Guillermo Fin 571 Week 1

Guillermo Furniture

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FIN 571

2/18/13

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Guillermo Furniture

Guillermo’s Furniture is a large furniture manufacturing location in North America. The area has a good supply of lumber available. The area also has a relatively inexpensive labor force. Until late in 1990, the business was successful. This is when a new competitor from overseas entered the furniture market and secondly one of the largest retailers in Sanora woke up (University of Phoenix, 2013). The new competitor used a high tech approach to build the furniture to exact specification at a very low price. The existing competitor expanded their market considerably. With the area providing inexpensive housing, mild weather, beautiful scenery, un-congested roads, a new international airport, and plenty of development there was an influx of people. This raised the costs of labor in the area.

Competitive Economic Advantage

Guillermo’s company follows the guideline of competitive economic advantage. The principal of economic self-interest behavior states that when all else is equal, all parties to a financial transaction will choose the course of action most financially advantageous to themselves (Emery, Finnerty, and Stowe, 2007, p. 20). Guillermo does not want to be acquired by a company which would affect his time with his family. So he looks for other alternatives. Often competing actions can be taken. The idea of opportunity costs, the value of one action versus the value of another action, comes into play. As a result, Guillermo realized that converting his production to an automated process is expensive. It would cut his operating costs and productivity would increase. The other option would be to become a distributor for another manufacturer. This would allow him to keep some custom work while moving toward primarily becoming a distributor. While some transactions are zero sum, where one player wins at the expense of the...