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Guillermo Furniture Analysis

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Guillermo's Furniture Store Scenario
Alysia Wright
FIN571
June 4, 2009
Micha Edwards

Guillermo's Furniture Store Scenario
Guillermo Furniture Store is a large furniture manufacturer that is located in Sonora, Mexico. Labor was considerably inexpensive and the location had ample supply of timber for furniture the company produced. In the early 1990s, business for the company started to decline caused by outside influences. The decline began when a new foreign competitor entered the market. The new competitor used technologically advanced methods that produced customized furniture at a lower price. Another disadvantage for Guillermo was that one of the largest retailers was only a few miles from the company and had a major impact on the communities in Sonora. “With inexpensive housing, mild weather, beautiful scenery, un-congested roads, a new International Airport, and plenty of development, an influx of people and jobs raised the cost of labor substantially. Guillermo watched his profit margins shrink as prices fell and costs rose” (University of Phoenix, 2010).
Guillermo Issues
Guillermo is facing two issues he did not have to deal with prior to the larger company entering his market with their hi-tech machinery producing furniture at low costs. First, Guillermo will have to alter his pricing structure if he wants to remain competitive with the new company. For years Guillermo has had a monopoly on the market and could charge top dollar for this custom made furniture. Because a competitor with a cheaper method of producing furniture has entered his market, Guillermo must make price cuts. Guillermo must also consider what cutting prices will do to his business. To keep the same profits levels, Guillermo must find a more cost-effective way to produce furniture.
Alternatives
The Guillermo Furniture Store simulation poses future success of the company may be...

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