Problem Solution: Lester Electronics
Lester Electronics (LEI) a domestic distributor of consumer and industrial electronics has grown rapidly over the past 35 years. During those 35 years, LEI has maintained an Exclusive Supply Agreement with Shang-wa Electronics, a small Korean manufacturer of capacitors. Thus far, this agreement has been beneficial to both companies it has allowed Lester to be the primary supplier of these specialty capacitors for the U.S. market as well as guaranteeing Shang-wa a minimum of $1 million in annual wholesale purchases.
Recently, global competitors have begun to see the growing domestic demand for the specialty capacitors and they have shown an interest in acquiring Shang-wa, which will put the Lester/Shang-wa exclusive distributorship agreement in jeopardy. If LEI loses sole domestic distribution of Shang-wa’s capacitors the company will face a 43% in revenues over the next five years.
In order to prevent a takeover of Lester Electronics a strategic plan must be developed and put into place quickly. Lester has a number of options to consider:
Forming a partnership with Shang-wa
Acquiring Shang-wa
Allowing Shang-wa to be acquired by Transnational Electronics Corporation (TEC).
After much research concerning other companies’ successful and unsuccessful mergers, deliberation among all stakeholders and number crunching LEI has come up with an optimal solution to be presented to Shang-wa’s owner, John Lin. This paper will discuss in detail the situation, the solution, the implementation plan, and the expected results.
Situation Analysis
Issue and Opportunity Identification
The current situation is that Lester Electronics has decided on a merger with Shang-wa. They believe this is the best option to eliminate potential takeovers by Avral and Transnational Electronics Corporation. They are now preparing a financial recommendation to present to Shang-wa. For LEI and Shang-wa to make the best business decision the...