Lester Gap Ana
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Running head: GAP ANALYSIS: LESTER ELECTRONICS
Gap Analysis: Lester Electronics
B.T.Brown
University of Phoenix
Gap Analysis: Lester Electronics
In todays business environment, company executives are often required to participate in a companys capital budgeting process as the sponsor, reviewer or approving authority of investment decisions. Lester Electronics is at a tipping point of the business. Lester cannot continue to manage the business as has previously been done. Lester Electronics is a consumer and electronics parts master distributor that markets its products to original equipment manufacturers. For many years, Shang-wa Company has had an exclusive supply agreement with Lester electronics. Now, the CEO of Shang-wa is wishing to retire and has no formal succession plans for the companys management. At the same time, Transnational Electronics Corporation (TEC) is pursuing Shang-wa for a takeover. Lester Electronics and Shang-wa Electronics are both upset over the take over possibility. In looking for solutions in the manufacturing marketing, Lester Electronics, Incorporated (LEI) is looking for viable options for growth. “Whether a company chooses to make further investments in its core business or decides to expand beyond its current core, there are only three avenues by which companies can grow their revenue base: (1) organic or internal growth, (2) growth through acquisition, and (3) growth through alliance-based initiatives. To formulate a successful growth strategy, a company must carefully analyze its strengths and weaknesses, how to deliver value to customers, and what growth strategies its culture can effectively support. Selecting the right growth strategy, therefore, requires a careful analysis of opportunities, strategic resources and cultural fit” (de Kluyver & Pearce, 2006).
Situation Analysis
Issue and Opportunity Identification
The first issue that Lester will have to deal with is that Transnational Electronics Corporation (TEC) has approached shang-Wa with a hostile takeover bid. This is a major issue for LEI. If Shang-Wa is acquired LEI will lose a contract with his main supplier which will cause LEI to lose revenue. Another issue that Lester has is to determine if they have the financial capacity to complete a merger with Shang-Wa. Financial capacity, like other types of organizational capacity, represents available organizational resources and relationships – both internal and external – that enable individual organizations to pursue their missions and fulfill their roles (Scott, 2003.) Lester will need to determine a capital structure and financing plan to use to go through with the merger with Shang-Wa. If Shang-Wa is acquired, Lester faces the issue of decreasing shareholders wealth. Anothet, issue for Lester Electronics is combining their financial reports with Shang-wa and reducing their exposure risk which is the susceptibility of a company to currency exchange rates (Investopedia, 2006). There are three main types of exposure: economic exposure, transaction exposure, and translation exposure (Ross, Westerfield, & Jaffe, 2005). Economic exposure is “the extent to which the value of the firm would be affected by unanticipated changes in exchange rates” (Ross, Westerfield, & Jaffe, 2005, p. 284). Transaction exposure is “the sensitivity of the realized domestic currency values of the firms contractual cash flows denominated in foreign currencies to unexpected exchange rate changes” (Ross, Westerfield, & Jaffe, 2005, p. 284).
The opportunites for Lester One opportunity revolves around developing a joint venture with Shang-wa Electronics to expand their company and protect their future. In fact, partnering with technologically compatible companies to achieve the prerequisite level of excellence is often essential. The implementation of such strategies, in turn, increases the speed at which technology diffuses around the world” (de Kluyver & Pearce, 2006). The second opportunity arises from the proposal of Avral Electronics to acquire LEI. In agreeing to an acquisition with Avral Electronics, LEI would open its company to becoming a MNC and increased globalization. This opportunity would allow LEI, as part of Avral Electronics, to have a worldwide presence in its market, integrate it operations worldwide, and standardize operations in one or more of the companys current functional areas. Lester Electronics has the opportunity of becoming partners with Shang-Wa and maintains the distribution contract. Lester Electronics has the opportunity to grow as a company, take on new actions, and continue its relationship with Shang-Wa. Lester Electronics has the opportunity to research to and find out how to best deal with operational exposures, such as exchange rate fluctuations. The opportunities offer diversification strategies, which are motivated by a variety of reasons including increasing shareholders wealth, increased profitability due to shared resources and synergies, “reduce the companys overall exposure tot risk by balancing the business portfolio, or an opportunity to exploit underused resources.
Stakeholder Perspectives/Ethical Dilemmas
All businesses have their own individual stakeholder groups each of which contains their own individual ethical issues and dilemmas. In looking at the groups of stakeholders, the employees will be affected directly. They have a vested interest in the success of the company. Employees are one of the most valuable stakeholders to Lester Electronics. If the company is to prosper, the employees must be treated well. Lester Electronics has employees who have a vast array of knowledge. However, their downfall is not using them to their full potential. It seems that Lester Electronics put pride into choosing their employees. Employees are the most important stakeholders because the company success depends on their employees abilities to do a quality job that would affect the growth of the company in a positive way. In addition, “organizations depend for success on their employees. You need a high level of employee satisfaction if the firm is to perform at is best – dissatisfied employees will soon leave or, worse, perform badly” (Heller & Hindle, 1998)
Another important stakeholder within Lester Electronics is their distribution