...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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...Financial Principles and 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...
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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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...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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...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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...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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...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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...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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...FIN 571 September 10, 2012 Gurpreet Atwal Guillermo Furniture Store Concepts Guillermo’s furniture store is a manufacturer of custom furniture in Sonora, Mexico. The founder and owner, Guillermo Navallez has built up his business over many years and enjoyed success. With recent economic challenges, and pressure from large competitors, Guillermo has to make changes to his operations and how to continue to operate in a competing field as a small business owner directly competing against large national and international chains. Guillermo has researched and used financial concepts to aid his thought process to turn business around and continue to remain open. Some of these concepts will be related in this paper. Self-Interested Behavior Guillermo, as a business owner follows one of the first principles of finance that the decisions made in his business are made in his own self-interest. “This principle says that when all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves” (Emery, Stowe, & Finnerty, pg. 20 2007). Guillermo has kept his operation small over the years and enjoyed his modest success by choice. As a business owner every decision made effects his life. When faced with new competition Guillermo considered expanding through acquisition. He chose not to do so, as “that could affect his time with his family in ways that he will not enjoy” (University of Phoenix Student Portal Corporate...
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...Furniture store Analysis Furniture Store Analysis Guillermo’s furniture located in Sonara, Mexico is facing major issues and problems, the decision and choices he makes from now will either make or break his company. Competing with a high-end top of the line technology operated model furniture production Guillermo’s furniture store will not be able to compete with and will not last long in the business. Guillermo will need to determine another resolution to stay up with the rivalry if he want’s to stay open. This essay will discuss the finance concept in efforts to keep Guillermo’s furniture store in business. There are many problems that need to be resolved at Guillermo’s furniture store before the competition takes over. Some of the areas that need to be cover to survive in the industry and to be complete in the international market and not loose any of his customers is to analyze how to keep up with business and be able to uphold a constructive cost arrangement that will decrease the outflow and bring more in profit. Currently labor cost hours are greatly higher since all pieces of furniture are being build by hand, meaning more time is spend in each piece being build. Building furniture pieces with state of the art machine will diminish the expenses and carry in more income. Labor costs are currently much higher due to the hand build detail and time that goes into each piece of furniture. With the new technology being use by the competitors, the profits...
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...This paper will look at the different alternatives that are available to the management of Guillermo's Furniture Store. The paper will include three different alternatives that Guillermo's could use, and what the optimal Weighted Average Cost of Capital (WACC) of each option will be presented along with techniques for reducing risks. There are many forms of capital budgeting models that can be used. Payback made simple, NPV, IRR, and Payback discounted. The payback period: The simple payback period can be defined as “the expected number of years required to recover the original investment.” (Emery 2007) For example, if Guillermo’s invest $300 million in one of its projects, within that particular time period Guillermo should able to receive back the original money invested. For example, Guillermo’s cumulative cash flow is at t = 0 is just the initial cost of -$300,000. In the first year the cumulative cash flow is the previous cumulative of $300, 000 plus the first year for the cash flow of $500: -$300,000 + $42,573=-$257,427. In comparison the cumulative for the second year is the previous cumulative of -$257,427 plus the inflow of cash from the second year of $42,573, resulting in –$214,854. Therefore the calculations of payback occurred during the third year. If the $40,584 of inflows comes in evenly during the third year, then the exact payback period can be found as follows: Applying the same procedure to the other two alternatives (Project High-Tech and Broker) you...
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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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...Store Analysis Rachelle Juarez FIN/571 March 22, 2012 John Triplett Store Analysis Guillermo’s Furniture store was hit by companies that are now his competitors. Guillermo’s furniture store has been losing profits and needs to consider other options. The paper will cover Guillermo’s different choices and consider doing some of his business overseas. Guillermo furniture store has been running for over ten years and has been profitable. Then the competitors moved in and brought down the profits for Guillermo. Budgeting Guillermo watched the other furniture stores operate in different aspects to make profits. Guillermo’s flex budget was close to his units budgeted to his actual. From the data collected in the previous analysis the budget and actual cost will be close. Guillermo will try to get the variance analysis close from being significantly lower. Guillermo carefully studied the other companies and how each of them operated differently and improved his or her profits. Weighted Average Cost of Capital After doing the weighted average cost of capital, Guillermo came up with 15.7% in 2010 weighted debt. Guillermo also came up for 2011 17.5%. After confirming the weighted debt Guillermo’s asset, liabilities, and total equity improved by a slight margin from 2010 to 2011, but the debt increased. Guillermo should worry about risk. His business has lost in profits, but the total liability and equity have stayed the same in the two year comparison. The comparisons have...
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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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