Guillermo Furniture Store Senario Week1

Guillermo Furniture Store has enjoyed a profitable venture creating handcraft furniture for many years. Competition and economic growth in the market has created increased labor costs and the need for competitive pricing in Sonora, Mexico (University of Phoenix, 2012). Guillermo Navallez has to make challenging decisions regarding the operational and financial options of Guillermo’s Furniture Store. Guillermo options to decide include determining the financial feasibility in the competitive economic environment, determine the competitive advantage of upgrading equipment and technology, and last, weighing the option of moving from manufacturing to distribution.

Competitive Economic Environment.

Opportunity costs are the difference between the value of one action and the value of the best alternative (Emery, Finnerty, & Stowe, 2007). Guillermo understands the principal-agent relationship and how the conflicts of interest and behaviors affect other entities (Emery, Finnerty, & Stowe, 2007). Operating with overhead costs in a competitive market will eventually force Guillermo out of business that poses threats to his employees. Additionally, Guillermo considered consolidating with a larger organization but the opportunity cost if losing operational independence or losing family time by expanding managerial responsibilities that are not appealing by way of the self-interested behaviors principal (University of Phoenix, 2012).

Equipment and Technology Upgrade

Unable to determine a clear course of action, Guillermo began looking at the competition for guidance (Emery, Finnerty, & Stowe, 2007) Guillermo can take a free rider approach by imitating the techniques of the competition that uses computer controlled laser lathes and robots to cut precise cuts to the wood. The equipment cost is expensive, however, Guillermo is able to reduce production and labor costs while producing 24-hours a day. The zero-sum game of acquiring high-tech equipment is at the expense...