Maximizing shareholder wealth requires a decisive strategy and a well-developed plan. It allows an investor to consider financial statements and growth strategies in order to establish a course of action. Case in point, one major franchising international business bought a well-known global restaurant business. The risks and expected return by these two companies may affect its long-term future goals. A profitable electronics company may lose its primary supplier in a strategic takeover in the industry. In an effort to maximize shareholder wealth, companies must develop a strategy for every maneuver and position in its respective market.
Strategies for Maximizing Shareholder Wealth
Trapped between the lost of a significant supplier, Shang-wa, and a potential hostel take over by Avral, Lester Electronic, Inc. is forced to develop a new strategic plan for survival. This is due to the important role that Shang-wa plays in LEI’s annual revenue. The lost of Shang-wa will profoundly decrease LEI annual revenue; causing LEI to go out of business. In addition, Avral is another threat to LEI’s survival. Avral can potentially acquire LEI through a hostel takeover. In recent event, IHOP acquired Applebee’s. LEI can use the experience from the merger of both IHOP and Applebee’s to help LEI with a new strategic planning. LEI need focus on issues such as growth strategies, capital management strategies, cross-borders challenges, companies overall performance, and the companany’ allocation of corporate resources. Using IHOP as a benchmark, LEI can better develop an efficient plan for the company’s survival. Synopsis of Companies
Lester Electronics, Incorporated
Lester Electronics is a U.S.-based consumer and electronics parts master distributor. Lester distributes electronic parts such as capacitors to small and medium size original equipment manufacturers, repair facilities and small local distributor. Lester has had an agreement with Shang-wa Electronics to supply various types of capacitors. About 40% of Lester's revenue comes from parts supplied from Shang-wa; hence, Lester considered the Korean based capacitor manufacturer as a strategic partner. This partnership has consisted of yearly agreements for Lester to purchase a minimum of $1 million of wholesale parts from Shang-wa, in return not to sell pats directly to Lester's competitors. In recent months, informal discussion between the principals - Mr. Bernard Lester, CEO and founder of Lester, and Mr. John Lin, founder and CEO of Shang-wa - has involved the possibility of a $60 million joint venture in a yet-to-be-determined Asian country that would be designed to combine Lester's management expertise with Shang-wa's manufacturing efficiencies to produce components for the growing market. John is eager on setting up the joint venture since he is planning for early retirement. Recently Transnational Electronics Corporation (TEC) is pursuing Shang-wa for a takeover. At the same time, Lester is being pursued by Paris based Avral Electronics to expand Arval's distribution network in United States. Lester would lose 43% of their revenues if they lose Shang-wa as a supplier. International House of Pancakes (IHOP) Corporation
IHOP restaurants, one of America's favorite restaurant chains serves delicious pancake and omelet breakfast. IHOP restaurants feature moderately priced, high-quality food and beverage items, and table service in an attractive and comfortable atmosphere. IHOP restaurants are best known for breakfast foods such as pancakes, omelets and other breakfast specialties. Restaurants are open throughout the day and evening hours and offer a broad array of lunch, dinner and snack items. According to IHOP's web site, more than 99% of IHOP restaurants are operated by franchisees. IHOP is one of few restaurants that has 50 year of history. IHOP always focused on providing guests with delicious food, warm, genuine service and...