Running head: GAP ANALYSIS: LESTER ELECTRONICS
Gap Analysis: Lester Electronics
University of Phoenix
Gap Analysis: Lester Electronics
Shang-wa Electronics, a small Korean electronics business, was put at risk of a hostile takeover by the much larger Transnational Electronics Corporation (TEC) in 2005. This not only worried Shang-wa, but also Lester Electronics, Inc (LEI) which had built a trusted relationship with Shang-wa that included LEI having the only rights in the United States to distribute Shang-wa capacitors. The takeover by TEC would leave LEI with an approximate reduction in revenues of 43% over the next five years. In order to prevent LEI from having this happen, the company acquired Shang-wa so the two companies could continue to work together while also expanding its market. However, acquisitions are a challenge and can present many issues. LEI is up against a number of problems, but the existence of promising opportunities makes the risk of the acquisition worth it. Stakeholders of LEI and Shang-wa hold different perspectives which can present further barriers in completing a successful acquisition. Both LEI and Shang-wa share the same goal of completing a successful acquisition by using financial planning and reviewing medium- and long-term financial alternatives, which will be discussed in a gap analysis.
Situation Analysis
Issue and Opportunity Identification
The merger between Lester Electronics (LEI) and Shang-wa Electronics presents many issues, but also opportunities. For LEI, the company is faced with the potential issue of losing revenue because of its expensive acquisition of Shang-wa. Instead of acquiring Shang-wa with one large payment, LEI should review medium-term financing options which would allow the company two to five years (Global Investor, 2009) for repayment. Medium-term financing is typically used for expansion (BlurtIt, 2007). This would allow LEI to use the majority of its money for expansion, such...