Lester Electronics - Problem Solution

Problem Solution: Lester Electronics

Lester Electronics has found itself in the midst of a crisis. A crisis that was unforeseen and unwanted. Lester Electronics’ main supplier and longtime friend, Shang-Wa has just been subject to a hostile takeover. Lester Electronics needs to evaluate the available options and act quickly and decisively in order to have an impact on its own future and make the most of this situation. In the following pages we will evaluate the problem, the possible solutions, evaluate those solutions for the best possible outcome.

Situation Analysis

Issue and Opportunity Identification

Through its 35 years in an distributor agreement with Shang-Wa, Lester Electronics has grown its United States annual market revenue to $500 million. This has been extremely beneficial for both Lester Electronics as well as Shang-Wa. As a result of both of their success, both Lester Electronics and Shang-Wa have been approached with hostile takeover offers.

Some of the issues and opportunities are have presented themselves are that Lester Electronics will lose approximately 43% of its revenue over the next five years if they lose their exclusive US distributorship agreement with Shang-Wa. Shang-Wa’s major issue is that they are not currently in a position to stop a hostile takeover from TEC. Combine this with the fact that John Lin, president and CEO of Shang-Wa, wants to retire soon and wants to know that the future of Shang-Wa is secure.

A big opportunity is for Lester Electronics and Shang-Wa to form a partnership in creating a new capacitor manufacturing facility in a neighboring Asian country. This partnership would solidify the two companies alliance and viability for future business.

Stakeholder Perspectives/Ethical Dilemmas

Bernard Lester, CEO and founder of Lester Electronics

Bernard Lester is a key stakeholder in this scenario for the facts that he is the CEO and founder of Lester Electronics and that he has the most to lose. Bernard must do something to get ahead of the current situation, both with Shang-Wa and with Avral Electronics. Bernard and John Lin have developed a close friendship over the past 35 years, which creates a difficult situation should John decide to agree to the TEC takeover. As well, depending on the offer from Avral Electronics it might be a good decision to take their offer, leaving John to fend for himself with Shang-Wa.

Anne Lorale, CFO, Lester Electronics

Anne is a key stakeholder in this scenario as so much is dependent upon her work and the numbers she comes up with and her recommendations. Although Anne has worked with Lester Electronics for at least a few years from the CPA firm and directly for Bernard, she was promoted quickly and does not have very much experience as a Controller or a Chief Financial Officer. Her lack of experience may be a liability when determining the best possible course of action and her recommendations of how to proceed.

John Lin, founder and CEO of Shang-wa Electronics

John Lin is a key stakeholder in this scenario as his company, Shang-Wa is at the center of this storm, both with the TEC takeover bid and with the affects of Avral Electronics offer to takeover Lester Electronics. John must also be proactive. If he waits to see what happens he will have no say in how these situations unfold.

For the TEC takeover bid, John must decide if this is what he wants to happened with his company and if not, he must make some changes to protect himself. For the Avral Eletronics takeover of Lester Electronics, John must be involved as well. If John loses Lester Electronics as the exclusive US distributor it would be equally devastating. The other key component is John’s relationship with Bernard that they have developed over the past 35 years. Either scenario will drastically impact their relationship unless they decide to work together on them.

David Antone, CEO, Transnational Electronics Corporation

David Antone is a stakeholder in this scenario as he is making a well calculated move to acquire Shang-Wa. David’s interest in Shang-Wa follows its trend of expanding through mergers and acquisitions. Ready to expand globally, acquiring Shang-Wa is a solid business move that would quickly accomplish this.

Robert Paget, Vice President of Acquisitions, Avral Electronics

Robert Paget is a stakeholder in this scenario as he is making an aggressive move to acquire Lester Electronics. Living up to his reputation, Robert’s interest in Lester Electronics would increase Avral Electronics’ world market share and earning potential.

Peter Zack, Managing Director, Silver Socks Company

Peter Zack is a stakeholder in this scenario as he is helping setup this opportunity for his former college roommate Robert Paget. Peter does not have any personal attachments or loyalties in this opportunity. His reputation is one of privilege, well connected and would rather be golfing or playing tennis.

Problem Statement

Lester Electronics will solidify its viability and future business opportunity through developing new manufacturing opportunities. This includes looking at all options to achieve this goal.

End-State Vision

Lester Electronics’ end-state vision is one that has Lester Electronics as an established global manufacturer and distributor of electronics components. Lester will accomplish this through various means, creating a partnership with Shang-Wa, investing in a new manufacturing facility, and possibly acquiring other manufacturer and distribution companies. This will increase productivity and marketability of its current and future products. Lester Electronics will be a leader in the future of global manufacturing and distribution of electronic components.

Alternative Solutions

Lester Electronics’ alternate solutions would include acquiring Shang-Wa, establishing an agreement between Lester Electronics, Avral Electronics, Shang-Wa and TEC, and finding other electronics manufacturer’s to establish a distributor agreement.

In Table 3, acquiring Shang-Wa looks like the best alternative solution. This will be difficult due to the value of Shang-Wa