Guillermo Furniture Store Scenario Fin571 Week 1

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Date Submitted: 09/05/2011 01:50 AM

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Guillermo's Furniture

The Guillermo Furniture Store scenario is one that is played out constantly and involves careful financial planning to ensure optimal outcomes. Self interest, especially in the financial sense, is of high import to those enduring this process. One benefit of small businesses such as Guillermo's is the entrepreneurship and innovation that drives entire markets. Flexibility and responsiveness for better diversification is also a benefit that small businesses have over larger ones. If expansion is inevitable to keep up with market trends, an initial public offering (IPO) may be beneficial in raising funds to do so. If the small company is deemed the best, the ethical behaviors of smaller companies can help build customer loyalty, avoid fines and legal expenses and build the confidence of investors for the possibility of a future IPO.

The principle of self-interested behavior applies to Guillermo's decisions in the scenario. He is interested in keeping the company functioning, but with specific conditions. Guillermo has very clear expectations for the future of his business and does not seem to want to settle. Though most of his decisions are financially driven, some are quite clearly motivated by quality of life concerns. He mentioned that he had no interest in being bought by a larger manufacturer. Though they may draw down his overhead costs and create leaner manufacturing, he would still be paid substantially for the initial purchase. Guillermo wants to keep his independent, small business not solely because it is financially responsible but because he enjoys it that way.

Guillermo has a valuable idea that he could use to help gain funds for enduring the conditions under which he is currently operating. He has a flame retardant finish that he applies to his furniture. If he desired, he could sell the patent for the idea to raise capital for investment of better technology to improve his manufacturing process.

A lesson that...