Lester Electronics Benchmark

Lester Electronics Benchmark

MBA 540

November 27, 2007

University of Phoenix Online

Lester Electronics Benchmark

Lester Electronics is at a pivotal point of the business. Bernard Lester cannot continue to manage the business as has previously been done due to the changes in the industry and a possible loss of their largest vendor, Shang-wa. John Lin, founder and CEO of Shang-wa, is looking to spend less time with his business and more time with his family. John Lin has informally suggested to Bernard that they partner in a new country that would enable both companies to meet the growing demands for their products. John Lin also feels pressured to sell to another manufacture, Transnational Electronics Corporation (TEC). If Shang-wa does not sell or enter into a joint venture with Lester, Shang-wa will not continue to remain in business because John Lin has not groomed a successor. Lester also feels pressured by Avral Electronics, S.A. to sell the business. Lester must make the decision to either sell or partner with Shang-wa so that they are not forced out of business. Lester's proposal to create a joint venture with Shang-wa may be the only option that would allow both companies to stay in business. Both companies are faced with aging presidents and must put together succession plans if they do choose the joint venture option.

Benchmarking companies

Beckman Inc. and Coulter Electronics

One of the companies that Lester can look at is Coulter Electronics. The success of Coulter electronics came from the manufacturing of a medical instrument that counted white and red blood cells. The company had been successful from the early 1950s through the 1980s selling hematology analyzers and patent rights. The company felt the pressure of competition in the 1980s as their patents began to expire. Coulter responded to the competition by leading the market in technological advances and supporting the world market. He replaced overseas managers and began to integrate and consolidate various international operations. He implemented the Japanese concept of "Just In Time (JIT)" manufacturing to reduce inventory and floor space requirements. Advances in technology, customer service and JIT reagent supplies helped Coulter to maintain advantages in the marketplace.

Beckman, Inc. founder Arnold Beckman's interest was in chemistry. While a professor at the California Institute of Technology, Beckman invented an acid meter that measured acidity levels in lemon juice (later rechristened the pH meter). Beckman created other chemistry innovations that revolutionized chemical analysis.

In 1997, Beckman Company purchased the Coulter Brother's company for $875 million and $275 million to retire Coulter's debt. "The formation of this new company, Beckman Coulter, from two of the industry's most recognized and respected names not only creates a powerful presence in diagnostics, but also strengthens our life sciences business," said Louis T. Rosso, Beckman's chairman and CEO (Beckman Coulter Inc, 2004). The advantage of the merger was that the individual firms sold different products to the same customers. Their combined product offering would allow hospitals to purchase more than 75% of their products from the same source. From the merger Beckman expected Coulter to increase sales among the managed care firms while Beckman's expertise in fiscal restraint would increase Coulter's profitability. Since the merger the Beckman Coulter has increased their profitability and growth each year (Beckman Coulter Inc., 2004).

Since Lester Electronics is a distributor of capacitors and not a manufacturer they must form a relationship with a manufacturer in order to have a product to distribute. One way to achieve a partnership would be to enter into a joint venture. A joint venture is a contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share the profits and losses of the enterprise (Joint venture, 2007). Lester Electronics could benefit from the partnership with Shang-wa by securing their supply of capacitors and offering customers a "one stop shopping" through the distributorship. Lester Electronics would offer the partnership the management and financial expertise that would help both companies remain profitable.

Target -

Target was in a similar position to Lester and Shang-wa. Target's CEO, Robert Ulrich, was recently promoted to the chairman of the board for Dayton Hudson Corp. Ulrich had been grooming two people from within the company, George Jones and Warren Feldberg. Jones left for a position at Rose's Store and Feldberg departed a month later for a position at Marshalls. Ulrich looked outside of the company for his next successor focusing on someone who has merchandising and operating experience. They have turned to Stephen Watson of the Dayton Hudson Corp. to meet the challenge (Halverson, 2007). Ulrich will have a short three months to get Watson up to speed as the transitions are made. To make a successful transition there must be a plan in place. Some of the things to consider in making the plan are; complete and accurate records of all aspects of the business, discussion of the future direction, understanding of the changing markets, and participation in the entire business to name a few (Sinopoli, 2005).

John Lin, now at age 68, has plans to spend less time on the business and more time with his grand children. The problem is that John has not groomed a successor and without on the business cannot afford to have him slow down. His posterity has taken other directions and John is looking forward to retirement.

Bernard Lester graduated from college in the mid-60s, which means that he would also be close to retirement years. The scenario does not discuss any of Lester children being involved in the business. The only top manager involved in the company is the CFO, Anne Lorale. Anne's experience is limited. Anne worked for the accounting firm in charge of Lester's account. Bernard realized that he needed a fulltime CPA and offered Anne the position. She does not have the experience needed to lead Lester into the future. Both Bernard and John are approaching retirement and have not groomed anyone within either company to take over management; Bernard should follow the example of Target and begin to look into succession planning for both entities, Lester Electronics and Shang-wa.

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