Gullermo Furniture Store Analysis

Guillermo Furniture Store Analysis

Marianela Tavarez Torres

University of Phoenix

FIN / 571 Corporate Finance

Ismael Torres-Pizarro, PE, Esq.

March 23, 2011

Introduction

Guillermo Furniture Store located in Sonora, Mexico is a large manufacturer furniture store. His labor was not considered expensive and where it is located has an ample supply of timber for furniture they produced. By the 1990’s the company’s business started to slow down caused by outside influences. This began when a new competitor entered de market. This new competitor has new technology and advanced methods that will help produced customized furniture at a cheaper price. Also Guillermo had another disadvantage is that one of the largest retailers was only a few miles away and this one had a major impact on the communities in Sonora. At this time Guillermo Furniture Store will have to find alternatives if they want to stay in business and compete with this other company which has more advance equipment and could make a large amount of furniture for less price and may be in less time.

Alternatives

Right now Guillermo is going thru some changes in the market and also has other alternatives he needs to adapt to the new market. In this scenario there are a few alternatives that a manager could consider in order to make a profitable decision. Those alternatives should be analyzed and categorized in order to know if they are good to invest in projects. First alternative is to stay working the same without changes. The second alternative is to use high-techonoly by doing that they be able to fabricate more custom furniture at a low cost. The third one is to become a broker for the new company.

There are quite a few ways of capital budgeting that could be applied to the alternatives mentioned this alternatives will be applied to the projects in order to choose the best one, also will predict any risks in order to reduce them. When making capital budgeting...