Guillermo Furniture Store Case Study
The aim of this paper is to examine the Guillermo Furniture case study. It begins with a description of the store, the current market challenges it faces, and the options that its owner, Guillermo Navallez, has in meeting those challenges. It then explores these options in the context of the business’ budget, performance reports and accounting information, as well as from an ethical perspective.
Located in Sonora, Mexico, Guillermo Furniture has historically done well as a furniture retailer. Its success, however, has been challenged by the introduction of a major competitor, an international chain that has recently opened a store in the community. The result has been a rise in costs, a drop in prices and a smaller market share for the smaller company.
Navallez, Guillermo’s owner, has explored a number of options for dealing with these challenges. Unwilling to merge with another company, he is left with three remaining options: investing in expensive new technology – in the form of a laser lathe – in order to reduce production costs, choosing to represent a Norwegian furniture manufacturer or focusing his efforts on marketing his patented furniture coating process.
Budget, Performance and Accounting
In order to make an informed decision, Navallez should begin by evaluating his budget. A budget is a quantitative action plan based on a company’s performance. A performance report provides information about variances in a company’s performance, which means it compares past budgets with actual financial results. When a performance report deviates from a budget (for example, if a company sees less income than the budget plans for), it becomes necessary to alter the budget to accommodate for such deviations (Horngren, 2008).
If Navallez used performance reports to fine-tune his budget, he could evaluate what his profits as well