Guillermo's Furniture Store Analysis
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Guillermo’s Furniture Store Financial Concepts
University of Phoenix FIN/571
November 18, 2012
Guillermo’s Furniture Store Scenario
Guillermo’s Furniture Store scenario outlines a furniture business in Mexico, owned and operated by one man, Guillermo Navallez, who until major competition moved in was operating a fruitful custom furniture business. Guillermo operated successfully because of a varying abundance of local wood and inexpensive labor costs. With the encroachment of a high-tech business that could provide goods at low overhead costs and the rising cost of labor because of an incursion of people and jobs Guillermo’s profits shrank considerably. Guillermo implemented a number of finance concepts, explained below, to counteract the effects of the competition and higher labor costs and turn his business around to improve revenues (Emery, Finnerty, & Stowe, 2007).
Principle of Self-Interested Behavior: People Act in Their Own Financial Self-Interest
Guillermo implemented the Principle of Self-Interest Behavior. He wanted to repair the damage done to his business in a way that allowed him to not sell to a larger company, purchase another company, or go out of business. His solutions were to implement innovative technologies in his manufacturing plant and partner with an overseas company as its distributor in the United States, essentially changing his main priority to distributing instead of manufacturing (Emery et al., 2007).
Behavioral Principle: When All Else Fails, Look at What Others Are Doing for Guidance
The implementation of new technologies, such as the computer-controlled laser lathe, also reflects Guillermo’s use of the Behavior Principle. Guillermo looked to other businesses and found that the use of the laser lathe not only cut down labor costs but also increased output because it could move between pieces quickly and operate 24 hours per day, increasing output, which could again increase profits (Emery et al., 2007).
The...
University of Phoenix FIN/571
November 18, 2012
Guillermo’s Furniture Store Scenario
Guillermo’s Furniture Store scenario outlines a furniture business in Mexico, owned and operated by one man, Guillermo Navallez, who until major competition moved in was operating a fruitful custom furniture business. Guillermo operated successfully because of a varying abundance of local wood and inexpensive labor costs. With the encroachment of a high-tech business that could provide goods at low overhead costs and the rising cost of labor because of an incursion of people and jobs Guillermo’s profits shrank considerably. Guillermo implemented a number of finance concepts, explained below, to counteract the effects of the competition and higher labor costs and turn his business around to improve revenues (Emery, Finnerty, & Stowe, 2007).
Principle of Self-Interested Behavior: People Act in Their Own Financial Self-Interest
Guillermo implemented the Principle of Self-Interest Behavior. He wanted to repair the damage done to his business in a way that allowed him to not sell to a larger company, purchase another company, or go out of business. His solutions were to implement innovative technologies in his manufacturing plant and partner with an overseas company as its distributor in the United States, essentially changing his main priority to distributing instead of manufacturing (Emery et al., 2007).
Behavioral Principle: When All Else Fails, Look at What Others Are Doing for Guidance
The implementation of new technologies, such as the computer-controlled laser lathe, also reflects Guillermo’s use of the Behavior Principle. Guillermo looked to other businesses and found that the use of the laser lathe not only cut down labor costs but also increased output because it could move between pieces quickly and operate 24 hours per day, increasing output, which could again increase profits (Emery et al., 2007).
The...