Fin/571 Week 4

Guillermo Furniture Store Analysis

Finance 571

The University of Phoenix

Guillermo Furniture Store Analysis

Guillmero Navallez is the owner of the Guillmero Furniture store in Sonora, Mexico. For years Guillermo was able to maintain a competitve advantage over his competition. With the large supply of wood, a cheap labor force, and a well priced product Guillermo was able to be a successful company. All was fine for Guillmero until the late 1900’s until major competition entered the market. An internation furniture maker was able to use a high tch process that was able to make custom order furniture that the customers’ exact needs and at rock bottom prices. A new international airport opened Sonora to other companies. With the influx of new companies to Sonora it drove up the labor cost for the workforce. With the increased furniture competiton and labor market cost Guillmero saw his profits decrease and his cost increase. In order to regain the succes that Guillmero had before the competion entered the market he is going to have to look at his business to see what can be done to lower cost and increase his margins.

Guillermo has a few options that can help get the company back to the successful level he once had. After reviewing what the competetion is doing there are a few things that Guillermo can do to help it. Guillmero can invest in new technology that can help lower the labor cost. Another possibilty is that Guillmero could parnter with a furniture maker from Norway and become their broker and help cooridnate its distribution cahnnels. The last option that Guillmero has is to do nothing with its current process but start using his patented process for coating furniture. Guillmero will need to look at the cost of each of these and detrmine which one to implement.

Capital Budgeting

Guillmero has a few capital budgeting techniques that it can use to determine what option will be the best to use in order to regain its market position. The most...