inc.and Shang-wa Electronics can take the present situation and grow from it by understanding the financial history of the corporations and the present situation, recognizing potential takeover threats and opportunities and stating the problem definition. End state goals will help them achieve successÐ’â€”for all parties involved.
Singha, R. (2004) The role of hostile takeovers in corporate governance. Applied Financial Economics, 14, 1291-1305. Retrieved January 30, 2006 from EBSCOhost database.
Schneper, W. and Guillen, M. (2004). Stakeholder rights and corporate governance: a cross-national study of hostile takeovers. Administrative Science Quarterly, 49(2), 263-295. Retrieved January 30, 2006 from EBSCOhost database.
Shang-Wa Takeover Ð’â€¢ Would drastically effect Lester Electronics
Shang-Wa Takeover Ð’â€¢ Would change Shang-Wa
Lester Takeover Ð’â€¢ Would drastically effect Lester Electronics
John Lin retirement Ð’â€¢ Would drastically effect both Lester Electronics and Shang-Wa Electronics
Do nothing Ð’â€¢ This is an option for Shang-wa. Lester Electronics stated it's not an option for them.
Fight the takeover Ð’â€¢ Lester Electronics can fight the takeover and continue on.
Fight the takeover Ð’â€¢ Shang-wa can fight the takeover and become a stronger corporation
Give to the takeover Ð’â€¢ Lester Electronics can give in to the takeover and grow as a part of the new company.
Give to the takeover Ð’â€¢ Shang-wa can give to the takeover, which would be a convenient way for John Lin to retire.
Sell to Lester Electronics Ð’â€¢ Shang-wa can sell to Lester Electronics and that way John Lin's successor is a good friend: Bernard Lester
Stakeholder Perspectives and Ethical Dilemmas
Stakeholder Perspectives and Ethical Dilemmas
Stakeholder Group Interests, Rights, and Values Ethical Dilemmas
Boards and CEOs The boards and CEOs have the right to make decisions they believes to be in the best interest of the corporation. Their values should be the ones the corporation was founded on. Do they sell out or not? Where do they take the corporation in the future and how does it effect the company and the employees?
American employees They have a right to work and rights guaranteed by the Union and laws. Their values represent the quality of the product. Do they support losing their job or having to move and take a pay cut if the company is taken over.
Customers Their right is for a legal product, at a decent price while not demolishing the American market. Do they continue to support a corporation who has taken another by hostile means?
Potential new Employees They have the right to accept a job offered. Their values are different because they are from a different culture. Do they take a job knowing someone else lost theirs? If the corporation to the job away from 'their own people' how much does the corporation value new employees?
Stockholders They have the right to have a profitable investment. They have the right to support or withdraw. When does it become them? When does the stockholder's job, which gave them the money to buy the stock, get taken over? How does this damage the American markets?
Hostile companies They have the right to try to grow and pursue
growth in a free market. How wrong is it to take someone over who doesn't want to be taken over?
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