Term Paper on "Gap Analysis: Lester Electronics the Stockholders Own"

Term Paper 4 pages (1122 words) Sources: 4 Style: APA

[EXCERPT] . . . .

Gap Analysis: Lester Electronics

The stockholders own the company and elect the board of directors, who appoints the management team. Thereafter, Management, functions in the interests of the stockholders. Bernard Lester and John Lin have the decision to merge so they are not forced into a hostile takeover. With the merger, there are many opportunities for them as they capitalize from the strengths and weaknesses of each other. Furthermore, the two companies will have an opportunity to develop a financial plan that will allow them to forecast their financial future. Along with that, they will be able to determine the viability of pursuing leasing equipment (Lester Electronics).

Situation Analysis

Issue and Opportunity Identification

Lester Electronics, Inc. (LEI) is an electronics parts master distributor, marketing its products to small- and medium-sized original equipment manufacturers (OEMs), repair facilities and small local distributors throughout the Americas and Europe. LEI has had an exclusive distribution contract with Shang-Wa Electronics for the United States. This agreement has served both companies very well because they both have proven that they can meet the growing demands of the market and now both CEO's have been approached by other companies wishing to acquire them. With the threat of a hostile takeover, John Lin, the founder and CEO of Shang-Wa Electronics approached Mr. Lester about a merger to protect Shang-Wa and prevent LEI from losing 43% of its revenue over the next five years if it loses Shang-Wa as a manufacturer.

With the merger, a new financial plan will need to be developed to allow the joint company to prosper because separately, they have been operating with the intent to maximize the value of their respective companies and stockholders. However, they will be merging due to the fact that they must develop a plan to continue maximizing the new company while deciding who the stakeholders will be. "Accountants generally argue that a firm's financial strength is inversely related to the amount of its liabilities" (Ross-Westerfield-Jaffe, 2004, Chapter 21, p.596). It appears that Shang-Wa may not have been taking full advantage of leasing since their net income for the last reporting year was one third of LEI's. However, their total liability was significantly higher. Shang-Wa's long-term debt is 48 times higher than LEI, which makes it an opportunity for the combined company to evaluate their strategy for paying long-term debt (Lester Electronics).

Stakeholder Perspectives/Ethical Dilemmas

It is then necessary to determine the influence and importance of each stakeholder on the project. In this case, how much influence and importance does each of the stakeholders have on Lester Electronics successful merger with Shang-Wa Electronics? Influence refers to how powerful a stakeholder is and importance refers to those stakeholders whose problems, needs and interests coincide with the aims of the project (Allen & Kilvington, 2001). By definition of his position as the CEO, Bernard Lester has the power to control what decisions are made and to facilitate the implementation of a merger with Shang-Wa Electronics. Stakeholders should be able to participate meaningfully in decision-making since participation reduces the risk of failure, but it is not a guarantee of project success (Mascarenhas-Keyes, 2004). In decision making, there are conflicting interests among the key stakeholders, which may result in additional costs in time while the conflicts are being resolved. With the threat of a hostile takeover, time is of the essence for both Lester Electronics… READ MORE

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