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