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Guillermo Furniture Store Concepts Essay

885 words - 4 pages

Guillermo Furniture Store Concepts

Student Name


December 17, 2012

Instructor’s Name

Guillermo Furniture Store Concepts

According to University of Phoenix (2012), Guillermo Furniture has been successfully owned and operated by Guillermo Navallez in Sonora, Mexico for several years. The Sonora location has offered a good supply of timber and relatively inexpensive labor costs up until recently. Mr. Navallez is faced with business challenges as a result of increased global competition and increased labor costs in Sonora. He has the opportunity to apply the principles of foundational corporate finance to aid him in charting ...view middle of the document...

Competitive Economic Advantage

The Principle of Self-Interested Behavior stating that “people act in their own financial self-interest” (Emery, Finnerty & Stowe, 2007, p. 20) can be applied to Mr. Navallez’s approach to using local, relatively inexpensive labor. Some could argue that the opportunity cost that this presents is that of a more technologically advanced automated approach to production that would provide more consistent, precise, products for customers with less manual manipulation from workers. Advanced technology and automation incurs higher fixed costs while lowering indirect costs such as labor providing both financial risks and benefits that need to be weighed.

The Principle of Two-Sided Transactions indicating that “for each buyer there is a seller” (Emery, Finnerty & Stowe, 2007, p. 21) applies to the consolidation by merger or acquisition occurring in the current market for those companies trying to respond to increased competition. Through consolidation, these companies can achieve economies of scale and the inherent benefits of increased production and lower cost of goods sold because of sharing fixed costs over a larger number of products.

The Signaling Principle: Actions Convey Information was applied when Mr. Navallez “watched his profit margins shrink as prices fell and costs rose” (University of Phoenix, 2012). This signaled the need to take action. The Behavioral Principle: When All Else Fails, Look at What Others are Doing for Guidance was also applied when Mr. Navallez began researching the foreign competition for insight regarding how they were handling some of the same economic changes.

Value and Economic Efficiency

The Principle of Valuable Ideas was applied through the research process on foreign competition. Through this process, Mr. Navallez identified approaches such as computer controlled laser lathes to increase precision, emphasis on automation decreasing the need for manual labor and increasing the ability to move production between products quickly. Reviewing the option to partner with a second...

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