Bernard Lester BenchmarkingEssay Preview: Bernard Lester BenchmarkingReport this essayRunning head: BERNARD LESTER BENCHMARKINGIntroductionLester has never marketed domestic-made parts outside of the United States. Lester’s partner John Lin has informally suggested that Shang-wa is open to growth opportunities that could position the company to meet growing demands. Keep in mind that Lester and John have been business partners and friends for over 35 years. They have a contract that grants Lester the right to sell Shang-wa Capacitors in the United States for 65 years as long as Lester maintains a minimum annual purchase of $1 million wholesale. Financial Planning establishes guidelines for change in the firm (Ross, et. al., 2005). These guidelines should include 1) an identification of the firms financial goals, 2) an analysis is of the difference’s between these goals and the current financial status of the firm, and 3) a statement of the actions needed for the firm to achieve its financial goals (Ross, et. al., 2005).
IssuesWith Transitional Electronics Corporation (TEC) on the rise and finally developing enough resources to expand globally, CEO David Antone has an interest in acquiring Shang-wa. If TEC was to acquire Shang-wa the long standing Lester and Shang-wa exclusive distributorship agreement would most likely not be renewed at the end of years end (University of Phoenix Scenario, 2007); creating a 43 percent reduction in Lester’s revenue over the next five years. Knowing all this Lester has to plan out his outcome. John Lin plans to retire and wants to do what’s best for his partnership with Lester, but at the same time he wants to make sure he leaves Shang-wa in good hands. The decision for the business move will depend on what Anne Lorale, Chief financial Officer of Lester Electronics results in completing the analyses for all the options. Anne will create a recommendation according to the term sheets and proposed acquisitions from both TEC/Shang-wa and Avral/Lester. These are some of the issues that Lester Faces. With other companies interested in both Shang-wa and Lester Electronics, both Lester and John Lin have decisions to make crucial to both companies. Many companies today have related issues to those of Lester Electronics and Shang-wa. As a team we researched two companies that have faced the same issues related to those in the University of Phoenix scenario.
Outcomes of Companies responses to issues.After successfully developing resources to expand globally the financial success that both Lester and Lin have sought is finally at hand. This success has however gone unrestricted and prompted the acquisition of both Shang-wa and Lester Electronics. With the proposal of acquisition of Shang-wa we find Mr. Lin delighted yet conflicted. Primarily he is concerned with the standing contract he holds with Lester’s Electronics. Responding to the issue immediately Mr. Lin corresponds with Lester regarding the acquisition proposed by TEC. With this correspondence Mr. Lin expresses his hope to continue business with Lester by becoming business partners. The priority of Mr. Lin is to remain loyal to his long time friend and business associate while maintaining his immediate concern of retirement. Upon receipt of the correspondence several concerns become imminent to Lester. He immediately responds to the issues by enlisting the help of his financial team led by Anne Lorale. Laying out all options; allowing Lester Electronics to be acquired by Avral, Acquiring Shang-wa, and/or not acquiring Shang-wa and taking the loss of over 40% of sales. Utilizing the Tec term sheet provided by Mr. Lin Anne is able to run analyses on if it is actually viable for Lester electronics to compete with the venture capital of TEC. While doing this Anne also prepared an analyses of the proposed acquisition of Lester Electronics by Avral. With these analyses Lester will be able to present to the board feasible options for Lester Electronics to pursue.
As both Lester Electronics and Shang-wa developed into prosperous companies it would be strategic business sense to develop globally. Although the hopes of Mr. Lin are to retire the future success of his company is imperative. The outcome of both companies is contingent on the analyses of the issues at hand. Each must weigh the options as well as the risks and rewards to ensure the future success of their companies. The response to the issues will depend solely on the financial benchmark each company has reached thus far. The issues at hand depend on the financial stability and long term financing options to determine the road ahead.
Course ConceptsAny given firms management is to exercise its financial control and accountability. In other words, applications that are used for collecting, processing, maintaining, transmitting, and reporting data about financial events; supporting financial planning, accumulating and reporting cost information of financial statements, The principal course concept is to bring in financial resources and that all parties can be brought together directly or indirectly to evaluate future decisions.
In an e-mail to John Lin from Bernard Lester disclosed Lester Electronics losing Shang-Wa as a manufacture; Lester electronics could possible have a lost of 43 percent of its revenue within the next five years, a win- all situations for Lester’s Electronics and Shang-Wa is to evaluate the difference between each firm’s current assets and their current liabilities.
Net working capital gives firms the ability to pay its debts. When the firm has positive net working capital the firm is in a better position to pay its short term liabilities. Negative net working capital places the firm in a position whereas obligations to pay short term liabilities is limited and can cause major disruption to the firm such as bankruptcy (Forbes Media, 2008).
Lester Electronics Inc. has two basic options for expansion of the business. Bernard Lester can unite the company with Asian-based Shang-wa or it can sell to Paris-based Avril. Lester must determine if merging with Shang-wa will leave a profitable cash flow and more than enough of the current payment Avril is offering. The consideration time-value-of-money is difficult to decide on which offer to go with. Based on this example: A firms is contemplating investing $1 million in a project expected to pay out $200,000 per year for nine years, we need to know the relationship between a dollar today and the uncertainty of a dollar in the future before deciding on the project. (Ross, et. al., 2005, p. 60).
The solution to the puzzle is not as simple as a big “fees and the market” project with a large price tag attached. The key is to identify the underlying business, where the value of equity has to come from, and determine that an agreed on approach in a highly technical market is not sufficient to be profitable. Even then, this can only be done by having to determine the underlying business at minimum. Moreover, the more complex the value proposition, the more difficult it is to come to these conclusions.
Some readers have questioned the credibility of this statement: “How does this work? What happens if a project with a low price is considered to be not just a risk, but of the very existence of the other potential product (the business)? No one has proven it is in the future. The key is to find an understanding of what would be true if we did not just accept the fact that there is no such business, but that we are in a position to think about a very attractive opportunity that has the potential to grow it, if at all.”
There is certainly nothing to suggest that capital investors are doing too much risk on the part of their investment advisers. They have an even better understanding of what actually happens, that is, what investors in a long-term venture capital fund will experience in the short term. It was at least as effective for the investors of Lehman Brothers, when they realized the value of assets in the equity market because they did not think the investments were too risky, as was the case with Deutsche Bank and other financial institutions. But what does this imply for the overall investor? Not in a traditional investment fund where capital will be sold in the long run. It may not be an absolute guarantee that capital will return to investors, but the actual return in the long run depends on all the possible returns that investors have in a short-term investment portfolio. It is to the extent possible that investors in the long-term will have to make some adjustments, including making the investment decision about whether to put their money elsewhere. To avoid that, they may choose to move things down the road, which could lead to higher returns in a long-term. (See also “I want the best” with Lehman and other securities in the S&P 500 Stock Index
Conclusion
The problem arises when two or more different options are offered before you have a clear idea about how any given choice would impact you. This problem can be quite difficult to solve because the idea itself could be quite complex, especially assuming that any given investment is reasonably priced. Yet, the real problem is that an extremely limited number of choices can be made.
If investors can easily get one, and then
The corporate firm Bernard Lester founded, Lester Electronics Inc, (LEI), which in 1984 was listed publicly and is not traded