Guillermo Furniture Store Executive Summary

Overview

Guillermo Furniture Store is an existing company that provides handcrafted products to its clients. Guillermo Furniture Store has been handcrafting quality furniture for years near his home in the state of Sonora. Guillermo Navallez owns and operates Guillermo Furniture Store (University of Phoenix, 2010).

In the 1990s, two events caused Guillermo Furniture Store to experience a substantial drop in business. First, an overseas competitor entered the market providing furniture to exact specifications through automated production. Second, a large national retailer emerged nearby and expanded its influence considerably. There was an influx of people as a result of the new job market increasing the cost of labor. Guillermo Navallez saw his profit margin shrink as prices fell and costs rose (University of Phoenix, 2010).

Guillermo watched as his competitors merged with other organizations or increased their size through acquisition. Guillermo prefers to be independent. He does not like the idea of merging with another company nor expanding his management responsibilities through acquisition (University of Phoenix, 2010).

Guillermo learned that his foreign competition has automated production with a computer-controlled laser lathe. The plant in Norway uses robotics to perform precise wood cuts and assembly functions. Production moves easily between different products and runs round the clock – the shift differentials are offset by the reduction in traditional labor costs. Guillermo realizes that converting his production to a computer-controlled laser lathe would be expensive, but he would also decrease his production and labor costs (University of Phoenix, 2010).

Contribution Margin

Based on the latest performance numbers, Guillermo Furniture Store needs to determine the best approach to improve performance and profitability. The company faced a net loss in the first two quarters of the reporting period because of inaccurate...