Guillermo Furniture Store Scenario Analysis
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Guillermo Furniture Store Scenario Analysis
FIN/571: FINANCE
March 1st, 2012
Guillermo's Furniture Store Scenario Analysis
Guillermo’s Furniture Store is located in Mexico and is a well-known furniture manufacturer that has been functioning well through the years. In the late 1990’s international competition started to affect regular business operation of Guillermo’s Furniture Store and forced owner of the store Guillermo to consider different business alternatives.
Guillermo began implementation of Self-interested behavior by focusing on financially advantageous actions for the business. Opportunity cost principle came into effect when Guillermo began researching and studying competitors' behavior and business approaches to understand the scope of needed measures. Since Guillermo wanted to have a life-work balance, business take over was not considered, nor was Guillermo looking to buy another company. This decision also refers to the Principal of Self-interested behavior but on individual level.
Through the observation of Guillermo’s Furniture Store's competitor who was using a high-tech approach to everyday business, the Signaling principal was utilized. The actions of foreign competition forecasted increase in labor costs and decrease of profit margin for Guillermo's store. Behavioral Principal is an application of the Signaling principal, it was exercised as well, as Guillermo started using newly obtained information to find a strategy for the business to continue making profit.
Guillermo had an option to follow one of the store's competitors and update equipment used in furniture manufacturing to a high-tech. This decision would decrease labor costs and improve the profit margin. However, the option of updating the equipment meant high costs associated with this action. Guillermo used Options Principle, as there was an option to either update equipment or not. Provided Income Statement shows that there is a...
FIN/571: FINANCE
March 1st, 2012
Guillermo's Furniture Store Scenario Analysis
Guillermo’s Furniture Store is located in Mexico and is a well-known furniture manufacturer that has been functioning well through the years. In the late 1990’s international competition started to affect regular business operation of Guillermo’s Furniture Store and forced owner of the store Guillermo to consider different business alternatives.
Guillermo began implementation of Self-interested behavior by focusing on financially advantageous actions for the business. Opportunity cost principle came into effect when Guillermo began researching and studying competitors' behavior and business approaches to understand the scope of needed measures. Since Guillermo wanted to have a life-work balance, business take over was not considered, nor was Guillermo looking to buy another company. This decision also refers to the Principal of Self-interested behavior but on individual level.
Through the observation of Guillermo’s Furniture Store's competitor who was using a high-tech approach to everyday business, the Signaling principal was utilized. The actions of foreign competition forecasted increase in labor costs and decrease of profit margin for Guillermo's store. Behavioral Principal is an application of the Signaling principal, it was exercised as well, as Guillermo started using newly obtained information to find a strategy for the business to continue making profit.
Guillermo had an option to follow one of the store's competitors and update equipment used in furniture manufacturing to a high-tech. This decision would decrease labor costs and improve the profit margin. However, the option of updating the equipment meant high costs associated with this action. Guillermo used Options Principle, as there was an option to either update equipment or not. Provided Income Statement shows that there is a...