Guillermo

Guillermo Furniture Store Concepts Paper

Introduction

Guillermo’s Furniture Store is a large furniture manufacturer located in Sonora, Mexico. Until the late 1990s, Guillermo’s Furniture Store dominated the local furniture manufacturing market at which time a new overseas competitor entered the local furniture market. The competitor can provide furniture to exact specifications and at rock-bottom prices through the use of a high tech manufacturing process. In addition, a large retailer moved to the area creating an influx of people and jobs; causing the cost of labor for Guillermo’s to increase considerably. As the cost of labor increased, the company’s profit margins decreased. In order to regain its competitive edge, the organization must find alternatives in manufacturing its product and expanding its operations to other investment areas.

The purpose of this paper is to discuss strategic operational changes and the effects on the company, based on Guillermo’s business decisions. The paper will further outline the financial concepts that have been identified in the scenario. The principles of financial concepts describe human behavior in financial transactions and how those behaviors influence how decisions are derived.

The Principle of Self-Interest Behavior

During his research, Guillermo discovered that his competitors were handling the increase of labor costs by merging into larger organizations. Guillermo does not want to give up his independence and did not want to expand his management responsibilities because it would infringe upon his personal lifestyle. Guillermo was making decisions based on the principle of self-interested behavior, which states, “that when all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves” (p. 20: Emery, Finnerty, & Stowe, 2007). The self-interested behavior involves more than money, it can often be an opportunity that was not used. In...