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Problem Solution: Lester Electronics
University of Phoenix
Problem Solution: Lester Electronics
Lester Electronics, Incorporated (LEI) established a business relationship with Shang-wa Electronics in 1973. The partnership has given LEI exclusive rights to sell Shang-wa Electronics capacitors in the United States with the stipulation the company must maintain a minimum annual purchase of $1 million dollars (University of Phoenix, 2008). For the past 35 years, both companies have enjoyed a business relationship that has allowed increased market shares and growth within the industry. Presently, both companies have been approached by competitors that want to acquire LEI and Shang-wa Electronics (University of Phoenix, 2008). To prevent a takeover and LEI losing 45% of its profits within a five year span, LEI is acquiring Shang-wa through a merger. The merger has been approved by the Board of Directors pending LEI’s management ability to find the best way to finance the acquisition and the post-merger expansion into Asia to maximize shareholder’s wealth.
Situation Analysis
Issue and Opportunity Identification
Lester Electronics Incorporated (LEI) has reached a pivotal point in the capacitor market. The company faces several issues and opportunities associated with the Shang-wa Electronics merger. The merger poses benefits and risk for shareholders and management. LEI will have to determine if the merger will maximize the shareholder’s wealth of the company. According to Ross, Westerfield and Jaffe (2005), “…the purpose of the firm is to create value” (p. 3). Another issue Lester Electronics will face is how to finance the merg ...