Guillermo Furniture Concepts

To help with company decision-making process, Guillermo Furniture Store needs to understand financial concepts. Knowing what type of concepts and how each relates to the business will only benefit the business for the future. Guillermo Navallez can use the various concepts to help his business become more successful.

The principle of self-interested behavior is the first of many concepts. The principle states that individuals are likely do or act in his or her best interest. With this concept Guillermo Navallez is going to act in the best interest for his business. The principle of self-interested behavior is shown for the business as Mr. Navallez has no intention on expanding or merging his business with another as it would increase his already busy business and eventually cut into his family time. By not expanding the business, the future can be in loss because of Mr. Navallez’s own self-interest is an example of opportunity costs.

The principle of two sided transactions is a concept that states there are a minimum of two different sides of every transaction. A prime example is the business becoming a supplier for the business’s competitors. This is beneficial for both sides, as the business would move from the typical manufacturer to the side of distributor, leaving the benefit for the competition a new distribution company.

Signaling principle states actions deliver information and behavior principle looks at other businesses and sees what another business may be doing. Examples would include Mr. Navallez examining a highly automated system his competitors have, if employees get word of the system, employees could think that his or her job is in jeopardy.

The principle of valuable ideas and the principle of comparative advantage seem to work together in the concepts. Valuable ideas happens when an individual patent or invents something or an idea to make money. A comparative advantage is an individual uses his or her expertise to make money. For...