Guillermo Concepts Paper

Guillermo Furniture Concepts

FIN/571

May 21, 2012

Guillermo Furniture Concepts

Guillermo Furniture Store Concept

Corporations apply customized financial concepts to recognize, evaluate, and solve financial issues within a company. Financial concepts are applied to make both short and long-term decisions. Guillermo’s furniture store is a large manufacturing company in Sonora, Mexico that produces various custom tables and chairs. Currently, emerging foreign competition, and growth threaten the company profit margin. Guillermo furniture must consider options to improve efficiency and address changes in the industry to remain competitive. This paper will focus on financial concepts that could be applied to Guillermo’s furniture store.

Financial Concepts

It is necessary to remain persistent in development within the industry for Guillermo’s furniture store to become successful. As Guillermo considers the strategic course of action, the company displays elements of the Principle of Self-Interested Behavior. Individuals want to secure their financial self-interest and by doing so there are other opportunities missed, therefore creating the opportunity cost. An opportunity cost “is the difference between the value of one action and the value of the best alternative” (Emery, Finnerty, & Stowe, 2007, pg. 20).

Another financial concept that applies to Guillermo’s furniture store is the Principle of two-sided transactions, which maintains that each financial transaction has a least two sides with one side benefiting at the expense of the other side. Guillermo furniture can try to surpass competitor’s prices and risk compromising the handcrafting specialty they provide. Potential buyers can be more attractive to Guillermo furniture if they use a differentiation strategy.

An example of the Principle of two-sided transaction is the zero-sum game, which only one person can gain only at the expense of another. An example of this...