Benchmarking for Bernard Lester

Benchmarking for Bernard Lester

University of Phoenix

MBA540

Instructor - Farshad Maltes

Benchmarking for Bernard Lester

Lester Electronics is at a tipping point of the business. Lester cannot continue to manage the business as has previously been done for a number of reasons. Due to changes in the industry, their largest vendor, Shang-wa feels pressured to sell to another manufacturer. If Shang-wa does not sell or enter into a joint venture with Lester, Shang-wa will not likely continue to remain in business. Lester also feels pressured by a competitor to sell the business. Lester must make the decision to either sell or grow 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. In addition, both companies are faced with aging presidents and must put together succession plans if they do choose the joint venture option.

Joint Venture Benchmarking for Bernard Lester

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 (www.investorwords .com, 2006).

Evox Rifa

One company that Lester can look at is Evox Rifa. Evox Rifa was facing some of the same issues that Lester Electronics is facing. Evox Rifa was looking for a partner to perform manufacturing of capacitors.

Evox Rifa was looking for a partner because the production costs in Europe were starting to become unprofitable. Another issue was that many of Evox Rifa’s customers were setting up production in China in order to reduce costs. Evox Rifa knew that it would be more profitable to find a good partner than to try to start a manufacturing facility (www.finnfund.com, 2002).

The partner that Evox Rifa chose was Jianghai Capacitor Factory in Nantong. Originally Jianghai was a subcontractor producing capacitors designed by Evox Rifa. The relationship made for an excellent beginning to a joint venture (www.finnfund.com, 2002).

The outcome for the two companies was a positive one; the companies were able to double production within a few months. They accomplished this by selling most of the capacitors in China; however, a large part of the future output will be exported to international markets via Evox Rifa’s worldwide sales network (www.finnfund.com, 2002).

Lester Electronics can learn from a company like Evox Rifa that has recognized the need for a partner, and created a relationship that benefits both companies.

Epcos and Beijing Jones Co Ltd

A second example of a joint venture is the relationship between Epcos and Beijing Jones Co Ltd. The joint venture will manufacture EMC filters. According to Epcos President and CEO Gerhard Pegam, the joint venture will step up Epcos’s presence in the fast-growing Chinese EMC market. This will allow for more profit from the significant growth potential of local Chinese manufactures (EE Times, 2005).

Epcos needed to enter into a joint venture in order to offer customers in China local research and development services in EMC. The joint venture will also extend the range of services to customers due to access to a local lab (joint venture, 2005).

Lester Electronics can learn from Epcos how to create growth through the formation of a joint venture. If Lester Electronics formed a joint venture with a manufacturing company in a different country, such as China, they could expand sales and increase profits.

Kemet

The third company that Lester Electronics could benchmark is Kemet. Unlike Lester Electronics, Kemet manufactures their multilayer ceramic capacitors. However, Kemet relies on their suppliers for the raw materials to produce the capacitors. Tantalum Ore is one of the raw materials needed and the price of the ore has been increasing dramatically. In order to for Kemet to remain competitive and meet the growing demand of their customers they must establish an independent source of tantalum (Kemet completes, 2001).

The partner that Kemet has chosen for the joint venture is Australasian Gold Mines NL. The joint venture will ultimately provide up to 15% of the tantalum ore for Kemet’s annual requirements.