Problem Solutions - Lester Electronics

Problem Solution: Lester Electronics

Lester Electronics Inc has made many decisions that will benefit the two companies. Based on the decision to merge with Shang-wa to maximize the potential and maximize the wealth of the two companies. The advantage is that the merger will allow each to capitalize on the strengths of the other while testing their weaknesses. In this paper it will explore the challenges, opportunities and the ethical dilemmas that Lester Electronics, Inc and Shang-Wa are experiencing during finding the right solutions for the companies.

Shang-wa Electronics was doing business for Bernard Lester, they manufacture 40% of Lester Electronics, Inc. products and establish a relationship. This company entered into an exclusive United States distribution contract with Bernard Lester, who then officially founded Lester Electronics, Inc (LEI). LEI grew rapidly as Lester added additional components to its product line, and made inroads with two large domestic manufacturers that use capacitors in both consumer and industrial products.

In the consumer industry there are many avenues that the distributor can take advantage of. Lester markets its products to small and medium sized original equipment manufacturers (OEMs). For repair they offer facilities and small local distributors throughout the Americas and Europe. Lester has never marketed domestic made parts outside of the United States. Operating in this way, the companies’ revenues approximate $500 million a year. Bernard Lester has come longs way to make his company public in 1984 and now it’s traded on NASDAQ market. In the other hand, Shang-wa CEO John Lin began manufacturing capacitors in 1969, building a small, well-respected business in Korea. Years later John entered into an exclusive agreement with Bernard Lester. Under that contract, Shang-wa gives the right to Lester to sell Shang-wa capacitors in the United States for 65 years, as long as Lester maintained a minimum annual purchase of $1 million wholesale; as a result; Shang-wa is Lester’s primary supplier of capacitates for the U.S. market. Since Shang-wa is Lester’s primary supplier that is where there took place because 40% of his products comes from Shang-wa.. In exchange, Shang-wa cannot knowingly sell its capacitors to anyone intending to market to U.S. buyers.

In the last past two visits to the United States for Lester’s quarterly Board meetings, John stood up an suggested that Shang-wa is open to growth opportunities that could help position the company to meet their growing expectations. A merger will bring success to both firms increasing growth and expansion is what they are trying to implement.

Situation Analysis

Lester will face many challenges in implementing these mergers offering many opportunities to strengthen the company as a whole. The first issue is Lester Electronics’ need to plan and put their self in their shoes to begin execute the merger and create a global manufacturing and marketing company profitable to its shareholders. The main focus for Lester Electronics is to make their shareholders happy. The opportunities that Lester Electronics is having will permit expansion of its global market and manufacturing capability while maximizing wealth among its shareholders. Growth and expansion while maintaining profitability are vital to a company while considering the merger. Lester Electronics has never marketed domestic-made parts outside of the United States. It’s become a growing issue because LEI is not only growing domestically but also globally. When looking at LEI’s we could see that without experience in the management area its hard to achieve the goals that are expected in the business industry.

Another issue is that Lester can take advantage of the merging of two business cultures to create a highly efficient and profitable manufacturing and marketing capability. This is a true advantage that Lester needs to take for more opportunities to grow.

The way technology is being done now days its so much different from years ago. It almost looks that retirement is coming closer because of the way electronics are being handle. He is looking forward to retire but worries because there is no successor to his company. This is extremely relevant to LEI because Shang-wa has been the primary electronics supplier, and any change with Shang-wa would have a significant impact on LEI and its sales revenue. The opportunity from the Shang-wa’s perspective is to maximize wealth by selling or partnering with a company that is better in management and able to offer high value for the company. The opportunity are not giving all the time so of if Lester want to offer to acquire from LEI perspective is to acquire Shang-wa to absorb