...Guillermo’s Furniture 1 GUILLERMO’S FURNITURE Guillermo’s Furniture Michelle Pate Sundar Shankar Mani Vannan Osvaldo Perez Niaz Tavakoli FIN571 University of Phoenix November 2009 Guillermo’s Furniture 2 Introduction During the history of furniture, designing trends have correlated to society’s changes. Today, because we have access to different fabrics, textures and technology advancements, people have a variety of furniture to choose from. Historians have a record of the year and technique in which furniture was made. Presently, you can find hand-made furniture at auctions, historic places and museums. They have a higher value and are looked at as a work of art because they are created by an artist’s imagination. Furniture makers often use oak wood in their furniture, since it is stronger and will last longer than other wood. It would be more difficult to create custom hand-made furniture using an automated machine because it takes the art out of the furniture, though it is less expensive. It takes more time and money to create hand-made furniture and get it ready for the selling stages than to create automated furniture or become a distributor. Guillermo’s Furniture Store is going through changes and he needs to adapt new strategies that would help him overcome the market’s competitors and stay in business. Guillermo’s Furniture Store is located in Sonora, Mexico and is one of the biggest companies that manufacture furniture in North America. This area has a...
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...Running Head: GUILLERMO FURNITURE STORE RECOMMENDATION Guillermo Furniture Store Recommendation Name: Course; Institution: Instructor: Introduction Guillermo Navallez has for many years operated from Sonara, a city in Mexico making furniture. One of the main reasons for maintaining his operations in this location has been the good supply of quality timber. However, a new competitor entered the market offering the same quality products at a fraction of the price Guillermo was charging. This was possible because of the heavy reliance on high-tech mechanization that the new supplier employed. To further complicate things for Guillermo was the entry into the city of a large retailer, a sudden explosion of workers resulting in a substantial increase in the cost of labor. All things had a negative effect on Guillermo’s bottom line. Discussion: The essence of any business operation is to maximize profits. This is only achieved when the business is able to meet its recurring costs and have a surplus available for reinvestment or payment as dividends to the owners. Guillermo’s case requires a critical investigation into the business operations to determine available to him. Given the current situation, Guillermo has three very viable options to consider. He could either maintain the present business model and continue operations as currently constituted, or adopt a new business model by embracing high technology and thus investing in highly automated machines...
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...Guillermo Furniture is a mid-grade to high-end sofa furniture manufacturer that operates in Sonora, Mexico. Guillermo Navallez is the sole owner of Guillermo Furniture and is looking at options that will provide the greatest return on his investment (University of Phoenix, n.d). Guillermo Furniture is looking at two options which include, (1) purchasing high-end machinery to reduce labor and production costs and (2) the possibility of becoming a distributor for a manufacturer that is trying to move into the North American market (University of Phoenix, n.d). After reviewing the information, relevant information that must be considered is financial and non-financial factors that will influence what information will be deemed relevant in each project (Edmonds, 2007). Mr. Navallez is looking to increase his profits through one of the business ventures without jeopardizing the time spent with his family and increasing managerial responsibilities (University of Phoenix, n.d). Factors that will be taken into consideration are machinery costs, training, and transfer of experienced employees, competition, production, labor, and overhead costs. In the first project, the purchase of high-end machinery appears to be a feasible opportunity but we must first consider all relevant information. The costs of purchasing the machinery are immense given the technological advancement and capabilities of the operation. With the purchase of the equipment, Mr. Navallez will have to consider the...
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...Guillermo Furniture Store Recommendation Team A FIN/571 James Carlin February 21, 2011 Abstract Guillermo founded Guillermo’s furniture company; in Sonora, Mexico, which is gorgeous retreat location. Guillermo has been the leading furniture manufacturing company in the vicinity for numerous years. Before the later part of the 1990’s Guillermo was holding their own, until new competition arrived in the area that also made furniture. The competitors came with the latest new-fangled technology seen at the lowest prices ever for clientele. For that reason, Guillermo’s felt he’s obligated to come up with the best alternative for the company, which is to improve with technology and venture ahead or carry on working as he has for the previous years and uphold the quality product their customers have come accustom to over the years. Guillermo Furniture Store Recommendation Analysis and Recommend Financial Decision The economy is weak, new competitors’ establishing a presents, Guillermo must tackle a tough decision, which is to become a furniture distributor or stay on the manufacturing side, or possibility do both. Guillermo understands that change is forth coming and he has to venture forward but the dilemma is what the best alternative is. First Guillermo must analysis the financial alternatives and establish which objective is beneficial for the company. The next step is to gather information and formulate a pro forma cash flow budget to analyze the projected earnings...
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...Guillermo Furniture Store Analysis Fin571 Guillermo Furniture Store Analysis Guillermo Furniture Store (Guillermo) is a manufacturer of furniture located in Sonora, Mexico and is the largest industrial furniture manufacturer in the area. Guillermo has investment opportunities but must consider past and current choices. Guillermo Navallez, the owner of Guillermo’s Furniture store, has been experiencing a slowdown of business, primarily due to the increase in competition. Due to the changes in the operating environment, Guillermo must find an alternative investment opportunity. Regardless of the opportunities available, the value of each is determined by the net present value they offer. This paper, which will include the evaluation of finance concepts from the readings, will identify which alternative is necessary to improve business. It will include an evaluation of possible changes and demonstrate how capital budget analysis can provide the necessary information for the best possible return on investment. However, due to the competition Guillermo is in a situation, which requires an evaluation of processes and find ways to compete. With more competitors in the market, the labor costs have increased but at the same time, the competitors have introduced techniques that lower production costs. These changes have decreased Guillermo's profit margins significantly, but Guillermo can use capital budgeting to increase the profit margins. The geographical location of...
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...This memo serves to provide information concerning capital budget recommendations for Guillermo Furniture. The firm has come to a crossroads in its industry. Due to competitive forces that have recently entered the firm’s market, the firm must decide if it should make capital investments to become a high tech manufacturer, become a distributor, or due nothing and continue its traditional course of operations. Capital investments are instrumental to future successes realizable by Guillermo and “business profitability ultimately hinges, to a large extent, on the quality of a few capital investment decisions” (Edmonds, 2007). As a result, we will explore recommendations for Guillermo to vacate its current landscape of operations for a more innovative approach as a high tech manufacturer or distributor. The goal of this brief is to convey the most appropriate management of Guillermo Furniture’s capital funds and ascertain the best return on the firm’s investments. There are various techniques available for the firm to utilize. Consequently, this memo will also serve to explain the fundamental differences between the following two techniques, net present value (NPV) and internal rate of return (IRR). Differences: NPV and IRR There are many techniques available for managers to use when analyzing potential capital investments. NPV compares the present value of an investment with the costs associated with the investment. The difference between the present value and the cost...
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...RUNNING HEAD: GUILLERMO FURNITURE STORE University of Phoenix Guillermo Furniture Store Guillermo Furniture Store Guillermo Furniture Store has undergone a major critical change within its industry. In order for this organization to stay focused there should be a change that can provide the organization with the best possible ambition to recap the profit and stability that the organization is use to. This paper will recap the cost relationship and behavior, management control systems that will help achieve Guillermo’s goals, also this paper will provide the break-even analysis for Guillermo’s current situation, and compute the Return on Investment. Cost Relationship and Behavior Cost relationships and behaviors can affect Guillermo’s decision making prerogatives for the manager. Cost behavior is defined as, “how the activities of an organization affect its costs” (Burgstahler, Horngren, Schatzberg, Stratton, and Sundem, 2008). Cost behavior consists of variable costs and fixed costs. Variable costs are, “costs that change in direct proportion to changes in the costs driver” (Burgstahler et al., 2008). Examples of variable costs for Guillermo are materials, equipment, and labor (Guillermo, 2009). Fixed costs are, “costs that is not immediately affected by changes in the cost-driver level” (Burgstahler et al., 2008). Examples of fixed costs for Guillermo are labor, utilities, taxes, and etc (Guillermo, 2009). Cost behavior can affect the choice of the process...
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...Guillermo’s Furniture Store Concepts Denisse Cruz FIN/571 March 19, 2013 James Ciaramella Guillermo Furniture Store Concepts Paper First week (1st) individual assignment was write no more than 800 word paper explaining the finance concepts found in the Guillermo Furniture Store Concepts Paper and relate finance concepts to the context of the scenario. Following Finances Concepts and relationship with scenario assigned. Finance Finances are the studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. Finance is defined as the set of activities and administrative decisions that lead a company to finance the acquisition of fixed assets such as land, buildings, furniture, etc. and circulating such as cash, accounts and notes receivable, etc. The analyses of these decisions are based on the flows of income and expenditure and its effects on management objectives that the company intends to achieve. The definition of finance comprises several factors that are involved directly with them and some of them are such as investment, brokerage, personal financial planning, financial planners and advisers, securities analysts, agents real estate, etc. Finance Concepts at Guillermo’s Scenario 1 Guillermo Navallez, is an entrepreneur localized in Sonora Mexico. Sonora Mexico is a large furniture manufacturing location in North...
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...Guillermo’s Furniture Store Scenario FIN/571 Earnest Jackson 8/14/2012 In the great vacation spot known as Sonora, Mexico Guillermo Furniture was created. Mexico is none as one of the largest furniture manufacturing areas in North America. Guillermo build his manufacturing plant in Sonora, not far from his home. He was a family oriented person that believed in family time, so his goal was to be close as possible. He also built furniture in Sonora because the area was saturated with timber that was used to build tables and chairs. Guillermo’s was a profitable company for a long time, until mid 1990’s. In the 1990’s two of the major organizations joined companies to make their organization bigger and stronger giving them and edge over smaller companies. They focused on builder better quality products in faster time with lower cost. This concept and others the company used made Guillermo Furniture profit margins drop considerably low with production costs increasing. Guillermo even had to lower his prices Guillermo Furniture desperately needed to create a strategic plan in developing a competitive edge to regain profits in this industry. They started to monitor and survey the competitors observing their operation structure. He was able to discover that smaller companies merged in regaining stability and lowering cost creating higher profit margins. Guillermo’s also discovered that the competitive foreign company...
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...Guillermo’s Furniture Store Aleshia Huffman FIN 571 John Kushner April 29, 2013 Guillermo’s Furniture Store Guillermo’s Furniture Store, a once profitable business in Sonora, Mexico, has recently experienced some new competition and a decrease in profits. By using three different financial principles, Guillermo has been able to identify several possible solutions to his problem. While there is no clear “right” answer for his company, he has found three viable solutions to his loss of profits situation, including imitation, diversification, and using the theory of comparative advantage. The Behavioral Principle The behavioral principle states that you can “look for guidance in what other firms similar to your firm are currently doing and have done in the recent past” (Emery, Finnerty, & Stowe, Chapter 2, 2007). Basically, this principle says that you should look at others in your industry for direction on how you should proceed. In Guillermo’s case, he has researched his competition to see how they have managed to thrive in this new market situation. After finding out that many other companies are consolidating, he decided that was not the option for him; he does not want to lose his independence. Still, by looking at the competition, he was able to identify one solution to his profit loss: consolidation. The Principle of Diversification A second financial principle is the principle of diversification. The idea here is that investors do not want to invest...
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...Guillermo Furniture Store Concepts Name Class Date Professor Guillermo Furniture Store Concepts Guillermo Navallez has long prospered with his furniture company, Guillermo Furniture. Guillermo enjoyed being able to run his business from his hometown of Sonora, Mexico where there was an abundance of quality timber. Sonora made for a perfect place to specialize in tables and chairs which was what made Guillermo Furniture popular among the locals. However, it wasn’t until before the turn of the century when the competition among furniture stores began to pose as a threat to his business. The problem was not just local competition, but foreign competition was threatening Guillermo Furniture with a high-tech level of design, making furniture to exact specifications at the lowest cost. What’s worse is that these foreign companies were acquiring the smaller competitors and merging them together to form a major threat to Guillermo’s company. Guillermo watched his profit margins shrink as prices fell and costs rose (University of Phoenix, 2012). In the following paragraphs, Guillermo’s business and competition will be used to describe examples of Competitive Economic Advantage, Value and Economic Efficiency, and Observing Financial Transactions. Competitive Economic Advantage Guillermo Furniture was a very well established furniture store in Sonora, Mexico. Guillermo enjoyed being able to run a popular business in the same city as his home. The competition wasn’t really...
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...Guillermo Analysis Paper FIN 571 June 11, 2012 Mr. John Kushner Guillermo Furniture Store Analysis Guillermo has a manufacturing company is Mexico. Guillermo has an excellent location for his business because of the supply of timber for his furniture. Inexpensive labor and slight raise in the price of the furniture had Guillermo making a good profit. The business was going well for Guillermo until a new competitor entered the furniture market. The rise in population and jobs increased the cost of labor causing Guillermo’s business to suffer. The success is challenged by the international chain that recently has opened a store in the community. The result has caused a rise in cost, a drop in prices and producing a smaller market share for the smaller company. Guillermo’s owner has explored a number of options for dealing with this challenge. He is unwilling to merge with another company, so he is left with several options one investing in new technology, which is expensive, laser lathe to reduce his production cost, and to focus on marketing his patented furniture coating process. The principle of valuable ideas is to have a new product or services are unique from competitors and will add value to business. Guillermo has a unique patented method for constructing a coating for the furniture. Guillermo should consider making changes to his business, such as coordinating his distributor chain to become a demostrator for this other...
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...Guillermo Furniture Store Analysis FIN571 October 22,2012 Portia Boyd Abstract This paper will define and discuss the different alternatives available to Guillermo Furniture Store. I will include a sensitive analysis; the optimal weighted averages cost of capital, discuss the use of multiple valuation techniques in reducing risks and calculate the net present value of future cash flows for each of the alternatives. Guillermo Navallez was owner of Guillermo Furniture Store located in Sonora Mexico. Guillermo Furniture Store has been manufacturing handcrafted tables and chairs for a number of years. The company was operating at a profit due to inexpensive labor costs and “the area had a good supply of timber” (University of Phoenix, 2012, para. 1) to produce the handcrafted furniture. The company was prospering without any worries. In 1990, the market shifted and Guillermo began facing challenges in the businessdue to two main factors. One was an overseas furniture business moving into the area. This ompeting company uses high tech methods to produce their furniture to “exact specification” (University of Phoenix, 2012 para 2) at reasonable prices. This was unlike Guillermo’s prices which are a little higher due to their handcrafted technique. This meant the new company could produce furniture faster and cheaper than Guillermo’s company The second factor was the awakening of the laid back relaxed atmosphere in the Sonara community. This was due to the result...
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...Guillermo Furniture Analysis University of Phoenix Abstract Guillermo Furniture stores had a dominate position in custom furniture. They were could sale their furniture at premium prices. New competition has caused Guillermo to rethink its strategy. The store must analyze the most advantageous way to stay competitive in their current market. Their choices are to stay the current course, become hi-tech, or a brokerage company. Guillermo Furniture Analysis Guillermo Furniture store was dominant in its region in developing customize furniture. However, they are starting to lose money because of competition from overseas and rising labor cost. The company must make a decision on how to proceed in the future. To ease their decision process they can use the following: five steps as a project moves from idea to reality: 1. Generating ideas for capital budgeting projects 2. Reviewing existing projects and facilities 3. Preparing proposals 4. Evaluating proposed projects and creating the capital budget, the firm has set of planned Capital expenditures 5. Preparing appropriation requests (Douglas R. Emery, 2007) In generating ideas for capital budgeting projects Guillermo has come up with three possible choice. They can stay with their current activities, become hi-tech, or be a brokerage firm for a company in Norway. Reviewing existing projects and facilities: new competitor from overseas entered the furniture market. Using a high-tech approach; One of the...
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...Abstract Guillermo’s Furniture Manufacturing Company is in Sonora, Mexico in a gorgeous vacation spot. Guillermo’s is the largest furniture store in the area and made furniture for years, until the late 1990s that a new competitors joined the furniture business that has put a dent into Guillermo’s business. Competitors have new technology when to allow them to come in with lower prices and lure customers but Guillermo has to decide on the best options for the company either upgrade or move forward working as he did making quality products for customer’s expectation. In order for Guillermo to improve his company, Guillermo has to seek other alternatives and make financial decisions to increase sales to make profits. The contents of the paper will examining Sensitivity Analysis, Weighted Average Cost of Capital (WACC), multiple valuation techniques in reducing risks, calculate NPV for future cash flows and work out pro forma cash flow budget for the next five years for the organization and analyze the companies projected earnings (UOP, 2009). Analysis of Different Alternatives Guillermo has three available alternatives to evaluate the furniture store. First alternative is to keep itself in the current position. The current managers use capital budgeting techniques to find the best project among the group of projects. Current budget for Guillermo is $42,577 net income before taxes could observe capital markets for just a short time to convince consumer the...
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