Lester Electronics

Running head: PROBLEM SOLUTION: LESTER ELECTRONICS

Problem Solution: Lester Electronics

Jennifer Chapman

University of Phoenix

Problem Solution: Lester Electronics

In 1978, Shang-wa Electronics, a small Korean manufacturer of capacitors, entered into an exclusive United States distribution contract with Bernard Lester, who then officially founded Lester Electronics, Inc. (LEI). As a consumer and industrial electronics parts master distributor, Lester markets its products to small- and medium-sized original equipment manufacturers (OEMs), repair facilities and small local distributors throughout the Americas and Europe. To date, however, Lester has never marketed domestic-made parts outside of the United States. Operating in this way, the company’s revenues approximate $500 million a year. In 1984, Bernard took his company public, and it is now traded on the NASDAQ market and rated Baa by a nationally recognized rating agency.

When deciding the future of a pre-existing company, hind sight is 20/20. It’s hard to know exactly how something may affect a company in the long run, but there are ways an organization could research all the possible problems that can arise, especially in specialized industries with many competitors. Recently, Lester Electronics and Shang-wa Electronics have had bids from their competitors to buy them out. As a result of current market trends there has been a decline in sales and the increasing competition has become more intense. Organizational strategic factors such as desire to increase innovation, recognize the value of long standing relationships, and reach new customers with new products have come into play. For Lester Electronics to succeed they need to examine what the important issues are, the potential opportunities that are available, stakeholder perspectives, their end-state vision, and what needs to be done to reach that vision.

Situation Analysis

Issue and Opportunity Identification

The Lester Electronic Leadership Team has a great deal on their plate in order to implement a global joint venture. It was their task to identify their industry, discuss challenges LEI may face with the possible acquisition by their competitors, create a new global strategy, and anticipate a few audit results and new budgeting process. This paper will discuss in detail what is needed for Lester Electronics to have a successful merger and how to implement it.

The LEI scenario is about a distributor company with and exclusive contract with Shang-wa Electronics, a manufacturer of capacitors that faces the possibility of a hostile takeover from two industry competitors. If Lester Electronics loses Shang-wa’s business there would be a 43% reduction in Lester revenues over the next five years. Both Lester and Shang-wa want to avoid this at all costs. Until recently LEI and Shang-wa Electronics have has a strong strategic alliance. This alliance is a formal relationship that grew into a more personal one, formed between the two parties to pursue a set of agreed upon goals and to meet a critical business need while still remaining independent organizations. John Lin loves the company and partnership he’s built with Bernard Lester, but as he gets older he wants to retire and he hasn’t groomed a successor for Shang-wa Electronics and without one he cannot afford to slow down. The survival of what he has built has resulted in the desire to merge Lester electronics and Shang-wa or else be bought out. Because their relationship has been a long and strong one, breaking ties would mean more than lost profits, which is why Lin brought up the idea for a joint venture to ensure the survival of the two organizations and what their partnership has built over the years.

Change happens for all kinds of reasons. Sometimes it’s because businesses need to change in order to keep up with the times. These forces are usually internal and external changes. External forces of change originate outside of the organization. The four key external forces of change are demographic characteristics, technological advancements, market changes, and social and political pressures. Demographic changes occur in the US workforce. Organizations need to effectively manage diversity if they are to receive maximum contribution and commitment from employees. Technological advancements mean improving productivity and market competitiveness. Development and use of information technologies is probably one of the biggest forces for change. Market changes occur even more now in a global economy that