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 direct competition together is what forced Guillermo to change his way of doing business. The handcrafted furniture that made his business so profitable for years by way of customization has to change forever. Guillermo’s skill of handcrafting furniture, although very unique at the time, was also very time consuming and labor intensified. Guillermo’s competition has duplicated Guillermo’s