Recommendations for Guillermo Furniture with Justification

Recommendations for Guillermo Furniture with Justification

Akua Larbi-Nartey, Asad Sheikh, Kritagya Rana, Muthukrishnan Kalyani, Shalondra Young

Team C

Corporate Finance/FIN571

January 23, 2011

James Ciaramella

Recommendations for Guillermo Furniture with Justification

Guillermo furniture store located in Sonara, Mexico has been operating smoothly for years. The recent new competition decrease the stores profit margins. Increasing competition has made it necessary for Guillermo Furniture to reevaluate its process and find ways to make necessary changes to gain competitive advantage. With little research Guillermo Navallez, the owner, has discovered that increase in labor cost, reduction in price because of foreign competition and aging machinery has become the prime reason behind the recent decline in sales. This paper provides recommendations for Guillermo’s problems of foreign competition and labor cost along with justification for the recommendations.

Available Alternatives

Guillermo Furniture has number of options available to it, to turn the situation around. First, it has the option of consolidating its operations and agreeing to a merger of some sort. This will introduce more capital into the business, allowing diversification of Guillermo’s products, services and long–term prospects. Shared control of the business will also introduce fresh ideas and ways of doing things. For instance merging with a good company that has established management and process systems will complement Guillermo’s. The only problem with this alternative is that Guillermo is not looking to expand because an expansion will bring with it bigger responsibilities and limited time with his family.

The second alternative available in the Guillermo’s scenario is the introduction of high-tech machinery in its production methods. In almost every business situation, owners seek ways to produce more in a shorter amount of time. Technology allows very little labor and quick...