Problem Solution: Lester Electronics Inc.

Problem Solution: Lester Electronics Inc.

Situation Analysis and Problem Statement for Lester Electronics

Despite the popular belief generated by the abundance of new headlines reading fraises such as China Trade Deficit, Globalization and Outsourcing, transition of product manufacturing to Asia is not the latest fad. Low wages and the abundance of labor have been exploited by distributors and wholesalers of all countries.

"IN THE ELECTRONICS industry, the world of logistics is dominated by the shift of production to Asia, the need for globalization and even greater demand for a global supply chain" ("South China Morning Post", 2006)

In 1978, Bernard Lester of Lester Electronics (LEI) realizing what low cost product acquisition could do for his company, struck a deal with a nine year old, respectable Korean manufacturer Shang-Wa.

The business does not hold still, and companies forced to compete across borders and continents. To become real global player cheap supply is not the only needed component. Therefore companies are acquiring and merging internationally, creating partnerships and joint ventures with governments and companies abroad. Lester Electronics is forced to deal with new global influences on business and evaluate it's business future security.

Lester Electronics Situation Background

Lester Electronics and Shang-wa Electronics business deal turned into a 35 year relationship with mutual benefits. The exclusive distribution agreement secured LEI as a sole distributor of Shang-wa capacitors in the US market. Mr Bernard Lester used his company sole distribution right along with the relationship between LEI and two other US manufacturers to create a product line aimed at original equipment manufacturers and small local distributors. The CEO's of both companies, Bernard Lester and John Lin, became friends and Mr Lester invited John Lin to LEI's board of directors. LEI grew into a profitable enterprise with current revenues of $500 million. The company went public in 1984 and for past three years posted over 100% annual growth in net income, 58% increase in revenue for the past year with almost no derogatory changes in the balance sheet and healthy organic growth.

Shang-wa Electronics significantly benefited from its relationship with LEI. Shang-wa capacitors represent 43% of LEI revenue. Shang-wa posted a double digit revenue growth for 3 consecutive years