Guillermo Furniture Store Week 6

Guillermo Furniture Store

Learning Team B

Jamal Block

Jeanette Chandler

Ted Harrison

Stormy Mckay

Carla Pigman

Erik Rose

Malissa Wood

FIN 571

January 16, 2012

Kimberly McCarrolle

Guillermo Furniture Store

The Guillermo Furniture Store scenario provides detail of the operations of Guillermo Furniture and changes in the furniture industry. The furniture industry has seen an increase in foreign competition with laser technology that allows them to have an advantage on price and cost in the market. The community Guillermo operates has also seen an increase in labor costs as the community has grown. These challenges to the industry require Guillermo to evaluate the effects of these changes on future operations to determine how they should react to the changes. The following will discuss the alternatives for Guillermo, recommend a course of action, and provide a pro forma cash flow budget for the recommendation.

Distributor

An alternative for Guillermo is to conduct market research and analysis concerning continuing with his existing production process and become a distributor versus succumbing to large company. By choosing distributorship, this would require some capital to establish a good distribution network, but long-term would increase revenue without increasing labor expense.

Guillermo’s business model would be to use the behavior theory to justify the recommendation to become a distributor. Examining the capital structure choices of comparable firms, Guillermo’s choice of capital structure would seem to be the most logical one. In gathering this research, Guillermo’s beta test of the international market and risk management would benefit the company the most. This research used the discount rate and the risk of assets. From the research, Guillermo has proven that the company has a good chance of growing.

Guillermo is independent, and he does not savor the idea of a larger competitor acquiring his business (University...