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Lester Electronics

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Introduction

Running head: BENCHMARKING RESEARCH: LESTER ELECTRONICS Benchmarking Research: Lester Electronics Name July 3, 2008 Benchmarking Research: Lester Electronics A fundamental goal of organizations is to maximize shareholder value and the worth of their business. Successful organizations, ones that maximize shareholder value, experience higher overall productivity and competitiveness. To achieve these higher levels of productivity and competitiveness, several strategies need to be evaluated, created, and executed. These strategies include the following: internal and external growth strategies, capital management strategies, and cross-border growth strategies. In addition, organizational performance and portfolio management must also be assessed. Lester Electronics, Inc. is a small, domestic organization that is faced with critical merger and acquisition decisions that will ultimately influence the future financial livelihood and success as an organization. Benchmarking studies have been performed related to the strategies and assessments that must be performed in order to make financially wise business decisions to assist Lester Electronics, Inc. during this critical time. Overall Analysis Capital Management Strategies The cash flow cycle concentrates and encompasses on all areas of business operations, and allows the organization to use cash to generate a profit. If a business is operating profitably, then it generates cash surpluses. The operating cycle is the time interval between the arrival of inventory stock and the date when cash is collected from the receivables. The cash cycle beings when cash is paid for materials, and ends when money is collected from the receivables, (Jaffe, Ross, & Westerfield, 2004, p734). ...read more.

Middle

In order to meet the increased global demand and protect both companies, merging together may be the best alternative for LEI and Shang-wa. As well, a capital expenditure for Europe was approved allowing them to be more global. Both companies will need to be more diversified. Diversification in finance is a risk management technique, which combines a variety of investments within a portfolio. By doing this, the fluctuations of a single security have less impact on a diverse portfolio, and diversification will lower the risk from any one investment. LEI will benefit to benchmark the approach that Starbucks has used. Starbucks does not only rely on the domestic market but finds markets outside of the US where demand for its products are high. By branching out to other countries and markets, LEI will see that Starbucks can be profitable. Implementing cross border growth strategies also means that adjustments will have to be made, especially when it comes to working with people from different cultures. Merging companies in a cross-border situation should develop a strategic plan in order to have a successful merger. Developing an effective strategic plan includes answering questions such as how will this merger create value, and when will this value be realized? In addition, can this merger pass the "better-off" test - to show more value by being more competitive, having a stronger cost structure, gaining additional competencies that can leverage in new ways (Finkelstein, 1999). Financial Statement and Ratio Strategies The importance of financial ratio to Lester Corporation is to analyze the processes and to determine the current or future status of the entity. ...read more.

Conclusion

Lester Electronics is trying to determine the best strategy for the company and for its shareholders. Shang-wa may be acquired by TEC, thereby discontinuing the relationship that Lester and Shang-wa shared for years. Analysis shows that if the relationship between Lester and Shang-wa ended, there would be a 43% reduction in Lester's revenues over the next five years. Lester will need to calculate the variance of the portfolio's return to see what his viable alternatives are. Lester will need to determine if joining forces with Shang-wa will show a higher expected return. The option that Lester chooses will dictate its portfolio management strategies and how it will optimize and allocate its resources. Conclusion After completing an intense Benchmarking Research Analysis for Lester Electronics and the concepts such as capital management strategies, internal and external growth, cross-border growth, financials and portfolio management, the best option for Lester Electronics and Shang-wa is to merge together and continue having or expanding their partnership as corporations. This will be beneficial for them both, since it will not only protect both companies financially, but also provide them with the opportunity of improving their product and increase their demand globally besides increasing also financially. In the research, Lester Electronics situation has been compared in different concepts to other companies that had the same issue of corporate growth or if a merger was beneficial for the corporations. In conclusion, it has already been discussed that if Lester Electronics lets go of Shang-wa, it would adversely affect Lester's Electronics revenue over at least the next five years. Lester Electronics' goal is to continue growth and increased revenue, their best option and guaranteed success is merging together. ...read more.

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