...The Guillermo Furniture Store Scenario Susie Smith FIN/571- Corporate Finance September 26, 2011 Danica Djordjevich, Instructor The Guillermo Furniture Store Scenario Guillermo Navallez is the owner of a furniture manufacturing company located near his New Sonora, Mexico home. This company specialized is handcraft products priced at a slight premium for the quality they represent. This scenario presents a challenge from the arrival of new competition from overseas that has entered the furniture market with headquarters a few miles from Guillermo’s location. This new competitor uses a high-tech approach and provides furniture to exact specifications at rock-bottom prices. In addition one of the largest retailers located a few miles from Guillermo Furniture Store. This factor had a impact on the company because of the growth in development, influx of people, and increase in jobs. The influence from new competition and an increase in labor cost resulted in profit margins at Guillermo shrinking as prices fell and the cost to operation increased substantially (University of Phoenix, 2011). Alternatives Three alternatives that Guillermo must meet head-on to adapt to the current changing market environment are obvious to remain competitive. The first is to continue what he is currently doing. The second alternative is to go high-tech this would produce his custom furniture at a lower cost by reducing labor cost, and the third is to consider operation as a furniture...
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...Guillermo Furniture Store Scenario Accounting is a daily function in many areas in our lives. Whether it is budgeting in our homes, or business, accounting services are useful and necessary. Guillermo Navallez has a very successful furniture business near his home in Sonora, Mexico. In the 1990’s Guillermo’s business was facing new competition. Rising costs and falling prices were causing Guillermo’s profit margin to shrink (University of Phoenix Guillermo Furniture Store Scenario, 2011). In this paper discussion topics will include how Guillermo can use budget and performance reports in his decision-making process, how ethics can play a role in the process, and relevant accounting information in the decision-making process. Budget Reports Budget reports help control spending. The definition of a budget is “quantitative expression of a plan of action” (Horngren, Sundem, Stratton, Burgstahler, and Schatzberg, 2008). Using a budget report, Guillermo can keep track of all business expenditures. The budget report can also reflect if there is any excessive or wrongful spending. Budget reports are also relevant accounts for business earnings based on product sales. Guillermo can have an idea of which products are best sellers versus those products that are not doing so well allowing him to make any necessary adjustments to his inventory. Performance Reports “Performance reports provide feedback by company results with plans and by highlighting variances, which are deviation...
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...Guillermo Furniture Store Scenario Accounting 561 University of Phoenix Introduction The business climate has changed dramatically for Guillermo Furniture over the last 10-15 years. The market share that was once seen in Sonora Mexico has now shrunk and has increased competition. The company must look to reduce cost while at the same time making a profit. The company has several options and ideas on the table, but Guillermo needs to look at the financial documentation to make sound business decisions. Guillermo Furniture has not done the best job of looking at the data and creating a business and production plan for the company. With increased competition and also the influx of machine cut furniture, the market for his product has been reduced over the years. The company must decide soon to keep things as they are, or spend the money needed to buy the appropriate machinery to produce the high quality products they desire. Although the machinery will be expensive from the start, they would eventually pay for themselves over time on the amount of labor saved. There has also seemed to be a lack of budgets and performance reports in the decision-making process. The company could use these reports in many areas to keep the company making profit, as well as shift the company in the proper direction for the future. One thing that can be taken away from the current data is that the company produced over budget on its mid-grade products, while failing to meet the...
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...Guillermo Furniture Store Scenario NAME HERE ACC/561 DATE Guillermo Furniture Store Scenario Guillermo Navallez is a highly successful manufacturer of furniture in Sonora, Mexico; however, he is coming to the understanding that he no longer holds a competitive economic advantage that he once enjoyed in the past. The reason behind the lack of advantage is due in part to a new international competitor entering the market and challenging the current profit structure with furniture made from robotic production methods. Additionally, the cost of labor has proliferated and an influx of people migrating to Sonora, Mexico has altered the economic state within the area. Guillermo Navallez has several opportunities and alternatives to contemplate in an attempt to counterbalance the negative situations. Upon further analysis, Guillermo Navallez knew that a merger with another company is not a feasible option nor is expanding his management responsibilities as it would impede upon his desires to spend quality time with his family. These alternatives ultimately lead to him advancing his production system to a highly sophisticated laser lathe which would be rather expensive yet it would significantly decrease production costs. The other alternative would to become a representative for a Norwegian manufacturer who had been looking for channels to distribute in North America. Before settling on a permanent decision, Guillermo Navallez must first evaluate his current budget and performance...
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...Guillermo Furniture Store Scenario Bridget Burns ACC/561 Accounting Rachael Lenzmeier Jencks March 13, 2011 Guilermo Navaliez has been a furniture maker for many years. Times have changed, Guilermo needs to look at his company and make an important decision on which way to take his company. He can keep what he is doing now, invest in hi-tech, or become a broker. Guilermo should use attention directing, which means reporting and interpreting information that helps managers to focus on operating problems, imperfections, inefficiencies, and opportunities (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg. 2008. p. 5). Guilermo will need to gather all relevant information, review it, and make an informed decision on which way to go. In order to make a good decision, accounting information is needed. Accounting information consists of management accounting and financial accounting. Management accounting is the process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating information that helps managers fulfill organizational objectives (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg. 2008. p. 5). Financial accounting develops reporting for external decision makers. Some of the management accounting reports that Guilermo needs are budgets and performance reports. Budgets are used to predict the future. Budgets are estimates of expected income and expenses for a given time. Performance reports...
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...Guillermo Furniture Store Concepts Paper Guillermo Furniture Store in Sonora, Mexico is the largest manufacturing company in the area ("GFS Scenario," n.d.). Guillermo Navallez, the owner, is now facing the challenges of competition. With competitors on the rise, Guillermo Navallez needs to evaluate current processes and determine where “change or improvements” are required to remain competitive and financially stable. This paper will explain at least four finance concepts and how they relate to the scenario for the Guillermo Furniture Store. Finance Concepts The first concept noticed in this scenario is the Principle of Self-Interest Behavior. This principle states that people tend to act or do what is best for them. The concept relates to the Guillermo Furniture Store scenario because Mr. Navallez is not considering expanding by acquiring or merging with another company for various reasons. Mr. Navallez fears expanding or merging would drain overhead costs, increase management responsibilities, and negatively affect family time (Emery, Finnerty, & Stowe, 2007). By not considering expansion or merger Mr. Navallez could put his business future in jeopardy which is an example of opportunity cost. Another concept noticed is the Principle of Two Sided Transaction. This principle states that there are two sides to every transaction (Emery et al., 2007). The concept relates to the scenario by Mr. Navallez becoming a distributor for his second competitor, who operates...
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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 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 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 financial principle is the principle of self-interested behavior, which states that people generally act on their own personal financial well being (Emery, Finnerty, & Stowe, 2007). In the scenario, Guillermo acts in his own self-interest by eliminating his options to have his company...
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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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...FIN/571 June 27, 2011 Guillermo Store Concept This paper will provide data about the financial concepts of the Guillermo Furniture Store. Upon the completion of viewing the scenario, the student will present the financial concepts that are represented in the scenario and how they relate to the readings in Chapter Two of the text. Located in Sonora, México the Guillermo furniture store is owned by Guillermo Narvaez. The store was established in the late 1990s. Guillermo’s is known for its one-of-a-kind, handmade pieces. Unfortunately for Guillermo, in recent months two competitors have caused a decline in business. Guillermo now finds itself in competition with two other companies in an industry that they once were on top of. One competitor, an international company, uses the most modern technology to create the parts for its furniture. This company stays ahead of Guillermo because this process is cheaper, faster and much smarter. Next there was the high cost of labor, Guillermo has to be able to afford the expensive wood and make the payroll when it is time for employees to be paid. Working against these problems will result in a profit loss. Guillermo faces the concept of 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, Finnerty, & Stowe, 2007).” Guillermo demonstrates this principle in the scenario wehn he is forced to...
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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'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...
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...Guillermo Furniture Store Concepts Veena Kaushal FIN 571 October 31, 2011 Professor Del Roberts Guillerno Furniture Store Concepts Understanding the concepts of finance is important for the success of any business. As we already know, finance encompasses every aspect of a company and understanding and utilizing these concepts can make or break a business and for this reason. While analyzing the scenario for Guillermo Furniture, four finance concepts directly relate to Guillermo, which are diversification, risk-return trade-off, and observing what others are doing. In addition, the principle of incremental benefits directly relates to Guillermo Furniture. Guillermo Overview According to the Guillermo Scenario, Guillermo Navallez settled down and had started a furniture business in the beautiful town of Sonora, Mexico. The town provided Guillermo with a good location because of its sufficient supply of timber. The sufficient supply of wood allowed Guillermo to produce an assortment of tables and chairs for his new company. For years, Guillermo was happy and successful with his furniture store. However, in the 1990’s, Guillermo was faced with problematic challenges that damaged his profit margin (University of Phoenix Simulation). Challenges forced Guillermo to figure out how to reconstruct his business. The first challenge was presented by a foreign competitor using a high tech approach with low prices (University of Phoenix Simulation). The second challenge Guillermo...
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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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