Business

There are 12 financial concepts from this weeks reading that if

applied, could greatly help Guillermo in his decision-making process.

The first of these concepts is the Principal of Self Interested Behavior. This

principle states that people act in their own financial self-interest without money

being the end all objective. If Guillermo were to apply this principle, perhaps

merging or expansion would be a priority. Financially it would seem like the best

thing to do for the future of the company. For now however, Guillermo prefers

family time while keeping responsibility to a minimal

The Principle of Two Sided Transactions is the second financial concept. It

states there are at least two sides to each transaction. An example of this concept is

Guillermo becoming a distributor for one of his competitors. This transaction has

two sides and both sides could benefit. Guillermo would benefit by changing from

primarily a manufacturer to a distributor and his competitor would benefit by

having the distributor they needed.

The third concept is the Signaling Principle, which states that actions convey

Information. The fourth concept is the Behavior Principle, which looks at the

industry effect or what others firms are doing in the industry that seems to work. An

example of these concepts would be the inquiry of Mr. Navallez into the highly

automated systems of his competitors. In this example his behavior would signal to

his employees that the company could be switching to an automated system, which

will lead to layoffs.

The Principle of Valuable Ideas is the fifth concept and the Principle of

Comparative Advantage is the sixth. These two concepts work together in that an

invention or a patented idea will make you money, and someone’s expertise

will also make you money. The relation of these concepts and Guillermo is that

their process for coating furniture along with their expertise in this process is of

great...