Guillermo Furniture Store Concepts

Guillermo Furniture Store Concepts

Olga Belteton

FIN/571

February 11, 2013

Instructor: Gurpreet Singh

Guillermo Furniture Store Concepts

Guillermo Navallez had his furniture store located in Sonora, Mexico. The area was known for its supply of timber and was also known to be a large furniture manufacturing area in North America. Mr. Navallez for years created a variety of tables and chairs that were fine pieces of furniture. His labor costs were low and he priced his pieces at a premium because of the quality of the work and the pieces he produced. In the late 1990 unforeseen problems occurred. An overseas competitor entered the market that could mass produce the same produce using high tech equipment and offer the products at low prices.

Mr. Navallez began to look into what his options were as his business began to diminish and he thought of a few options to consider. He could decide to use the high tech equipment to produce his furniture but that would be rather expensive. He could be a representative to another manufacturing company or he could also try and make his product different by using a stain resistant coating to add value to the furniture. These are options to consider keeping in mind the type of life style he does not want to give up.

A budget can be used to look at the revenues and expenses projected with how the furniture store is going to be doing if it stays the same. The current financials give the idea of where the company is at present. Forecasting various scenarios would give the company an idea of what is to come if changes are not made as well as if changes are implemented. By looking at the forecasted numbers the company can see the options on paper and have a better understanding of what picking one over the other will mean for the company’s future.

Currently the Stores net income before taxes is $46,118. If the company decides to invest in the high tech equipment it could see a net income of $213,175. Going with...