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Problem Solution: Lester Electronics, Inc Mba 540 Week 6

2593 words - 10 pages

Problem Solution: Lester Electronics PAGE \* Arabic 1
Running head: PROBLEM SOLUTION: LESTER ELECTRONICSProblem Solution: Lester ElectronicsUniversity of PhoenixProblem Solution: Lester ElectronicsIntroduction:Lester Electronics, Inc., is a distribution company in the United States, and has a contract with Shang-wa Electronics, a Korean manufacturer of capacitors. Shang-wa has been in business since 1969, and has been a small successful business from the beginning. Under the contract, which must be renewed annually, Shang-wa granted, Lester the exclusive right to sell capacitors in the United States for 65 years, as long as Lester maintained a minimum annual purchase of $1 million wholesale; as result, Shang-wa is Lester's primary supplier of capacitors for the U.S. market. In exchange, Shang-wa cannot knowingly sell its capacitors to anyone intending to market to U.S. buyers. Lester added additional components to its product line. Shang-wa's capacitors are well known in the U.S. market that is why Transnational Electronics Corporation, a large manufacturer and distributor of electronics components wants to acquire Shang-wa. On the other hand, Avral Electronics equipment and component parts manufacturer headquartered in Paris wants to acquire Lester, because they want to market their product in the U.S. market (UOP, 2007). This new acquisition could cost trouble between Lester and Shang-wa agreement and for morale.Situation AnalysisIssue and Opportunity IdentificationLester Electronics, Inc. is a distribution company in the United States, and they have a contract with Shang-wa Electronics, which is a Korean manufacturer of capacitors. Under this contract which is renewed annually, Shang-wa is Lester's primary supplier of capacitors for the U. S. market. Lester's revenues are approximately $500 million a year. The next issue is that Transnational Electronics is interested in a hostile take-over of Shang-wa, if this happens it would mean a large drop of 43% of the revenue for Lester's Electronics. This would result in financial distress for Lester's and could through them into bankruptcy. By merging the two companies they will be able to build their company and increase the wealth of the shareholders, while maximizing the potential for growth.Stakeholder Perspectives/Ethical DilemmasCost of financial distress If Lester's Electronics does not go through a merger with Shang-wa they stand to lose 43% of their revenue over the next five years. That is if Transnational completes the hostile takeover that has been discussed. By not completing the merger it could mean financial distress.Financial distress would have some direct cost which will include legal and administrative cost this does not include the cost of expert witnesses that could easily go over the cost of the lawyers and the accountants. There is also the potential of lost customers and suppliers. Sales are frequently lost due to both fear and loss of trust. These companies have worked long...

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