...Guillermo’s Furniture Store Joshua B Dean FIN/571 4-15-2013 James Hellmich Guillermo’s Furniture Store Introduction The situation that Guillermo finds himself in is not uncommon. Bigger competitors have moved into his area. He does not want to sell his company and retire and he does not want to take on extra work by buying a competitor. The competition is forcing his hand to either change his production or change completely to distribution. Guillermo has to decide what is best both for his business and his family. There are several financial principles that can be applied to Guillermo’s situation. Two-Sided Transactions The principle of two-sided transactions is that there are two parties involved within a sale, the buyer and the seller. Guillermo had a corner on the market until competition came in. Once competitors came in, prices began to fall which causes a decrease in Guillermo’s bottom line. Since his customers now have choices, his business has lost customers. Principle of Comparative Advantage Comparative Advantage shows how someone with a talent or a business with special product lines is more valuable than companies that offer the same products as everyone else in the market. For Guillermo, he makes his furniture by hand which increases the price and also increases how much a particular piece is worth. One of Guillermo’s competitors has the ability to make furniture at a lower cost because they use a laser to cut the furniture. Guillermo loses some of...
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...Introduction Guillermo Navallez has been in the furniture making business for several years in Sonora, Mexico. This once quiet town was notorious for vacationing and has a great supply of timber for the furniture that Guillermo produces. Consumers pay a higher premium for the well-crafted furniture and his labor is inexpensive. In Guillermo’s Furniture Store scenario, there are various financial concepts that are found. Location For 13 years Guillermo’s furniture business was at a prime location partially due to materials being available, after the competition had moved in creating numerous changes, the location has declined. In one year from 12/31/09 to 12/31/10 Guillermo’s assets, liabilities and equity, and overall total liabilities increased 1.12% and total liabilities & equity also increased 1% despite the competitive changes. Although the business shows an increase, it is not large enough to maintain a steady profit. Operating Expenses For years Guillermo has used local timber that delivers high quality furniture. His products were priced higher because of the craftsmanship and well-known quality. He had developed a variance analysis that displays his budget for various expenses including materials. All total operating expenses (excluding supplies) exceeded the budgeted amount by 1.1%, while his overall revenue had not met his budgeted amount which could be due to competitive products that are moving in. For example, because of budgeted net revenue...
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...Running Head: Guillermo’s Furniture Store Scenario [Name] [Professor Name] [Course] [Date] Abstract: This paper attempts to examine the financial concepts found in Guillermo's Furniture Store Scenario. The Financial concepts are used to demonstrate how they can significantly sustain a company’s competitive edge. It further discusses the financial management approaches and how their proper application can add value to a business’ products as well as economic efficiency. Further, the paper attempts to develop a financial plan for Guillermo to enable it to competitive in its respective furniture market. Guillermo’s Furniture Store: Financial Principles Guillermo’s Furniture Store offers a convenient case study essential for analysis of financial principle concepts within a competitive economic setting. Among the financial concepts appreciable within the context of the set-up include financial markets, financial principles as well as business ethics that form the basis from which financial decisions are made. Guillermo’s Furniture Store case study divulges how the entry of a new competitor from abroad has triggered unexpected challenges to the financial situation of the business. Previously, Guillermo furniture store seem to benefitted from a form of monopoly advantage, resulting from its seemingly popular brand name, non-competitive market conditions and cheap labor in Sonora. This was until the entrance of the new entrants into the local market. Competitors...
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...Guillermo Furniture Store Concepts FIN/571: Corporate Finance Guillermo Navallez, owner of Guillermo’s Furniture Store (GFS) experienced diminishing profit margins as operating costs increased and prices decreased steadily during the late 1990s. Two factors triggered the aforementioned. One, a new competitor started using computer programmed machinery to make high quality, but less expensive furniture. Two, improved infrastructure and new businesses created jobs, creating an influx of workers and substantial increases in labor costs. The purpose of this paper is to explain 12 finance principles and concepts learned in week one and discuss how Navallez can apply said concepts to maximize his company’s value (University of Phoenix, 2009). The scope of this discussion encompasses the 12 concepts foundational to corporate finance. The 12 principles are self-interested behavior, two-sided transactions, signaling, behavioral, valuable ideas, competitive advantage, options, risk-return trade-off, diversification, capital market efficiency, and time-value-of-money (Emery, Finnerty, & Stowe, 2007). Principles and Concepts Self-interested behavior dictates that people tend to act in their best financial interest. For Navallez, selling or another company acquiring GFS was not in his best financial interest. Conversely, he believed that transforming his company into a distributorship was financially viable and would allow him to maximize family time. GFS and its Norway competitor...
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...Guillermo’s Furniture Store Concepts Paper Kavita Purav Corporate Finance/FIN 571 April 29, 2013 John Kushner Guillermo’s Furniture Store Concepts Guillermo Navallez is the owner of a large manufacturing furniture store located in Sonora, Mexico. Guillermo’s store was doing good business with the locals by providing them handcrafted products. The store was making good profits due to low labor costs, and charging premiums for handcrafted products. Currently Guillermo is facing issues with making profits due to a new overseas competitor. Guillermo needs to figure out a way to understand and make changes if necessary to his store, in order to stand up to the competitor. To make the right decisions, it is important to understand the principles of finance and the different concepts of finance. Concepts of Finance The Behavioral Principle: When All Else Fails, Look at What Others Are Doing for Guidance Guillermo is losing business to his competitors who use high technology equipment, make furniture to the exact specifications and with really low prices. The store owner wants to understand how the competitor operates, and why are they more successful. Guillermo spends some time into researching the high tech solution that the foreign competitor provides. He will try to figure out the cost of the technology, the low labor costs and whether he can cut his costs by converting into the high tech model. Basically he wants to research if he can imitate his competitor to better...
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...Guillermo’s Furniture Store Concepts and Principles of Guillermo’s Store Kendall Norman II University of Phoenix Corporate Finance/571 The goal of this paper is to briefly discuss the Guillermo Furniture Store scenario while pointing out and tying key financial concepts and principles discussed in the textbook. The Guillermo Furniture store scenario is about a local furniture manufacturer whose business is located in Sonora, Mexico. He has enjoyed several years of success without any threat of competition. Most recently competition has come about from two different directions. Guillermo has competition via a new international furniture manufacturer who makes the same furniture with better precision, in less time, and at a much cheaper price. The next type of competition comes through the way of development of a new international airport. This is a problem because this airport development will need labor workers. This need will surely drive up the cost of wages, and thus force Guillermo’s hand in the way of increasing his wages for his employees. This is one concept from the text that will be discussed in correlation to Guillermo’s furniture store. Some of the other concepts and/or principles that will be branched into are the concepts of risk aversion, diversification, specification, and time value of money, as well as, the behavior principle, the self interested behavior, and finally the Comparative Advantage Principle. The combination of two forces of...
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...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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...Guillermo Furniture Store Lori A. Poole FIN-571 Marcel A. Santiz December 12, 2011 Guillermo Navallez resides in Sonora, Mexico and has made a living for a number of years creating his own style of furniture. The area of Sonora, Mexico is not only known as a beautiful vacation spot, but it is also large furniture manufacturing location in North America. A good supply of timber is an available in this area that allows Guillermo to have access to a variety of wood to create tables and chairs for his company. For years, Guillermo has had the advantage of inexpensive labor cost and charged a premium for the quality of his handcrafted pieces of furniture (Guillermo’s Furniture Store, 2011). Guillermo eventually faced a challenge during the 1990s when two obstacles caused a dent in his business. The first obstacle was the entrance of a competitor located overseas into the furniture market. The second obstacle was the opening of a large retailer causing...
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...Concepts Nicole Ruthig FIN/571 December 10, 2012 Gurpreet Atwal Financial Principles and Concepts Financial concepts can be used when a company is considering various options. Which options cost more and which options will result in higher gains are two of the financial factors that affect decisions. In the University of Phoenix (n.d.) scenario, Guillermo’s Furniture Store has several options to consider which can help bring the revenues back to the company. This paper explains and relates three basic principles and concepts to the scenario. Financial Principles When it comes to corporate finance, there are many principles that are important. These include the principles of self-interested behavior and risk-return trade off. How they relate to the scenario involving Guillermo’s Furniture Store vary based on the principles and concepts themselves but they relate in one way or another. Guillermo, the owner of the furniture store is faced with many options once his sleepy little town expands (University of Phoenix, n.d.). The main financial principle that is described in the furniture store scenario is the behavioral principle. In this principle, people look to others for guidance based on what similar companies have done recently (Emery, Finnerty, & Stowe, 2007). Guillermo knew of his options to either be bought out or acquire another company based on what other companies in the area had done, he was following the behavioral theory. Another...
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...Guillermo Furniture Store Concepts Paper FIN 571 Guillermo Furniture Store Concepts Paper Sonora, Mexico was the ideal location for Guillermo’s Furniture Store. An abundant supply of cheap timber and relatively cheap labor costs, Guillermo’s had been producing high quality products, mainly chairs and tables, selling at premium prices. Guillermo’s exclusivity came to an end; competition from overseas using high-tech manufacturing equipment eroded his business market share through lower prices. Sonora, once a sleepy village, has grown. Along with this growth has come is the influx of people, increased labor rates and material costs. Higher costs to produce, lower prices to sell, Guillermo’s Furniture Store faces the recurring problem through the market place, change. Guillermo’s looked at his competition, his operations, his customer base, and the potential for business into the future. Guillermo’s needed to re-establish their competitive advantage; a strategy and methodology to ensure increase in value through economic efficiency. Guillermo’s discovered many smaller companies were consolidating with larger companies through mergers or acquisitions. Large organization offer scale of magnitude and ability to adjust available resources resulting in consolidation of costs and efficiency with manufacturing. Guillermo’s was not interested in purchasing smaller locations or being acquired by another company. Guillermo’s could opt for the advantages of the lower manufacturing costs...
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...Guillermo Furniture Store FIN/571 February 4, 2013 Garrick Turner University of Phoenix Instructor: Paul Stevens Guillermo Furniture Store The Guillermo furniture store is the largest furniture store in Sonora, Mexico. The store definitely has established itself as the main provider of fine art furniture, until the late 1990 when two competitors, pose as a problem for the local store. The first company is a foreign furniture company, making a good use of a high-tech approach, building furniture with exact specification. The second competition is one of the largest retailers who have expanded which caused an influx of people and jobs. This paper will evaluate Guillermo processes and determine how to handle the challenges they are facing from a changing market. Guillermo’s financial interest, return, and risk and its ability to maintain its business ethic taken in consideration if they decide to continue business on their own sticking with its traditional way of making fine furniture; Adapt the new high-tech developments of producing furniture or merge with a possible alliances, taking on new services as a distributor. The financial interest for Guillermo Furniture Store is to manufacture a product that best fit the needs of the business and its customer. Examine their budget information, can be analyze to determine if the company will be more profitable by staying independent or merging with its competitor, to become more efficient they must...
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...Guillermo Furniture Store Analysis Introduction When looking at a budget there are many factors to discuss and apply. The Guillermo Furniture Company has been a staple in Mexico for numerous years. Guillermo will have to use the correct reports relating to both performance and budgets in many different ways. Guillermo's competitor has updated machinery and budget. The competitor has forced Guillermo to look at his budget, sales forecast, and analysis of ethical considerations in the preparation, use of the budget and ethical code of ethics. The authors of this paper will provide Guillermo’s Furniture Store with the tools needed to make decisions based on data using performance and budget reports. Sales Forecasts: Risks and Organizational Success Sales budget is the foundation of budgeting and the accuracy of this budget relies heavily on the accuracy of budgeted sales. Managers prepare the departmental budgets monthly based on the sales forecast. Several factors contributes to creating sales forecast, which are past patterns of sales, estimates made by the sales force, general economic conditions, competitors’ actions, changes in firm prices, changes in product mix, market research studies, advertising, and sales promotion plans. Specifically in Guillermo’s case, the four challenging instance to creating his sales forecast is in the 1990s, when foreign competition provided furniture to exact specifications at very low prices. Enabling Guillermo to make an...
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...Guillermo Furniture Store Concepts Paper 1 Guillermo Furniture Store Concepts Paper 2 Introduction In the world of business, we have many financial concepts and principles that help and allow business managers to make financial decisions that give them the greatest advantage in the market. The Guillermo Furniture Store is located in one of North America’s most popular vacation spots of Sonora, Mexico. Guillermo manufactured custom made furniture with an excessive supply of local timber. Guillermo faces a new competitor within industry that uses hi-tech strategies to manufacture furniture. This paper will highlight financial concepts that will relate to the gist of the Guillermo Furniture Scenario. Outlining The Principle of Self-Interested Behavior Human behavior defines that people (act in an economically rational way people act in their own financial self-interest) (Emery, Finnerty & Stowe, 2007). Mr. Guillermo displays his desire to gain control of his business while not being pushed out of the market by a competitor that has enhanced and expanded their operation within the furniture industry. One main focus that Guillermo’s Furniture has overcome would be analyzing the benefit with advancing toward being a distributor hopefully becoming a representative operation in Norway using an automated system...
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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 Navallez has made furniture for years near his Sonoran home in Mexico as the area had a good supply of timber for the variety of tables and chairs produced by his company; and labor was also relatively inexpensive (University of Phoenix, 2009) Unfortunately for Guillermo, in the 1990s a competitor from overseas entered the furniture market causing a large decrease in business for Guillermo. Luckily, Guillermo has a few tools at his disposal to help make the tough decisions he is now faced with. Accounting budget and performance reports can be used in decision making in a variety of ways such as; estimating the expected revenue and expenditure of a business. These reports would be helpful in Guillermo's decision of which option will be best suited for his business. Guillermo must decide whether to purchase the high tech computer controlled laser lathe, represent and sell for a manufacturer in Norway, or continue selling his hand crafted coated furniture. Budget: With the use of an account budget Guillermo can project required labor hours, product cost, and expected return. This type of income information can provide comparative figures of expected profit for the different business options. In the case of the three business options available to Guillermo, he can assess the net revenue and return on investment to help him decide which option will be more profitable for the business. Performance Report: A performance report can also help Guillermo compare his business...
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